cover_final_EN_update2103.pdf 1 2017-03-21 4:20 PM
Our
Core Values
We Act Like
Entrepreneurs
We Operate
Responsibly
We Believe in
Our People
FPO
C
M
Y
CM
MY
CY
CMY
K
®
1
Our company started with a fundamental mission to
create value in
everything we do
We remain committed to driving continuous and
sustainable growth by leveraging our vertical
integration, operational scale, global reach,
investments in technology and sound management of
our shareholders’ capital to deliver superior value to all
of our stakeholders.
Our growing portfolio of brands provides the
opportunity to deliver everyday family apparel
to consumers globally, while never compromising
on our belief that operating responsibly, taking care
of our employees and integrating sustainable solutions
into our business are key factors in our success
and future growth.
Making Apparel Better TM
Highlights
Financial
Operational
Responsibility
revenue
units
produced
energy from
renewable sources
record free
cash flow
capital
expenditures
returned to
shareholders
integrated
acquisitions
vs. 2010 levels
reduction in
greenhouse gas
emissions intensity
vs. 2010 levels
water intensity
reduction
*2015 calendar year
Table of Contents
3
6
9
Message from the Chairman
Message from the President and CEO
Financial Highlights
13
15
18
Manufacturing – The Gildan Way
Growing Family of Brands
2016 Report to Shareholders
11
Conversation with our Leaders
All amounts in this report are in $U.S.
3
Message from the Chairman
To our shareholders,
the acquisitions of Alstyle and Peds,
followed by the American Apparel®
On behalf of the Board, it is my
brand in early 2017. These key initiatives
pleasure
to present our
2016
have reinforced the Company’s long
Annual Report. This past year was
term competitive position. At the same
distinguished by significant changes
time we have remained focused on
in the world and challenging market
key governance areas including the
conditions, particularly in the retail
launch of a new Code of Ethics and the
sector. Against this backdrop, Gildan
Company’s first Diversity and Inclusion
continued to
leverage
its vertical
Policy, both of which articulate the
integration, expanded its operational
Company’s commitment to creating
base and remained steadfastly focused
and fostering an ethical and inclusive
on
its
long-term growth drivers.
workplace.
As a result, the Company delivered
solid performance, executed on its
Recognized leadership
significant strategic objectives and
For the fourth consecutive year, the
returned capital to shareholders.
Company was included in the Dow
Jones Sustainability World Index (DJSI
Making Apparel Better™
World Index), the benchmark for global
Gildan was founded on a vision that
leaders in economic, environmental
owning
its
factories,
investing
in
and social responsibility. We were the
technology and pursuing continuous
only North American company in the
improvements was the best way to
Textiles, Apparel and Luxury Goods
operate and to make better apparel.
industry group listed in the DJSI World
Over time Gildan has stayed true
Index once again.
to those beliefs and the Company
“As one of the world’s largest manufac-
turers of apparel and socks, with control
over almost the entire production process,
we understand firsthand that operating
responsibly and integrating sustainable
Gildan also received a Distintivo ESR
2016 award, presented by the Mexican
Center
for Philanthropy
(Cemefi)
and the Alliance for Corporate Social
Responsibility (Aliarse). This award is
given to companies in Latin America
that are considered leaders in their
corporate social responsibility (CSR)
solutions drives our financial success and
efforts.
enables our future growth.”
Genuine shareholder engagement
We understand that shareholders value
is now one of the world’s leading
communication
and
transparency.
manufacturers of basic apparel and
Once again demonstrating Gildan’s
socks.
leadership, we have put into place
a Shareholder Engagement Policy
During 2016, Gildan invested in its
founded on the belief that constructive
operations, brands and people with
and meaningful dialogue between
the completion of the ramp up of U.S.-
members of the Board of Directors
based yarn-spinning operations and
and
the Company’s shareholders
4
can provide valuable
insights on
• 19% reduction in waste sent to
strategy,
corporate
governance
and the Board’s oversight role, as
well as a clearer understanding of
the views or concerns of investors.
Genuine ResponsibilityTM
landfills2
While we can most certainly be proud
of what has been accomplished to
date we remain committed to pursuing
further reduction of our environmental
As one of
the world’s
largest
impacts.
manufacturers of apparel and socks,
with control over almost the entire
Value creation
production process, we understand
firsthand that operating responsibly
and integrating sustainable solutions
drives our financial success and enables
our future growth.
In 2016, we published our 12th Corporate
Citizenship update, which highlighted
our results across several key metrics.
This recent update1 highlights the
following results:
• 34% reduction in greenhouse gas
Gildan launched a new mission
statement in 2016:
Create Value In Everything We Do
It connects the Company’s founding
principles with our current position as
a diversified manufacturing company
with a growing portfolio of brands that
delivers value to all of our stakeholders.
We strive to create value for customers
through our products; for communities
emissions intensity2
by acting responsibly; for shareholders
• 51% of the Company’s 2015
by driving sustainable and profitable
total energy needs met through
renewable sources
• 14% reduction of energy
consumption per kg of
production2
• 17% decrease in water
consumption per kg of production,
a savings of approximately 3.85M
m3 of water2
• 89% recycling or repurposing of
total waste
growth; for employees by empowering
them to achieve success and for the
environment by endlessly pursuing
continuous improvements to reduce
our impact on future generations. It’s
our belief that if we stay true to our
mission each and every day, we can
continue to achieve remarkable results.
5
inclusion in the
Dow Jones Sustainability
World Index
recycling or
repurposing of
total waste1
1
The 2016 Genuine Responsibility report
featured data pertaining to the 2015
calendar year.
2
from 2010 levels.
The year ahead
at our next Annual Shareholders
As we
look forward, we expect
Meeting. Patrik Frisk and Shirley
the world will continue to undergo
Cunningham’s
biographies
are
significant change, and that successful
included in the Information Circular
companies will need to be nimble,
for this meeting and we are very
adaptable and well-positioned to
much
looking
forward
to
their
succeed. The entrepreneurial spirit
contributions based on their past
that lies at the core of Gildan’s DNA,
business experience.
and is fostered under Glenn’s strong
leadership, remains a critical factor
On behalf of the Board, I would like
in the success of the Company and
to thank Glenn, the members of the
fuels the confidence the Board has in
Gildan management team and the
Gildan’s strong prospects for success.
more than 48,000 Gildan employees
worldwide for their dedication to
We are confident that the Company’s
serving the needs of our customers,
unrelenting drive towards operational
for operating responsibly and for their
excellence and commitment
to
commitment to delivering sustainable
operating responsibly will continue to
value to all our stakeholders.
deliver outstanding value to all of our
stakeholders. Most importantly, we
I would also like to thank you, our
have confidence that the employees
shareholders,
for your continued
of Gildan, who are the heart and soul
support and the confidence you
of the Company, are working together
place in us. We are proud to work for
with a shared belief in our mission.
you and look forward to a promising
future.
We are pleased to introduce two new
strong candidates who have accepted
Sincerely,
to be nominated to the Board of
Directors, and will be submitted to the
Company’s shareholders for election
William D. Anderson
6
Message from the President and CEO
To our shareholders,
the channels of distribution for the Peds® and MediPeds®
brands and by extending these brands into Gildan’s other
I am very proud of what we have achieved in 2016.
product categories.
Despite fairly challenging market conditions and the
anticipated headwinds that we had projected, we stayed
In a transaction that closed in early February 2017, we
focused on our growth drivers and executed against
acquired the American Apparel® brand, a leading premium
our key priorities. We generated consolidated sales of
brand in the fashion basics category in the printwear
approximately $2.6 billion and delivered earnings of $1.47
channel. This iconic brand rounds out our Printwear
per share and adjusted earnings of $1.51 per share.
offering extremely well, positioned alongside Gildan®
and Alstyle® in basic and performance apparel, Comfort
We made significant progress this year on all of our
Colors® in vintage fashion and anvil® in affordable fashion
strategic initiatives, positioning us very well to continue
basics.
to deliver profitable and responsible growth and value to
our shareholders. The Company generated record free
In our Printwear business, we continued to expand our
cash flow of $398 million for the full year and executed
penetration into key markets, driven by strong growth in
on all of its capital allocation priorities while returning
the fashion basics and performance product categories
approximately $470 million to shareholders through the
and double-digit volume growth in international markets.
payment of dividends and share repurchases.
We now offer a broader variety of printwear apparel to our
Growing portfolio of brands
During the course of the year, we successfully completed
two
strategic acquisitions,
leveraging our cash
generating ability and strong balance sheet. Alstyle was
a complementary addition to our Printwear business,
customers—with leading brands in the basics, premium
fashion, performance wear and affordable fashion basics
categories. Through these timely and targeted actions,
I believe we have successfully positioned ourselves to
deliver long-term growth and value for our shareholders.
strengthening Gildan’s penetration in printwear markets in
Continued growth in retail
the U.S., Canada and Mexico, especially in the southwestern
I am pleased by the positive results from our Branded
U.S., where the Alstyle® brand has a strong presence. The
Apparel business where, in spite of overall market
Peds acquisition has added a strong women’s sock and
challenges, we continued to increase our market share in
legwear brand to our Branded Apparel portfolio. We
key product categories. Throughout the year we achieved
expect to create revenue growth opportunities through
better and broader placement at leading mass retailers
Gildan’s existing customer relationships by broadening
and expanded our product offering. This increased
7
consumer’s exposure to our brands
on new
technology, equipment,
and allowed us
to successfully
capacity expansion and cost savings
compete directly with national brands.
initiatives. From 2011 to 2016, Gildan
has invested more than $1 billion
Gildan® branded socks achieved 22%
in capital expenditures,
further
market share in the U.S. at the end of
solidifying our leadership position
the year, making it the number one
as one of the world’s lowest cost,
brand in unit share in the U.S. men’s
most responsible manufacturers of
sock category. Gildan® branded
apparel and socks, while expanding
underwear also continued its growth
our capabilities for higher quality and
in 2016, firmly positioned as the
better value apparel.
number three brand in U.S. men’s
underwear and reaching over 10%
Our investments of over $400 million
market share in January 2017.
in U.S. yarn-spinning operations
over the
last four years
is now
In the past year, we effectively
virtually complete and exemplifies
supported organic growth within
our strong commitment
to U.S.
our brands by expanding
into
manufacturing and cotton. As one
new product categories and new
of the largest domestic consumers
channels,
leveraging our world-
of U.S. cotton, sustainably grown
class manufacturing operations to
and ethically harvested by proud
deliver better quality and value to
American farmers, we were pleased
consumers. We also continued to
to join the Cotton Leads® program
promote our brands with strategic
this year,
representative of a
marketing investments, such as the
shared commitment to sustainable,
ongoing sponsorship of the Gildan®
responsible
and
transparent
New Mexico Bowl.
practices.
We made good progress this year
The Alstyle
acquisition, which
on several
initiatives to address
added one textile facility and two
the ongoing shifts
in consumer
sewing operations in Mexico to our
behavior. We launched a powerful
manufacturing network, enhanced
new e-commerce platform featuring
our competitive position
in
the
GoldToe® and Powersox® products,
Mexican printwear and retail markets.
with an anticipated roll out of
Gildan® and other brands onto the
platform in early 2017. We also have
merchandised product lines and built
infrastructure necessary to service
pure-play e-commerce companies
and traditional retailers’ e-commerce
business to ensure we are able to
continue to develop our share within
these growing market segments.
Manufacturing excellence
We continued our strong history
of strategic capital
investments
during 2016, spending $140 million
8
“We will continue to use our vertical
integration, operational excellence
and low cost structure to support
our strong brands with great
quality products.”
We anticipate more cost savings and
synergies to be realized as we increase
capacity in these facilities to support
further sales growth. While this
move diversifies our manufacturing
footprint, these additional facilities
Looking ahead
help us further improve the efficiency
Based upon our track record and the
of our operations and have effectively
progress we continue to make on
expanded our capacity in textiles at a
our strategic initiatives, we remain
very low capital cost.
confident that we can deliver solid
growth
in 2017
in
line with the
Accordingly in 2017, we anticipate
targets we announced in February.
our capital expenditures will be
The future
is bright for Gildan.
approximately $125 million, largely
focused on textile capacity related to
As I reflect upon the past year and
the continued development of the Rio
look towards the future, I believe our
Nance 6 facility in Honduras, capacity
business strategy remains powerful.
expansion in Bangladesh, investments
We will continue to use our vertical
in distribution and garment dyeing as
integration, operational excellence
well as the expansion of our sewing
and low cost structure to support
capacity in line with the increase in
our strong brands with great quality
textile capacity.
Delivering value to shareholders
This year we
introduced a debt
leverage target that serves as a
framework to allow us to execute on
products. Our mission is to create
value for all of our stakeholders by
delivering everyday family apparel
that
is responsibly manufactured
and trusted by millions of consumers
worldwide for quality, comfort and
our capital allocation priorities and
use our balance sheet effectively.
value.
I would like to thank each and every
one of our over 48,000 employees,
who bring their enthusiasm and
commitment to Gildan every day, and
to whom we owe our success. I would
also like to thank our customers
for their trust and loyalty and our
shareholders for the confidence you
place in us.
Sincerely,
We are pleased to have delivered
a record level of free cash flow in
2016 and to have returned $470
million
to
shareholders
through
share repurchases and dividends. We
completed the normal course issuer
bid which we initiated on February
19, 2016 and expanded the program
later in the year, repurchasing close
to 13.8 million shares in total.
With the continuation of our strong
cash generation, we will continue
to reinvest in our growth, pursue
complementary
acquisitions
and
pursue initiatives to return capital to
shareholders. To that effect, we were
pleased to announce the renewal of
the normal course issuer bid for the
repurchase of up to 5% of our shares
outstanding in February 2017, along
with our fifth consecutive 20% annual
increase to our dividend.
returned to
shareholders
global markets
serviced
Glenn J. Chamandy
brand in men’s
socks in the U.S.
9
Financial Highlights
NET SALES
(In U.S.$ millions)
5
6
0
,
2
12
5
1
2
,
2
13
9
9
2
,
2
14
9
6
5
,
2
15
5
8
5
,
2
16
DILUTED EARNINGS PER SHARE
6
3
.
1
3
3
.
1
(In U.S.$)
4
1
.
1
2
1
.
1
6
4
.
1
2
4
.
1
1
5
.
1
7
4
.
1
9
9
.
0
4
9
.
0
12
Diluted earnings per share
13
14
15
16
Adjusted diluted earnings per share(1)
ADJUSTED EBITDA(1)
(In U.S.$ millions)
NET DEBT TO ADJUSTED EBITDA(1)
0.8x
8
8
3
14
0.6x
4
0
5
15
1.0x
4
2
5
16
0.3x
3
5
3
12
9
4
4
13
1.0x
0.8x
0.6x
0.3x
0.0x
12
13
14
15
16
CAPITAL EXPENDITURES
FREE CASH FLOW(1)
(In U.S.$ millions)
(In U.S.$ millions)
7
7
0
0
2
2
3
3
0
3
2
0
4
1
2
0
3
3
7
1
2
8
-
9
5
1
8
9
3
12
13
14
15
16
12
13
14
15
16
(1) Adjusted EBITDA, adjusted diluted earnings per share, free cash flow and net debt to adjusted EBITDA are non-GAAP financial measures.
See “Definition and reconciliation of non-GAAP financial measures” in the 2016 Management’s Discussion and Analysis.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
10
(In U.S.$ millions, except per share data and ratios)
STATEMENT OF EARNINGS
Net sales
Adjusted EBITDA(1)
Operating Income
Results shown on a calendar year basis
2012
2016
2013
2015
2014
2014
2015
2013
2016
2012
2,585.1
2,568.6
2,299.2
2,214.9
2,065.2
523.8
503.8
388.4
449.4
353.0
371.5
367.5
284.8
349.2
237.7
Adjusted operating income(1)
383.2
378.9
289.6
354.7
257.8
Net earnings
346.6
346.1
276.6
326.6
229.8
Diluted earnings per share
1.47
1.42
1.12
1.33
0.94
Adjusted net earnings(1)
356.3
355.4
281.0
334.5
242.1
Adjusted diluted earnings per share(1)
1.51
1.46
1.14
1.36
0.99
CASH FLOW
Cash flows from operating activities
537.9
384.4
244.6
370.5
377.4
Capital expenditures
Free cash flow(1)
FINANCIAL POSITION
Total assets
Net indebtedness
(cash in excess of total indebtedness)(1)
(140.2)
(229.6)
(331.9)
(199.8)
(77.2)
398.4
158.9
(81.9)
173.2
302.1
2,990.1
2,834.3
2,648.3
2,124.1
1,921.7
561.8
324.3
313.9
(15.1)
95.0
Shareholders' equity
2,119.6
2,188.4
1,882.2
1,742.9
1,449.5
FINANCIAL RATIOS
Adjusted EBITDA margin(2)
20.3%
19.6%
16.9%
20.3%
17.1%
Adjusted operating margin(3)
14.8%
14.8%
12.6%
16.0%
12.5%
Adjusted net earnings margin(4)
13.8%
13.8%
12.2%
15.1%
11.7%
Return on shareholders' equity(5)
16.5%
17.5%
15.5%
21.0%
17.9%
Net debt to adjusted EBITDA(1)
1.0x
0.6x
0.8x
n.a.
0.3x
(1)
(2)
(3)
(4)
(5)
Adjusted EBITDA, adjusted operating income, adjusted net earnings, adjusted diluted earnings per share, free cash flow, net indebtedness (cash in
excess of total indebtedness), and net debt to adjusted EBITDA are non-GAAP financial measures. See “Definition and reconciliation of non-GAAP
financial measures” in the 2016 Management’s Discussion and Analysis.
Adjusted EBITDA divided by net sales
Adjusted operating income divided by net sales
Adjusted net earnings divided by net sales
Adjusted net earnings divided by average shareholders’ equity for the period
n.a.
not applicable
Certain minor rounding variances exist between the consolidated financial statements and this summary.
11
Conversation
with our Leaders
Glenn J.
Chamandy
President
& CEO
Q What most impressed you with
the Company’s performance last
year?
A Our ability to hit our operational
targets, while navigating
through
challenging times and integrating two
acquisitions in 2016 and completing
a third in early 2017. This tells me our
model works and that we have the
buy-in of our management teams and
our more than 48,000 employees in
our strategies and long term vision.
Q What do you see as the biggest
differentiator between Gildan and
its competitors?
A Firstly, I would say our commitment
to vertical
integration. As other
companies
have
divested
of
manufacturing assets, Gildan has
invested heavily, more than $1 billion
since 2011, and extended our vertical
integration even further with our new
US-based yarn-spinning operations.
As a result of our commitment to
vertical integration, close to 90% of our
revenues are derived from products
manufactured in company-owned and
managed facilities.
Secondly, I would say that our people
A We are monitoring the ongoing
also set us apart. I am proud of the
trade and tax discussions carefully but
skills and talent we have developed
recognize that the apparel industry
and also the entrepreneurial spirit that
has faced many changes in the last
flows through our employees which
25 years, resulting in more than 97%
fosters continuous improvement and
of all apparel currently sold in the U.S.
a relentless pursuit of operational
being imported. We believe that our
excellence.
Rhodri
Harries
Chief
Financial &
Administrative
Officer
Q What do you consider the main
financial highlights to be over the
last year?
A Beyond our
sales and EPS
performance, we were particularly
pleased
that we were able
to
deliver on all elements of our capital
allocation strategy. We were able
to invest in our manufacturing to
support further growth, close two
attractive acquisitions, with a third
occurring early in 2017, while at the
same time returning $470 million to
our shareholders through dividends
and share repurchases. We did this
while maintaining a strong balance
vertical integration and operational
diversification position us well to
navigate the potential changes and
continue to create strong value for
all stakeholders.
It’s
important to
note that a large portion of our total
cost base is generated within the
U.S., thanks in large part to our $400
million investments in U.S.-based yarn-
spinning operations. We are confident
that these commitments, along with
our ongoing leadership as one of the
largest domestic consumers of U.S.
cotton, put us in a very good position
for the future.
Mike
Hoffman
President,
Printwear
Q How do you believe
the
American Apparel® brand will fit
into your business?
sheet, which together with our cash
A The brand has been in the printwear
generating capabilities, positions us
channel, as a premium fashion brand,
very well for the future.
Q What would you tell an investor
concerned about changes to trade
agreements, duties and taxes?
for quite some time. It is complementary
to our existing portfolio of brands.
Gildan® is the industry’s leading basics
12
brand. Alstyle® is a leading basics
to make higher quality, value-driven
brand with large decorators. Comfort
everyday family apparel and socks.
Colors® and anvil® fill roles as vintage
When consumers try our products and
and affordable fashion brands. So
our brands, we see good results. Going
American Apparel® gives us a premium
forward, we are looking to expand our
offering, with great
fabrics and
placement and product offering across
silhouettes. We also feel we can take
almost all channels of retail to drive
this brand to international markets,
more growth.
by
leveraging Gildan’s established
distribution network servicing over 55
I am very pleased that we have become
countries.
one of the largest suppliers of socks
to the U.S. market, with the Gildan®,
Benito
Masi
Executive
Vice-President,
Manufacturing
Q Can you provide an update
on the integration of the Alstyle
operations acquired in 2016?
Q Can you tell us how you
international
the
are growing
Peds®, GoldToe® brands and our Under
A The Alstyle operations are now fully
Armour® sock license all performing
integrated
into our manufacturing
printwear business?
well. We are also the number three
system and we have begun to see
brand in men’s underwear and are
synergies
from
leveraging Gildan’s
growing our market share.
operational scale and strong cost focus.
A In response to growing demand from
our distribution partners globally, we
are introducing new brands and new
products in many of our international
markets. What is common across all the
international markets is the potential
for success of Gildan’s business
Q What are your plans
address
rapidly
changing
consumer purchasing habits?
As we increase volumes and integrate
more processes and expertise, we
to
expect to drive more synergies and
cost reductions.
Q What can you tell us about
in
your manufacturing
facility
model, based upon consistent quality,
A Consumers are migrating towards
available inventory and a commitment
online for many categories of products
Bangladesh?
to operating responsibly.
in three main channels that are
Eric
Lehman
President,
Branded Apparel
Q What explains Gildan’s growing
market share in the sock and
underwear categories?
A Our success to date has come from
delivering better value to consumers
using our manufacturing advantage
fueling this shift, namely pure-play
A Bangladesh remains an important
e-commerce,
retailer’s e-commerce
part of our overall strategy to service
and direct-to-consumer
initiatives.
our international sales growth in the
We have worked hard this year to
coming years. I am very proud we have
create specific product collections
successfully ‘Gildanized’ the operation
and operational
infrastructure
to
and empowered the employees who are
more effectively service this growing
actively participating in these efforts.
business.
We have integrated core elements of
our Genuine Responsibility™ programs,
including free meals and on-site access
to medical care as well as extensive
training programs
in Health and
Safety, Ergonomics, Fire Safety and
Academics.
13
Manufacturing - The Gildan Way
Our extensive vertical integration and operational expertise provides us with control over the entire
manufacturing process, which allows us to uncover efficiencies and resource savings along the way while
never compromising our commitment to always operate responsibly and sustainably.
U . S . cotton
r n spinnin
g
a
Y
T e xtiles
Cotton is purchased from
U.S. farmers and sent to our
yarn-spinning facilities in
North Carolina and Georgia.
The cotton is spun into
yarn which is then shipped
to our textile facilities to
create fabrics.
The yarn is knit into fabric,
dyed and cut within our
vertically-integrated facilities.
The cut parts are sent to our
sewing operations.
Genuine ResponsibilityTM
Our philosophy is simple, everywhere we operate, we make it a priority to treat our employees with respect and
dignity, to provide them with safe and ethical work environments and to continuously find new ways to reduce
our environmental impacts. We believe this is critical to our success and future growth.
Employees have access
24/7 onsite medical clinics
51% of our overall
Gildan’s Environmental Code
to subsidized meals and
provide free general
energy consumption
of Practice (ECP) is strictly
12,500 employees are
healthcare, medicine,
in 2015 was powered by
applied to better control or
provided transportation to
vaccinations, preventative
renewable sources.
eliminate harmful substances
and from work.
screening and health
in our processes or products.
campaigns.
14
ENVIR
O
N
E
O P L
E
P
www.
genuinegildan
.com
C
O
M
M
U
N
ITY
D
O
R
P
M
E
N
T
T
C
U
S e wing
i s t r ibution
D
C o n sumers
Cut parts are assembled
in our sewing facilities
into finished garments.
