Hanesbrands Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 11:37
Quarterly Report for Quarter Ending September 27, 2025 (Form 10-Q)
| Management's Discussion and Analysis of Financial Condition and Results of Operations |
This management's discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see "Forward-Looking Statements" in this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The unaudited condensed consolidated interim financial statements and notes included herein should be read in conjunction with our audited consolidated financial statements and notes for the year ended December 28, 2024, which were included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for the full year or any other future periods, and our actual results may differ materially from those expressed in or implied by the forward-looking statements as a result of various factors, including but not limited to those listed under Part I, Item 1A. "Risk Factors" and included elsewhere in our Annual Report on Form 10-K for the year ended December 28, 2024. In particular, among others, statements with respect to trends associated with our business, our key business strategies, our expectations regarding liquidity and our ability to maintain compliance with the covenants in our Senior Secured Credit Facility (as defined below) and our future financial performance included in this MD&A are forward-looking statements.
Overview
Hanesbrands Inc. (collectively with its subsidiaries, "we," "us," "our," or the "Company") is a socially responsible global leader in everyday iconic apparel with a mission to create a more comfortable world for every body. We operate across the Americas, Australia and Asia. We own a portfolio of some of the world's most recognized apparel brands in the core basic and innerwear apparel categories, including Hanes, Bonds, Bali, Maidenform, Playtex, Bras N Things, Berlei, Wonderbra, Zorba, JMS/Just My Size and Comfortwash. We design, manufacture, source and sell a broad range of innerwear apparel, such as T-shirts, bras, panties, shapewear, underwear and socks, as well as other apparel products that are manufactured or sourced in our low-cost global supply chain. Our products are broadly distributed and available to consumers where, when and how they want to shop, including in mass merchants, mid-tier and department stores, specialty stores, company-owned retail stores as well as both retailer and company-owned e-commerce websites. Our portfolio of leading brands is designed to address the needs and wants of various consumer segments across a broad range of basic apparel products and our brands have strong consumer positioning that helps distinguish them from competitors.
Our Key Business Strategies
Our business strategy integrates our brand superiority, industry-leading innovation and low-cost global supply chain to provide higher value products while lowering production costs. We operate primarily in the global innerwear apparel category, along with smaller operations within other apparel categories. Our strategy is based on managing and growing our iconic brands through the three key principles of Simplify for Growth, Focus for Impact, and Continuously Improving to Win. By simplifying the portfolio, we continue to elevate these brands by delivering quality and value to our consumers through innovative brand and product experiences. We remain focused on the core product offerings while also expanding through innovation and new business opportunities for greater marketplace impact.
We are taking decisive actions to streamline operations and deliver measurable results and have pushed to reduce inventory and product SKUs through our disciplined inventory management. We have segmented and consolidated our world-class supply chain for greater efficiency and flexibility and our go-to-market strategy has been reimagined into a winning, repeatable cadence, supported by a robust, consumer-led innovation process that keeps us at the forefront of industry trends. We are highly confident our iconic brand portfolio, world-class supply chain and product innovation will ensure we will consistently grow sales, expand our margins and generate cash flow.
Over the last several years, we have experienced several unanticipated challenges, including significant cost inflation, market disruption and consumer-demand headwinds. Despite the challenging global operating environment, we have been able to balance the near-term management of the business with making the long-term investments necessary to execute our strategy and transform the Company. During this time, we have made meaningful progress on several of our strategic initiatives. We have pivoted our U.S. innerwear business back to gaining market share, which has been driven by the launch of new product innovation, increased marketing investments in our brands and improved on-shelf product availability. We have simplified our portfolio by selling our European Innerwear and U.S. Sheer Hosiery businesses.
In 2024, we reached the decision to exit the global Championbusiness, U.S.-based outlet store business and the ChampionJapan business. We determined these businesses represent multiple components of a single strategic plan that met held-for-sale and discontinued operations accounting criteria in 2024. Accordingly, we began to separately report the results of these businesses as discontinued operations in our Condensed Consolidated Statements of Operations and to present the related assets and liabilities as held for sale in our Condensed Consolidated Balance Sheets. These changes have been applied to all periods
presented. Unless otherwise noted, discussion within this MD&A relates to continuing operations. See Note, "Assets and Liabilities of Businesses Held for Sale" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information about discontinued operations.
We seek to generate strong cash flow through effectively optimizing our capital structure and managing working capital levels. In January 2023, we shifted our capital allocation strategy to focus the use of all our free cash flow (cash from operations less capital expenditures) on reducing debt and bringing our leverage back to a range that is no greater than two to three times on a net debt-to-adjusted EBITDA basis. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding restructuring and other action-related costs and certain other losses, charges and expenses. Net debt is defined as the total of current debt, long-term debt, and borrowings under the accounts receivable securitization facility (excluding long-term debt issuance costs) less other debt and cash adjustments and cash and cash equivalents.
Our Segments
In 2024 we realigned our segment reporting as a result of the sale of the global Championbusiness, as discussed in Note "Assets and Liabilities of Businesses Held for Sale" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q. While the global Championbusiness was reflected within all reportable segments prior to its reclassification to discontinued operations, the U.S. Championbusiness made up the majority of our former Activewear segment. Accordingly, the former Activewear segment has been eliminated and the segment information herein excludes the results of the global Championbusiness for all periods presented. As a result of the strategic shift and resulting reorganization, the chief executive officer, who is our chief operating decision maker, began reviewing all U.S. innerwear and U.S. activewear operations together as one U.S. operating segment. As a result of these changes, our operations are now managed and reported in two operating segments, each of which is a reportable segment for financial reporting purposes: U.S. and International. In December 2024, the Champion Japan business, which was previously reported within the International segment, was classified as held for sale and reflected as discontinued operations for all periods presented. Accordingly, the Champion Japan business has been excluded from the International segment information herein. These changes have been applied to all periods presented. These segments are organized and managed principally by geographic location. Each segment has its own management team that is responsible for the operations of the segment's businesses, but the segments share a common supply chain and media and marketing platforms.
Other consists of short-term transition service agreements and support of disposed businesses. Our U.S.-based outlet store business was also reflected in Other prior to its reclassification to discontinued operations in the second quarter of 2024 as discussed in Note "Assets and Liabilities of Businesses Held for Sale" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q. As a result of this reclassification, the results of the U.S.-based outlet store business are excluded from the segment information herein for all periods presented.