Our garments are
distributed to printwear
and retail customers
around the world.
Gildan’s growing portfolio
of brands deliver quality
everyday apparel to
consumers globally.
$2 million donated
$100,000 raised in the
Cotton LEADS®
Oeko-Tex® Standard 100
for education and
Gildan Glow Run for
recognizes the use
certification for Gildan®,
wellness projects in
community projects in
of best practices and
anvil® and Secret® products
local communities.
Central America.
traceability in the cotton
that we manufacture.
supply chain.
15
Growing Family of Brands
Gildan® is one of the world’s leading brands in
everyday basics, trusted by every member of the
family for products that deliver premium quality,
long lasting durability and value-driven prices. In the
printwear industry, Gildan® is the ultimate solution
for decorators globally looking for superior quality,
consistent colors (100+) and the best availability. For
U.S. consumers, Gildan’s value promise of high quality
and great prices has made the brand the #1 men’s sock
brand and the #3 men’s underwear brand.
anvil® is one of our fastest growing brands, delivering
affordable fashion basics to the printwear industry
in the U.S., Canada, Europe and several Asia Pacific
markets. anvil® is best described as affordable chic
for everyone with collections that celebrate the
creative inspiration within us all with silhouettes and
fabrics that look and feel great.
Comfort Colors® collection of lived-in, vintage
tees, tanks and sweats are perfect for every day.
Our collections were crafted for ultimate comfort
in earthy hues inspired by nature, including the
industry’s widest array of pigment and reactive dyed
apparel and accessories. Live life in Comfort Colors®.
16
American Apparel® is the printwear industry’s
leading premium fashion brand and well
recognized by consumers worldwide. This iconic
brand has a rich history of amazing fabrics, fashion
forward styling and distinct marketing, creating
some of the industry’s hottest trends that are
loved by loyal brand followers across the globe.
Since 1976, Alstyle® has been a leading manufacturer
and distributor of quality activewear to large North
American decorators. The product line includes a wide
variety of styles and a brilliant color palette in basic
styles sized 6 months through 6XL. Alstyle® is known
for color consistency, fast shipping and Build Your
Own Brand customization programs.
Founded in 1934, featuring the iconic ‘gold toe’, these
collections have been American’s favorite socks for
generations. GOLDTOE® collections deliver superior quality,
fit and comfort, from classic blacks and browns to argyles,
checks and patterns. New collections like the HarringtonTM
and underwear by GOLDTOE® have expanded the brand’s
appeal to a wider range of consumers.
17
PEDS® offers quality, stylish and comfortable foot
apparel and legwear with a strong focus on innovation
trends and technology. PEDS® collections include
socks, legwear and liners. MEDIPEDS® products are
designed to provide foot and leg solutions for many
consumers with specific needs.
Our collection of sheer hosiery brands, Silks®, Secret®
and Secret Silky® keep women in step with the latest
fashion trends with sophisticated patterns and refined
colors for that perfect finishing touch. Our collection
of brands are sold through multiple channels across
the North American retail channel.
Kushyfoot® offers stylish sock and legwear
solutions with a focus on comfort. Offering a
wide assortment of products ranging from foot
covers, socks, knee highs and tights, Kushyfoot®
has everything to suit your needs.
Our licensed brands
18
2016
REPORT TO
SHAREHOLDERS
February 24, 2017
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
1.0
PREFACE
2.0
3.0
4.0
5.0
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
OUR BUSINESS
3.1 Overview
3.2 Our operating segments
3.3 Our operations
3.4 Competitive environment
STRATEGY AND OBJECTIVES
OPERATING RESULTS
5.1 Non-GAAP financial measures
5.2 Business acquisitions
5.3 Selected annual information
5.4 Consolidated operating review
5.5 Segmented operating review
5.6 Summary of quarterly results
5.7
Fourth quarter operating results
FINANCIAL CONDITION
CASH FLOWS
LIQUIDITY AND CAPITAL RESOURCES
LEGAL PROCEEDINGS
6.0
7.0
8.0
9.0
10.0 OUTLOOK
11.0
12.0 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
13.0 ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS NOT YET APPLIED
14.0 DISCLOSURE CONTROLS AND PROCEDURES
15.0
16.0 RISKS AND UNCERTAINTIES
INTERNAL CONTROL OVER FINANCIAL REPORTING
FINANCIAL RISK MANAGEMENT
17.0 DEFINITION AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
P. 3
P. 4
P. 5
P. 10
P. 11
P. 23
P. 25
P. 26
P. 29
P. 29
P. 29
P. 34
P. 36
P. 37
P. 37
P. 38
P. 46
P. 50
P. 53
P. 57
MANAGEMENT'S DISCUSSION AND ANALYSIS
1.0 PREFACE
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.
On December 4, 2014, the Company announced that it would be transitioning to a new fiscal year-end in 2015. As a result
of this transition, the Company’s year-end is now the Sunday closest to December 31, rather than the first Sunday following
September 28. For purposes of its regulatory filings, the Company’s reported results for fiscal 2015 included the15-month
transition period from October 6, 2014 through January 3, 2016. The Company’s first 12-month fiscal year on a calendar
basis began on January 4, 2016 and ended on January 1, 2017.
This MD&A comments on our operations, financial performance and financial condition as at and for the 12-month fiscal year
ended January 1, 2017 (Fiscal 2016) and the 15-month transition period ended January 3, 2016 (Fiscal 2015). 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 audited annual consolidated financial statements for the year ended January 1,
2017 and the related notes.
In preparing this MD&A, we have taken into account all information available to us up to February 24, 2017, the date of this
MD&A. The audited annual consolidated financial statements 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.
All financial information contained in this MD&A and in the audited annual consolidated financial statements has been prepared
in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB), except for certain information discussed in the section entitled “Definition and reconciliation of non-GAAP
financial measures” in this MD&A.
All earnings per share and share data in this MD&A are on a post-split basis, reflecting the effect of the two-for-one stock
split of the Company’s outstanding common shares by way of a share dividend that took effect on March 27, 2015.
Additional information about Gildan, including our 2016 Annual Information Form, is available on our website at
www.gildan.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.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
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
- Our operations”, “Strategy and objectives”, “Liquidity and capital resources - Long-term debt and net indebtedness”, and
“Outlook” 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 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:
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our ability to implement our growth strategies and plans, including achieving market share gains, obtaining and
successfully introducing new sales programs, implementing new product introductions, increasing capacity,
implementing cost reduction initiatives, and completing and successfully integrating acquisitions, including the
Alstyle, Peds, and American Apparel acquisitions;
the intensity of competitive activity and our ability to compete effectively;
changes in general economic and financial conditions globally or in one or more of the markets we serve;
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
fibers, 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 in the countries in which we operate 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, and other unforeseen adverse events;
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;
changes to domestic tariffs and international trade legislation 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, liquidity risk, foreign currency risk, and
interest rate risk, as well as risks arising from commodity prices.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
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.
3.0 OUR BUSINESS
Recent Developments
Acquisition of the American Apparel® brand
On February 8, 2017, the Company acquired the American Apparel® brand and certain assets from American Apparel, LLC,
(American Apparel) which filed for Chapter 11 bankruptcy protection on November 14, 2016. The acquisition was effected
through a court supervised auction during which Gildan emerged as the successful bidder with a final cash bid of approximately
$88 million. The American Apparel® brand will be a strong complementary addition to Gildan’s growing brand portfolio. The
acquisition provides the opportunity to grow American Apparel® sales by leveraging the Company’s extensive printwear
distribution networks in North America and internationally to drive further market share penetration in the fashion basics
segment of these markets. Results from the sale of products under the American Apparel® brand will be included in the
Printwear segment.
3.1 Overview
Gildan is a leading manufacturer and marketer of quality branded basic family apparel, including T-shirts, fleece, sport shirts,
underwear, socks, hosiery, and shapewear. We sell our products under a diversified portfolio of Company-owned brands,
including the Gildan®, Gold Toe®, Anvil®, Comfort Colors®, American Apparel®, Alstyle®, Secret®, Silks®, Kushyfoot®,
Secret Silky®, Therapy Plus™, Peds®, and MediPeds® brands. We also distribute some of our sock products through our
exclusive U.S. sock license for the Under Armour® brand, and we also market a wide array of products through a global
license for the Mossy Oak® brand. Our products are sold in two primary markets, namely the printwear and retail markets.
We distribute our products in printwear markets in the U.S., Canada, Mexico, Europe, Asia-Pacific, and Latin America. In
retail markets, we sell our products to a broad spectrum of retailers primarily in the U.S. and Canada and we also manufacture
for select leading global athletic and lifestyle consumer brands.
Gildan owns and operates vertically-integrated, large-scale manufacturing facilities which are primarily located in Central
America, the Caribbean Basin, North America, and Bangladesh. These facilities are strategically located to efficiently service
the quick replenishment needs of our customers in the markets that we serve. With over 48,000 employees worldwide we
operate with a strong commitment to industry-leading labour and environmental practices throughout our supply chain in
accordance with our comprehensive corporate social responsibility program which is embedded in the Company's long-term
business strategy.
3.2 Our operating segments
The Company manages and reports its business under two operating segments, Printwear and Branded Apparel, each of
which is a reportable segment for financial reporting purposes. Each segment has its own management that is accountable
and responsible for the segment’s operations, results, and financial performance. These segments are principally organized
by the major customer markets they serve. The following summary describes the operations of each of the Company’s
operating segments.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
3.2.1 Printwear segment
The Printwear segment, headquartered in Christ Church, Barbados, designs, manufactures, sources, markets, and distributes
undecorated activewear products in large quantities primarily to wholesale distributors in printwear markets in over 55 countries
across North America, Europe, Asia-Pacific, and Latin America. Through our Printwear segment, we sell mainly undecorated
activewear products (blanks) primarily to wholesale distributors who sell our products to screenprinters, advertising specialty
distributors, and embroiderers, who in turn decorate the products with designs and logos and sell the 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. Our activewear products are used in a variety of daily activities by individuals and have various
applications, including work and school uniforms and athletic team wear, and for various other purposes to convey individual,
group, and team identity.
The following table summarizes the primary brands under which we market our products in the printwear channel:
Primary brands
Gildan®
Gildan Performance®
Anvil®
Comfort Colors®(1)
American Apparel®
Alstyle®(1)
New Balance®(2)
Primary products
Activewear: T-shirts, fleece,
sport shirts
(1) Comfort Colors® and Alstyle® are registered trademarks in the U.S.
(2) Under license agreement for distribution rights in the U.S. and Canada.
3.2.2 Branded Apparel segment
The Branded Apparel segment, headquartered in Charleston, South Carolina, designs, manufactures, sources, markets, and
distributes branded family apparel, which includes athletic, casual and dress socks, underwear, activewear, sheer hosiery,
legwear, and shapewear products which are sold to retailers in the United States and Canada. We market our products
primarily under our Company-owned and licensed brands. Although the main focus of the Company’s growth strategy is the
continued development of its Company-owned and licensed brands, the Company is also pursuing the opportunity to grow
its sales as a supply chain partner to a small number of targeted global athletic and lifestyle brands, for which we manufacture
and decorate products.
The following table summarizes the current retail distribution of various product categories under Company-owned and
licensed brands:
GILDAN 2016 REPORT TO SHAREHOLDERS P. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
Primary products
Retail distribution channels
Brand
Gildan®
Gildan Platinum® (1)
Socks, underwear, activewear
Socks, underwear, activewear
Mass-market, regional department stores,
craft channel, food and drug
Regional department stores, national
chains
Smart Basics®
Socks, underwear, activewear
Dollar store channel, food and drug
Gold Toe®
G® (1)
PowerSox®
Socks, activewear
Department stores, national chains, price
clubs
Socks, underwear, activewear
Department stores, national chains
Athletic socks
Sports specialty, national chains,
department stores
GT a Gold Toe brand™
Silver Toe®
Signature Gold by Goldtoe®
Socks
Socks
Socks
All Pro®
Under Armour® (2)
Mossy Oak® (3)
Secret® (1)
Silks® (1)
Athletic socks
Athletic socks
Socks, activewear, underwear,
loungewear, thermals, fleece
Sheer/pantyhose, tights/leggings,
shapewear, underwear, intimate
accessories, socks
Sheer/pantyhose, tights/leggings
Therapy Plus® (1)
Legwear, foot solutions/socks
Mass-market
National chains
Mass-market
Mass-market
Sports specialty, national chains,
department stores
Sports specialty, national chains, mass-
market, price clubs, dollar store channel,
department stores
Mass-market, department stores, food and
drug
Department stores, national chains, price
clubs
Mass-market, department stores, food and
drug
Kushyfoot® (1)
Secret Silky®
Peds®
MediPeds®
Legwear, foot solutions/socks
Sheer/pantyhose
Food and drug
Food and drug
Socks, sheer/pantyhose, legwear
Mass-market, footwear
Legwear, foot solutions/socks
Mass-market
(1) Gildan Platinum®, G®, and Kushyfoot® are registered trademarks in the U.S. Secret®, Silks®, and Therapy Plus® are registered
trademarks in Canada.
(2) Under license agreement for socks only - with exclusive distribution rights in the U.S.
(3) Under license agreement - with worldwide distribution rights and exclusivity for certain product categories.
3.3 Our operations
3.3.1 Manufacturing
The vast majority of our products are manufactured in facilities that we own and operate. Our vertically-integrated
manufacturing operations include capital-intensive yarn-spinning, textile, sock, and sheer hosiery manufacturing facilities,
as well as labour-intensive sewing plants. At our yarn-spinning facilities, we convert cotton and other fibers into yarn. In our
textile plants, we convert yarn into dyed and cut fabric, which is subsequently assembled into activewear and underwear
garments primarily at sewing facilities which we operate in owned or leased premises. We also use third party sewing
contractors, although to a lesser extent, to satisfy some of our sewing requirements. In our integrated sock manufacturing
facilities, we convert yarn into finished socks. The majority of our sock production does not require sewing as the equipment
used in our facilities knits the entire sock with a seamless toe closing operation. Our manufacturing facilities for sheer hosiery
include knitting, dyeing, and packaging capabilities.
All of our yarn-spinning operations, which include five facilities, are in the United States where we manufacture the majority
of the yarn used to produce our products. We also use third party yarn-spinning suppliers, primarily in the United States to
satisfy the remainder of our yarn requirements. Our largest manufacturing hub is in Honduras, Central America, strategically
located to efficiently serve the quick replenishment requirements of our markets. In Honduras we have textile, sock, and
sewing operations. We operate three large-scale, vertically-integrated textile facilities at our Rio Nance complex in Honduras
and we are currently developing an additional facility. We also own and operate another vertically-integrated textile facility
GILDAN 2016 REPORT TO SHAREHOLDERS P. 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
in Honduras outside the Rio Nance complex. The majority of our sock production is also produced at our Rio Nance complex
in two sock manufacturing facilities. With the acquisition of Peds in 2016, we now also own and operate a sock manufacturing
facility in Hildebran, NC. The majority of the cut goods produced in the textile facilities in Central America are assembled in
our sewing facilities located in Honduras and Nicaragua, mainly in leased premises. We also have screenprinting and
decorating capabilities in Central America to support our sales to leading global athletic and lifestyle consumer brands. In
the Caribbean Basin we operate a large-scale, vertically-integrated textile facility and two sewing facilities in the Dominican
Republic, and also use dedicated third-party sewing contractors in Haiti. We also have a manufacturing hub in Mexico where
we operate a large integrated textile, sewing, and distribution facility, as well as cut and sew facilities, which were acquired
in 2016 as part of the Alstyle acquisition, as described in section 5.2 of this MD&A. We have increased capacity utilization
at the Alstyle facility, with the capability to significantly expand the facility’s textile production capacity for basics going forward.
In Bangladesh we own and operate a smaller vertically-integrated manufacturing facility for the production of activewear
dedicated primarily to servicing international markets. Garment dyeing operations are conducted in Honduras and also out
of a small garment dyeing facility in the U.S. Sheer hosiery manufacturing is located in a facility in Canada. While we internally
produce the majority of the products we sell, we also have sourcing capabilities to complement our large scale, vertically-
integrated manufacturing.
The following table provides a summary of our primary manufacturing operations by geographic area:
Canada
United States
Central America
Caribbean Basin
Mexico
Asia
Yarn-spinning
facilities
Textile
facilities
Garment dyeing
facility
Sewing facilities(1)
Sock / Sheer
manufacturing
facilities
Clarkton, NC
Cedartown, GA
Salisbury, NC -
(2 facilities)
Mocksville, NC
Honduras
(4 facilities)
Dominican
Republic
Dominican
Republic
(2 facilities)
Ensenada
Hermosillo
Agua Prieta
Honduras
(4 facilities)
Nicaragua
(3 facilities)
Honduras
(2 facilities)
(1) We also use the services of third-party sewing contractors, primarily in Haiti, to support textile production from the Dominican Republic.
3.3.2 Sales, marketing and distribution
Our sales and marketing offices are responsible for customer-related functions, including sales management, marketing,
customer service, credit management, sales forecasting, and production planning, as well as inventory control and logistics
for each of their respective operating segments.
Printwear segment
Our sales and marketing office servicing our global printwear markets is located in Christ Church, Barbados. We distribute
our activewear products for the printwear markets primarily out of our main distribution centre in Eden, NC. We also have
distribution centres in Honduras and in Mexico. In addition, we have leased distribution facilities primarily in the U.S. west
coast, and we also use third-party warehouses in the U.S., Canada, Mexico, Colombia, Europe, and Asia.
Branded Apparel segment
Our primary sales and marketing office for our Branded Apparel segment is located in Charleston, South Carolina at the
same location as our primary distribution centre servicing our retail customers. We also service some of our customers
through our distribution centre in Honduras. In addition, we service retail customers from smaller distribution centres in North
Carolina, South Carolina, and Canada. We also operate retail stores located in outlet malls throughout the Eastern United
States.
3.3.3 Employees and corporate office
We currently employ over 48,000 employees worldwide. Our corporate head office is located in Montreal, Canada.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
3.4 Competitive environment
The markets for our products are highly competitive and we compete with domestic and international manufacturers or
suppliers. Competition is generally based upon price, with reliable quality and service also being critical requirements for
success. Among our competitive strengths is our expertise in designing, constructing, and operating large-scale, vertically-
integrated, and strategically-located manufacturing hubs. This skill set and the continued significant capital investment we
have made in our own vertically-integrated manufacturing infrastructure, which has surpassed industry average levels of
investment, allow us to operate efficiently, remain cost-competitive, maintain consistent product quality, and provide a reliable
supply chain with short production/delivery cycle times. Continued investment and innovations in our manufacturing processes
have also allowed us to deliver enhanced product features, further improving the value proposition of our product offering to
our customers. Consumer brand recognition and appeal are also important factors in the retail market. The Company is
focused on further developing its brands and is continuing to make significant investments in marketing and advertising.
Recognition for our high standards of environmental and social responsibility practices is also an important competitive
advantage, particularly as this area is becoming an increasingly important consideration for our customers.
3.4.1 Printwear segment
Our primary competitors in North America include major apparel manufacturers such as Fruit of the Loom, Inc. (Fruit of the
Loom) and Russell Corporation (Russell), which are both subsidiaries of Berkshire Hathaway Inc. (Berkshire), as well as
Hanesbrands Inc. (Hanesbrands). We also compete with smaller U.S.-based competitors, including Delta Apparel Inc., Color
Image Apparel, Inc., Next Level Apparel, and Bella + Canvas, as well as Central American and Mexican manufacturers. In
addition, we compete with private label brands sold by our customers. Competitors in the European printwear market include
Fruit of the Loom and Russell, as well as competitors that do not have integrated manufacturing operations and source
products from suppliers in Asia.
3.4.2 Branded Apparel segment
In the retail channel, we compete primarily with Hanesbrands, Berkshire subsidiaries, Fruit of the Loom, Russell and Garan
Incorporated, as well as Renfro Corporation, Jockey International, Inc., Kayser Roth Corporation, and Spanx, Inc. In addition,
we compete with brands of well-established U.S. fashion apparel and sportswear companies, as well as private label brands
sold by our customers that source products for these brands primarily from Asian and other manufacturers.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
4.0 STRATEGY AND OBJECTIVES
Our growth strategy comprises the following four initiatives:
4.1 Continue to pursue additional printwear market penetration and opportunities
We intend to continue to leverage our vertical manufacturing platform, cost advantage, and distributor reach to continue to
grow in the North American printwear market, including the faster-growing fashion basics and sports performance categories
where our participation in these categories has not been as extensive as in the basics category. We are targeting further
market penetration in printwear with brands well-positioned to compete in each product category and through new product
introductions. In the basics category, we market our products under the Gildan® brand, the leading brand in this category,
and the Alstyle® brand which we acquired in 2016. In the fashion basics segment, we market our products under the Anvil®
brand featuring a more contemporary line of ring-spun products incorporating more fashion-oriented styles. We also sell
products under the Comfort Colors® brand featuring garment-dyed activewear products allowing us to achieve a worn-in
and weathered look and a soft and comfortable feel. On February 8, 2017, we added the American Apparel® brand to our
portfolio of brands to enhance our positioning within the fashion basics segment of the printwear market. In the sports
performance category, we market our products under our Gildan Performance® brand, featuring moisture wicking and anti-
microbial properties for long-lasting comfort and performance, as well as the licensed New Balance® brand. We are pursuing
growth with new product introductions, including softer fabrics and blends, and expanding our global product offering in
performance garments, ladies styles, sport shirts, and workwear.
We also intend to continue to expand our presence in international markets such as Europe, Asia-Pacific, and Latin America,
which currently represent less than 10% of our total consolidated net sales, through product extensions, expanded distribution,
and by leveraging our brands.
2016 highlights
• On May 26, 2016, we acquired Alstyle Apparel, LLC and its subsidiaries (Alstyle) and added the Alstyle® brand as part
of our basics product offering. The acquisition expanded Gildan's penetration in printwear markets in the U.S., particularly
in the Western U.S. where Alstyle has a strong presence. It also broadened distribution in Canada and Mexico. As part
of the acquisition, Gildan gained manufacturing operations in Mexico which are expected to enhance Gildan’s competitive
positioning in the Mexican printwear and retail markets. Further, Alstyle's manufacturing operations provide additional
textile capacity to support further sales growth and offer the opportunity to leverage preferential trade agreements which
provide duty-free access to markets in South America.
• During 2016, we achieved double digit unit sales volume growth in fashion and performance basics, as well as in
international printwear markets.
4.2 Continue penetration of retail market as a full-line supplier of branded family apparel
We continue to leverage our existing core competencies, successful business model, and competitive strengths to grow our
sales to North American retailers. As in the printwear channel, success factors in penetrating the retail channel include
consistent quality, competitive pricing, and fast and flexible replenishment, together with a commitment to sound practices
in corporate social responsibility and environmental sustainability. Consumer brand recognition and appeal are also important
factors in the retail market. We intend to leverage our current distribution with retailers, our manufacturing scale and expertise,
and our ongoing marketing investment to support the further development of Company-owned and licensed brands to create
additional sales growth opportunities in activewear, underwear, socks, sheer hosiery, legwear, and shapewear products.
Although we are primarily focused on further developing our Company-owned and licensed brands, we are also building our
relationships and growing our sales as a supply chain partner to a small number of select global athletic and lifestyle brands.
2016 highlights
• The Branded Apparel business drove market share expansion in Gildan® branded men's socks and underwear and
achieved improved in-store placement for Gildan® branded men's underwear. Gildan® brand market share for the quarter
ended December 31, 2016 in the men's underwear category was 9.2%, up 210 basis points compared to the same period
last year. In the men's sock category, the Gildan® brand moved into the number one position in this category during 2016
and market share for the fourth quarter was 22.1%, up 220 basis points compared to the corresponding quarter in 2015.
In August 2016, we acquired 100% of the equity interest of Peds Legwear Inc. (Peds), a marketer of quality foot apparel
and legwear products, including ladies no-show liners, socks and sheer, and therapeutic hosiery sold mainly under the
Peds® and MediPeds® brands to U.S. and Canadian retailers. The acquisition is expected to create revenue growth
opportunities by leveraging Gildan's existing customer relationships to broaden the channels of distribution for the Peds®
•
GILDAN 2016 REPORT TO SHAREHOLDERS P. 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
and MediPeds® brands and by extending these brands into Gildan's other product categories. In addition, Peds distribution
into the footwear channel provides broader access in this channel for Gildan's brands and product portfolio.