Gildan Merger Agreement
On August 13, 2025, we and Gildan Activewear Inc. ("Gildan") entered into a definitive agreement (the "Merger Agreement") under which Gildan will acquire us through a series of transactions (the "Transactions"). Pursuant to the Transactions, Gildan will acquire all of the outstanding shares of our common stock in exchange for 0.102 common shares of Gildan and $0.80 in cash for each share of our common stock. The consummation of the Transactions is subject to certain conditions, including approval by our stockholders, regulatory approvals, and the Gildan common shares to be issued in connection with the Transactions being approved for listing on the New York Stock Exchange ("NYSE") and the Toronto Stock Exchange ("TSX").
If the Merger Agreement is terminated under specified circumstances, we may be required to pay Gildan a termination fee of $68 million in cash (the "Hanesbrands Termination Fee"). If the Merger Agreement is terminated by either party due to failure to obtain approval by our stockholders, we will reimburse Gildan for its expenses in an amount up to $18 million. If the Hanesbrands Termination Fee subsequently becomes payable, any previously paid expense reimbursement amount will be deducted from the amount of the Hanesbrands Termination Fee.
The Transactions are expected to close in late 2025 or early 2026. If the Transactions are consummated, our common stock will be delisted from the NYSE and deregistered under the Exchange Act.
Goodwill and Indefinite-lived Intangible Assets
Goodwill and indefinite-lived intangible assets are evaluated for impairment at least annually as of the first day of the third quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value. In connection with the annual impairment analysis, we perform a quantitative assessment utilizing an income approach to estimate the fair values of its reporting units and certain indefinite-lived intangible assets. The most significant assumptions used to estimate the fair values of the reporting units and
certain indefinite-lived intangible assets include the weighted average cost of capital, revenue growth rate, terminal growth rate and operating profit margin.
During the quarter ended September 27, 2025, we completed our annual quantitative impairment analysis for each reporting unit and the respective goodwill balances. While it was determined that no impairment existed for the goodwill balances as of the quarter ended September 27, 2025, we noted a meaningful decline in the fair value cushion above the carrying value for the Australia reporting unit. The decline in the Australia reporting unit was driven by continued macroeconomic pressures impacting consumer spending which resulted in a fair value cushion that exceeded its carrying value by approximately 10% at the time the analysis was performed. As a result, the goodwill associated with this reporting unit is considered to be at a higher risk for future impairment if economic conditions worsen or earnings and operating cash flows do not recover as currently estimated by management. As of September 27, 2025, the carrying value of the goodwill balance associated with the Australia reporting unit was $238 million, which is reflected in the "Goodwill" line in the Condensed Consolidated Balance Sheets.
We also completed our annual quantitative impairment analysis for certain indefinite-lived intangible assets during the quarter ended September 27, 2025. While it was determined that no impairment existed for the indefinite-lived intangible assets during the quarter ended September 27, 2025, we noted a meaningful decline in the fair value cushion above the carrying value for one of the indefinite-lived trademarks within the Australian business and one of the indefinite-lived trademarks within the U.S. business. Within the Australian business, the decline in the trademark fair value was driven by continued macroeconomic pressures impacting consumer spending in Australia and resulted in a fair value that approximated the carrying value at the time the analysis was performed. Within the U.S. business, the decline in the trademark fair value was driven by macroeconomic pressures within the intimate apparel business and resulted in a fair value cushion that exceeded the carrying value by approximately 10% at the time the analysis was performed. As a result, both of these trademarks are considered to be at a higher risk for future impairment if economic conditions worsen or earnings and operating cash flows do not recover as currently estimated by management. As of September 27, 2025, the carrying values of certain trademarks within the Australian business and the U.S. business were $230 million and $209 million, respectively, which are reflected in the "Trademarks and other identifiable intangibles, net" line in the Condensed Consolidated Balance Sheets.
Although we determined that no impairment existed for our goodwill or indefinite-lived intangible assets as of September 27, 2025, these assets could be at risk for future impairment due to changes in our business or global economic conditions.
Global Economy
The global macroeconomic pressures continue to impact our business operations and financial results, as described in more detail under "Condensed Consolidated Results of Operations - Third Quarter Ended September 27, 2025 Compared with Third Quarter Ended September 28, 2024" and "Condensed Consolidated Results of Operations - Nine Months Ended September 27, 2025 Compared with Nine Months Ended September 28, 2024" below, primarily through consumer-demand headwinds and elevated interest rates. Despite the challenging global operating environment, we have been able to balance near term management of the business with implementing changes to execute our strategy to simplify and position the Company for growth.
In April 2025, the U.S. imposed a new tariff and trade policy and has subsequently announced various updates to its tariff policy. The imposition of tariffs by the U.S. government and some trading partners, along with associated geopolitical tensions have created an uncertain environment for global trade. While we believe we are well positioned to navigate the current U.S. tariffs, countries may, in the future, adjust or impose new tariffs or other restrictions which may further affect our business and operations or could lead to further weakened business conditions for our industry. With continued uncertainty surrounding the geopolitical and trade environment, we continue to evaluate the impact of actual and proposed tariffs and other trade controls on our business and plan and implement actions to mitigate unfavorable impacts from tariffs and related risks. Such actions may include, among others, further cost reductions, pricing actions and pursuing incremental revenue opportunities created from tariff-related market disruptions.
The future impact of global macroeconomic pressures, including consumer demand headwinds, elevated interest rates and the imposition of tariffs and other trade controls remains highly uncertain, and our business and results of operations, including our net sales, earnings and cash flows, could be adversely impacted. See the related risk factors under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2024.
Seasonality and Other Factors
Our operating results are typically subject to some variability due to seasonality and other factors. For instance, we have historically generated higher sales during the back-to-school and holiday shopping seasons and during periods of cooler weather, which benefits certain product categories such as socks and fleece. Our diverse range of product offerings, however,
typically mitigates some of the impact of seasonal changes in demand for certain items. Sales levels in any period are also impacted by our customers' decisions to increase or decrease their inventory levels of our categories in response to anticipated consumer demand or the overall inventory levels of their other product categories. Our customers may cancel orders, change delivery schedules or change the mix of products ordered with minimal notice to us. Media, advertising and promotion expenses may vary from period to period during a fiscal year depending on the timing of our advertising campaigns for retail selling seasons and product introductions.
Although the majority of our products are replenishment in nature and tend to be purchased by consumers on a planned rather than impulse basis, our sales are impacted by discretionary consumer spending trends. Discretionary spending is affected by many factors that are outside of our control, including, among others, general business conditions, interest rates, inflation, consumer debt levels, the availability of consumer credit, currency exchange rates, tariffs, taxation, energy prices, unemployment trends and other matters that influence consumer confidence and spending. Consumers' purchases of discretionary items, including our products, could decline during periods when disposable income is lower, when prices increase in response to rising costs, or in periods of actual or perceived unfavorable economic conditions. As a result, consumers may choose to purchase fewer of our products, to purchase lower-priced products of our competitors in response to higher prices for our products or may choose not to purchase our products at prices that reflect our price increases that become effective from time to time.