4.3 Continue to increase capacity to support our planned sales growth and generate manufacturing and distribution
cost reductions
We plan to continue to increase capacity to support our planned sales growth. We are continuing to seek to optimize our
cost structure by adding new low-cost capacity, investing in projects for cost-reduction and further vertical-integration, as
well as for additional product quality enhancement.
2016 highlights
• We essentially completed the ramp up of our largest new yarn-spinning facility for the production of ring-spun yarn in
Mocksville, NC.
• During 2016, the Company continued to generate cost reductions from its capital investments in yarn-spinning and other
capital projects.
• With the acquisition of Alstyle in 2016, we acquired manufacturing operations in Mexico. We are targeting to achieve
synergies as we align production operations at Alstyle's manufacturing facilities in Mexico with Gildan's standardized
manufacturing processes, and through the optimization of capacity. Further, the existing large textile facility in Mexico
provides the opportunity to develop additional capacity at a lower rate of capital spending.
4.4 Utilize free cash flow and balance sheet strength to enhance sales and earnings growth and shareholder returns
We have established a capital allocation framework intended to enhance sales and earnings growth and shareholder returns.
Beyond our dividend, our first priority for the use of free cash flow and debt financing capacity is completing complementary
strategic acquisitions which meet our criteria. We have developed criteria in evaluating acquisition opportunities around three
main considerations: (1) strategic fit; (2) ease of integration; and (3) financial targets, including return on investment thresholds,
based on our risk-adjusted cost of capital. Beyond dividends and acquisitions, when appropriate, we intend to use excess
cash to repurchase shares. The Company has set forth a net debt leverage target ratio of one to two times adjusted EBITDA
which it believes will provide an efficient capital structure and allow it to execute on all of its capital allocation priorities within
this framework.
2016 highlights
• As discussed in the “Strategy and Objectives” section of this MD&A under sections 4.1 and 4.2, the Company completed
two acquisitions during 2016.
• During the second quarter of 2016, the Company raised $600 million of long-term debt in order to support its net debt
leverage target of one to two times adjusted EBITDA.
• During 2016, the Company generated close to $400 million in free cash flow and returned $470 million to shareholders
through dividends and share repurchases. At the end of 2016 the Company's net debt leverage ratio was 1.0 times
adjusted EBITDA.
• On February 22, 2017, the Board of Directors approved a 20% increase in the amount of the quarterly dividend compared
to the dividend of the prior quarter.
We are subject to a variety of business risks that may affect our ability to maintain our current market share and profitability,
as well as our ability to achieve our short and long-term strategic objectives. These risks are described under the “Financial
risk management” and “Risks and uncertainties” sections of this MD&A.
5.0 OPERATING RESULTS
As discussed in section 1.0 of this MD&A, the Company changed its year end in fiscal 2015 to the Sunday closest to
December 31, rather than the first Sunday following September 28. This MD&A comments on our operations, financial
performance and financial condition as at and for the 12-month fiscal year ended January 1, 2017 (Fiscal 2016) and the 15-
month transition period ended January 3, 2016 (Fiscal 2015). Fiscal 2014 refers to the 12-month fiscal year ended October
5, 2014.
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. We use non-GAAP measures including adjusted net earnings, adjusted diluted EPS,
GILDAN 2016 REPORT TO SHAREHOLDERS P. 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
adjusted operating income, adjusted operating margin, adjusted EBITDA, free cash flow, total indebtedness, net indebtedness
(cash in excess of total indebtedness), and net debt leverage ratio to measure our performance from one period to the next
without 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 17.0 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 Business acquisitions
We completed two business acquisition in fiscal 2016, and one in fiscal 2015, which are described below. The Company
accounted for these acquisitions using the acquisition method in accordance with IFRS 3, Business Combinations, and the
results of each acquisition have been consolidated with those of the Company from the respective dates of acquisition. The
Company has determined the fair value of the assets acquired and liabilities assumed based on management's best estimate
of their fair values and taking into account all relevant information available at the time of acquisition. Please refer to note 5
to the 2016 audited annual consolidated financial statements for a summary of the amounts recognized for the assets acquired
and liabilities assumed at the dates of acquisitions.
5.2.1 Peds
On August 22, 2016, the Company acquired a 100% interest in Peds for total consideration of $51.9 million (net of cash
acquired and income tax liabilities assumed), of which $47.9 million was paid at closing and a balance due of $4.0 million is
expected to be paid within twelve months of closing. Excluding the income tax liabilities and certain non-operational liabilities
assumed, the gross consideration was $55.0 million. The acquisition was financed by the utilization of the Company's long-
term bank credit facilities. Peds is a marketer of quality foot apparel and legwear products, including ladies no-show liners,
socks and sheer, and therapeutic hosiery sold mainly under the Peds® and MediPeds® brands to U.S. and Canadian retailers.
The acquisition is expected to create revenue growth opportunities by leveraging Gildan's existing customer relationships to
broaden the channels of distribution for the Peds® and MediPeds® brands and by extending these brands into Gildan’s other
product categories. In addition, Peds' current distribution into the footwear channel provides broader access in this channel
for Gildan’s brands and product portfolio.
The audited annual consolidated financial statements for the fiscal year ended January 1, 2017 include the results of Peds
from August 22, 2016 to January 1, 2017. The results of Peds are included in the Branded Apparel segment.
5.2.2 Alstyle
On May 26, 2016, the Company acquired a 100% interest in Alstyle for cash consideration of $110 million. The acquisition
was financed by the utilization of the Company’s long-term bank credit facilities. Alstyle manufactures and markets activewear
products such as T-shirts and fleece, the majority of which are sold under the Alstyle® brand. Alstyle sells its products to
screenprinters, embellishers, and mass-marketers largely in the U.S., as well as in Canada and Mexico. Its manufacturing
and distribution operations include a large-scale textile manufacturing facility and cut and sew facilities in Mexico, as well as
distribution centers located in the U.S., Canada, and Mexico. The acquisition of Alstyle expands Gildan’s penetration in
printwear markets in the U.S., Canada, and Mexico, and broadens and complements Gildan’s position in the Western United
States where Alstyle has a strong presence.
The audited annual consolidated financial statements for the fiscal year ended January 1, 2017 include the results of Alstyle
from May 26, 2016 to January 1, 2017. The results of Alstyle are included in the Printwear segment.
5.2.3 Comfort Colors
On March 2, 2015, the Company acquired substantially all of the operating assets of a company operating under the Comfort
Colors trade name for cash consideration of $103.3 million. The transaction also resulted in the effective settlement of $8.4
million of trade accounts receivable from Comfort Colors prior to the acquisition. The acquisition was financed by the utilization
of the Company’s revolving long-term bank credit facility. Comfort Colors is a leading supplier of garment-dyed undecorated
basic T-shirts and sweatshirts for the North American printwear market. The Comfort Colors® brand is highly recognized
among consumers purchasing from college bookstores, specialty retail stores, and destination and resort shops. The
acquisition of Comfort Colors reinforces Gildan’s strategy to increase its penetration of the growing fashion basics segment
of the North American printwear market.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 12
The audited annual consolidated financial statements for the 15-month fiscal period ended January 3, 2016 include the results
of Comfort Colors from March 2, 2015 to January 3, 2016. The results of Comfort Colors are included in the Printwear
segment.
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.3 Selected annual information
(in $ millions, except per share amounts or
otherwise indicated)
2016
2015
2014
Variation 2016-2015 Variation 2015-2014
%
%
$
$
Net sales
Gross profit
SG&A expenses
Restructuring and acquisition-related costs
Operating income
Adjusted operating income(1)
Adjusted EBITDA(1)
Financial expenses
Income tax expense
Net earnings
Adjusted net earnings(1)
Basic EPS
Diluted EPS
Adjusted diluted EPS(1)
2,585.1
719.7
336.4
11.7
371.5
383.2
523.8
19.7
5.2
346.6
356.3
1.47
1.47
1.51
Gross margin
SG&A expenses as a percentage of sales
Operating margin
Adjusted operating margin (1)
27.8%
13.0%
14.4%
14.8%
(15 months)
2,959.2
730.1
388.0
14.9
327.2
342.1
488.5
17.8
4.5
304.9
317.8
2,360.0
658.7
286.0
3.2
369.4
372.6
468.3
2.9
7.0
359.6
362.0
1.26
1.25
1.30
24.7%
13.1%
11.1%
11.6%
1.48
1.46
1.47
27.9%
12.1%
15.7%
15.8%
(374.1)
(10.4)
(51.6)
(3.2)
44.3
41.1
35.3
1.9
0.7
41.7
38.5
0.21
0.22
0.21
n/a
n/a
n/a
n/a
(12.6)%
(1.4)%
(13.3)%
(21.5)%
13.5 %
12.0 %
7.2 %
10.7 %
15.6 %
13.7 %
12.1 %
16.7 %
17.6 %
16.2 %
3.1 pp
(0.1) pp
3.3 pp
3.2 pp
599.2
71.4
102.0
11.7
(42.2)
(30.5)
20.2
14.9
(2.5)
(54.7)
(44.2)
(0.22)
(0.21)
(0.17)
25.4 %
10.8 %
35.7 %
n.m.
(11.4)%
(8.2)%
4.3 %
n.m.
(35.7)%
(15.2)%
(12.2)%
(14.9)%
(14.4)%
(11.6)%
n/a
n/a
n/a
n/a
(3.2) pp
1.0 pp
(4.6) pp
(4.2) pp
Total assets
Total non-current financial liabilities
Annual cash dividends declared per
common share
n.m. = not meaningful
n/a = not applicable
2,990.1
600.0
2,834.3
380.9
2,593.0
163.0
155.8
219.1
5.5 %
57.5 %
241.3
217.9
9.3 %
133.7 %
0.312
0.325
0.216
(0.013)
(4.0)%
0.109
50.5 %
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
5.4 Consolidated operating review
5.4.1 Net sales
(in $ millions)
Segmented net sales
Printwear
Branded Apparel
2016
2015
2014
(15 months)
Variation 2016-2015 Variation 2015-2014
%
%
$
$
Total net sales
Certain minor rounding variances exist between the consolidated financial statements and this summary.
1,651.1
934.0
2,585.1
1,794.8
1,164.5
2,959.3
1,559.5
800.4
2,359.9
(143.7)
(230.5)
(374.2)
(8.0)%
(19.8)%
(12.6)%
235.3
364.1
599.4
15.1%
45.5%
25.4%
GILDAN 2016 REPORT TO SHAREHOLDERS P. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal 2016 compared to Fiscal 2015
The $374 million decrease in net sales was mainly due to the inclusion of three additional months of sales in fiscal 2015,
which was a 15-month transition period due to the Company's change in fiscal year end. On a calendar year basis, net sales
for 2016 were up $16.5 million compared to same period last year due to the approximate $119 million impact of the Alstyle
and Peds acquisitions, the benefit of positive point of sales (POS) growth in Printwear, and organic sales growth in Branded
Apparel excluding the exit of private label programs. The impact of these positive factors more than offset lower Printwear
net selling prices, lower retailer inventory replenishment, the non-recurrence of distributor inventory re-stocking in 2015 and
the planned exit of approximately $65 million in retailer private label programs combined with unfavourable foreign currency
exchange and product-mix.
Net sales for fiscal 2016 were essentially in line with the Company’s previous sales guidance of approximately $2.6 billion,
provided on November 3, 2016, with Branded Apparel sales impacted by retailer inventory reductions in the fourth quarter.
Fiscal 2015 compared to Fiscal 2014
The increase in consolidated net sales for the 15-month transition period ended January 3, 2016 compared to fiscal 2014
was primarily attributable to an additional three months of sales included in fiscal 2015 amounting to $543.8 million. Excluding
this impact, the remaining increase in sales in fiscal 2015 compared to fiscal 2014 was mainly due to higher sales in Branded
Apparel, including the acquisition of Doris Inc. (Doris), partially offset by lower net sales in Printwear. Despite higher unit
sales volumes in Printwear, including the impact of the acquisition of Comfort Colors, Printwear net sales declined due to
lower net selling prices, including a $48 million distributor inventory devaluation discount in the first quarter of fiscal 2015,
and the decline in the value of foreign currencies relative to the U.S. dollar. Excluding the impact of the extra quarter, the
acquisitions of Doris and Comfort Colors contributed incremental year-over-year sales of approximately $95 million, taking
into account that the acquisitions of Doris and Comfort Colors occurred on July 7, 2014 and March 2, 2015, respectively.
5.4.2 Gross profit
(in $ millions, or otherwise indicated)
2016
Variation
2016-2015
Variation
2015-2014
2014
658.7
Gross profit
27.9%
Gross margin
Certain minor rounding variances exist between the consolidated financial statements and this summary.
719.7
27.8%
(10.4)
3.1 pp
71.4
(3.2) pp
2015
(15 months)
730.1
24.7%
Consolidated gross profit is the result of our net sales less cost of sales. Gross margin reflects gross profit as a percentage
of sales. Our cost of sales includes all raw material costs, manufacturing conversion costs, including manufacturing
depreciation expense, sourcing costs, inbound freight and inter-facility transportation costs, and outbound freight to customers.
Cost of sales also includes the costs of purchased finished goods, costs relating to purchasing, receiving and inspection
activities, manufacturing administration, third-party manufacturing services, sales-based royalty costs, insurance, inventory
write-downs, and customs and duties. Our reporting of gross profit and gross margin may not be comparable to these metrics
as reported by other companies, since some entities include warehousing and handling costs, and/or exclude depreciation
expense, outbound freight to customers and royalty costs from cost of sales.
Fiscal 2016 compared to fiscal 2015
Gross margin increased by 310 basis points in fiscal 2016, mainly due to significantly lower margin realized during the fiscal
quarter ended January 4, 2015, which was the first of the five fiscal quarters in fiscal 2015. The low gross margin of 11.0%
in that quarter was primarily due to a $48 million distributor inventory devaluation discount and the impact of consuming high-
cost inventories relating to the integration of new retail programs in fiscal 2014. The gross margin in the first fiscal quarter of
2015 accounted for 210 basis points of the 310 basis point improvement in gross margin in 2016 compared to fiscal 2015.
The remaining 100 basis point increase, which reflects the increase in gross margin on a calendar year basis, was due to
lower raw material costs and the benefit of manufacturing cost savings in fiscal 2016, partially offset by the impact of lower
net selling prices and unfavourable foreign currency exchange.
Fiscal 2015 compared to fiscal 2014
Gross margins decreased by 320 basis points in fiscal 2015 mainly due to lower Printwear net selling prices, including the
distributor inventory devaluation discount in the first quarter of fiscal 2015, the consumption of high-cost inventories in the
first six months of fiscal 2015 which included transitional manufacturing costs related to the integration of new retail programs
during fiscal 2014, the effect of the decline in international currencies relative to the U.S. dollar, and unfavourable product-
mix. The negative impact of these factors was partially offset by lower manufacturing costs mainly related to cost savings
from our investments in new yarn-spinning and other capital projects and lower cotton and purchased input costs. As explained
GILDAN 2016 REPORT TO SHAREHOLDERS P. 14
in section 5.6.1 in this MD&A, gross margins in the first nine months of fiscal 2015 reflected the misalignment between the
timing of lower Printwear net selling prices and the benefit of lower manufacturing and cotton costs. Gross margins for the
fifth quarter of fiscal 2015 were 240 basis points higher than the first 12 months of fiscal 2015, mainly due to sequentially
lower cotton costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4.3 Selling, general and administrative expenses
(in $ millions, or otherwise indicated)
2016
Variation
2016-2015
Variation
2015-2014
2014
286.0
SG&A expenses
12.1%
SG&A expenses as a percentage of sales
Certain minor rounding variances exist between the consolidated financial statements and this summary.
336.4
13.0%
(51.6)
(0.1) pp
102.0
1.0 pp
2015
(15 months)
388.0
13.1%
Fiscal 2016 compared to fiscal 2015
The decrease in selling, general and administrative expenses (SG&A) in fiscal 2016 compared to fiscal 2015 was mainly
due to the additional three months of expenses included in fiscal 2015. On a calendar year basis, SG&A expenses in 2016
increased by $28 million compared to 2015 mainly due to the Alstyle and Peds acquisitions in 2016 and higher variable
compensation expenses. Although SG&A expenses as a percentage of sales in fiscal 2016 were essentially flat compared
to the 2015 15-month transition period, the SG&A percentage for fiscal 2015 included the impact of an abnormally high SG&A
percentage in the first of the five fiscal quarters due to the low level of Printwear net sales in that quarter, which accounted
for 110 basis points of SG&A expenses for the 15-month period. On a calendar year basis, SG&A expenses as a percentage
of net sales increased by 100 basis points in 2016 compared to the same period in 2015, mainly attributable to lower organic
sales, and higher variable compensation expenses, partially offset by the favourable impact of the weaker Canadian dollar
on head office expenses.
Fiscal 2015 compared to fiscal 2014
The increase in selling, general and administrative (SG&A) expenses for the 15-month transition period ended January 3,
2016 compared to fiscal 2014 was mainly due to an additional three months of expenses included in fiscal 2015, the impact
of the acquisitions of Doris and Comfort Colors, increased advertising and marketing expenses, higher legal and professional
fees, and higher volume-driven distribution expenses, partially offset by the favourable impact of the weaker Canadian dollar
on corporate head office expenses. As a percentage of sales, SG&A expenses for the 15-month transition period ended
January 3, 2016 were 13.1%, up from 12.1% in fiscal 2014 mainly due to the decline in Printwear sales in the first quarter
of fiscal 2015, which included the distributor inventory devaluation discount, higher marketing and advertising expenses in
Branded Apparel and the impact of the Doris acquisition.
5.4.4 Restructuring and acquisition-related costs
(in $ millions, or otherwise indicated)
Employee termination and benefit costs
Loss on settlement on wind-up of defined benefit
pension plan
Exit, relocation and other costs
Loss on disposal of PPE related to exit activities
Loss (gain) on disposal or transfer of assets held
for sale
2016
5.0
—
7.9
1.1
0.6
2015
(15 months)
5.0
—
8.5
0.2
0.5
1.9
0.4
—
(1.0)
(0.3)
Remeasurement of contingent consideration in
connection with a business acquisition
—
0.8
Acquisition-related transaction costs
3.3
Restructuring and acquisition-related costs
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(6.2)
3.3
11.7
1.1
1.1
14.9
2014
Variation
2016-2015
Variation
2015-2014
—
—
(0.6)
0.9
1.6
(7.3)
2.2
(3.2)
4.5
(1.9)
8.1
0.2
(0.7)
1.1
0.3
11.6
Restructuring and acquisition-related costs are comprised of costs directly related to the closure of business locations or the
relocation of business activities, significant changes in management structure, as well as transaction, exit and integration
costs incurred pursuant to business acquisitions.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
Restructuring and acquisition-related costs in fiscal 2016 related primarily to costs incurred in connection with the integration
of acquired businesses, including the integrations of the more recent Alstyle and Peds acquisitions, the completion of the
integration of other businesses acquired in previous years, involving consolidation of customer service, distribution, and
administrative functions, and costs incurred in connection with the rationalization of our retail store outlets as part of our
overall direct to consumer channel strategy. Restructuring and acquisition-related costs also included transaction costs related
to the acquisitions of Alstyle and Peds. Restructuring and acquisition-related costs were partially offset by a gain on the re-
measurement of the fair value of contingent consideration in connection with the Doris acquisition as described in note 14
(a) to the audited annual consolidated financial statements for the year ended January 1, 2017.
Restructuring and acquisition-related costs in fiscal 2015 related primarily to costs incurred in connection with the integration
of acquired businesses, including the integrations of the Doris and Comfort Colors acquisitions, and the completion of the
integration of other businesses acquired in previous years, involving consolidation of customer service, distribution and
administrative functions, and screenprinting operations. Restructuring and acquisition-related costs also included transaction
costs related to the acquisition of the operating assets of Comfort Colors as well as costs incurred in connection with the
consolidation of sewing operations.
Restructuring and acquisition-related costs in fiscal 2014 relate primarily to a loss incurred on the final settlement on the
wind-up of the former Gold Toe defined benefit pension plan, and transaction costs incurred in connection with the acquisition
of the operating assets of Doris.
5.4.5 Operating income and adjusted operating income
(in $ millions, or otherwise indicated)
2016
2015
2014
Variation
2016-2015
Variation
2015-2014
(15 months)
327.2
369.4
44.3
(42.2)
Operating income
Adjustment for:
Restructuring and acquisition-related costs
Adjusted operating income(1)
371.5
11.7
383.2
14.9
342.1
3.2
372.6
Operating margin
Adjusted operating margin(1)
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
11.1%
11.6%
14.4%
14.8%
15.7%
15.8%
(3.2)
41.1
3.3 pp
3.2 pp
11.7
(30.5)
(4.6) pp
(4.2) pp
Fiscal 2016 compared to fiscal 2015
Operating income in fiscal 2016 increased by $44.3 million compared to the 2015 15-month transition period due mainly to
an operating loss of $40.3 million incurred in the first of five fiscal quarters of 2015. On a calendar year basis, operating
income in 2016 reflected a slight increase of $4.0 million compared to the same period in 2015, as higher gross profit was
essentially offset by higher SG&A expenses. Operating margin of 14.4% in fiscal 2016 was up from 11.1% in the 2015 15-
month transition period. The comparable period was impacted by the $40.3 million operating loss in the first of five fiscal
quarters of 2015. On a calendar year basis, operating margin in 2016 was 14.4%, essentially at the same level of the 14.3%
operating margin in 2015.
Fiscal 2015 compared to fiscal 2014
Operating income in fiscal 2015 declined compared to fiscal 2014 despite an additional three months of operating income
amounting to $70.7 million included in fiscal 2015. Excluding the impact of the additional three months of operating results
in fiscal 2015, operating income decreased by $112.9 million compared to fiscal 2014 due to lower operating margins primarily
as a result of the strategic pricing actions in Printwear taken in December 2014 which contributed to the net operating loss
in the first fiscal quarter of 2015 and a misalignment of the timing between Printwear selling price reductions and cost
reductions as noted in section 5.4.2 of this MD&A. In addition, Branded Apparel operating margins were down compared to
fiscal 2014 due to the consumption of high-cost inventories in the first six months of fiscal 2015 and higher marketing and
advertising expenses in fiscal 2015 compared to last year. The decline in operating income also reflected higher restructuring
and acquisition-related costs compared to fiscal 2014.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4.6 Financial expenses, net
(in $ millions, or otherwise indicated)
Interest expense on financial liabilities recorded at
2016
2015
(15 months)
2014
Variation
2016-2015
Variation
2015-2014
amortized cost
2.1
3.3
Bank and other financial charges
0.3
Interest accretion on discounted provisions
(2.8)
Foreign exchange loss (gain)
2.9
Financial expenses, net
Certain minor rounding variances exist between the consolidated financial statements and this summary.
12.6
6.3
0.3
0.4
19.6
8.6
4.7
0.4
4.0
17.7
4.0
1.6
(0.1)
(3.6)
1.9
6.5
1.4
0.1
6.8
14.8
Fiscal 2016 compared to fiscal 2015
The increase in net financial expenses in fiscal 2016 was due to higher interest expense as a result of higher borrowing
levels and higher effective interest rates on our long-term debt. In addition, higher bank and other financial charges were
due to the amortization of financing fees incurred in connection with the new debt issuances in fiscal 2016, and discount fees
related to the sales of trade accounts receivables. These factors were partially offset by the impact of the additional three
months included in fiscal 2015, and lower foreign exchange losses in calendar 2016 compared to same period last year.
Fiscal 2015 compared to fiscal 2014
The increase in net financial expenses in fiscal 2015 compared to fiscal 2014 was due to higher interest expense, as a result
of higher borrowing levels from our revolving long-term bank credit facility and the impact of an additional three months in
fiscal 2015. In addition, the Company incurred a foreign exchange loss in fiscal 2015 mainly due to the unfavourable revaluation
of net monetary assets denominated in foreign currencies, compared to a foreign exchange gain in fiscal 2014.