Inflation can have a long-term impact on us because increasing costs of materials and labor may impact our ability to maintain satisfactory margins. For example, the cost of the materials that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, including cotton, dyes and chemicals, and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation and other factors. Disruptions to the global supply chain due to factory closures, port congestion, transportation delays as well as labor and container shortages may negatively impact product availability, revenue growth and gross margins. We would work to mitigate the impact of global supply chain disruptions through a combination of cost savings and operating efficiencies, as well as pricing actions, which could have an adverse impact on demand. Costs incurred for materials and labor are capitalized into inventory and impact our results as the finished goods inventory is sold. In addition, a significant portion of our products are manufactured in countries other than the United States and declines in the value of the U.S. dollar may result in higher manufacturing costs. Increases in inflation may not be matched by growth in consumer income, which also could have a negative impact on spending.
Changes in product sales mix can impact our gross profit as the percentage of our sales attributable to higher margin products, such as intimate apparel and men's underwear, and lower margin products, such as basic apparel, fluctuate from time to time. In addition, sales attributable to higher and lower margin products within the same product category fluctuate from time to time. Our customers may change the mix of products ordered with minimal notice to us, which makes trends in product sales mix difficult to predict. However, certain changes in product sales mix are seasonal in nature, as sales of socks and fleece products generally have higher sales during the last two quarters (July to December) of each fiscal year as a result of cooler weather, back-to-school shopping and holidays, while other changes in product mix may be attributable to consumers' preferences and discretionary spending.
Key Financial Results from the Third Quarter Ended September 27, 2025
Key financial results are as follows:
•Total net sales in the third quarter of 2025 were $892 million, compared with $900 million in the same period of 2024, representing a 1% decrease.
•Operating profit increased 14% to $108 million in the third quarter of 2025, compared with $94 million in the same period of 2024. As a percentage of sales, operating profit increased to 12.1% in the third quarter of 2025, compared to 10.4% in the same period of 2024.
•Diluted earnings per share from continuing operations was $0.76 in the third quarter of 2025 compared with diluted earnings per share of $0.07 in the same period of 2024.
Condensed Consolidated Results of Operations - Third Quarter Ended September 27, 2025 Compared with Third Quarter Ended September 28, 2024
| Quarters Ended | |||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Net sales | $ | 891,683 | $ | 900,367 | $ | (8,684) | (1.0) | % | |||||||||||||||
| Cost of sales | 528,233 | 526,890 | 1,343 | 0.3 | |||||||||||||||||||
| Gross profit | 363,450 | 373,477 | (10,027) | (2.7) | |||||||||||||||||||
| Selling, general and administrative expenses | 255,922 | 279,440 | (23,518) | (8.4) | |||||||||||||||||||
| Operating profit | 107,528 | 94,037 | 13,491 | 14.3 | |||||||||||||||||||
| Other expenses | 8,053 | 9,343 | (1,290) | (13.8) | |||||||||||||||||||
| Interest expense, net | 47,116 | 48,542 | (1,426) | (2.9) | |||||||||||||||||||
| Income from continuing operations before income taxes | 52,359 | 36,152 | 16,207 | 44.8 | |||||||||||||||||||
| Income tax expense (benefit) | (219,548) | 11,430 | (230,978) | (2,020.8) | |||||||||||||||||||
| Income from continuing operations | 271,907 | 24,722 | 247,185 | 999.9 | |||||||||||||||||||
| Gain (loss) from discontinued operations, net of tax | (1,171) | 5,229 | (6,400) | (122.4) | |||||||||||||||||||
| Net income | $ | 270,736 | $ | 29,951 | $ | 240,785 | 803.9 | % | |||||||||||||||
Net Sales
Net sales decreased 1% during the third quarter of 2025 compared to the third quarter of 2024 primarily due to an unanticipated late-quarter shift in replenishment orders at one of our large U.S. retail partners, continued macro-driven economic pressures impacting consumer spending and the unfavorable impact from foreign currency exchange rates in our International business of approximately $4 million, partially offset by sales related to short-term transition service agreements and support of disposed businesses in the third quarter of 2025.
Operating Profit
Operating profit as a percentage of net sales was 12.1% during the third quarter of 2025, representing an increase from 10.4% in the third quarter of 2024. The operating margin improvement primarily resulted from approximately 160 basis points from cost savings initiatives and disciplined expense management, 105 basis points from cost savings initiatives within our supply chain, approximately 50 basis points from lower input costs and approximately 40 basis points from pricing actions which were partially offset from approximately 310 basis points from unfavorable assortment management and mix. Additionally, a decrease in restructuring and other action-related charges included in operating profit to $8 million in the third quarter of 2025 compared to $19 million in the third quarter of 2024, resulted in a favorable impact to operating margin of approximately 120 basis points.
Other Highlights
Other Expenses - Other expenses decreased $1 million in the third quarter of 2025 compared to the third quarter of 2024 primarily due to lower funding fees for sales of accounts receivable to financial institutions and lower pension expense in the third quarter of 2025.
Interest Expense - Interest expense from continuing operations was $47 million and nearly $49 million in the third quarters of 2025 and 2024, respectively, representing a decrease of $1 million. Interest expense from continuing operations in the third quarter of 2024 excludes $17 million, which was allocated to discontinued operations due to the requirement to pay down a portion of our outstanding term debt under the Senior Secured Credit Facility with the net proceeds from the sale of the global Championbusiness. Combined interest expense from continuing and discontinued operations decreased approximately $17 million in the third quarter of 2025 compared to the third quarter of 2024 primarily due to lower weighted average outstanding debt balances combined with a lower weighted average interest rate on our borrowings during the third quarter of 2025. Our combined weighted average interest rate, including the portion of interest expense that was allocated to discontinued operations, on our outstanding debt was 7.25% for the third quarter of 2025 compared to 7.50% for the third quarter of 2024.
Income Tax Expense- In the third quarter of 2025, income tax benefit was $220 million, resulting in an effective income tax rate of (419.3)% and in the third quarter of 2024, income tax expense was $11 million, resulting in an effective income tax rate of 31.6%. Our effective tax rates for the third quarter of 2025 primarily differs from the U.S. statutory rate due to the release of valuation allowances recorded against U.S. deferred tax assets. Our effective tax rate for the third quarter of 2024 primarily differs from the U.S. statutory rate due to valuation allowances against certain net deferred tax assets. We had
favorable discrete items of $227 million in the third quarter of 2025 and unfavorable discrete items of $1 million in the third quarter of 2024.
For the third quarter 2025, we released valuation allowances of $241 million recorded against our beginning of year U.S. federal and U.S. state deferred tax assets. A valuation allowance release indicates that it is more likely than not that the deferred tax assets will be realized. We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of all available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. For the third quarter 2025, based on our analysis of all positive and negative evidence, we concluded it is more-likely-than-not that a significant portion of our U.S. federal and certain U.S. state deferred tax assets will be realizable based on our current and anticipated future earnings. When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as discrete tax benefit in the interim period. The release of these valuation allowances resulted in a discrete tax benefit of $225 million in the third quarter of 2025. We continue to maintain a valuation allowance on certain U.S federal, U.S. state, and foreign deferred tax assets which do not meet the more-likely-than-not realization criterion. We monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA" or "the Bill") into law. The Bill contains a broad range of tax reform provisions, which include the extension and modification of certain provisions of the Tax Cuts and Jobs Act, immediate expensing of domestic research and development expenditures, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation with various effective dates beginning in 2025. We have considered the impact of the OBBBA on our annual effective tax rate. These provisions did not have a material impact to income taxes in our condensed consolidated financial statements for the third quarter 2025.
Discontinued Operations- The results of our discontinued operations include the operations of our global Champion business, U.S.-based outlet store business, and the ChampionJapan business, which we reached the decision to exit in 2024. See Note "Assets and Liabilities of Businesses Held for Sale" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information related to discontinued operations.
Operating Results by Business Segment - Third Quarter Ended September 27, 2025 Compared with Third Quarter Ended September 28, 2024
| Net Sales | |||||||||||||||||||||||
| Quarters Ended | |||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| U.S. | $ | 647,531 | $ | 678,345 | $ | (30,814) | (4.5) | % | |||||||||||||||
| International | 204,371 | 222,410 | (18,039) | (8.1) | |||||||||||||||||||
| Other | 39,781 | (388) | 40,169 | 10,352.8 | |||||||||||||||||||
| Total | $ | 891,683 | $ | 900,367 | $ | (8,684) | (1.0) | % | |||||||||||||||
| Operating Profit and Margin | |||||||||||||||||||||||||||||||||||
| Quarters Ended | |||||||||||||||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
| U.S. | $ | 143,999 | 22.2 | % | $ | 149,637 | 22.1 | % | $ | (5,638) | (3.8) | % | |||||||||||||||||||||||
| International | 20,799 | 10.2 | 27,704 | 12.5 | (6,905) | (24.9) | |||||||||||||||||||||||||||||
| Other | 1,416 | 3.6 | (1,989) | 512.6 | 3,405 | 171.2 | |||||||||||||||||||||||||||||
| Corporate | (58,686) | NM | (81,315) | NM | 22,629 | 27.8 | |||||||||||||||||||||||||||||
| Total | $ | 107,528 | 12.1 | % | $ | 94,037 | 10.4 | % | $ | 13,491 | 14.3 | % | |||||||||||||||||||||||
U.S.
U.S. net sales decreased approximately 5% compared to the third quarter of 2024 primarily due to an unanticipated late-quarter shift in replenishment orders at one of our large U.S. retail partners, partially offset by growth in our active apparel and new businesses including scrubs and loungewear products.
U.S. operating margin was 22.2%, an increase from 22.1% in the third quarter of 2024. The operating margin rate improvement primarily resulted from approximately 155 basis points from cost savings initiatives within our supply chain and approximately 70 basis points from lower input costs which were partially offset by approximately 190 basis points from unfavorable assortment management and mix.
International
Net sales in the International segment decreased 8% compared to the third quarter of 2024 due to continued macro-driven economic pressures impacting consumer spending in Australia combined with unfavorable foreign currency exchange rates. The unfavorable impact of foreign currency exchange rates decreased net sales by approximately $4 million in the third quarter of 2025. International net sales on a constant currency basis, defined as net sales excluding the impact of foreign currency, decreased approximately 6% when compared to the third quarter of 2024. The impact of foreign currency exchange rates is calculated by applying prior period exchange rates to the current year financial results. We believe constant-currency information is useful to management and investors to facilitate comparison of operating results and better identify trends in our businesses.
International operating margin was 10.2%, a decrease from 12.5% in the third quarter of 2024. The operating margin rate decline primarily resulted from approximately 175 basis points from higher operating expenses and approximately 50 basis points from strategic, planned brand investments.
Other
Sales and operating results in the third quarter of 2025 and 2024 primarily reflect short-term transition service agreements and support of disposed businesses.
Corporate
Corporate expenses included in operating profit were lower in the third quarter of 2025 compared to the third quarter of 2024 primarily due to lower restructuring and other action-related charges.
Restructuring and other action-related charges within operating profit were $8 million and $19 million in the third quarters of 2025 and 2024, respectively, as described in more detail below.
•Charges related to professional services primarily include consulting and advisory services related to restructuring activities including cost transformation and technology modernization initiatives, which are reflected in the "Selling, general and administrative expenses" line in the Condensed Consolidated Statements of Operations.
•We recognized headcount actions and related severance charges, including subsequent adjustments to initial estimates, resulting from restructuring activities and operating model initiatives are primarily reflected in the "Selling, general and administrative expenses" line in the Condensed Consolidated Statements of Operations.
•Supply chain restructuring and consolidation charges primarily attributed to charges and subsequent adjustments to estimates related to headcount actions and related severance pertaining to restructuring and consolidation efforts within the Company's supply chain network as well as charges for accelerated amortization of right of use assets for the leased facilities that the Company expects to exit before the end of the contractual lease term.
•Corporate asset impairment charges primarily represent charges during the second quarter of 2024 related to a contract termination of $10 million and impairment of the Company's headquarters location that was classified as held for sale of $10 million which were recorded in the "Cost of sales" and "Selling, general and administrative expenses" lines of the Condensed Consolidated Statements of Operations, respectively.
•Other charges in the quarter ended September 27, 2025, are primarily associated with transaction fees and transition planning charges related to the pending Gildan transactions which were primarily recorded in the "Selling, general and administrative expenses" line of the Condensed Consolidated Statements of Operations. The remaining restructuring and other action-related charges within operating profit are charges related to real estate initiatives pertaining to our corporate headquarters move and other restructuring and action-related charges.