5.4.7 Income taxes
The Company’s average effective tax rate, including and excluding the impact of restructuring and acquisition-related costs,
is calculated as follows:
(in $ millions, or otherwise indicated)
Earnings before income taxes
Income tax expense
Average effective income tax rate
Earnings before income taxes and restructuring
and acquisition-related costs
Income tax expense excluding tax recoveries on
restructuring and acquisition-related costs(1)
Average effective income tax rate, excluding the
impact of restructuring and acquisition-related
costs
2016
351.8
5.2
1.5%
2015
(15 months)
309.4
4.5
1.5%
2014
Variation
2016-2015
Variation
2015-2014
366.5
7.0
1.9%
42.4
0.7
0.0 pp
(57.1)
(2.5)
(0.4) pp
363.6
324.3
369.8
39.3
(45.5)
7.2
6.5
7.8
0.7
(1.3)
2.0%
2.0%
2.1%
0.0 pp
(0.1) pp
(1) Tax recoveries on restructuring and acquisition-related costs are presented in the reconciliation of net earnings to adjusted net
earnings in section 5.4.8 in this MD&A.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
Fiscal 2016 compared to fiscal 2015
The income tax expense and average effective income tax rate for fiscal 2016 are comparable to the respective amounts for
fiscal 2015. The income tax expense for both years is net of tax recoveries and adjustments related to prior taxation years
of $4.8 million for fiscal 2016 and $5.1 million for fiscal 2015, and an income tax recovery of $2.0 million related to restructuring
and acquisition-related costs for both years. The average effective tax rate for fiscal 2016, excluding the impact of restructuring
and acquisition-related costs, was 2.0%, compared to the Company’s previously forecasted effective tax rate of 5%. The
lower than anticipated average effective tax rate was mainly due to the lower than expected operating income in Branded
Apparel which is subject to a higher effective tax rate, the recognition of favourable tax adjustments in the fourth quarter of
GILDAN 2016 REPORT TO SHAREHOLDERS P. 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
fiscal 2016, including the recognition of a portion of the adjustments relating to prior taxation years, and the recognition of a
deferred tax asset to the extent of the acquired deferred tax liabilities resulting from the Peds acquisition.
Fiscal 2015 compared to fiscal 2014
The income tax expense for fiscal 2015 included an income tax recovery of $2.0 million related to restructuring and acquisition-
related costs, compared to $0.8 million in fiscal 2014. The average effective income tax rate, excluding the impact of
restructuring and acquisition-related costs, was 2.0% in fiscal 2015 compared to 2.1% in fiscal 2014. The income tax expense
for fiscal 2015 is net of adjustments related to prior taxation years, and the income tax expense for fiscal 2014 reflected an
income tax recovery relating to the recognition of a deferred tax asset to the extent of the acquired deferred tax liabilities
resulting from the Doris acquisition.
5.4.8 Net earnings, adjusted net earnings, and earnings per share measures
(in $ millions, or otherwise indicated)
Net earnings
Adjustments for:
Restructuring and acquisition-related costs
Income tax recovery on restructuring and
acquisition-related costs
Adjusted net earnings(1)
2016
346.6
2015
(15 months)
304.9
2014
Variation
2016-2015
Variation
2015-2014
359.6
41.7
(54.7)
11.7
14.9
3.2
(3.2)
11.7
(2.0)
356.3
(2.0)
317.8
(0.8)
362.0
1.48
1.46
1.47
—
38.5
0.21
0.22
0.21
(1.2)
(44.2)
(0.22)
(0.21)
(0.17)
Basic EPS
Diluted EPS
Adjusted diluted EPS(1)
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
1.26
1.25
1.30
1.47
1.47
1.51
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
Fiscal 2016 compared to fiscal 2015
The $41.7 million increase in net earnings and the $38.5 million increase in adjusted net earnings in fiscal 2016 compared
to the 2015 15-month transition period was mainly due to the $41.2 million net loss in the first of the five fiscal quarters in
2015. The increase in diluted EPS and adjusted diluted EPS was mainly due to the net loss and adjusted net loss incurred
in the first fiscal quarter of 2015, which had a per share impact of $0.17 and $0.15, respectively.
On a calendar year basis, net earnings and adjusted net earnings for 2016 were essentially flat compared to the same period
in 2015, as a slightly higher operating income and slightly lower income taxes were offset by higher financial expenses.
Adjusted diluted EPS for fiscal 2016 totaled $1.51 per share, up 3.4% compared to adjusted diluted EPS of $1.46 in the 2015
calendar year reflecting the favourable impact of share repurchases under the Company's NCIB during 2016, as discussed
in section 8.6 of this MD&A. The Company achieved adjusted diluted EPS for 2016 slightly above its previous guidance of
$1.48 to $1.50 provided on November 3, 2016, as the benefit of an income tax recovery in the fourth quarter more than offset
the impact of lower than anticipated net sales in Branded Apparel.
Fiscal 2015 compared to fiscal 2014
The decrease in net earnings and adjusted net earnings in fiscal 2015 compared to fiscal 2014 was primarily due to lower
operating margins in both operating segments and increased financial expenses, which more than offset the benefit of the
inclusion of three additional months of operating results in fiscal 2015 which contributed adjusted net earnings of $0.28 per
share.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 18
5.5 Segmented operating review
(in $ millions, or otherwise indicated)
2016
2015
Variation $
Variation %
MANAGEMENT'S DISCUSSION AND ANALYSIS
Segmented net sales:
Printwear
Branded Apparel
Total net sales
(15 months)
1,651.1
934.0
2,585.1
1,794.8
1,164.5
2,959.3
(143.7)
(230.5)
(374.2)
Segment operating income:
Printwear
Branded Apparel
Total segment operating income
Corporate and other(1)
Total operating income
(1) Includes corporate head office expenses, restructuring and acquisition-related costs, and amortization of intangible assets,
388.1
85.4
473.5
(102.0)
371.5
363.6
91.0
454.6
(127.4)
327.2
24.5
(5.6)
18.9
25.4
44.3
(8.0)%
(19.8)%
(12.6)%
6.7 %
(6.2)%
4.2 %
(19.9)%
13.5 %
excluding software.
Certain minor rounding variances exist between the financial statements and this summary.
Segment operating margin:
Printwear
Branded Apparel
2016
2015
Variation
(15 months)
23.5%
9.1%
20.3%
7.8%
3.2 pp
1.3 pp
5.5.1 Printwear
Net sales
The $143.7 million decrease in Printwear sales in fiscal 2016 compared to fiscal 2015 was mainly due to an additional three
months of sales included fiscal 2015. On a calendar year basis, Printwear net sales for fiscal 2016 were up $16.7 million
compared to 2015, due to the acquisition of Alstyle effective May 26, 2016 which contributed $88.3 million, continued growth
in the performance and fashion basics product segments in the U.S printwear channel, and double digit unit sales volume
growth in international printwear markets. These factors were largely offset by lower net selling prices, the impact of
unfavourable foreign currency exchange on international sales, and the non-recurrence of distributor inventory re-stocking
in 2015.
Operating income
The $25 million increase in Printwear operating income in 2016 compared to the 2015 15-month transition period was mainly
due to the $21 million operating loss in Printwear incurred in the first of the five fiscal quarters of 2015, which included the
distributor inventory devaluation discount of $48 million. On a calendar year basis, operating income in 2016 was slightly
higher compared to the same period in 2015 as the benefit of lower raw material costs, manufacturing cost savings, and
higher unit sales volumes including Alstyle were largely offset by lower net selling prices and unfavourable foreign exchange.
Printwear operating margins for 2016 were up 320 basis points compared to the 2015 15-month transition period, mainly
due to the impact of the operating loss in the first of the five fiscal quarters of 2015. On a calendar year basis, Printwear
operating margins were at the same level as 2015 reflecting lower raw material costs and manufacturing cost savings, offset
by reduced selling prices and higher SG&A.
5.5.2 Branded Apparel
Net sales
The $231 million decrease in Branded Apparel sales in 2016 compared to fiscal 2015 was mainly due to the additional three
months of sales included in the 2015 15-month transition year. On a calendar year basis, Branded Apparel net sales for
fiscal 2016 were flat compared to 2015, as the $30.3 million impact of the acquisition of Peds, sales growth from shelf space
expansion, and new retail programs were offset by the Company's planned exit in 2016 of private label programs, amounting
to approximately $65 million, as well as unfavourable impacts from a weak retail environment throughout the year. Weak
retail market conditions contributed to unfavourable product-mix due to softness in the department store and national chain
retail channel and tight retailer inventory management.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating income
The $6 million decrease in Branded Apparel operating income in 2016 compared to the 2015 15-month transition period was
mainly due to the additional three months of results included in fiscal 2015. On a calendar year basis, Branded Apparel
operating income in 2016 was slightly higher compared to the same period in 2015. Branded Apparel operating margin for
2016 was up 130 basis points compared to the 2015 15-month transition period. The increase in operating margin reflected
the non-recurrence of the consumption of high-cost opening inventories in the first six months of fiscal 2015 due to transitional
manufacturing costs incurred in fiscal 2014. In addition, operating margin in Branded Apparel in 2016 was favourably impacted
by lower raw material and other input costs and manufacturing cost savings, partly offset by higher promotional spending
and higher SG&A expenses in 2016 compared to the same period in 2015.
5.6 Summary of quarterly results
The table below sets forth certain summarized unaudited quarterly financial data for the eight most recently completed
quarters in accordance with IFRS. This quarterly information is unaudited and has been prepared on the same basis as the
audited annual consolidated financial statements. The operating results for any quarter are not necessarily indicative of the
results to be expected for any period.
For the three months ended
(in $ millions, except per share amounts)
Jan 1,
2017
(1)
Oct 2,
2016
(2)
Jul 3,
2016
Net sales
Net earnings
Net earnings per share
Basic(4)
Diluted(4)
Weighted average number of shares
outstanding (in ‘000s)
587.9
74.3
0.32
0.32
715.0
114.4
0.49
0.49
688.9
94.7
0.40
0.40
Apr 3,
2016
593.3
63.2
0.26
0.26
Jan 3,
2016
543.8
67.6
0.28
0.28
Oct 4,
2015
674.5
123.1
0.51
0.50
Jul 5,
2015
(3)
Apr 5,
2015
714.2
99.4
0.41
0.41
636.2
56.0
0.23
0.23
Basic
Diluted
231,364
231,855
231,924
235,496
232,715
236,272
242,637
243,355
243,183
244,174
242,257
241,856
241,360
244,063
243,809
243,513
(1) Reflects the acquisition of Peds from August 22, 2016.
(2) Reflects the acquisition of Alstyle from May 26, 2016.
(3) Reflects the acquisition of Comfort Colors from March 2, 2015.
(4) Quarterly EPS may not add to year-to-date EPS due to rounding.
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
5.6.1 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. Historically, consolidated net sales have been lowest in the last calendar quarter and highest in the second and third
quarters of the calendar year, reflecting the seasonality of our operating segments’ net sales. For our Printwear segment,
demand for T-shirts is lowest in the fourth calendar quarter, and highest in the second calendar 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 calendar quarters of the year. For our Branded Apparel segment, sales
are higher during the second half of the year, during the back-to-school period and the Christmas holiday selling season.
Historically, the seasonal sales trends of our business have resulted in fluctuations in our inventory levels throughout the
year, in particular a build-up of T-shirt inventory levels in the fourth and first calendar quarters of the year.
Our results are also impacted by fluctuations in the price of raw materials and other input costs. Cotton and polyester fibers
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 in advance of delivery and derivative financial instruments 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,
GILDAN 2016 REPORT TO SHAREHOLDERS P. 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
and petroleum prices, which can also influence transportation costs and the cost of related items used in our business, such
as polyester fibers, chemicals, dyestuffs, and trims.
Business acquisitions may affect the comparability of results. As noted in the table under “Summary of quarterly results”, the
quarterly financial data reflects the acquisition of Peds effective August 22, 2016, the acquisition of Alstyle effective May 26,
2016, and the acquisition of Comfort Colors effective March 2, 2015. 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. The effect of asset write-downs, including provisions for bad debts and slow moving inventories, can also affect the
variability of our results. Subsection 5.4.4 entitled “Restructuring and acquisition-related costs” in this MD&A contains a
discussion of costs related to the Company’s restructuring activities and business acquisitions.
Our reported amounts for net sales, SG&A expenses and financial expenses/income are impacted by fluctuations in the U.S.
dollar versus certain other currencies 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.
During the first of five fiscal quarters in 2015, the Company significantly lowered Printwear net selling prices in North America
and applied the benefit of the reduction in selling prices to existing distributor inventories through a distributor inventory
devaluation discount of approximately $48 million, which was recorded as a reduction in net sales in the first of five fiscal
quarters of 2015. The reduction in selling prices also reflected the decline in the price of cotton futures that occurred in the
latter half of 2014, even though the Company only began to benefit from lower cotton costs starting in the third fiscal quarter
of 2015. Consequently, the Company reported a significant operating loss for its Printwear segment in the first of five fiscal
quarters of 2015 and results for the first nine months of fiscal 2015 reflected the misalignment between the timing of lower
Printwear net selling prices and lower manufacturing and cotton costs. In addition, results during the first six months of fiscal
2015 include the negative impact on Branded Apparel margins from the consumption of inventories in cost of sales which
included transitional manufacturing costs related to the integration of new retail programs during fiscal 2014.
5.7 Fourth quarter operating results
For the three months ended
(in $ millions, except per share amounts or otherwise indicated)
January 1,
2017
January 3,
2016
Variation $
Variation %
Net sales
Gross profit
SG&A expenses
Restructuring and acquisition-related costs
Operating income
Adjusted operating income(1)
Adjusted EBITDA(1)
Financial expenses
Income tax expense (recovery)
Net earnings
Adjusted net earnings(1)
Basic EPS
Diluted EPS
Adjusted diluted EPS(1)
Gross margin
SG&A expenses as a percentage of sales
Operating margin
Adjusted operating margin(1)
n.m. = not meaningful
587.9
156.9
86.8
0.2
69.8
70.0
102.6
5.8
(10.3)
74.3
74.5
0.32
0.32
0.32
26.7%
14.8%
11.9%
11.9%
543.8
144.8
72.8
1.3
70.7
72.0
101.7
2.4
0.6
67.6
68.9
0.28
0.28
0.28
26.6%
13.4%
13.0%
13.2%
44.1
12.1
14.0
(1.1)
(0.9)
(2.0)
0.9
3.4
(10.9)
6.7
5.6
0.04
0.04
0.04
n/a
n/a
n/a
n/a
8.1 %
8.4 %
19.2 %
(84.6)%
(1.3)%
(2.8)%
0.9 %
141.7 %
n.m.
9.9 %
8.1 %
14.3 %
14.3 %
14.3 %
0.1 pp
1.4 pp
(1.1) pp
(1.3) pp
n/a - not applicable
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
January 1,
2017
January 3,
2016
Variation $
Variation %
325.8
262.1
587.9
284.9
258.9
543.8
40.9
3.2
44.1
For the three months ended
(in $ millions)
Segmented net sales:
Printwear
Branded Apparel
Total net sales
14.4 %
1.2 %
8.1 %
9.2 %
(22.6)%
(1.3)%
(1.3)%
(1.3)%
Segment operating income:
Printwear
Branded Apparel
Total segment operating income
Corporate and other(1)
Total operating income
(1) Includes corporate head office expenses, restructuring and acquisition-related costs, and amortization of intangible assets.
62.8
31.0
93.8
(23.1)
70.7
68.6
24.0
92.6
(22.8)
69.8
5.8
(7.0)
(1.2)
0.3
(0.9)
For the three months ended
Segment operating margin:
Printwear
Branded Apparel
n/a - not applicable
January 1,
2017
January 3,
2016
Variation $
Variation %
21.0%
9.1%
22.0%
12.0%
n/a
n/a
(1.0) pp
(2.9) pp
Consolidated net sales for the fourth quarter of 2016 were up 8.1% compared to the fifth fiscal quarter of 2015 (the
corresponding quarter of the prior year) reflecting sales increases of 14.4% in the Printwear segment and 1.2% in Branded
Apparel.
Printwear segment sales for the fourth quarter of 2016 grew strongly to $325.8 million, up 14.4% from $284.9 million in the
corresponding quarter of 2015. The increase was mainly due to the $30 million sales contribution from the Alstyle acquisition
and organic unit sales volume growth driven by strong double digit volume growth in international printwear markets and
higher sales of fashion basics. These positive factors were partly offset by lower net selling prices and the impact of
unfavourable foreign currency exchange on international sales.
Net sales for the Branded Apparel segment in the quarter were $262.1 million, up 1.2% from $258.9 million in the corresponding
quarter of the prior year. Despite a challenging retail environment, the $20 million impact from the Peds acquisition combined
with positive point of sales growth during the quarter more than offset the impact of significant retailer inventory destocking
and the anticipated impact of the exit of certain private label programs as the Company had previously planned.
Consolidated gross margin in the fourth quarter of 2016 was 26.7%, in line with the corresponding quarter of the prior year,
as the benefits from lower raw material and other input costs were largely offset by lower net selling prices.
SG&A expenses as a percentage of sales of 14.8% in the fourth quarter were up from 13.4% compared to the corresponding
prior year quarter due primarily to higher marketing and advertising expenses as well as SG&A deleveraging in Branded
Apparel due to lower organic sales compared to the fourth calendar quarter of 2015.
Consolidated operating margins and adjusted operating margins in the fourth quarter of 2016 were both 11.9% compared to
13.0% and 13.2%, respectively in the corresponding quarter of 2015.
Operating income in Printwear for the three months ended January 1, 2017 totaled $68.6 million, up 9.2% compared to $62.8
million in the corresponding quarter of 2015. Printwear operating margins for the quarter were 21.0%, down 100 basis points
over the prior year due primarily to lower 2016 net selling prices, unfavourable foreign currency exchange, and the short-
term dilutive impact on operating margins from the acquisition of Alstyle. These factors were partly offset by the benefit of
lower raw material and other input costs.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating income in Branded Apparel of $24.0 million in the three months ended January 1, 2017 declined 22.6% compared
to $31.0 million in the corresponding quarter last year. Branded Apparel operating margins for the quarter were 9.1% down
from 12.0% in the same quarter last year. The operating margin decline was primarily due to re-timed marketing and advertising
expenses and SG&A deleveraging resulting from lower organic sales impacted by retailer inventory destocking, partly offset
by lower raw material and other input costs.
Consolidated net earnings for the fourth quarter of 2016 totaled $74.3 million or $0.32 per share on a diluted basis for the
three months ended January 1, 2017, compared with net earnings of $67.6 million or $0.28 per share for the corresponding
quarter of the prior year. Excluding after-tax restructuring and acquisition-related costs of $0.2 million in the quarter and $1.3
million in the corresponding quarter last year, Gildan reported adjusted net earnings of $74.5 million, or $0.32 per share on
a diluted basis for the fourth quarter of 2016, up from $68.9 million, or $0.28 per share in the corresponding prior year quarter.
The 14.3% increase in adjusted diluted EPS was primarily due to higher gross profit, an income tax recovery in the quarter,
and the benefit of share repurchases during the year, partly offset by higher SG&A and financial charges.
6.0 FINANCIAL CONDITION
6.1 Current assets and current liabilities
(in $ millions)
January 1,
2017
January 3,
2016
Variation
Cash and cash equivalents
Trade accounts receivable
Inventories
Prepaid expenses, deposits and other current assets
Assets held for sale
Accounts payable and accrued liabilities
Income taxes payable
Total working capital
Certain minor rounding variances exist between the consolidated financial statements and this summary.
38.2
277.7
954.9
69.7
—
(234.1)
(1.9)
1,104.5
50.7
306.1
851.0
42.9
2.8
(232.3)
(1.0)
1,020.2
(12.5)
(28.4)
103.9
26.8
(2.8)
(1.8)
(0.9)
84.3
•
•
•
•
The decrease in trade accounts receivable (which are net of accrued sales discounts) was mainly due to the impact of
the sale of trade accounts receivables related to Branded Apparel to a financial institution as disclosed in note 7 of the
audited consolidated financial statements for the year ended January 1, 2017, which more than offset the impact of a
higher number of days' sales outstanding due to longer payment terms with a major retailer, and a $30 million increase
from the acquisitions of Alstyle and Peds in fiscal 2016.
The increase in inventories of $103.9 million was mainly due to the impact of the acquisitions of Alstyle and Peds, which
increased inventories by $85 million. Year-end inventories were also slightly higher due to the short term impact of lower
than anticipated net sales during fiscal 2016, partially offset by lower manufacturing costs.
The increase in prepaid expenses, deposits and other current assets was mainly due to the higher fair value of derivative
financial instruments designated as effective hedging instruments, as well as the acquisitions of Alstyle and Peds.
The slight increase in accounts payable and accrued liabilities was mainly due to the impact of the Alstyle and Peds
acquisitions (including the balance due on the Peds acquisition), mostly offset by the impact of shorter payment terms
as a result of increased vertical integration into yarn-spinning.
• Working capital was $1,104.5 million as at January 1, 2017 compared to $1,020.2 million as at January 3, 2016. The
current ratio at the end of fiscal 2016 was 5.7 compared to 5.4 at the end of fiscal 2015.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
6.2 Property, plant and equipment, intangible assets and goodwill
(in $ millions)
Balance, January 3, 2016
Net capital additions
Additions through business acquisitions
1,044.4
125.4
31.8
Property, plant
and equipment
Intangible
assets
Other
Depreciation and amortization
Balance, January 1, 2017
Certain minor rounding variances exist between the consolidated financial statements and this summary.
—
(124.7)
1,076.9
336.8
4.7
34.0
—
(21.3)
354.2
Goodwill
190.6
—
9.6
1.9
—
202.1
• Additions to property, plant and equipment reflected capital expenditure investments primarily related to textile capacity,
including the development of Rio Nance 6 and capacity expansion in Bangladesh, as well as investments in yarn-
spinning, including the ramp-up of ring-spun yarn production in the Mocksville, NC facility, and property, plant and
equipment acquired in connection with the acquisitions of Alstyle and Peds.
•
Intangible assets are comprised of customer contracts and relationships, trademarks, license agreements, non-compete
agreements, and computer software. The increase in intangible assets mainly reflects $34.0 million related to the
acquisition of Alstyle and Peds, and other capital additions primarily related to software, partially offset by amortization
of $21.3 million.
•
The increase in goodwill is mainly due to the goodwill recorded in connection with the acquisitions of Alstyle and Peds.
6.3 Other non-current assets and non-current liabilities
(in $ millions)
Deferred income taxes
Other non-current assets
January 1,
2017
January 3,
2016
1.5
14.9
2.8
6.1
(375.0)
(37.6)
Variation
(1.3)
8.8
(225.0)
3.0
Long-term debt
Other non-current liabilities
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(600.0)
(34.6)
•
The increase in other non-current assets is mainly due to a deposit made in the fourth quarter of fiscal 2016 with respect
to the acquisition of the American Apparel brand and other assets, which closed on February 8, 2017.
• Other non-current liabilities include provisions, employee benefit obligations, and contingent consideration in connection
with a business acquisition. The decrease in other non-current liabilities is mainly due to the decrease of contingent
consideration in connection with a business acquisition as discussed in section 5.4.4 of this MD&A, partially offset by
increases to employee benefit obligations for active employees located in Central America.
•
See the section entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt.
Total assets were $2,990.1 million as at January 1, 2017, compared to $2,834.3 million as at January 3, 2016.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.0 CASH FLOWS
7.1 Cash flows from (used in) operating activities
(in $ millions)
Net earnings
Adjustments to reconcile net earnings to cash flows from operating
activities(1)
Changes in non-cash working capital balances
Cash flows from operating activities
2016
346.6
158.4
32.8
537.8
2015
Variation
(15 months)
304.9
147.7
(98.9)
353.7
41.7
10.7
131.7
184.1
(1) Includes $140.6 million (2015 - $146.4 million) related to depreciation and amortization.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
•
The year-over-year increase in operating cash flows of $184.1 million was mainly due to the impact of higher net earnings,
and a decrease in non-cash working capital in fiscal 2016, compared to an increase in non-cash working capital in fiscal
2015, as explained below.
• Non-cash working capital decreased by $32.8 million during fiscal 2016, compared to an increase of $98.9 million during
fiscal 2015. In fiscal 2016, the change in non-cash working capital was due primarily to a decrease in trade accounts
receivable, partially offset by increases in inventories and decreases in accounts payable and accrued liabilities, as
noted in the "Financial Condition" section of this MD&A. In fiscal 2015, the change in non-cash working capital was due
primarily to significant decreases in accounts payable and accrued liabilities, and increases in inventories, partially offset
by a decrease in trade accounts receivable. The changes in working capital during fiscal 2015 were largely due to
seasonal factors, as fiscal 2015 was a 15-month transition period which began on October 5, 2014 and ended on
January 3, 2016.