In the quarter ended September 27, 2025, we recorded a non-cash discrete tax benefit of $228 million primarily related to the release of valuation allowances recorded against certain U.S. federal and state deferred tax assets, which is recorded within the "Income tax expense (benefit)" line of the Condensed Consolidated Statements of Operations. As of September 27, 2025, based on our analysis of all positive and negative evidence, we concluded it is more-likely-than-not that a significant portion of our U.S. federal and certain U.S. state deferred tax assets will be realizable based on our current and anticipated future earnings. We continue to maintain a valuation allowance on certain U.S federal, U.S. state, and foreign deferred tax assets which do not meet the more-likely-than-not realization criterion. We monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
The components of restructuring and other action-related charges were as follows:
| Quarters Ended | |||||||||||
|
September 27, 2025 |
September 28, 2024 |
||||||||||
| (dollars in thousands) | |||||||||||
| Restructuring and other action-related charges: | |||||||||||
| Professional services | $ | 3,119 | $ | 8,271 | |||||||
| Headcount actions and related severance | (283) | (1,245) | |||||||||
| Supply chain restructuring and consolidation | 731 | 10,710 | |||||||||
| Corporate asset impairment charges | - | - | |||||||||
| Other | 4,713 | 1,209 | |||||||||
| Total included in operating profit | 8,280 | 18,945 | |||||||||
| Discrete tax (expense) benefit | 227,732 | - | |||||||||
|
Tax effect on actions
|
- | - | |||||||||
| Total included in income tax (expense) benefit | 227,732 | - | |||||||||
| Total restructuring and other action-related charges included in income (loss) from continuing operations | $ | (219,452) | $ | 18,945 | |||||||
Condensed Consolidated Results of Operations - Nine Months Ended September 27, 2025 Compared with Nine Months Ended September 28, 2024
| Nine Months Ended | |||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Net sales | $ | 2,643,156 | $ | 2,618,969 | $ | 24,187 | 0.9 | % | |||||||||||||||
| Cost of sales | 1,551,081 | 1,649,716 | (98,635) | (6.0) | |||||||||||||||||||
| Gross profit | 1,092,075 | 969,253 | 122,822 | 12.7 | |||||||||||||||||||
| Selling, general and administrative expenses | 749,981 | 903,005 | (153,024) | (16.9) | |||||||||||||||||||
| Operating profit | 342,094 | 66,248 | 275,846 | 416.4 | |||||||||||||||||||
| Other expenses | 34,348 | 29,021 | 5,327 | 18.4 | |||||||||||||||||||
| Interest expense, net | 137,971 | 149,404 | (11,433) | (7.7) | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 169,775 | (112,177) | 281,952 | 251.3 | |||||||||||||||||||
| Income tax expense (benefit) | (201,771) | 31,486 | (233,257) | (740.8) | |||||||||||||||||||
| Income (loss) from continuing operations | 371,546 | (143,663) | 515,209 | 358.6 | |||||||||||||||||||
| Gain (loss) from discontinued operations, net of tax | (28,655) | (163,888) | 135,233 | 82.5 | |||||||||||||||||||
| Net income (loss) | $ | 342,891 | $ | (307,551) | $ | 650,442 | 211.5 | % | |||||||||||||||
Net Sales
Net sales increased 1% during the nine months of 2025 compared to the nine months of 2024 primarily due to sales related to short-term transition service agreements and support of disposed businesses during the nine months of 2025, the unfavorable impact from foreign currency exchange rates in our International business of approximately $24 million and the continued macro-driven slowdown impacting consumer spending across segments.
Operating Profit
Operating profit as a percentage of net sales was 12.9% during the nine months of 2025, representing an increase from 2.5% in the nine months of 2024. The operating margin improvement primarily resulted from approximately 160 basis points from cost savings initiatives and disciplined expense management, approximately 70 basis points from lower input costs and approximately 65 basis points from cost savings initiatives within our supply chain which were partially offset by 105 basis points from unfavorable assortment management and mix. Additionally, a decrease in restructuring and other action-related charges included in operating profit of $215 million in the nine months of 2025 compared to the nine months of 2024, resulted in a favorable impact to operating margin of approximately 823 basis points.
Other Highlights
Other Expenses - Other expenses increased $5 million in the nine months of 2025 compared to the nine months of 2024 primarily due to charges of approximately $10 million as a result of the redemption of the 4.875% Senior Notes and refinancing of the Senior Secured Credit Facility in first quarter of 2025. The charges included a payment of $1 million for a required make-whole premium related to the redemption of the 4.875% Senior Notes, third party and legal fees charged to expense of $1 million related to the Senior Secured Credit Facility refinancing and non-cash charges of $8 million for the write-off of the related unamortized debt issuance costs. See Note "Debt" to our condensed consolidated interim financial statements included in our Quarterly Report on Form 10-Q for additional information. Other expenses also included lower pension expense and lower funding fees for sales of accounts receivable to financial institutions in the third quarter of 2025.
Interest Expense- Interest expense from continuing operations was $138 million and $149 million in the nine months of 2025 and 2024, respectively, representing a decrease of $11 million. The interest expense from continuing operations excludes $0.2 million and $53 million in the nine months of 2025 and 2024, respectively, which was allocated to discontinued operations due to the requirement to pay down a portion of outstanding term debt under the Senior Secured Credit Facility with the net proceeds from the sale of the global Championbusiness. Combined interest expense from continuing and discontinued operations decreased $58 million in the nine months of 2025 compared to the nine months of 2024 primarily due to lower weighted average outstanding debt balance combined with a lower weighted average interest rate on our borrowings during the nine months of 2025. Our combined weighted average interest rate, including the portion of interest expense that was allocated to discontinued operations, on our outstanding debt was 7.12% for the nine months of 2025 compared to 7.56% for the nine months of 2024.
Income Tax Expense- In the nine months of 2025, income tax benefit was $202 million, resulting in an effective income tax rate of (118.8)% and in the nine months of 2024, income tax expense was $31 million, resulting in an effective income tax rate of (28.1)%. Our effective tax rate for the nine months of 2025 primarily differs from the U.S. statutory rate due to the release of valuation allowances recorded against U.S. deferred tax assets. Our effective tax rate the nine months of 2024 primarily differs from the U.S. statutory rate due to valuation allowances against certain net deferred tax assets. We had favorable discrete items of $226 million in the nine months of 2025 and minimal favorable discrete items in the nine months of 2024.