7.2 Cash flows from (used in) investing activities
(in $ millions)
2016
2015
Variation
Purchase of property, plant and equipment
Purchase of intangible assets
Business acquisitions
Proceeds on disposal of assets held for sale and property, plant
and equipment
Cash flows used in investing activities
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(129.4)
(10.8)
(163.9)
(15 months)
(319.4)
(7.5)
(103.8)
0.8
(303.3)
5.5
(425.2)
190.0
(3.3)
(60.1)
(4.7)
121.9
•
The lower use of cash in investing activities during fiscal 2016 compared to fiscal 2015 reflected lower capital spending
mainly due to lower yarn-spinning investments and the impact of an additional three months in fiscal 2015. Cash used
in investing activities during fiscal 2016 included $109.5 million for the acquisition of Alstyle, $47.9 million for the acquisition
of Peds, and $6.6 million for a deposit relating to the acquisition of the American Apparel brand and other assets, while
cash used in investing activities during fiscal 2015 included $103.3 million for the acquisition of Comfort Colors.
• Capital expenditures during fiscal 2016 are described in section 6.2 of this MD&A, and our projected capital expenditures
for the next fiscal year are discussed under “Liquidity and capital resources” in section 8.0 of this MD&A.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 25
7.3 Free cash flow
(in $ millions)
2016
2015
Variation
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash flows from operating activities
Cash flows used in investing activities
Adjustment for:
Business acquisitions
Free cash flow(1)
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
537.9
(303.4)
163.9
398.4
(15 months)
353.6
(425.3)
103.8
32.1
184.3
121.9
60.1
366.3
Certain minor rounding variances exist between the consolidated financial statements and this summary.
•
For fiscal 2016, the year-over-year increase in free cash flow of $366.3 million reflected higher operating cash flows and
lower capital expenditures.
7.4 Cash flows from (used in) financing activities
(in $ millions)
Increase (decrease) in amounts drawn under revolving
long-term bank credit facilities
Proceeds from term loan
Proceeds from issuance of notes
Dividends paid
Withholding taxes paid pursuant to the settlement of non-Treasury
RSUs
Proceeds from the issuance of shares
Repurchase and cancellation of shares
Share repurchases for future settlement of non-Treasury RSUs
Cash flows from (used in) financing activities
2016
2015
Variation
(15 months)
(375.0)
300.0
300.0
(74.4)
(4.7)
2.2
(394.5)
—
(246.4)
218.0
—
—
(79.7)
—
16.0
(79.7)
(15.2)
59.4
(593.0)
300.0
300.0
5.3
(4.7)
(13.8)
(314.8)
15.2
(305.8)
Certain minor rounding variances exist between the consolidated financial statements and this summary.
• Cash flows from financing activities during fiscal 2016 reflected proceeds of $600.0 million from the term loan and the
issuance of the notes, partially offset by a $375.0 million decrease in funds drawn on our long-term bank credit facilities.
See the section entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt. The net
long-term debt proceeds were used to finance a portion of the repurchase and cancellation of common shares under
the normal course issuer bid (NCIB) as discussed in section 8.4 of this MD&A. During fiscal 2015, the $218.0 million
increase in amounts drawn under our bank credit facilities was mainly used to finance the acquisition of Comfort Colors
and the repurchase and cancellation of common shares under a previous NCIB.
•
The Company paid $74.4 million of dividends during fiscal 2016 for dividends declared in February 2016, May 2016,
July 2016, and November 2016. The decrease in dividends paid was as a result of five quarterly dividends paid in fiscal
2015, offset by the impact of the 20% increase in the amount of the quarterly dividend approved on February 23, 2016.
The Company paid an aggregate of $79.7 million of dividends during fiscal 2015 for dividends declared in December
2014, February 2015, May 2015, July 2015, and November 2015.
8.0 LIQUIDITY AND CAPITAL RESOURCES
8.1 Long-term debt and net indebtedness
Our primary uses of funds are for working capital requirements, capital expenditures, business acquisitions, and payment
of dividends. We have also used funds in fiscal 2015 and 2016 for the repurchase of shares. We fund our requirements with
GILDAN 2016 REPORT TO SHAREHOLDERS P. 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
cash generated from operations and with funds drawn from our long-term debt facilities. The Company's long-term debt as
at January 1, 2017 is described below.
Effective
interest
rate (1)
Principal amount
January 1,
2017
January 3,
2016
Maturity
date
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-
based interest rate plus a spread ranging from 1% to 2% (2)
1.6%
$
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-
based interest rate plus a spread ranging from 1% to 1.25% (3)
Term loan, interest at variable U.S. LIBOR-based interest rate plus a
spread ranging from 1% to 2% (4)
Notes payable, interest at fixed rate of 2.70%, payable semi-annually (5)
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a
spread of 1.53% payable quarterly (5)
Notes payable, interest at fixed rate of 2.91%, payable semi-annually (5)
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a
spread of 1.57% payable quarterly (5)
1.5%
1.9%
2.7%
2.7%
2.9%
2.9%
— $
—
300,000
100,000
50,000
100,000
50,000
375,000
April
2021
— March
2018
— June
2021
— August
2023
— August
2023
— August
2026
— August
2026
$
600,000 $
375,000
(1) Represents the effective interest rate for the year ended January 1, 2017, including the cash impact of interest rate swaps, where
applicable.
(2) The Company’s committed unsecured revolving long-term bank credit facility of $1 billion provides for an annual extension which is
subject to the approval of the lenders. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net
debt to EBITDA ratio (as defined in the credit facility agreement). In addition, an amount of $19.0 million (January 3, 2016 - $27.1
million) has been committed against this facility to cover various letters of credit.
(3) During March 2016, the Company entered into an unsecured revolving long-term bank credit facility agreement for a total principal
amount of $300 million, which has a one year revolving period followed by a one year term-out period, and provides for an annual
extension of the revolving period which is subject to the approval of the lenders. A fixed spread of 1.0% during the revolving period and
1.25% during the term-out period is added to the U.S. LIBOR-based variable interest rate.
(4) During June 2016, the Company entered into an unsecured five-year term loan agreement for a total principal amount of $300 million.
The term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the U.S.
LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreement).
(5) During July 2016, the Company entered into a Note Purchase Agreement and subsequently issued unsecured notes for a total aggregate
principal amount of $300 million to accredited investors in the U.S. private placement market. The notes can be prepaid in whole or in
part at any time, subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement.
During fiscal 2016, the Company entered into a total of $250 million of floating-to-fixed interest rate swaps to fix the floating
rate exposure on certain long term debt agreements. A $50 million 7-year floating-to-fixed interest rate swap maturing in
August 2023 is converting the interest rate on the $50 million variable-rate notes payable maturing in August 2023 to an all-
in fixed rate of 2.7%, and a $50 million 10-year floating-to-fixed interest rate swap maturing in August 2026 is converting the
interest rate on the $50 million variable-rate notes payable maturing in August 2026 to an all-in fixed rate of 2.9%. In addition,
$150 million of 5-year floating-to-fixed interest rate swaps maturing in June 2021 are converting the variable-rate LIBOR
component of an equivalent portion of the term loan to a fixed rate of 0.96%.
Under the terms of the revolving facilities, term loan facility, and notes, the Company is required to comply with certain
covenants, including maintenance of financial ratios. The Company was in compliance with all covenants at January 1, 2017.
(in $ millions)
Long-term debt and total indebtedness(1)
Cash and cash equivalents
Net indebtedness(1)
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
January 1,
2017
January 3,
2016
600.0
(38.2)
561.8
375.0
(50.7)
324.3
Certain minor rounding variances exist between the consolidated financial statements and this summary.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
The primary measure used by the Company to monitor its financial leverage is its net debt leverage ratio. The Company’s
net debt leverage ratio is defined as the ratio of net indebtedness to adjusted EBITDA for the trailing twelve months. Gildan’s
net debt leverage ratio as at January 1, 2017 was 1.0 times (0.6 times as at January 3, 2016) which was at the low end of
its previously communicated target net debt leverage ratio of one to two times adjusted EBITDA. The Company’s net debt
leverage ratio is calculated as follows:
(in $ millions)
Adjusted EBITDA for the trailing twelve months
Adjustment for:
Business acquisitions
Pro-forma adjusted EBITDA for the trailing twelve months
Net indebtedness(1)
Net debt leverage ratio(1)
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
January 1,
2017
January 3,
2016
523.8
503.8
12.5
536.3
561.8
1.0
2.7
506.5
324.3
0.6
For the year ended December 31, 2017, the Company is projecting capital expenditures of approximately $125 million to
support future growth, primarily for textile capacity related to the continued development of the Rio Nance 6 facility in Honduras,
capacity expansion in Bangladesh, investments in distribution and garment dyeing, as well as sewing capacity expansion to
align to increases in textile capacity.
We expect that cash flows from operating activities and the unutilized financing capacity under our long-term debt facilities
will continue to provide us with sufficient liquidity for the foreseeable future to fund our organic growth strategy, including
anticipated working capital and capital expenditure requirements, to fund dividends to shareholders, as well as provide us
with financing flexibility to take advantage of potential acquisition opportunities which complement our organic growth strategy,
and to fund the NCIB discussed in section 8.4 below.
The Company, upon approval from its Board of Directors, may issue or repay long-term debt, issue or repurchase shares,
or undertake other activities as deemed appropriate under the specific circumstances.
8.2 Outstanding share data
Our common shares are listed on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX) under the
symbol GIL. As at February 17, 2017, there were 230,245,359 common shares issued and outstanding along with 2,532,019
stock options and 249,033 dilutive restricted share units (Treasury RSUs) outstanding. Each stock option entitles the holder
to purchase one common share at the end of the vesting period at a pre-determined option price. Each Treasury RSU entitles
the holder to receive one common share from treasury at the end of the vesting period, without any monetary consideration
being paid to the Company. However, the vesting of at least 50% of each Treasury RSU grant is contingent on the achievement
of performance conditions that are primarily based on the Company’s average return on assets performance for the period
compared to the S&P/TSX Capped Consumer Discretionary Index, excluding income trusts, or as determined by the Board
of Directors.
8.3 Declaration of dividend
The Company paid dividends of $74.4 million during the year ended January 1, 2017. On February 22, 2017, the Board of
Directors approved a 20% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.0935
per share for an expected aggregate payment of $21.5 million which will be paid on April 3, 2017 on all of the issued and
outstanding common shares of the Company, rateably and proportionately to the holders of record on March 9, 2017. This
dividend is an “eligible dividend” for the purposes of the Income Tax Act (Canada) and any other applicable provincial legislation
pertaining to eligible dividends.
The Board of Directors considers several factors when deciding to declare quarterly cash dividends, including the Company’s
present and future earnings, cash flows, capital requirements, and present and/or future regulatory and legal restrictions.
There can be no assurance as to the declaration of future quarterly cash dividends. Although the Company’s long-term debt
agreements require compliance with lending covenants in order to pay dividends, these covenants are not currently, and are
not expected to be, a constraint to the payment of dividends under the Company’s dividend policy.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
8.4 Normal course issuer bid
On February 24, 2016, the Company announced the initiation of a normal course issuer bid (NCIB) beginning February 26,
2016 and expiring February 25, 2017, to purchase for cancellation up to 12,192,814 outstanding common shares of the
Company, representing approximately 5% of the Company’s issued and outstanding common shares, on the TSX and the
NYSE or alternative trading systems, if eligible, or by such other means as the TSX, the NYSE, or a securities regulatory
authority may permit, including by private agreements under an issuer bid exemption order issued by securities regulatory
authorities in Canada. The price paid by Gildan for any common shares was the market price at the time of the acquisition
plus brokerage fees, and purchases made under an issuer bid exemption order were at a discount to the prevailing market
price in accordance with the terms of the order.
On July 26, 2016, the Company obtained approval from the TSX to amend its NCIB in order to increase the maximum number
of common shares that may be repurchased from 12,192,814 common shares, or 5% of the Company’s issued and outstanding
common shares as at February 19, 2016 (the reference date for the NCIB), to 20,727,784 common shares, representing
8.5% of the Company’s issued and outstanding common shares or 8.6% of the public float of 239,683,863 common shares
as at February 19, 2016. No other terms of the NCIB were amended. During the year ended January 1, 2017, the Company
repurchased for cancellation a total of 13,775,248 common shares for a total cost of $394.5 million, of which a total of
4,025,000 common shares were repurchased by way of private agreements with arm’s length third party sellers.
On February 22, 2017, the Board of Directors of the Company approved the initiation of a new NCIB commencing on February
27, 2017 to purchase for cancellation up to 11,512,267 common shares, representing approximately 5% of the Company’s
issued and outstanding common shares. Gildan is authorized to make purchases under the NCIB during the period from
February 27, 2017 to February 26, 2018 in accordance with the requirements of the TSX. Purchases will be made by means
of open market transactions on both the TSX and the NYSE, or alternative trading systems, if eligible, or by such other means
as the TSX, the NYSE, or a securities regulatory authority may permit, including by private agreements under an issuer bid
exemption order issued by securities regulatory authorities in Canada. Under the bid, Gildan may purchase up to a maximum
of 131,732 shares daily through TSX facilities, which represents 25% of the average daily trading volume on the TSX for the
most recently completed six calendar months. The price to be paid by Gildan for any common shares will be the market price
at the time of the acquisition, plus brokerage fees, and purchases made under an issuer bid exemption order will be at a
discount to the prevailing market price in accordance with the terms of the order. Gildan’s management and the Board of
Directors believe the repurchase of common shares represents an appropriate use of Gildan’s financial resources and that
share repurchases under the NCIB will not preclude Gildan from continuing to pursue organic growth and complementary
acquisitions.
9.0 LEGAL PROCEEDINGS
9.1 Claims and litigation
The Company is a party to claims and litigation arising in the normal course of operations. The Company does not expect
the resolution of these matters to have a material adverse effect on the financial position or results of operations of the
Company.
10.0 OUTLOOK
A discussion of management’s expectations as to our outlook for fiscal 2017 is contained in our fourth quarter earnings results
press release dated February 23, 2017 under the section entitled “Fiscal 2017 Outlook”. The press release is available on
the SEDAR website at www.sedar.com, on the EDGAR website at www.sec.gov and on our website at www.gildan.com.
11.0 FINANCIAL RISK MANAGEMENT
This section of the MD&A provides disclosures relating to the nature and extent of the Company’s exposure to risks arising
from financial instruments, including credit risk, liquidity risk, foreign currency risk and interest rate risk, as well as risks arising
from commodity prices, and how the Company seeks to manage those risks. The disclosures under this section, in conjunction
with the information in note 14 to the 2016 audited annual consolidated financial statements, are designed to meet the
requirements of IFRS 7, Financial Instruments: Disclosures, and are therefore incorporated into, and are an integral part of,
the 2016 audited annual consolidated financial statements.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company may periodically use derivative financial instruments to manage risks related to fluctuations in foreign exchange
rates, commodity prices, interest rates, and the market price of its own common shares. The use of derivative financial
instruments is governed by the Company’s Financial Risk Management Policy approved by the Board of Directors and is
administered by the Financial Risk Management Committee. The Financial Risk Management Policy of the Company
stipulates that derivative financial instruments should only be used to hedge or mitigate an existing financial exposure that
constitutes a commercial risk to the Company, and if the derivatives are determined to be the most efficient and cost effective
means of mitigating the Company’s exposure to liquidity risk, foreign currency risk, and interest rate risk, as well as risks
arising from commodity prices. Hedging limits, as well as counterparty credit rating and exposure limitations are defined in
the Company’s Financial Risk Management Policy, depending on the type of risk that is being mitigated. Derivative financial
instruments are not used for speculative purposes.
At the inception of each designated hedging derivative contract, we formally designate and document the hedging relationship
and our risk management objective and strategy for undertaking the hedge. Documentation includes identification of the
hedging instrument, the hedged item, the nature of the risk being hedged, and how we will assess whether the hedging
relationship meets the hedge effectiveness requirements, including our analysis of the sources of hedge ineffectiveness and
how we determine the hedge ratio.
11.1 Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises primarily from the Company’s trade accounts receivable. The Company may also have credit risk
relating to cash and cash equivalents and derivative financial instruments, which it manages by dealing only with highly-
rated North American and European financial institutions. Our trade accounts receivable and credit exposure fluctuate
throughout the year based on the seasonality of our sales and other factors. The Company’s average trade accounts receivable
and credit exposure during an interim reporting period may be significantly higher than the balance at the end of that reporting
period. In addition, due to the seasonality of the Company’s net sales in the Printwear segment, the Company’s trade accounts
receivable balance as at the end of a calendar year will typically be lower than at the end of an interim reporting period.
Under the terms of a receivables purchase agreement entered into during 2016, the Company may continuously sell trade
receivables of certain designated customers in the Branded Apparel segment to a third party financial institution in exchange
for a cash payment equal to the face value of the sold trade receivables, less an applicable discount. The Company retains
servicing responsibilities, including collection, for these trade receivables but does not retain any credit risk with respect to
any trade receivables that have been sold. All receivables sold under the receivables purchase agreement are removed from
the consolidated statements of financial position as the sale of the receivables qualify for de-recognition. As at January 1,
2017, trade accounts receivables being serviced under a receivables purchase agreement amounted to $80.5 million. The
receivables purchase agreement, which allows for the sale of a maximum of $175 million of accounts receivables at any one
time, expires on June 26, 2017, subject to annual extensions.
The Company’s credit risk for trade accounts receivable is concentrated, as the majority of its sales are to a relatively small
group of wholesale distributors within the Printwear segment and mass-market and other retailers within the Branded Apparel
segment. As at January 1, 2017, the Company’s ten largest trade debtors accounted for 60% of trade accounts receivable,
of which one wholesale customer within the Printwear segment accounted for 19% and one mass-market retailer within the
Branded Apparel segment accounted for 11%, before factoring in the impact of the receivables purchase agreement described
above. Of the Company’s top ten trade debtors, four are in the Printwear segment, six are in the Branded Apparel segment
and all are located in the U.S. The remaining trade accounts receivable balances are dispersed among a larger number of
debtors across many geographic areas including the U.S., Canada, Europe, Mexico, Asia-Pacific, and Latin America.
Most of the Company’s customers have been transacting with the Company or its subsidiaries for several years. Many
distributors and other customers in the Printwear segment are highly-leveraged with significant reliance on trade credit terms
provided by a few major vendors, including the Company, and third-party debt financing, including bank debt secured with
trade accounts receivable and inventory pledged as collateral. The financial leverage of these customers may limit or prevent
their ability to refinance existing indebtedness or to obtain additional financing, and could affect their ability to comply with
restrictive debt covenants and meet other obligations. The profile and credit quality of the Company’s customers in the
Branded Apparel segment varies significantly. Adverse changes in a customer’s financial condition could cause us to limit
or discontinue business with that customer, require us to assume more credit risk relating to that customer’s future purchases
or result in uncollectible trade accounts receivable from that customer. Future credit losses relating to any one of our top ten
customers could be material and could result in a material charge to earnings.
The Company’s extension of credit to customers involves considerable judgment and is based on an evaluation of each
customer’s financial condition and payment history. The Company has established various internal controls designed to
GILDAN 2016 REPORT TO SHAREHOLDERS P. 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
mitigate credit risk, including a dedicated credit function which recommends customer credit limits and payment terms that
are reviewed and approved on a quarterly basis by senior management at the Company’s sales offices in Christ Church,
Barbados and Charleston, SC. Where available, the Company’s credit departments periodically review external ratings and
customer financial statements, and in some cases obtain bank and other references. New customers are subject to a specific
validation and pre-approval process. From time to time, the Company will temporarily transact with customers on a prepayment
basis where circumstances warrant. While the Company’s credit controls and processes have been effective in mitigating
credit risk, these controls cannot eliminate credit risk in its entirety and there can be no assurance that these controls will
continue to be effective, or that the Company’s low credit loss experience will continue.
The Company’s exposure to credit risk for trade accounts receivable by geographic area and operating segment was as
follows as at:
(in $ millions)
Trade accounts receivable by geographic area:
United States
Canada
Europe and other
Total trade accounts receivable
Trade accounts receivable by operating segment:
Printwear
Branded Apparel
Total trade accounts receivable
The aging of trade accounts receivable balances was as follows as at:
(in $ millions)
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-120 days
Past due over 121 days
Trade accounts receivable
Less allowance for doubtful accounts
Total trade accounts receivable
11.2 Liquidity risk
January 1,
2017
January 3,
2016
237.5
20.5
19.7
277.7
158.1
119.6
277.7
264.8
19.3
22.0
306.1
119.7
186.4
306.1
January 1,
2017
January 3,
2016
235.4
20.0
12.2
3.8
11.9
283.3
(5.6)
277.7
213.9
63.0
14.8
14.6
4.4
310.7
(4.6)
306.1
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. We rely on cash
resources, debt and cash flows generated from operations to satisfy our financing requirements. We may also require access
to capital markets to support our operations as well as to achieve our strategic plans. Any impediments to our ability to
continue to meet the covenants and conditions contained in our long-term debt agreements as well as our ability to access
capital markets, or the failure of a financial institution participating in our revolving long-term bank credit facilities, or an
adverse perception in capital markets of our financial condition or prospects, could have a material impact on our financing
capability. In addition, our access to financing at reasonable interest rates could become influenced by the economic and
credit market environment.
We manage liquidity risk through the management of our capital structure and financial leverage, as outlined in note 24 to
the 2016 audited annual consolidated financial statements. In addition, we manage liquidity risk by continuously monitoring
actual and projected cash flows, taking into account the seasonality of our sales and cash receipts, and the expected timing
of capital expenditures. The Board of Directors reviews and approves the Company’s operating and capital budgets, as well
GILDAN 2016 REPORT TO SHAREHOLDERS P. 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
as transactions such as the declaration of dividends, the initiation of share repurchase programs, mergers, acquisitions and
other major investments or divestitures.
11.2.1 Off-balance sheet arrangements and maturity analysis of contractual obligations
In the normal course of business, we enter into contractual obligations that will require us to disburse cash over future periods.
All commitments have been reflected in our consolidated statements of financial position except for purchase
obligations, minimum annual lease payments under operating leases which are primarily for premises, and minimum royalty
payments, which are included in the table of contractual obligations that follows. The following table sets forth the maturity
of our contractual obligations by period for the following items as at January 1, 2017.
(in $ millions)
Accounts payable and accrued
liabilities
Long-term debt(1)
Purchase obligations
Operating leases and other obligations
Total contractual obligations
(1) Excluding interest
Carrying
amount
Contractual
cash flows
Less than 1
fiscal year
1 to 3
fiscal years fiscal years
4 to 5 More than 5
fiscal years
234.1
600.0
—
—
834.1
234.1
600.0
109.9
183.2
1,127.2
234.1
—
108.1
59.3
401.5
—
—
1.8
62.0
63.8
—
300.0
—
25.2
325.2
—
300.0
—
36.7
336.7
As disclosed in note 23 to our 2016 audited annual consolidated financial statements, we have granted financial guarantees,
irrevocable standby letters of credit, and surety bonds to third parties to indemnify them in the event the Company and some
of its subsidiaries do not perform their contractual obligations. As at January 1, 2017, the maximum potential liability under
these guarantees was $53.8 million, of which $10.4 million was for surety bonds and $43.4 million was for financial guarantees
and standby letters of credit.
11.3 Foreign currency risk
The majority of the Company’s cash flows and financial assets and liabilities are denominated in U.S. dollars, which is the
Company’s functional and reporting currency. Foreign currency risk is mainly limited to the portion of the Company’s business
transactions denominated in currencies other than U.S. dollars, primarily for sales and distribution expenses for customers
outside of the U.S., certain equipment purchases, and head office expenses in Canada. The Company’s exposure relates
primarily to changes in the U.S. dollar versus the Canadian dollar, the Pound sterling, the Euro, the Australian dollar, the
Mexican peso, and the Chinese yuan. For the Company’s foreign currency transactions, fluctuations in the respective
exchange rates relative to the U.S. dollar will create volatility in the Company’s cash flows, in the reported amounts for sales
and SG&A expenses in its consolidated statement of earnings and comprehensive income, and for property, plant and
equipment in its consolidated statement of financial position, both on a period-to-period basis and compared with operating
budgets and forecasts. Additional earnings variability arises from the translation of monetary assets and liabilities denominated
in currencies other than the U.S. dollar at the rates of exchange at each reporting dates, the impact of which is reported as
a foreign exchange gain or loss and included in financial expenses (net) in the statement of earnings and comprehensive
income.