For the nine months of 2025, we released valuation allowances of $241 million recorded against our beginning of year U.S. federal and U.S. state deferred tax assets. A valuation allowance release indicates that it is more likely than not that the deferred tax assets will be realized. We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of all available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. For the nine months of 2025, based on our analysis of all positive and negative evidence, we concluded it is more-likely-than-not that a significant portion of our U.S. federal and certain U.S. state deferred tax assets will be realizable based on our current and anticipated future earnings. When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as discrete tax benefit in the interim period. The release of these valuation allowances resulted in a discrete tax benefit of $225 million in the nine months of 2025. We continue to maintain a valuation allowance on certain U.S federal, U.S. state, and foreign deferred tax assets which do not meet the more-likely-than-not realization criterion. We monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA" or "the Bill") into law. The Bill contains a broad range of tax reform provisions, which include the extension and modification of certain provisions of the Tax Cuts and Jobs Act, immediate expensing of domestic research and development expenditures, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation with various effective dates beginning in 2025. We have considered the impact of the OBBBA on our annual effective tax rate. These provisions did not have a material impact to income taxes in our condensed consolidated financial statements for the nine months of 2025.
Discontinued Operations- The results of our discontinued operations include the operations of our global Championbusiness, U.S.-based outlet store business and the ChampionJapan business which we reached the decision to exit in 2024. See Note "Assets and Liabilities of Businesses Held for Sale" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information related to discontinued operations.
Operating Results by Business Segment - Nine Months Ended September 27, 2025 Compared with Nine Months Ended September 28, 2024
| Net Sales | |||||||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| U.S. | $ | 1,919,239 | $ | 1,962,390 | $ | (43,151) | (2.2) | % | |||||||||||||||
| International | 625,863 | 655,494 | (29,631) | (4.5) | |||||||||||||||||||
| Other | 98,054 | 1,085 | 96,969 | 8,937.2 | |||||||||||||||||||
| Total | $ | 2,643,156 | $ | 2,618,969 | $ | 24,187 | 0.9 | % | |||||||||||||||
| Operating Profit and Margin | |||||||||||||||||||||||||||||||||||
| Nine Months Ended | |||||||||||||||||||||||||||||||||||
|
September 27, 2025 |
September 28, 2024 |
Higher (Lower) |
Percent Change |
||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
| U.S. | $ | 439,796 | 22.9 | % | $ | 406,114 | 20.7 | % | $ | 33,682 | 8.3 | % | |||||||||||||||||||||||
| International | 67,545 | 10.8 | 74,742 | 11.4 | (7,197) | (9.6) | |||||||||||||||||||||||||||||
| Other | 8,233 | 8.4 | (1,438) | (132.5) | 9,671 | 672.5 | |||||||||||||||||||||||||||||
| Corporate | (173,480) | NM | (413,170) | NM | 239,690 | 58.0 | |||||||||||||||||||||||||||||
| Total | $ | 342,094 | 12.9 | % | $ | 66,248 | 2.5 | % | $ | 275,846 | 416.4 | % | |||||||||||||||||||||||
U.S.
U.S. net sales decreased 2% compared to the nine months of 2024 primarily due to an unanticipated shift in replenishment orders at one of our large U.S. retail partners in the third quarter and softer point-of-sale trends stemming from the continued macroeconomic pressures, primarily within the intimate apparel business.
U.S. operating margin was 22.9%, an increase from 20.7% in the nine months of 2024. The operating margin improvement primarily resulted from approximately 105 basis points from cost savings initiatives within our supply chain and approximately 90 basis points from lower input costs.
International
Net sales in the International segment decreased 5% compared to the nine months of 2024 due to continued macro-driven economic pressures impacting consumer spending in Australia combined with unfavorable foreign currency exchange rates which was partially offset by growth in Asia. The unfavorable impact of foreign currency exchange rates decreased net sales approximately $24 million in the nine months of 2025. International net sales on a constant currency basis, defined as net sales excluding the impact of foreign currency, decreased by approximately 1% when compared to the nine months of 2024. The impact of foreign currency exchange rates is calculated by applying prior period exchange rates to the current year financial results. We believe constant-currency information is useful to management and investors to facilitate comparison of operating results and better identify trends in our businesses.
International operating margin was 10.8%, a decrease from 11.4% in the nine months of 2024. The operating margin improvement primarily resulted from approximately 60 basis points from increased strategic, planned brand investments and approximately 20 basis points from cost savings initiatives and disciplined expense management which was partially offset by approximately 20 basis points from higher input costs.
Other
Sales and operating results in the nine months of 2025 and 2024 primarily reflect short-term transition service agreements and support of disposed businesses. Sales and operating results in the nine months of 2024 primarily reflect short term transition service agreements and support of disposed businesses, including support of the U.S. Sheer Hosiery business which was sold on September 29, 2023.
Corporate
Corporate expenses included in operating profit were lower in the nine months of 2025 compared to the nine months of 2024 primarily due to lower restructuring and other action-related charges.
Restructuring and other action-related charges within operating profit were $8 million and $223 million in the nine months of 2025 and 2024, respectively, as described in more detail below.
•Charges related to professional services primarily include consulting and advisory services related to restructuring activities including cost transformation and technology modernization initiatives, which are reflected in the "Selling, general and administrative expenses" line in the Condensed Consolidated Statements of Operations.
•We recognized headcount actions and related severance charges, including subsequent adjustments to initial estimates, resulting from restructuring activities and operating model initiatives are primarily reflected in the "Selling, general and administrative expenses" line in the Condensed Consolidated Statements of Operations.
•Supply chain restructuring and consolidation charges primarily attributed to charges and subsequent adjustments to estimates related to headcount actions and related severance pertaining to restructuring and consolidation efforts within the Company's supply chain network as well as charges for accelerated amortization of right of use assets for the leased facilities that the Company expects to exit before the end of the contractual lease term and depreciation of certain fixed assets.
•Corporate asset impairment charges primarily represent charges during the nine months ended September 28, 2024 related to a contract termination of $10 million and impairment of the Company's headquarters location that was classified as held for sale of $10 million which were recorded in the "Cost of sales" and "Selling, general and administrative expenses" lines of the Condensed Consolidated Statements of Operations, respectively.
•Other charges in the nine months ended September 27, 2025, are primarily associated with transaction fees and transition planning charges related to the pending Gildan transactions which were primarily recorded in the "Selling, general and administrative expenses" line of the Condensed Consolidated Statements of Operations. The remaining restructuring and other action-related charges within operating profit are charges related to real estate initiatives pertaining to our corporate headquarters move and other restructuring and action-related charges.
In the nine months ended September 27, 2025, we recorded charges totaling $10 million in restructuring and other action-related charges related to the refinancing of the senior secured credit facility and redemption of our 4.875% Senior Notes. The charges, which are recorded in the "Other expenses" line in the Condensed Consolidated Statements of Operations, included a payment of $1 million for a required make-whole premium related to the redemption of our 4.875% Senior Notes, charges for third party and legal fees of $1 million related to our senior secured credit facility refinancing, and non-cash charges of $8 million for the write-off of the related unamortized debt issuance costs. See Note "Debt" for additional information.
In the nine months ended September 27, 2025, we recorded a non-cash discrete tax benefit of $228 million primarily related to the release of valuation allowances recorded against certain U.S. federal and state deferred tax assets, which is recorded within the "Income tax expense (benefit)" line of the Condensed Consolidated Statements of Operations. As of September 27, 2025, based on our analysis of all positive and negative evidence, we concluded it is more-likely-than-not that a significant portion of our U.S. federal and certain U.S. state deferred tax assets will be realizable based on our current and anticipated future earnings. We continue to maintain a valuation allowance on certain U.S federal, U.S. state, and foreign deferred tax assets which do not meet the more-likely-than-not realization criterion. We monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
The components of restructuring and other action-related charges were as follows:
| Nine Months Ended | |||||||||||
|
September 27, 2025 |
September 28, 2024 |
||||||||||
| (dollars in thousands) | |||||||||||
| Restructuring and other action-related charges: | |||||||||||
| Professional services | $ | 6,485 | $ | 12,704 | |||||||
| Headcount actions and related severance | (1,102) | 17,853 | |||||||||
| Supply chain restructuring and consolidation | (2,513) | 169,624 | |||||||||
| Corporate asset impairment charges | - | 20,107 | |||||||||
| Other | 5,328 | 2,660 | |||||||||
| Total included in operating profit | 8,198 | 222,948 | |||||||||
|
Loss on extinguishment of debt included in other expenses
|
9,979 | - | |||||||||
| Total included in income (loss) from continuing operations before income taxes | 18,177 | 222,948 | |||||||||
| Discrete tax (expense) benefit | 227,732 | - | |||||||||
|
Tax effect on actions
|
- | - | |||||||||
| Total included in income tax (expense) benefit | 227,732 | - | |||||||||
| Total restructuring and other action-related charges included in income (loss) from continuing operations | $ | (209,555) | $ | 222,948 | |||||||
Liquidity and Capital Resources
Cash Requirements and Trends and Uncertainties Affecting Liquidity
We primarily rely on our cash flows generated from operations and the borrowing capacity under our credit facilities to meet the cash requirements of our business. In January 2023, we shifted our capital allocation strategy to utilize our cash from operations for payments to our employees and vendors in the normal course of business and to reinvest in our business through capital expenditures. We then utilize our free cash flow (cash from operations less capital expenditures) to pay down debt to bring our leverage back to a range that is no greater than two to three times on a net debt-to-adjusted EBITDA basis.
Based on our current expectations and forecasts of future earnings and cash flows, we believe we have sufficient cash and available borrowings to support our operations and key business strategies for at least the next 12 months and we currently believe our cash flows and available borrowings, together with our access to the capital markets, are sufficient to support our longer term liquidity needs as well.
Our primary financing arrangements are our Senior Secured Credit Facility, our 9.000% senior notes due in 2031 (the "9.000% Senior Notes") and our accounts receivable securitization facility due in 2026 (the "ARS Facility"). The Senior Secured Credit Facility consists of a $750 million revolving loan facility due in 2030 (the "Revolving Loan Facility"), a senior secured term loan A facility due in 2030 (the "Term Loan A") and a senior secured term loan B facility due in 2032 (the "Term Loan B").
Our primary sources of liquidity are cash generated from global operations and cash available under our Revolving Loan Facility, our ARS Facility and our other international credit facilities.
We had the following borrowing capacity and available liquidity under our credit facilities as of September 27, 2025:
| As of September 27, 2025 | |||||||||||
|
Borrowing Capacity |
Available Liquidity |
||||||||||
| (dollars in thousands) | |||||||||||
| Senior Secured Credit Facility: | |||||||||||
|
Revolving Loan Facility(1)
|
$ | 750,000 | $ | 584,564 | |||||||
|
Accounts Receivable Securitization Facility(2)
|
115,000 | 6,000 | |||||||||
|
Other international credit facilities(3)
|
949 | (8,900) | |||||||||
| Total liquidity from credit facilities | $ | 865,949 | $ | 581,664 | |||||||
| Cash and cash equivalents | 217,573 | ||||||||||
| Total liquidity | $ | 799,237 | |||||||||
(1)Available liquidity is reduced by standby and trade letters of credit issued and outstanding under this facility.
(2)Borrowing availability under the ARS Facility is subject to a quarterly fluctuating facility limit ranging from $85 millionto $115 million based on the applicable quarter and permitted only to the extent that the face of the receivables in the collateral pool, net of applicable reserves and other deductions, exceeds the outstanding loans.
(3)Available liquidity for other international credit facilities is reduced for any outstanding international letters of credit. The international letters of credit are not outstanding under any specific credit facility and do not reduce actual borrowing capacity under the specific credit facilities.
The following have impacted or may impact our liquidity:
•We have principal and interest obligations under our debt and ongoing financial covenants under those debt facilities.
•In March 2025, we refinanced our Senior Secured Credit Facility including the senior secured revolving credit facility, the senior secured Term Loan A facility, and the senior secured Term Loan B facility which will mature in March 2030, March 2030 and March 2032, respectively. Additionally, we elected to exercise the optional redemption rights to redeem all of the outstanding 4.875% senior notes due 2026.
•In August 2025, we entered into a definitive agreement to be acquired by Gildan which includes termination rights under certain circumstances which could result in a termination fee payable by us in the amount of $68 million, which we refer to as the Hanesbrands Termination Fee. Additionally, if we do not receive stockholder approval of the Transactions, we will reimburse Gildan for its expenses up to $18 million. If the Hanesbrands Termination Fee subsequently becomes payable, any previously paid expense reimbursement amount will be deducted from the amount of the Hanesbrands Termination Fee.
•The difficult global macroeconomic environment has had, and may continue to have, a negative impact on our business and the businesses of our customers.
•Our Board of Directors eliminated our quarterly cash dividend as we shifted our capital allocation strategy in January 2023 to pay down debt to bring our leverage back to a range that is no greater than two to three times on a net debt-to-adjusted EBITDA basis. The declaration of any future dividends and, if declared, the amount of any such dividends, will be subject to our actual future earnings, capital requirements, regulatory restrictions, debt covenants, other contractual restrictions and to the discretion of our Board of Directors.