The Company also incurs a portion of its manufacturing costs in foreign currencies, primarily payroll costs paid in Honduran
Lempiras, Dominican Pesos, Mexican Pesos, Nicaraguan Cordobas, and Bangladeshi Taka. Significant changes in the
Lempira, Dominican Peso, Mexican Peso, Cordoba, or Taka relative to the U.S. dollar exchange rate in the future, may have
a significant impact on our operating results.
The Company’s objective in managing its foreign currency risk is to minimize its net exposures to foreign currency cash flows,
by transacting with third parties in U.S. dollars to the maximum extent possible and practical, and holding cash and cash
equivalents and incurring borrowings in U.S. dollars. The Company monitors and forecasts the values of net foreign currency
cash flows, and from time-to-time will authorize the use of derivative financial instruments such as forward foreign exchange
contracts, to economically hedge a portion of foreign currency cash flows, with maturities of up to three years. The Company
had forward foreign exchange contracts outstanding as at January 1, 2017, consisting primarily of contracts to sell and buy
Canadian dollars, sell Euros, sell Pounds sterling, sell Australian dollars, and to buy Mexican pesos in exchange for U.S.
dollars. The outstanding contracts and other foreign exchange contracts that were settled during fiscal 2016 were designated
as cash flow hedges and qualified for hedge accounting. The underlying risk of the foreign exchange contracts is identical
to the hedged risk, and accordingly we have established a ratio of 1:1 for all foreign exchange hedges. No ineffectiveness
was recognized in net earnings as the change in value used for calculating the ineffectiveness of the hedging instruments
GILDAN 2016 REPORT TO SHAREHOLDERS P. 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
was the same as the change in value used for calculating the ineffectiveness of the hedged items. We refer the reader to
note 14 to the 2016 audited annual consolidated financial statements for details of these financial derivative contracts and
the impact of applying hedge accounting.
The following tables provide an indication of the Company’s significant foreign currency exposures included in the consolidated
statement of financial position as at January 1, 2017 arising from financial instruments:
(in U.S. $ millions)
CAD
EUR
GBP
MXN
January 1, 2017
AUD
CNY
Cash and cash equivalents
Trade accounts receivable
Prepaid expenses, deposits and other current assets
Accounts payable and accrued liabilities
2.3
20.6
1.6
(16.5)
2.2
2.5
2.2
(4.2)
0.6
2.1
—
(0.3)
3.9
2.8
1.9
(3.2)
3.8
3.5
0.8
(0.9)
0.2
1.8
—
—
Based on the Company’s foreign currency exposures arising from financial instruments noted above, and the impact of
outstanding derivative financial instruments designated as effective hedging instruments, varying the foreign exchange rates
to reflect a 5 percent strengthening of the U.S. dollar would have increased (decreased) earnings and other comprehensive
income as follows, assuming that all other variables remained constant:
(in U.S. $ millions)
CAD
EUR
For the year ended January 1, 2017
AUD
MXN
GBP
CNY
Impact on earnings before income taxes
Impact on other comprehensive income before income
taxes
(0.4)
(0.1)
(0.1)
(0.3)
(0.4)
(0.1)
1.3
1.6
1.7
(0.9)
—
0.2
An assumed 5 percent weakening of the U.S. dollar during the year ended January 1, 2017 would have had an equal but
opposite effect on the above currencies to the amounts shown above, assuming that all other variables remain constant.
11.4 Commodity risk
The Company is subject to the commodity risk of cotton prices and cotton price movements, as the majority of its products
are made of 100% cotton or blends of cotton and synthetic fibers. The Company is also subject to the risk of fluctuations in
crude oil and petrochemicals as they influence the cost of polyester fibers which are also used in many of its products. The
Company purchases cotton from third party merchants, cotton-based yarn from third party yarn manufacturers, and polyester
fibers from third party polyester manufacturers. The Company assumes the risk of price fluctuations for these purchases.
The Company enters into contracts, up to eighteen months in advance of future delivery dates, to establish fixed prices for
its cotton and cotton-based yarn purchases, and polyester fibers purchases, in order to reduce the effects of fluctuations in
the cost of cotton, crude oil, and petrochemicals used in the manufacture of its products. These contracts are not used for
trading purposes, and are not considered to be financial instruments that would need to be accounted for at fair value in the
Company’s consolidated financial statements. Without taking into account the impact of fixed price contracts, a change of
$0.01 per pound in the price of cotton or polyester fibers would affect the Company’s annual raw material costs by
approximately $6 million, based on current production levels.
In addition, fluctuations in crude oil or petroleum prices also affect our energy consumption costs and can also influence
transportation costs and the cost of related items used in our business, including other raw materials we use to manufacture
our products such as chemicals, dyestuffs, and trims. We generally purchase these raw materials at market prices.
The Company has the ability to enter into derivative financial instruments, including futures and option contracts, to manage
its exposure to movements in commodity prices. Such contracts are accounted for at fair value in the consolidated financial
statements in accordance with the accounting standards applicable to financial instruments. During fiscal 2016, the Company
entered into commodity derivative contracts as described in note 14 to the 2016 audited annual consolidated financial
statements. The underlying risk of the commodity derivative contracts is identical to the hedged risk, and accordingly we
have established a ratio of 1:1 for all commodity derivative hedges. Due to a strong correlation between commodity future
contract prices and our purchased cost, we did not experience any significant ineffectiveness on our hedges. We refer the
reader to note 14 to the 2016 audited annual consolidated financial statements for details of these derivative contracts and
the impact of applying hedge accounting.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
11.5 Interest rate risk
The Company is subject to interest rate risk arising from its $300 million term loan, $100 million of its unsecured notes
payable, and amounts drawn on its revolving long-term bank credit facilities, all of which bear interest at a variable U.S.
LIBOR-based interest rate, plus a spread.
The Company generally fixes the rates for LIBOR-based borrowings for periods of one to three months. The interest rates
on amounts drawn on debt agreements and on any future borrowings will vary and are unpredictable. Increases in interest
rates on new debt issuances may result in a material increase in financial charges.
The Company has the ability to enter into derivative financial instruments that would effectively fix its cost of current and
future borrowings for an extended period of time. During fiscal 2016, the Company entered into a total of $250 million of
floating-to-fixed interest rate swaps to hedge its floating interest rate exposure on a designated portion of certain long term
debt agreements, as described in section 8.1 in this MD&A. The interest rate swap contracts were designated as cash flow
hedges and qualified for hedge accounting.
Based on the value of interest-bearing financial instruments during the year ended January 1, 2017, an assumed 0.5
percentage point increase in interest rates during such period would have decreased earnings before income taxes by
$2.4 million. An assumed 0.5 percentage point decrease in interest rates would have had an equal but opposite effect on
earnings before income taxes, assuming that all other variables remain constant.
12.0 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Our significant accounting policies are described in note 3 to our 2016 audited annual consolidated financial statements. The
preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future periods affected.
12.1 Critical judgments in applying accounting policies
The following are critical judgments that management has made in the process of applying accounting policies and that have
the most significant effect on the amounts recognized in the consolidated financial statements:
Determination of cash-generating units (CGUs)
The identification of CGUs and grouping of assets into the respective CGUs is based on currently available information about
actual utilization experience and expected future business plans. Management has taken into consideration various factors
in identifying its CGUs. These factors include how the Company manages and monitors its operations, the nature of each
CGU’s operations and the major customer markets they serve. As such, the Company has identified its CGUs for purposes
of testing the recoverability and impairment of non-financial assets to be Printwear, Branded Apparel and Yarn-Spinning
(yarn-spinning manufacturing division).
Income taxes
The Company’s income tax provisions and income tax assets and liabilities are based on interpretations of applicable tax
laws, including income tax treaties between various countries in which the Company operates as well as underlying rules
and regulations with respect to transfer pricing. These interpretations involve judgments and estimates and may be challenged
through government taxation audits that the Company is regularly subject to. New information may become available that
causes the Company to change its judgment regarding the adequacy of existing income tax assets and liabilities; such
changes will impact net earnings in the period that such a determination is made.
12.2 Key sources of estimation uncertainty
Key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amount
of assets and liabilities within the next financial year are as follows:
Allowance for doubtful accounts
The Company makes an assessment of whether accounts receivable are collectable, which considers the credit-worthiness
of each customer, taking into account each customer’s financial condition and payment history, in order to estimate an
GILDAN 2016 REPORT TO SHAREHOLDERS P. 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
appropriate allowance for doubtful accounts. Furthermore, these estimates must be continuously evaluated and updated.
The Company is not able to predict changes in the financial condition of its customers, and if circumstances related to its
customers’ financial condition deteriorate, the estimates of the recoverability of trade accounts receivable could be materially
affected and the Company may be required to record additional allowances. Alternatively, if the Company provides more
allowances than needed, a reversal of a portion of such allowances in future periods may be required based on actual
collection experience.
Sales promotional programs
In the normal course of business, certain incentives are granted to our customers including discounts and rebates. At the
time of sale, estimates are made for customer price discounts and rebates based on the terms of existing programs. Accruals
required for new programs, which relate to prior sales, are recorded at the time the new program is introduced. Sales are
recorded net of these program costs and a provision for estimated sales returns, which is based on historical experience,
current trends and other known factors. If actual price discounts, rebates or returns differ from estimates, significant
adjustments to net sales could be required in future periods.
Inventory valuation
The Company regularly reviews inventory quantities on hand and records a provision for those inventories no longer deemed
to be fully recoverable. The cost of inventories may no longer be recoverable if those inventories are slow moving, discontinued,
damaged, if they have become obsolete, or if their selling prices or estimated forecast of product demand decline. If actual
market conditions are less favorable than previously projected, or if liquidation of the inventory which is no longer deemed
to be fully recoverable is more difficult than anticipated, additional provisions may be required.
Business combinations
Business combinations are accounted for in accordance with the acquisition method. On the date that control is obtained,
the identifiable assets, liabilities and contingent liabilities of the acquired company are measured at their fair value. Depending
on the complexity of determining these valuations, the Company uses appropriate valuation techniques which are generally
based on a forecast of the total expected future net discounted cash flows. These valuations are linked closely to the
assumptions made by management regarding the future performance of the related assets and the discount rate applied as
it would be assumed by a market participant.
Recoverability and impairment of non-financial assets
The calculation of fair value less costs of disposal or value in use for purposes of measuring the recoverable amount of non-
financial assets involves the use of significant assumptions and estimates with respect to a variety of factors, including
expected sales, gross margins, SG&A expenses, cash flows, capital expenditures, and the selection of an appropriate earnings
multiple or discount rate, all of which are subject to inherent uncertainties and subjectivity. The assumptions are based on
annual business plans and other forecasted results as well as earnings multiples obtained by using market comparables as
a reference, and discount rates which are used to reflect market based estimates of the risks associated with the projected
cash flows, based on the best information available as of the date of the impairment test. Changes in circumstances, such
as technological advances, adverse changes in third party licensing arrangements, changes to the Company’s business
strategy, and changes in economic conditions can result in actual useful lives and future cash flows differing significantly
from estimates and could result in increased charges for amortization or impairment. Revisions to the estimated useful lives
of finite life non-financial assets or future cash flows constitute a change in accounting estimate and are applied prospectively.
There can be no assurance that the estimates and assumptions used in the impairment tests will prove to be accurate
predictions of the future. If the future adversely differs from management’s best estimate of key economic assumptions, and
if associated cash flows materially decrease, the Company may be required to record material impairment charges related
to its non-financial assets.
Valuation of statutory severance obligations and the related costs
The valuation of the statutory severance obligations and the related costs requires economic assumptions, including discount
rates and expected rates of compensation increases, and participant demographic assumptions. The actuarial assumptions
used may differ materially from year to year due to changing market and economic conditions, resulting in significant increases
or decreases in the obligations and related costs.
Measurement of the estimate of expected costs for decommissioning and site restoration
The measurement of the provision for decommissioning and site restoration costs requires assumptions to be made including
expected timing of the event which would result in the outflow of resources, the range of possible methods of decommissioning
and site restoration, and the expected costs that would be incurred to settle any decommissioning and site restoration
liabilities. The Company has measured the provision using the present value of the expected costs which requires assumptions
on the discount rate to use. Revisions to any of the assumptions and estimates used by management may result in changes
GILDAN 2016 REPORT TO SHAREHOLDERS P. 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
to the expected expenditures to settle the liability which would require adjustments to the provision and which may have an
impact on the operating results of the Company in the period the change occurs.
Income taxes
The Company has unused available tax losses and deductible temporary differences in certain jurisdictions. The Company
recognizes deferred income tax assets for these unused tax losses and deductible temporary differences only to the extent
that, in management’s opinion, it is probable that future taxable profit will be available against which these available tax
losses and temporary differences can be utilized. The Company’s projections of future taxable profit involve the use of
significant assumptions and estimates with respect to a variety of factors, including future sales and operating expenses.
There can be no assurance that the estimates and assumptions used in our projections of future taxable income will prove
to be accurate predictions of the future, and in the event that our assessment of the recoverability of these deferred tax assets
changes in the future, a material reduction in the carrying value of these deferred tax assets could be required, with a
corresponding charge to net earnings.
13.0 ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS NOT YET APPLIED
13.1 Accounting policies
The Company’s audited consolidated financial statements for fiscal 2016 were prepared in accordance with IFRS as issued
by the International Accounting Standards Board (IASB), using the same accounting policies as those applied in its fiscal
2015 audited annual consolidated financial statements, except as noted below.
Share based payment
On July 4, 2016, the Company early adopted the amendments to IFRS 2, Share-based payment, which were issued by the
IASB on June 20, 2016, with effect as at January 3, 2016. The amendments clarify how to classify and measure certain types
of share-based payment transactions, including share-based payment transactions with a net settlement feature for
withholding tax obligations. The adoption of the amendments to IFRS 2 did not have an impact on the Company’s consolidated
financial statements as at the effective date of adoption.
Income Taxes
In November 2016, the IFRS Interpretations Committee issued an agenda decision that prohibits the application of guidance
in IAS 12, Income Taxes, for non-depreciable property, plant and equipment by analogy, to intangible assets with an indefinite
useful life when measuring deferred tax. The agenda decision clarifies that an entity must consider whether the intangible
asset with an indefinite useful life is expected to be recovered through use or through sale, or a combination of both. The
revised guidance was effective immediately. The impact of the adoption of the revised guidance to IAS 12 is described in
note 10 to the audited annual consolidated financial statements for the year ended January 1, 2017.
13.2 New accounting standards and interpretations not yet applied
The following new accounting standards are not effective for the year ended January 1, 2017, and have not been applied in
preparing the audited annual consolidated financial statements.
Revenues from contracts with customers
In May 2014, the IASB released IFRS 15, Revenue from Contracts with Customers, which establishes principles for reporting
and disclosing the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods and services.
IFRS 15 provides a single model in order to depict the transfer of promised goods or services to customers, and supersedes
IAS 11, Construction Contracts, IAS 18, Revenue, and a number of revenue-related interpretations (IFRIC 13, Customer
Loyalty Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfers of Assets from
Customers, and SIC-31, Revenue - Barter Transactions Involving Advertising Service). IFRS 15 is effective for the Company’s
fiscal year beginning on January 1, 2018, with earlier application permitted. The Company is currently evaluating the impact
of the adoption of IFRS 15 on the consolidated financial statements, including the transition options. Based on a preliminary
assessment, the Company does not expect that the adoption of IFRS 15 will have a material impact on the consolidated
financial statements. The Company will finalize its assessment during fiscal 2017.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 36
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Instruments
In July 2014, the IASB issued the complete IFRS 9 (2014), Financial Instruments. IFRS 9 (2014) differs in some regards
from IFRS 9 (2013) which the Company early adopted effective March 31, 2014. IFRS 9 (2014) includes updated guidance
on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing
a new expected credit loss model for calculating impairment, and new general hedge accounting requirements. The mandatory
effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively
with some exemptions. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this
standard on its consolidated financial statements.
Leases
In January 2016, the IASB issued IFRS 16 Leases, which specifies how an entity will recognize, measure, present, and
disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities
for all leases unless the lease term is twelve months or less, or the underlying asset has a low monetary value. Lessors
continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged
from its predecessor, IAS 17. IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019, with earlier
application permitted only if IFRS 15, Revenue from Contracts with Customers, has also been applied. The Company is
currently evaluating the impact of the adoption of this standard on its consolidated financial statements, and expects that the
majority of its operating leases will need to be recognized in the consolidated statement of financial position on initial adoption
of IFRS 16.
14.0 DISCLOSURE CONTROLS AND PROCEDURES
As stated in the Canadian Securities Administrators’ National Instrument 52-109, Certification of Disclosure in Issuers’ Annual
and Interim Filings and Rules 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, disclosure controls
and procedures means controls and other procedures of an issuer that are designed to provide reasonable assurance that
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities
legislation and include controls and procedures designed to ensure that information required to be disclosed by an issuer in
its annual filings, interim filings, or other reports filed or submitted under securities legislation is accumulated and
communicated to the issuer’s management, including its certifying officers, as appropriate to allow timely decisions regarding
required disclosure.
An evaluation was carried out under the supervision of, and with the participation of, our management, including our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of January 1,
2017. For the year ended January 1, 2017, management’s evaluation of the effectiveness of its disclosure controls and
procedures excluded the disclosure controls and procedures of the acquired businesses of Alstyle Apparel, LLC (Alstyle)
and Peds Legwear, Inc. (Peds), acquired on May 26, 2016 and August 22, 2016, respectively, the results of which are included
in the audited annual consolidated financial statements of the Company for the year ended January 1, 2017, to the extent
Alstyle's and Peds’ disclosure controls and procedures are subsumed by internal control over financial reporting. The
consolidated results of the Company for the year ended January 1, 2017 included net sales of $118.6 million and net earnings
of $1.8 million relating to Alstyle's and Peds’ results of operations since they were acquired. Alstyle and Peds accounted for
$133.9 million of current assets, $66.1 million of non-current assets, $28.0 million of current liabilities, and $2.4 million of
non-current liabilities in the Company’s audited consolidated statement of financial position as at January 1, 2017. Based
on that evaluation, which excluded Alstyle's and Peds’ disclosure controls and procedures, our Chief Executive Officer and
our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 1, 2017.
15.0 INTERNAL CONTROL OVER FINANCIAL REPORTING
15.1 Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rules 13(a)-15(f) and 15(d)-15(f) under the U.S. Securities Exchange Act of 1934 and under National
Instrument 52-109.
Our internal control over financial reporting means a process designed by, or under the supervision of, an issuer’s certifying
officers, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with the issuer’s GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) are designed to provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
GILDAN 2016 REPORT TO SHAREHOLDERS P. 37
MANAGEMENT'S DISCUSSION AND ANALYSIS
with International Financial Reporting Standards, and that our receipts and expenditures are being made only in accordance
with authorization of our management and directors; and (3) are designed to provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect
on the annual financial statements or interim financial reports.
The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain
events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. As a result, due to its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management
conducted an evaluation of the effectiveness of our internal control over financial reporting, as of January 1, 2017, based on
the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). For the year ended January 1, 2017, management’s evaluation of internal control
over financial reporting excluded the internal control over financial reporting of the acquired businesses of Alstyle and Peds,
acquired on May 22, 2016 and August 22, 2016, respectively, the results of which are included in the audited annual
consolidated financial statements of the Company for the year ended January 1, 2017. The consolidated results of the
Company for the year ended January 1, 2017 included net sales of $118.6 million and net earnings of $1.8 million relating
to Alstyle's and Peds’ results of operations since they were acquired. Alstyle and Peds accounted for $133.9 million of current
assets, $66.1 million of non-current assets, $28.0 million of current liabilities, and $2.4 million of non-current liabilities in the
Company’s audited consolidated statement of financial position as at January 1, 2017. Based on that evaluation under this
framework, which excluded Alstyle's and Peds’ internal control over financial reporting, our Chief Executive Officer and our
Chief Financial Officer concluded that our internal control over financial reporting was effective as of January 1, 2017.
15.2 Attestation report of independent registered public accounting firm
KPMG LLP, an independent registered public accounting firm, which audited and reported on our financial statements in this
Report to Shareholders, has issued an unqualified report on the effectiveness of our internal control over financial reporting
as of January 1, 2017.
15.3 Changes in internal control over financial reporting
There have been no changes that occurred during the period beginning on October 3, 2016 and ended on January 1, 2017
in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
16.0 RISKS AND UNCERTAINTIES
In addition to the risks previously described under the sections “Financial risk management”, “Critical accounting estimates
and judgments”, and those described elsewhere in this MD&A, this section describes the principal risks that could have a
material adverse effect on our financial condition, results of operations or business, cash flows or the trading price of our
common shares, as well as cause actual results to differ materially from our expectations expressed in or implied by our
forward-looking statements. The risks listed below are not the only risks that could affect the Company. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our
financial condition, results of operations, cash flows, or business.
Our ability to implement our growth strategies and plans
The growth of our business depends on the successful execution of our key strategic initiatives, which are described in
section 4.0 of this MD&A. We may not be able to successfully implement our growth strategy in the future. We may not be
successful in increasing our penetration in the North American and international markets as success factors may be different
and economic returns may be lower in new market channels and new geographical markets which the Company enters. In
addition, we may not be successful in further developing our Company-owned brands and obtaining and successfully
introducing new programs in the U.S. retail channel, including increasing our sales of underwear and activewear to retailers,
or achieving targeted levels of profitability in our Branded Apparel segment. Our opportunities for growth may be limited, and
we may lose market share, if we fail to successfully develop new business in new market channels or new geographical
markets. As consumers increasingly migrate towards on-line shopping, our future sales may be negatively impacted if we
fail to continue to further develop relationships with and effectively service major retailers with on-line capabilities. Also, there
can be no assurance that we do not encounter operational issues that may affect or disrupt our current production or supply
GILDAN 2016 REPORT TO SHAREHOLDERS P. 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
chain or delay the ramp up of new facilities. In addition, we may not be successful in adding new low-cost capacity to support
our planned sales growth, in executing on furthering our vertical integration into yarn-spinning, or in achieving targeted
manufacturing and distribution cost reductions. Our ability to generate cash flows from operations will depend on the success
we have in executing our key strategic initiatives, which in turn will ultimately impact our ability to reinvest cash flows or
distribute cash flows to our shareholders. We may be unable to identify acquisition targets, successfully integrate a newly
acquired business, or achieve expected synergies from such integration.
Our ability to compete effectively
The markets for our products are highly competitive and evolving rapidly. Competition is generally based upon price, with
reliable quality and service also being critical requirements for success. Consumer brand recognition and appeal are also
important factors in the retail market. Our competitive strengths include our expertise in building and operating large-scale,
vertically-integrated, strategically-located manufacturing hubs which have allowed us to operate efficiently and reduce costs,
offer competitive pricing, and a reliable supply chain. There can be no assurance that we will be able to maintain our low
cost manufacturing and distribution structure, and remain competitive in the areas of price, quality, brand appeal, service,
and marketing. As noted in section 3.4 of this MD&A, we compete with domestic and international manufacturers, brands of
well-established U.S. apparel and sportswear companies, as well as customers that sell basic apparel products under their
own private label brands. Shopping trends are also evolving, including consumers increasingly shopping on e-commerce or
on-line platforms. We may be competitively disadvantaged if we fail to continue to secure business with on-line retailers or
with existing and new customers that offer on-line platforms to sell products. We may also face increased competition from
our customers’ private label brands, including the potential impact of on-line retailers introducing private label brands in basic
apparel products. There can be no assurance that the level and intensity of competition will not increase, or that competitors
will not improve their competitive position relative to Gildan’s. Any changes in our ability to compete effectively in the future
may result in the loss of customers to competitors, reduction in customer orders or shelf space, lower prices, the need for
additional customer price incentives and other forms of marketing support to our customers, all of which could have a negative
effect on our profitability if we are unable to offset such negative impact with new business or cost reductions. Recently there
has been an increasing focus on U.S. domestic manufacturing that has drawn worldwide attention. The current U.S.
government administration is encouraging companies to manufacture in the U.S. While a significant proportion of our costs
to manufacture our products originate in the United States, the Company also has significant operations outside the U.S.
There can be no assurance that the recent and continuing focus in this area may not attract negative publicity on the Company
and its activities, lead to adverse changes in international trade agreements and preference programs that the Company
currently relies on, or lead to tax reform in the U.S. that could increase our effective income tax rate. Any of such outcomes
could negatively impact our ability to compete effectively and negatively affect our results of operations.
Our ability to integrate acquisitions
The Company’s strategic opportunities include potential complementary acquisitions that could support, strengthen, or expand
our business. The integration of newly acquired businesses may prove to be more challenging, take more time than originally
anticipated, and result in significant additional costs and/or operational issues, all of which could negatively affect our financial
condition and results of operations. In addition, we may not be able to fully realize expected synergies and other benefits.
We may be negatively impacted by changes in general economic and financial conditions
General economic and financial conditions, globally or in one or more of the markets we serve, may negatively affect our
business. If there is a decline in economic growth and in consumer and commercial activity, and/or if adverse financial
conditions exist in the credit markets, as in the case of the global credit crisis in 2008 and 2009, this may lead to lower demand
for our products resulting in sales volume reductions and lower selling prices, and may cause us to operate at levels below
our optimal production capacity, which would result in higher unit production costs, all of which could negatively affect our
profitability and reduce cash flows from operations. Weak economic and financial conditions could also negatively affect the
financial condition of our customers, which could result in lower sales volumes and increased credit risk. The nature and
extent of the Company’s credit risks are described under the section “Financial risk management” in this MD&A.
We rely on a small number of significant customers
We rely on a small number of customers for a significant portion of our total sales. In fiscal 2016 our largest and second
largest customers accounted for 18.2% and 12.4% (2015 - 15.7% and 13.1%) of total sales respectively, and our top ten
customers accounted for 59.1% (2015 - 56.1%) of total sales. We expect that these customers will continue to represent a
significant portion of our sales in the future.
Future sales volumes and profitability could be negatively affected should one or more of the following events occur:
•
a significant customer substantially reduces its purchases or ceases to buy from us, or Gildan elects to reduce its
volume of business with or cease to sell to a significant customer, and we cannot replace that business with sales
to other customers on similar terms;
GILDAN 2016 REPORT TO SHAREHOLDERS P. 39
MANAGEMENT'S DISCUSSION AND ANALYSIS
•
•
•
a large customer exercises its purchasing power to negotiate lower prices or higher price discounts, or to require
Gildan to incur additional service and other costs;
further industry consolidation leads to greater customer concentration and competition; and
a large customer encounters financial difficulties and is unable to meet its financial obligations.
Our customers do not commit to purchase minimum quantities
Our contracts with our customers do not require them to purchase a minimum quantity of our products or commit to minimum
shelf space allocation for our products. If any of our customers experience a significant business downturn or fail to remain
committed to our products, they may reduce or discontinue purchases from us. Although we have maintained long-term
relationships with many of our wholesale distributor and retail customers, there can be no assurance that historic levels of
business from any of our customers will continue in the future.
Our ability to anticipate, identify, or react to changes in consumer preferences and trends
While we currently focus on basic products, the apparel industry, particularly within the retail channel, is subject to evolving
consumer preferences and trends. Our success may be negatively impacted by changes in consumer preferences which do
not fit with Gildan’s core competency of marketing and large-scale manufacturing of basic apparel products. If we are unable
to successfully anticipate, identify or react to changing styles or trends, or misjudge the market for our products, our sales
could be negatively impacted and we may be faced with unsold inventory which could negatively impact our profitability. In
addition, when introducing new products for our customers we may incur additional costs and transitional manufacturing
inefficiencies as we ramp-up production or upgrade manufacturing capabilities to support such customer programs, which
could negatively impact our profitability.
Our ability to manage production and inventory levels effectively in relation to changes in customer demand
Demand for our products may vary from year to year. We aim to appropriately balance our production and inventory with our
ability to meet market demand. Based on discussions with our customers and internally generated projections reflecting our
analysis of factors impacting industry demand, we produce and carry finished goods inventory to meet the expected demand
for delivery of specific product categories. If, after producing and carrying inventory in anticipation of deliveries, demand is
significantly less than expected, we may have to carry inventory for extended periods of time, or sell excess inventory at
reduced prices. In either case, our profits would be reduced. Excess inventory could also result in lower production levels,
resulting in lower plant and equipment utilization and lower absorption of fixed operating costs. Alternatively, we are also
exposed to loss of sales opportunities and market share, if we produce insufficient inventory to satisfy our customers’ demand
for specific product categories as a result of underestimating market demand or not meeting production targets, in which
case our customers could seek to fulfill their product needs from competitors and reduce the amount of business they do
with us.
We may be negatively impacted by fluctuations and volatility in the price of raw materials used to manufacture our
products
Cotton and polyester fibers are the primary raw materials used in the manufacture of our products. We also use chemicals,
dyestuffs, and trims which we purchase from a variety of suppliers. The price of cotton fluctuates and is affected by consumer
demand, global supply, which may be impacted by weather conditions in any given year, speculation in the commodities
market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors
that are generally unpredictable and beyond our control. In addition, fluctuations in crude oil or petroleum prices affect our
energy consumption costs and can also influence transportation costs and the cost of related items used in our business,
such as polyester fibers, chemicals, dyestuffs, and trims. As discussed under the heading entitled “Commodity risk” in the
“Financial risk management” section of this MD&A, the Company purchases cotton and polyester fibers through its yarn-
spinning facilities, and also purchases processed cotton yarn and blended yarn from outside vendors, at prices that are
correlated with the price of cotton and polyester fibers. The Company may enter into contracts up to eighteen months in
advance of future delivery dates to establish fixed prices for cotton, cotton-based yarn, and polyester fiber purchases and
reduce the effect of price fluctuations in the cost of cotton and polyester fibers used in the manufacture of its products. For
future delivery periods where such fixed price contracts have been entered into, the Company will be protected against cotton
and polyester fiber price increases but would not be able to benefit from cotton or polyester fiber price decreases. Conversely,
in the event that we have not entered into sufficient fixed priced contracts for cotton or polyester fibers, or have not made
other arrangements to lock in the price of cotton or polyester fibers in advance of delivery, we will not be protected against
price increases, but will be in a position to benefit from any price decreases. A significant increase in raw material costs,
particularly cotton and polyester fiber costs, could have an negative effect on our business, results of operations, and financial
condition, if the increase or part of the increase is not mitigated through additional manufacturing and distribution cost
reductions and/or higher selling prices, or if resulting selling price increases negatively impact demand for the Company’s
products. In addition, when the Company fixes its cotton and polyester fiber costs for future delivery periods and the cost of
cotton or polyester fibers subsequently decreases significantly for that delivery period, the Company may need to reduce
selling prices, which could have a negative effect on our business, results of operations and financial condition.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 40
MANAGEMENT'S DISCUSSION AND ANALYSIS
We rely on key suppliers
Our ability to meet our customers’ needs depends on our ability to maintain an uninterrupted supply of raw materials and
finished goods from third party suppliers. More specifically, we source cotton, cotton-based yarns, polyester fibers, chemicals,
dyestuffs, and trims primarily from a limited number of outside suppliers. In addition, a substantial portion of the products
sold under the Gold Toe® portfolio of brands and licensed brands are purchased from a number of third party suppliers. Our
business, results of operations, and financial condition could be negatively affected if there is a significant change in our
relationship with any of our principal suppliers of raw materials or finished goods, or if any of these key suppliers have difficulty
sourcing cotton fibers and other raw materials, experience production disruptions, fail to maintain production quality,
experience transportation disruptions or encounter financial difficulties. These events can result in lost sales, cancellation
charges or excessive markdowns, all of which can can have a negative effect on our business, results of operations, and
financial condition.
We may be negatively impacted by climate, political, social, and economic risks in the countries in which we operate
or from which we source production
The majority of our products are manufactured in Central America, primarily in Honduras and the Caribbean Basin, and to
a lesser extent in Bangladesh, as described in the section entitled “Our operations” in this MD&A. We also purchase significant
volumes of socks from third party suppliers in Asia. Some of the countries in which we operate or source from have experienced
political, social, and economic instability in the past, and we cannot be certain of their future stability. In addition, most of our
facilities are located in geographic regions that are exposed to the risk of, and have experienced in the past, hurricanes,
floods, and earthquakes, and any such events in the future could have a negative impact on our business.
The following conditions or events could disrupt our supply chain, interrupt production at our facilities or those of our suppliers,
increase our cost of sales and other operating expenses, result in material asset losses, or require additional capital
expenditures to be incurred:
•
•
•
•
fires, pandemics, extraordinary weather conditions, or natural disasters, such as hurricanes, tornadoes, floods,
tsunamis, typhoons, and earthquakes;
political instability, social and labour unrest, war, or terrorism;
disruptions in port activities, shipping and freight forwarding services; and
interruptions in the availability of basic services and infrastructure, including power and water shortages.
Our insurance programs do not cover every potential loss associated with our operations, including potential damage to
assets, lost profits, and liability that could result from the aforementioned conditions or events. In addition, our insurance
may not fully cover the consequences resulting from a loss event, due to insurance limits, sub-limits, or policy exclusions.
Any occurrence not fully covered by insurance could have a negative effect on our business.
Compliance with laws and regulations in the various countries in which we operate and the potential negative effects
of litigation and/or regulatory actions
Our business is subject to a wide variety of laws and regulations across all of the countries in which we do business, which
involves the risk of legal and regulatory actions regarding such matters as international trade, competition, taxation,
environmental, health and safety, product liability, employment practices, patent and trademark infringement, corporate and
securities legislation, licensing and permits, data privacy, bankruptcies, and other claims. Some of these compliance risks
are further described in this "Risks and uncertainties" section of the MD&A. In the event of non-compliance with such laws
and regulations, we may be subject to regulatory actions, claims and/or litigation which could result in fines, penalties, claim
settlement costs or damages awarded to plaintiffs, legal defense costs, product recalls, remediation costs, incremental
operating costs and capital expenditures to improve future/ongoing compliance, and damage to the Company’s reputation.
In addition, non-compliance with certain laws and regulations could result in regulatory actions that could temporarily or
permanently restrict or limit our ability to conduct operations as planned, potentially resulting in lost sales, closure costs, and
asset write-offs. Due to the inherent uncertainties of litigation or regulatory actions in both domestic and foreign jurisdictions,
we cannot accurately predict the ultimate outcome of any such proceedings.
Laws and regulations are constantly changing and complex, and future compliance cannot be assured. Changes necessary
to maintaining compliance with these laws and regulations may increase future compliance costs and have other negative
impacts on our business, results of operations, and financial condition.
As part of the regulatory and legal environments in which we operate, Gildan is subject to anti-bribery laws that prohibit
improper payments directly or indirectly to government officials, authorities or persons defined in those anti-bribery laws in
order to obtain business or other improper advantages in the conduct of business. Failure by our employees, subcontractors,
suppliers, agents, and/or partners to comply with anti-bribery laws could impact Gildan in various ways that include, but are
not limited to, criminal, civil and administrative legal sanctions, negative publicity, and could have a negative effect on our
business, results of operations, and financial condition.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 41
MANAGEMENT'S DISCUSSION AND ANALYSIS
We rely on certain international trade agreements and preference programs and are subject to evolving international
trade regulations
As a multinational corporation, we are affected by domestic tariffs, international trade legislation, bilateral and multilateral
trade agreements and trade preference programs in the countries in which we operate, source, and sell products. In order
to remain globally competitive, we have situated our manufacturing facilities in strategic locations to benefit from various free
trade agreements and trade preference programs. Furthermore, management continuously monitors new developments and
evaluates risks relating to duties, tariffs, and quotas that could impact our approach to global manufacturing and sourcing
and makes adjustments as needed. The United States has implemented several free trade agreements and trade preference
programs to enhance trade with certain countries. The Company relies on a number of preferential trade programs which
provide duty free access to the U.S. market for goods meeting specified rules of origin, including the Caribbean Basin Trade
Partnership Act, the Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR), the North
American Free Trade Agreement (NAFTA) and the Haitian Hemispheric Opportunity through Partnership Encouragement
(HOPE), which allow qualifying textiles and apparel from participating countries duty-free access to the U.S. market. The
Company relies on similar arrangements to access the European Union, Canada, and other markets. Changes to trade
agreements or trade preference programs that the Company currently relies on may negatively impact our global competitive
position. The likelihood that the agreements and preference programs around which we have built our manufacturing supply
chain will be modified, repealed, or allowed to expire, and the extent of the impact of such changes on our business, cannot
be determined with certainty.
Most trade agreements provide for the application of special safeguards in the form of reinstatement of normal duties if
increased imports constitute a substantial cause of serious injury, or threat thereof, to a domestic industry. The likelihood
that a safeguard will be adopted and the extent of its impact on our business cannot be determined with certainty.
In 2015, the United States concluded free trade negotiations with a group of countries under the umbrella of the Trans-Pacific
Partnership (TPP). In January 2017, the new Administration in the United States issued a Presidential Memorandum directing
the withdrawal of the United States from the TPP agreement. At this point, there is uncertainty as to the future of this agreement.
As a result of the U.S. withdrawal from TPP, the remaining countries currently participating in the TPP are Australia, Brunei,
Canada, Chile, Mexico, Malaysia, New Zealand, Peru, Singapore, Japan, and Vietnam. Should the TPP agreement or any
other new free trade agreement come into force in the future, this may negatively affect our competitive position in the various
countries in which we sell our products.
Overall, new agreements or arrangements that further liberalize access to our key developed country markets from countries
where our competitors make products could potentially impact our competiveness in those markets negatively. The likelihood
that any such agreements, measures or programs will be adopted, modified, repealed, or allowed to expire, and the extent
of the impact of such changes on our business, cannot be determined with any certainty.
The new Administration in the United States has indicated its intention to enter into discussions to renegotiate NAFTA which
includes the United States, Canada, and Mexico as participating countries to the agreement. The renegotiation of NAFTA,
a U.S. withdrawal from NAFTA, or the movement to a bilateral agreement with Canada that would exclude Mexico could
adversely impact the overall competitiveness of products we ship to the U.S. from our Mexican and Canadian manufacturing
supply chains.
Furthermore, the imposition of any new domestic tariffs in any of the countries in which we operate may also negatively
impact our global competitive position.
On June 23, 2016, the United Kingdom voted to leave the European Union. The Company currently relies upon a number
of free trade agreements and trade preference programs between the European Union and the various countries in which
we manufacture our products which provide us with duty free access into the commerce of the European Union, including
the United Kingdom. Following an exit of the United Kingdom from the European Union, should the United Kingdom fail or
delay ratifying identical or similar agreements to the ones in effect in the European Union, this could negatively impact the
competitiveness of our supply chain in servicing the United Kingdom.
In addition, the Company is subject to customs audits as well as valuation and origin verifications in the various countries in
which it operates. Although we believe that our customs compliance programs are effective at ensuring the eligibility of all
goods manufactured for the preferential treatment claimed upon importation, we cannot predict the outcome of any
governmental audit or inquiry.
The Company operates two U.S. foreign trade zones (FTZs). Both FTZs relate to the Company’s primary distribution
warehouses in the U.S. The FTZs enhance efficiencies in the customs entry process and allow for the non-application of
GILDAN 2016 REPORT TO SHAREHOLDERS P. 42
MANAGEMENT'S DISCUSSION AND ANALYSIS
duty on certain goods distributed internationally. FTZs are highly regulated operations and while the Company believes it
has adequate systems and controls in place to manage the regulatory requirements associated with FTZs, we cannot predict
the outcome of any governmental audit or examination of the FTZs.
In recent years, governmental bodies have responded to the increased threat of terrorist activity by requiring greater levels
of inspection of imported goods and imposing security requirements on importers, carriers and others in the global supply
chain. These added requirements can sometimes cause delays and increase costs in bringing imported goods to market.
We believe we have effectively addressed these requirements in order to maximize velocity in our supply chain, but changes
in security requirements or tightening of security procedures, for example, in the aftermath of a terrorist incident, could cause
delays in our goods reaching the markets in which we distribute our products.
Textile and apparel articles are generally not subject to specific export restrictions or licensing requirements in the countries
where we manufacture and distribute goods. However, the creation of export licensing requirements, imposition of restrictions
on export quantities, or specification of minimum export pricing and/or export prices or duties could potentially have a negative
impact on our business. In addition, unilateral and multilateral sanctions and restrictions on dealings with certain countries
and persons, which are unpredictable, continue to emerge and evolve in response to international economic and political
events, and could impact our trading relationships with vendors or customers.
Factors or circumstances that could increase our effective income tax rate
The Company benefits from a low overall effective corporate tax rate as the majority of its profits are earned and the majority
of its sales, marketing and manufacturing operations are carried out in low tax rate jurisdictions in Central America and the
Caribbean Basin. The Company’s income tax filing positions and income tax provisions are based on interpretations of
applicable tax laws, including income tax treaties between various countries in which the Company operates as well as
underlying rules and regulations with respect to transfer pricing. These interpretations involve judgments and estimates and
may be challenged through government taxation audits that the Company is regularly subject to. Although the Company
believes its tax filing positions are sustainable, we cannot predict with certainty the outcome of any audit undertaken by
taxation authorities in any jurisdictions in which we operate, and the final result may vary compared to the estimates and
assumptions used by management in determining the Company’s consolidated income tax provision and in valuing its income
tax assets and liabilities. Depending on the ultimate outcome of any such audit, there may be a negative impact on the
Company’s financial condition, results of operations and cash flows. In addition, if the Company were to receive a tax
reassessment by a taxation authority prior to the ultimate resolution of an audit, the Company could be required to submit
an advance deposit on the amount reassessed.
The Company’s overall effective income tax rate may also be adversely affected by the following: changes to current domestic
laws in the countries in which the Company operates; changes to or terminations of the income tax treaties the Company
currently relies on; an increase in income and withholding tax rates; changes to free trade and export processing zone rules
in certain countries where the Company is currently not subject to income tax; changes to guidance regarding the interpretation
and application of domestic laws, free trade and export processing zones and income tax treaties; increases in the proportion
of the Company’s overall profits being earned in higher tax rate jurisdictions due to changes in the locations of the Company’s
operations; and changes in the mix of profits between operating segments; or other factors. For example, the Organization
for Economic Cooperation and Development (“OECD”), an international association of 34 countries, recently issued
recommendations regarding international taxation, which if adopted by and between the tax authorities in the countries in
which we operate could result in a material increase in the Company’s overall effective income tax rate.
In the past year, there has been significant momentum in the U.S. for income tax reform. Any significant changes to the
current tax rules which govern the manner in which sales and profits are taxed in the U.S., including the implementation of
a border adjustment tax which would involve the disallowance of a deduction for the cost of goods imported into the U.S. in
arriving at taxable income, could materially increase the effective income tax rate of the Company.
We have not recognized a deferred income tax liability for the undistributed profits of our subsidiaries, as we currently have
no intention to repatriate these profits. If our expectations or intentions change in the future, we could be required to recognize
a charge to earnings for the tax liability relating to the undistributed profits of our subsidiaries, which would also result in a
corresponding cash outflow in the years in which the earnings would be repatriated. As at January 1, 2017, the estimated
income tax liability that would result in the event of a full repatriation of these undistributed profits is approximately $71 million.
Provisions for uncertain tax positions are measured at the best estimate of the amounts expected to be paid upon ultimate
resolution. The Company’s overall effective income tax rate is impacted by its assessment of uncertain tax positions and
whether additional taxes and interest may be due. The Company’s assessment of uncertain tax positions may be negatively
affected as a result of new information, a change in management’s assessment of the technical merits of its positions, changes
to tax laws, administrative guidance, and the conclusion of tax audits.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 43
MANAGEMENT'S DISCUSSION AND ANALYSIS
Compliance with environmental, health, and safety regulations
We are subject to various federal, state and local environmental and occupational health and safety laws and regulations in
the different jurisdictions in which we operate, concerning, among other things, wastewater discharges, air emissions, storm
water flows, and solid waste disposal. Our manufacturing plants generate small quantities of hazardous waste, which are
recycled, repurposed, or disposed of by licensed waste management companies. Through our Corporate Environmental
Policy, Environmental Code of Practice and Environmental Management System, we seek not only to comply with applicable
laws and regulations, but also to reduce our environmental footprint through waste prevention, recovery, and treatment.
Although we believe that we are currently in compliance in all material respects with the regulatory requirements of those
jurisdictions in which our facilities are located, the extent of our liability, if any, for past failures to comply with laws, regulations,
and permits applicable to our operations cannot be reasonably determined. In line with our commitment to the environment,
as well as to the health and safety of our employees, we incur capital and other expenditures each year that are aimed at
achieving compliance with current environmental standards. There can be no assurance that future changes in federal, state,
or local regulations, interpretations of existing regulations or the discovery of currently unknown problems or conditions will
not require substantial additional environmental remediation expenditures or result in a disruption to our supply chain that
could have an adverse effect on our business, results of operation, or financial condition.
During fiscal 2013, Gildan was notified that a subsidiary of Gold Toe Moretz, a company that we acquired in fiscal 2011, was
identified as one of numerous “potentially responsible parties” at a certain waste disposal site undergoing an investigation
by the Pennsylvania Department of Environmental Protection under the Pennsylvania Hazardous Sites Cleanup Act and the
Solid Waste Management Act. As a result of activities alleged to have occurred during the 1980’s, Gildan could be liable to
contribute to the costs of any investigation or cleanup action which the site may require, although to date we have insufficient
information from the authorities as to the potential costs of the investigation and cleanup to reasonably estimate Gildan’s
share of liability for any such costs, if any.
Compliance with product safety regulation
We are subject to consumer product safety laws and regulations that could affect our business. In the United States, we are
subject to the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008, the
Federal Hazardous Substances Act, the Flammable Fabrics Act, the Toxic Substances Control Act, and rules and regulations
promulgated pursuant to these statutes. Such laws provide for substantial penalties for non-compliance. These statutes and
regulations include requirements for testing and certification for flammability of wearing apparel, for lead content and lead in
surface coatings in children’s products, and for phthalate content in child care articles, including plasticized components of
children’s sleepwear. We are also subject to similar laws and regulations, and to additional warning and reporting requirements,
in the various individual states in which our products are sold.
In Canada, we are subject to similar laws and regulations, the most significant of which are the Hazardous Products Act and
the Canada Consumer Product Safety Act (the “CCPSA”), which applies to manufacturers, importers, distributors, advertisers,
and retailers of consumer products.
In the European Union, we are also subject to product safety regulations, the most significant of which are imposed pursuant
to the General Product Safety Directive. We are also subject to similar laws and regulations in the other jurisdictions in which
our products are sold.
Compliance with existing and future product safety laws and regulations and enforcement policies may require that we incur
capital and other costs, which may be significant. Non-compliance with applicable product safety laws and regulations may
result in substantial fines and penalties, costs related to the recall, replacement and disposal of non-compliant products, as
well as negative publicity which could harm our reputation and result in a loss of sales. Our customers may also require us
to meet existing and additional consumer safety requirements, which may result in our inability to provide the products in the
manner required. Although we believe that we are in compliance in all material respects with applicable product safety laws
and regulations in the jurisdictions in which we operate, the extent of our liability, if any, for past failure to comply with laws,
regulations and permits applicable to our operations cannot be reasonably determined.
We may be negatively impacted by changes in our relationship with our employees or changes to domestic and
foreign employment regulations
We employ over 48,000 employees worldwide. As a result, changes in domestic and foreign laws governing our relationships
with our employees, including wage and human resources laws and regulations, fair labour standards, overtime pay,
unemployment tax rates, workers’ compensation rates, and payroll taxes, would likely have a direct impact on our operating
costs. The majority of our employees are employed outside of Canada and the United States. A significant increase in wage
rates or the cost of benefit programs in the countries in which we operate could have a negative impact on our operating
costs.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 44
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company has historically been able to operate in a productive manner in all of its manufacturing facilities without
experiencing significant labour disruptions, such as strikes or work stoppages. Some of our employees are members of
labour organizations. The Company is party to collective bargaining agreements at three of its sewing facilities in Nicaragua
and one sewing facility in Honduras. In connection with its textile operations in the Dominican Republic, the Company was
previously a party to a collective bargaining agreement with a union registered with the Dominican Ministry of Labor, covering
approximately 900 employees. The collective bargaining agreement was terminated in February 2011 upon the mutual
consent of the Company and the union, although the union is still claiming to represent a majority of the factory workers. A
second union is also claiming that it represents the majority of the workers at the plant and the matter is now before the
Dominican Republic Labor Court. Notwithstanding the termination of the agreement, the Company is continuing to provide
all of the benefits to the employees covered by the original agreement. If labour relations were to change or deteriorate at
any of our facilities or any of our third-party contractors’ facilities, this could negatively affect the productivity and cost structure
of the Company’s manufacturing operations.