•We have invested in global growth initiatives, as well as marketing and brand building.
•We previously launched a series of multi-year cost savings programs and recently began implementing significant restructuring and consolidation efforts within our supply chain network, both manufacturing and distribution, as well as corporate cost and headcount reductions within continuing operations to drive stronger operating performance and margin expansion.
•In the future, when it aligns with our capital allocation strategy and absent any covenant restrictions, we may pursue strategic business acquisitions.
•We have completed and may pursue strategic divestitures, such as the recently completed Initial Closing of our global Championbusiness and exit of our U.S.-based outlet store business in 2024 and the Deferred Closing of our global Championbusiness on January 31, 2025. In December 2024, we finalized plans to exit the ChampionJapan business and expect to complete the sale of the business within the current fiscal year.
•We made required cash contributions of approximately $11 million to our U.S. pension plans in the nine months of 2025 based on the preliminary calculation by our actuary. We may also elect to make additional voluntary contributions.
•We may increase or decrease the portion of the current-year income of our foreign subsidiaries that we remit to the United States, which could impact our effective income tax rate. We have not changed our reinvestment strategy from the prior year with regards to our unremitted foreign earnings and intend to remit foreign earnings totaling $65 million.
Sources and Uses of Our Cash
The information presented below regarding the sources and uses of our cash flows for the nine months ended September 27, 2025 and September 28, 2024 was derived from our condensed consolidated interim financial statements.
| Nine Months Ended | |||||||||||
|
September 27, 2025 |
September 28, 2024 |
||||||||||
| (dollars in thousands) | |||||||||||
| Operating activities | $ | (44,272) | $ | 196,812 | |||||||
| Investing activities | 2,284 | (31,843) | |||||||||
| Financing activities | 40,400 | (40,161) | |||||||||
| Effect of changes in foreign exchange rates on cash | 4,307 | (3,398) | |||||||||
| Change in cash and cash equivalents | 2,719 | 121,410 | |||||||||
| Cash and cash equivalents at beginning of year | 215,354 | 205,501 | |||||||||
| Cash and cash equivalents at end of period | $ | 218,073 | $ | 326,911 | |||||||
| Balances included in the Condensed Consolidated Balance Sheets: | |||||||||||
| Cash and cash equivalents | $ | 217,573 | $ | 316,801 | |||||||
| Cash and cash equivalents included in current assets held for sale | 500 | 10,110 | |||||||||
| Cash and cash equivalents at end of period | $ | 218,073 | $ | 326,911 | |||||||
Operating Activities
Our overall liquidity has historically been driven by our cash flow provided by operating activities, which is dependent on net operating results and changes in our working capital. Net cash used by operating activities in the nine months of 2025 was primarily driven by higher inventory resulting from sales trends and increased tariff costs, in addition to higher payments for variable compensation and taxes, all of which was partially offset by increased profitability. We generated cash provided by operating activities in the nine months of 2024 primarily from working capital management.
Investing Activities
Net cash provided by investing activities in the nine months of 2025 of $2 million was primarily due to net proceeds received from dispositions which were partially offset by capital expenditures. The net cash used by investing activities in the nine months of 2024 was primarily the result of capital expenditures of $32 million.
Financing Activities
Net cash provided by financing activities of $40 million in the nine months of 2025 primarily resulted from net borrowings related to operations and the refinancing of our revolving loan facility, Term Loan A, and Term Loan B in addition to the redemption of the 4.875% Senior Notes. As a result of the debt refinancing completed during the nine months of 2025, we incurred debt issuance costs of $23 million. Net cash used by financing activities of $40 million in the nine months of 2024 primarily resulted from total scheduled repayments on the Term Loan A and the Term Loan B of approximately $30 million and net repayments on our ARS Facility. See Note "Debt" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information.
Financing Arrangements
In March 2025, we refinanced our Senior Secured Credit Facility which provides for a $750 million senior secured revolving credit facility maturing March 7, 2030, a $400 million senior secured Term Loan A facility maturing March 7, 2030, and a $1.1 billion senior secured Term Loan B facility maturing March 7, 2032. The net proceeds from the refinancing, together with cash on hand, were used to redeem our outstanding 4.875% Senior Notes due 2026 in the original aggregate principal amount of $900 million, to refinance our existing senior secured credit facilities, and to pay related fees and expenses. See Note "Debt" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information.
In May 2025, we amended the ARS Facility which extended the maturity date to May 2026 and reduced the 2025 quarterly fluctuating facility limit to $85 million in the first and second quarters and $115 million in the third and fourth quarters only to the extent that the face value of the receivables in the collateral pool, net of applicable concentrations, reserves and other deductions, exceeds the outstanding loans. Additionally, the amendment created three pricing tiers based on a consolidated total net leverage ratio. See Note "Debt" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for additional information.
We believe our financing structure provides a secure base to support our operations and key business strategies. As of September 27, 2025, we were in compliance with all financial covenants under our credit facilities and other outstanding indebtedness. Under the terms of the Senior Secured Credit Facility, among other financial and non-financial covenants, we are required to maintain a minimum interest coverage ratio and a maximum total debt to EBITDA (earnings before interest, income taxes, depreciation expense and amortization, as computed pursuant to the Senior Secured Credit Facility), or leverage ratio, each of which is defined in the Senior Secured Credit Facility. The method of calculating all of the components used in the covenants is included in the Senior Secured Credit Facility.
We expect to maintain compliance with our covenants, as amended, for at least 12 months from the issuance of these financial statements based on our current expectations and forecasts, however economic conditions or the occurrence of events discussed under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2024 or other SEC filings could cause noncompliance. If economic conditions worsen or our earnings do not recover as currently estimated by management, this could impact our ability to maintain compliance with our amended financial covenants and require us to seek additional amendments to the Senior Secured Credit Facility. If we are not able to obtain such necessary additional amendments, this would lead to an event of default and, if not cured timely, our lenders could require us to repay our outstanding debt. In that situation, we may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.
For further details regarding our liquidity from our available cash balances and credit facilities see "Cash Requirements and Trends and Uncertainties Affecting Liquidity" above.
Critical Accounting Policies and Estimates
We have chosen accounting policies that we believe are appropriate to report our operating results and financial condition in conformity with accounting principles generally accepted in the United States. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note "Summary of Significant Accounting Policies" to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 28, 2024.
The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants to assist in our evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 28, 2024. There have been no material changes in these policies from those described in our Annual Report on Form 10-K for the year ended December 28, 2024.
Recently Issued Accounting Pronouncements
For a summary of recently issued accounting pronouncements, see Note "Recent Accounting Pronouncements" to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.
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