We may experience negative publicity as a result of actual, alleged or perceived violations of labour laws or
international labour standards, unethical labour, and other business practices
We are committed to ensuring that all of our operations comply with our strict internal Code of Conduct, local and international
laws, and the codes and principles to which we subscribe, including those of the Fair Labor Association (FLA) and the
Worldwide Responsible Accredited Production (WRAP). While the majority of our manufacturing operations are conducted
through Company-owned facilities, we also utilize third-party contractors, which we do not control, to complement our vertically-
integrated production. If one of our own manufacturing operations or one of our third-party contractors or sub-contractors
violates or is accused of violating local or international labour laws or other applicable regulations, or engages in labour or
other business practices that would be viewed, in any market in which our products are sold, as unethical, we could experience
negative publicity which could harm our reputation and result in a loss of sales.
We may be negatively impacted by changes in third party licensing arrangements and licensed brands
A number of products are designed, manufactured, sourced and sold under trademarks that we license from third parties,
under contractual licensing relationships that are subject to periodic renewal. Because we do not control the brands licensed
to us, our licensors could make changes to their brands or business models that could result in a significant downturn in a
brand’s business, negatively affecting our sales and results of operations. If any licensor fails to adequately maintain or
protect their trademarks, engages in behaviour with respect to the licensed marks that would cause us reputational harm,
or if any of the brands licensed to us violates the trademark rights of a third party or are deemed to be invalid or unenforceable,
we could experience a significant downturn in that brand’s business, negatively affecting our sales and results of operations,
and we may be required to expend significant amounts on public relations, advertising, legal, and other related costs. In
addition, if any of these licensors chooses to cease licensing these brands to us in the future, our sales and results of
operations would be negatively affected.
Our ability to protect our intellectual property rights
Our trademarks are important to our marketing efforts and have substantial value. We aggressively protect these trademarks
from infringement and dilution through appropriate measures, including court actions and administrative proceedings;
however, the actions we have taken to establish and protect our trademarks and other intellectual property may not be
adequate. We cannot be certain that others will not imitate our products or infringe our intellectual property rights. Infringement
or counterfeiting of our products could diminish the value of our brands or otherwise negatively affect our business. In addition,
unilateral actions in the United States or other countries, such as changes to or the repeal of laws recognizing trademark or
other intellectual property rights, could have an impact on our ability to enforce those rights.
From time to time we are involved in opposition and cancellation proceedings with respect to our intellectual property, which
could affect its validity, enforceability, and use. The value of our intellectual property could diminish if others assert rights in,
or ownership of, or oppose our applications to register, our trademarks and other intellectual property rights. In some cases,
there may be trademark owners who have prior rights to our trademarks or to similar trademarks, which could harm our ability
to sell products under or register such trademarks. In addition, we have registered trademarks in certain foreign jurisdictions
and the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the
United States or Canada. We do not own trademark rights to all of our brands in all jurisdictions, which may limit the future
sales growth of certain branded products in such jurisdictions. Furthermore, actions we have taken to protect our intellectual
property rights may not be adequate to prevent others from seeking to invalidate our trademarks or block sales of our products
as a violation of the trademarks and intellectual property rights of others.
In some cases, litigation may be necessary to protect our trademarks and other intellectual property rights, to enforce our
rights or defend against claims by third parties alleging that we infringe, dilute, misappropriate, or otherwise violate third party
trademark or other intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit,
and whether successful or not, could result in substantial costs and diversion of our resources, which could have a negative
GILDAN 2016 REPORT TO SHAREHOLDERS P. 45
MANAGEMENT'S DISCUSSION AND ANALYSIS
effect on our business, financial condition, results of operation and cash flows. Any intellectual property litigation claims
against us could result in the loss or compromise of our intellectual property rights, could subject us to significant liabilities,
require us to seek licenses on unfavorable terms, if available at all, and/or require us to rebrand our products and services,
any of which could negatively affect our business, results of operations, financial condition, and cash flows.
We rely significantly on our information systems for our business operations
We place significant reliance on our information systems, including our JD Edwards Enterprise Resource Planning (ERP)
system. We are in the process of upgrading our ERP system to the current release. We depend on our information systems
to purchase raw materials and supplies, schedule and manage production, process transactions, summarize results, respond
to customer inquiries, manage inventories and ship goods on a timely basis to our customers. There can be no assurance
that we will not experience operational problems with our information systems as a result of system failures, viruses, security
and cyber security breaches, disasters or other causes, or in connection with the implementation of the upgrade to our ERP
system. In addition, there can be no assurance that we will be able to timely modify or adapt our systems to meet evolving
requirements for our business. Any material disruption or slowdown of our systems could cause operational delays and other
impacts that could negatively affect our business and results of operations.
We may be negatively impacted by data security and privacy breaches
Our business involves the regular collection and use of sensitive and confidential information regarding employees, customers,
business partners, vendors, and other third parties. These activities are highly regulated and privacy and information security
laws are complex and constantly changing. Non-compliance with these laws and regulations can lead to legal liability.
Furthermore, an information technology system failure or non-availability, cyber-attack, or breach of systems could disrupt
our operations, cause the loss of, corruption of, or unauthorized access to business information and data, compromise
confidential information, or expose us to regulatory investigation, litigation, or contractual penalties. We seek to detect and
investigate all security incidents and to prevent their occurrence or recurrence. We continue to invest in and improve our
threat protection, detection and mitigation policies, procedures and controls, and work on increased awareness and enhanced
protections against cyber security threats. However, given the highly evolving nature and sophistication of these security
threats or disruptions and their increased frequency, the impact of any future incident cannot be easily predicted or mitigated,
and the costs related to such threats and disruptions may not be fully insured or indemnified by other means.
We depend on key management and our ability to attract and/or retain key personnel
Our success depends upon the continued contributions of our key management, some of whom have unique talents and
experience and would be difficult to replace in the short term. The loss or interruption of the services of a key executive could
have a negative effect on our business during the transitional period that would be required to restructure the organization
or for a successor to assume the responsibilities of the key management position. Our future success will also depend on
our ability to attract and retain key managers, sales people, and other personnel. We may not be able to attract or retain
these employees, which could negatively affect our business.
17.0 Definition and Reconciliation of Non-GAAP Financial Measures
We use non-GAAP measures to assess our operating performance and financial condition. The terms and definitions of the
non-GAAP measures used in this MD&A and a reconciliation of each non-GAAP measure to the most directly comparable
GAAP measure are provided below. The non-GAAP measures are presented on a consistent basis for all periods presented
in this MD&A. These non-GAAP measures do not have any standardized meanings prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Accordingly, they should not be considered
in isolation.
Adjusted net earnings and adjusted diluted EPS
Adjusted net earnings are calculated as net earnings before restructuring and acquisition-related costs, net of related income
tax recoveries. Adjusted diluted EPS is calculated as adjusted net earnings divided by the diluted weighted average number
of common shares outstanding. The Company uses adjusted net earnings and adjusted diluted EPS to measure its
performance from one period to the next, without the variation caused by the impacts of the items described above. The
Company excludes these items because they affect the comparability of its financial results and could potentially distort the
analysis of trends in its business performance. Excluding these items does not imply they are necessarily non-recurring.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 46
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three months ended
January 1,
2017
January 3,
2016
2016
2015
74.3
0.2
67.6
346.6
(15 months)
304.9
1.3
11.7
14.9
(in $ millions, except per share amounts)
Net earnings
Adjustments for:
Restructuring and acquisition-related costs
Income tax recovery on restructuring and acquisition-
related costs
Adjusted net earnings
Basic EPS
Diluted EPS
Adjusted diluted EPS
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
—
68.9
0.28
0.28
0.28
(2.0)
356.3
1.47
1.47
1.51
(2.0)
317.8
1.26
1.25
1.30
—
74.5
0.32
0.32
0.32
Certain minor rounding variances exist between the consolidated financial statements and this summary.
Adjusted operating income and adjusted operating margin
Adjusted operating income is calculated as operating income before restructuring and acquisition-related costs. Adjusted
operating margin is calculated as adjusted operating income divided by net sales. Management uses adjusted operating
income and adjusted operating margin to measure our performance from one period to the next, without the variation caused
by the impacts of the items described above. We exclude these items because they affect the comparability of our financial
results and could potentially distort the analysis of trends in our business performance. Excluding these items does not imply
they are necessarily non-recurring.
(in $ millions, or otherwise indicated)
Operating income
Adjustment for:
Restructuring and acquisition-related costs
Adjusted operating income
Three months ended
January 1,
2017
January 3,
2016
69.8
0.2
70.0
70.7
1.3
72.0
13.0%
Operating margin
13.2%
Adjusted operating margin
Certain minor rounding variances exist between the consolidated financial statements and this summary.
11.9%
11.9%
2016
2015
371.5
11.7
383.2
14.4%
14.8%
(15 months)
327.2
14.9
342.1
11.1%
11.6%
Adjusted EBITDA
Adjusted EBITDA is calculated as earnings before financial expenses, income taxes, and depreciation and amortization, and
excludes the impact of restructuring and acquisition-related costs. The Company uses adjusted EBITDA, among other
measures, to assess the operating performance of its business. The Company also believes this measure is commonly used
by investors and analysts to measure a company’s ability to service debt and to meet other payment obligations, or as a
common valuation measurement. The Company excludes depreciation and amortization expenses, which are non-cash in
nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.
Excluding these items does not imply they are necessarily non-recurring.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 47
(in $ millions)
Three months ended
January 1,
2017
January 3,
2016
Net earnings
Restructuring and acquisition-related costs
Depreciation and amortization
Financial expenses, net
Income tax (recovery) expense
Adjusted EBITDA
Certain minor rounding variances exist between the consolidated financial statements and this summary.
74.3
0.2
32.6
5.8
(10.3)
102.6
67.6
1.3
29.8
2.4
0.6
101.7
MANAGEMENT'S DISCUSSION AND ANALYSIS
2016
2015
346.6
11.7
140.6
19.7
5.2
523.8
(15 months)
304.9
14.9
146.4
17.8
4.5
488.5
Free cash flow
Free cash flow is defined as cash from operating activities, less cash flow used in investing activities excluding business
acquisitions. The Company considers free cash flow to be an important indicator of the financial strength and performance
of its business, because it shows how much cash is available after capital expenditures to repay debt, to pursue business
acquisitions, and/or to redistribute to its shareholders. The Company believes this measure is commonly used by investors
and analysts when valuing a business and its underlying assets.
(in $ millions)
Cash flows from operating activities
Cash flows used in investing activities
Adjustment for:
Business acquisitions
Free cash flow
Certain minor rounding variances exist between the consolidated financial statements and this summary.
2016
2015
537.9
(303.4)
163.9
398.4
(15 months)
353.6
(425.3)
103.8
32.1
Total indebtedness and net indebtedness
Total indebtedness is defined as the total bank indebtedness and long-term debt (including any current portion), and net
indebtedness is calculated as total indebtedness net of cash and cash equivalents. The Company considers total indebtedness
and net indebtedness to be important indicators of the financial leverage of the Company.
(in $ millions)
Long-term debt and total indebtedness
Cash and cash equivalents
Net indebtedness
Certain minor rounding variances exist between the consolidated financial statements and this summary.
January 1,
2017
January 3,
2016
600.0
(38.2)
561.8
375.0
(50.7)
324.3
Net debt leverage ratio
The net debt leverage ratio is defined as the ratio of net indebtedness to pro-forma adjusted EBITDA for the trailing twelve
months. The pro-forma adjusted EBITDA for the trailing twelve months is calculated as adjusted EBITDA for the trailing twelve
months, including the pro-forma adjustments to reflect business acquisitions made during the trailing twelve month period,
as if they had occurred at the beginning of the trailing twelve month period. The Company has set a target net debt leverage
ratio of one to two times pro-forma adjusted EBITDA. We use, and believe that certain investors and analysts use the net
debt leverage ratio to measure the financial leverage of the Company.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 48
(in $ millions, or otherwise indicated)
Adjusted EBITDA for the trailing twelve months
Adjustment for:
Business acquisitions
Pro-forma adjusted EBITDA for the trailing twelve months
Net indebtedness
Net debt leverage ratio
Certain minor rounding variances exist between the consolidated financial statements and this summary.
MANAGEMENT'S DISCUSSION AND ANALYSIS
January 1,
2017
January 3,
2016
523.8
503.8
12.5
536.3
561.8
1.0
2.7
506.5
324.3
0.6
GILDAN 2016 REPORT TO SHAREHOLDERS P. 49
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements have been prepared by management and approved by the Board of
Directors of the Company. The consolidated financial statements were prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and, where appropriate, reflect
management’s best estimates and judgments. Where alternative accounting methods exist, management has chosen those
methods deemed most appropriate in the circumstances. Management is responsible for the accuracy, integrity and objectivity
of the consolidated financial statements within reasonable limits of materiality, and for maintaining a system of internal controls
over financial reporting as described in “Management’s annual report on internal control over financial reporting” included in
Management’s Discussion and Analysis for the fiscal year ended January 1, 2017. Management is also responsible for the
preparation and presentation of other financial information included in the 2016 Annual Report and its consistency with the
consolidated financial statements.
The Audit and Finance Committee, which is appointed annually by the Board of Directors and comprised exclusively of
independent directors, meets with management as well as with the independent auditors and internal auditors to satisfy itself
that management is properly discharging its financial reporting responsibilities and to review the consolidated financial
statements and the independent auditors’ report. The Audit and Finance Committee reports its findings to the Board of
Directors for consideration in approving the consolidated financial statements for presentation to the shareholders. The Audit
and Finance Committee considers, for review by the Board of Directors and approval by the shareholders, the engagement
or reappointment of the independent auditors.
The consolidated financial statements have been independently audited by KPMG LLP, on behalf of the shareholders, in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States). Their report outlines the nature of their audit and expresses their opinion on the consolidated
financial statements of the Company. In addition, our auditors have issued a report on the Company’s internal controls over
financial reporting as of January 1, 2017. KPMG LLP has direct access to the Audit and Finance Committee of the Board of
Directors.
(Signed: Glenn J. Chamandy)
Glenn J. Chamandy
President and Chief Executive Officer
(Signed: Rhodri J. Harries)
Rhodri J. Harries
Executive Vice-President,
Chief Financial and Administrative Officer
February 22, 2017
GILDAN 2016 REPORT TO SHAREHOLDERS P. 50
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Gildan Activewear Inc.:
We have audited the accompanying consolidated financial statements of Gildan Activewear Inc. (the “Company”), which comprise the
consolidated statements of financial position as at January 1, 2017 and January 3, 2016, the consolidated statements of earnings and
comprehensive income, changes in equity and cash flows for the year ended January 1, 2017 and the fifteen month fiscal period ended
January 3, 2016, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as
Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Gildan
Activewear Inc. as at January 1, 2017 and January 3, 2016, and its consolidated financial performance and its consolidated cash flows for
the year ended January 1, 2017 and the fifteen month fiscal period ended January 3, 2016 in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Other Matter
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s
internal control over financial reporting as of January 1, 2017, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2017 expressed an
unqualified (unmodified) opinion on the effectiveness of the Company’s internal control over financial reporting.
Montréal, Canada
February 22, 2017
*CPA auditor, CA, public accountancy permit No. A110592
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 51
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Gildan Activewear Inc.:
We have audited Gildan Activewear Inc.’s internal control over financial reporting as of January 1, 2017, based on the criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Gildan Activewear Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting as presented in the section entitled “Management’s Annual Report on Internal
Control over Financial Reporting” included in Management’s Discussion and Analysis for the year ended January 1, 2017. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Gildan Activewear Inc. maintained, in all material respects, effective internal control over financial reporting as of January 1,
2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
During 2016, Gildan Activewear Inc. acquired Alstyle Apparel, LLC ("Alstyle") and Peds Legwear, Inc. ("Peds"), and Management excluded
from its assessment of the effectiveness of internal control over financial reporting as of January 1, 2017 Alstyle's and Peds' internal control
over financial reporting associated with total assets of $200 million and total net sales of $118.6 million included in the consolidated financial
statements of Gildan Activewear Inc. as at and for the year ended January 1, 2017. Our audit of internal control over financial reporting of
Gildan Activewear Inc. also excluded the evaluation of the internal control over financial reporting of Alstyle and Peds.
We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statements of financial position of Gildan Activewear Inc. as at January 1,
2017 and January 3, 2016 and the related consolidated statements of earnings and comprehensive income, changes in equity and cash
flows for the year ended January 1, 2017 and the fifteen month fiscal period ended January 3, 2016, and our report dated February 22, 2017
expressed an unmodified (unqualified) opinion on those consolidated financial statements.
Montréal, Canada
February 22, 2017
*CPA auditor, CA, public accountancy permit No. A110592
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 52
CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. dollars)
Current assets:
Cash and cash equivalents (note 6)
Trade accounts receivable (note 7)
Inventories (note 8)
Prepaid expenses, deposits and other current assets
Assets held for sale
Total current assets
Non-current assets:
Property, plant and equipment (note 9)
Intangible assets (note 10)
Goodwill (note 10)
Deferred income taxes (note 18)
Other non-current assets
Total non-current assets
Total assets
Current liabilities:
Accounts payable and accrued liabilities
Income taxes payable
Total current liabilities
Non-current liabilities:
Long-term debt (note 11)
Other non-current liabilities (note 12)
Total non-current liabilities
Total liabilities
Commitments, guarantees and contingent liabilities (note 23)
Equity:
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total equity attributable to shareholders of the Company
January 1, 2017
January 3, 2016
$
$
$
$
$
$
38,197
277,733
954,876
69,719
—
1,340,525
1,076,883
354,221
202,108
1,500
14,907
1,649,619
2,990,144
234,062
1,866
235,928
600,000
34,569
634,569
870,497
152,313
23,198
1,903,525
40,611
2,119,647
50,675
306,132
851,033
42,934
2,840
1,253,614
1,044,389
336,753
190,626
2,793
6,105
1,580,666
2,834,280
232,268
953
233,221
375,000
37,616
412,616
645,837
150,497
14,007
2,022,846
1,093
2,188,443
Total liabilities and equity
$
2,990,144
$
2,834,280
See accompanying notes to consolidated financial statements.
On behalf of the Board of Directors:
(Signed: Glenn J. Chamandy)
Glenn J. Chamandy
Director
(Signed: Russell Goodman)
Russell Goodman
Director
GILDAN 2016 REPORT TO SHAREHOLDERS P. 53
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal years ended January 1, 2017 and January 3, 2016
(in thousands of U.S. dollars, except per share data)
CONSOLIDATED FINANCIAL STATEMENTS
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (note 16(a))
Restructuring and acquisition-related costs (note 17)
Operating income
Financial expenses, net (note 14(c))
Earnings before income taxes
Income tax expense (note 18)
Net earnings
Other comprehensive income (loss), net of related income taxes:
Cash flow hedges (note 14(d))
Actuarial loss on employee benefit obligations (note 12(a))
Comprehensive income
Earnings per share: (note 19)
Basic (1)
Diluted (1)
2016
$
2,585,070
1,865,367
719,703
336,433
11,746
371,524
19,686
351,838
5,200
346,638
39,518
(5,239)
34,279
380,917
1.47
1.47
$
$
$
2015
(15 months)
2,959,238
2,229,130
730,108
387,963
14,908
327,237
17,797
309,440
4,526
304,914
8,825
(10,000)
(1,175)
303,739
1.26
1.25
$
$
$
$
(1) All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
See accompanying notes to consolidated financial statements.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 54
CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Fiscal years ended January 1, 2017 and January 3, 2016
(in thousands or thousands of U.S. dollars)
Share capital
Number
Amount
Contributed
surplus
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
equity
Balance, October 5, 2014
244,648
$ 124,595
$
20,778
$
(7,732)
$ 1,885,892
$ 2,023,533
Share-based compensation
Shares issued under employee share
purchase plan
Shares issued pursuant to exercise of
stock options
Shares issued or distributed pursuant to
vesting of restricted share units
Shares repurchased for cancellation
(note 13(d))
Share repurchases for future settlement of
non-Treasury RSUs (note 13(e))
Dividends declared
Transactions with shareholders of the
Company recognized directly in equity
Cash flow hedges (note 14(d))
Actuarial loss on employee benefit
obligations (note 12(a))
Net earnings
Comprehensive income
—
59
—
12,152
1,761
—
1,462
21,904
(7,465)
1,013
19,031
(19,031)
(3,050)
(1,555)
—
(560)
(15,239)
—
—
7,488
85
(1,076)
25,902
(6,771)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,825
—
—
8,825
—
—
—
—
12,152
1,761
14,439
—
(78,188)
(79,743)
—
(79,772)
(7,751)
(79,687)
(157,960)
(138,829)
—
8,825
(10,000)
(10,000)
304,914
294,914
304,914
303,739
Balance, January 3, 2016
243,572
$ 150,497
$
14,007
$
1,093
$ 2,022,846
$ 2,188,443
Share-based compensation
Shares issued under employee share
purchase plan
Shares issued pursuant to exercise of
stock options
Shares issued or distributed pursuant to
vesting of restricted share units
Shares repurchased for cancellation
(note 13(d))
Change in classification of non-Treasury
RSUs to equity-settled (note 3(cc))
Dividends declared
Transactions with shareholders of the
Company recognized directly in equity
(13,354)
Cash flow hedges (note 14(d))
Actuarial loss on employee benefit
obligations (note 12(a))
Net earnings
Comprehensive income
—
—
—
—
—
53
77
—
15,225
1,532
1,278
—
(453)
291
7,632
(12,185)
(13,775)
(8,626)
—
—
—
—
—
1,816
—
—
—
—
6,234
370
9,191
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,225
1,532
825
(143)
(4,696)
(385,825)
(394,451)
—
6,234
(74,752)
(74,382)
(460,720)
(449,713)
39,518
—
39,518
—
—
39,518
(5,239)
346,638
341,399
(5,239)
346,638
380,917
Balance, January 1, 2017
230,218
$ 152,313
$
23,198
$
40,611
$ 1,903,525
$ 2,119,647
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
See accompanying notes to consolidated financial statements.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 55
CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended January 1, 2017 and January 3, 2016
(in thousands of U.S. dollars)
Cash flows from (used in) operating activities:
Net earnings
Adjustments to reconcile net earnings to cash flows from operating activities
(note 21(a))
Changes in non-cash working capital balances:
Trade accounts receivable
Income taxes
Inventories
Prepaid expenses, deposits and other current assets
Accounts payable and accrued liabilities
Cash flows from operating activities
Cash flows from (used in) investing activities:
Purchase of property, plant and equipment
Purchase of intangible assets
Business acquisitions (notes 5 & 26)
Proceeds on disposal of assets held for sale and property, plant and
equipment
Cash flows used in investing activities
Cash flows from (used in) financing activities:
Increase (decrease) in amounts drawn under revolving
long-term bank credit facility
Proceeds from term loan
Proceeds from issuance of notes
Dividends paid
Withholding taxes paid pursuant to the settlement of non-Treasury RSUs
Proceeds from the issuance of shares
Repurchase and cancellation of shares (note 13(d))
Share repurchases for future settlement of non-Treasury RSUs (note 13(e))
Cash flows (used in) from financing activities
Effect of exchange rate changes on cash and cash equivalents denominated in
foreign currencies
Net decrease in cash and cash equivalents during the fiscal year
Cash and cash equivalents, beginning of fiscal year
Cash and cash equivalents, end of fiscal year
Cash paid (included in cash flows from operating activities):
Interest
Income taxes, net of refunds
Supplemental disclosure of cash flow information (note 21)
See accompanying notes to consolidated financial statements.
$
$
2016
2015
(15 months)
$
346,638
$
304,914
158,447
505,085
57,097
(1,716)
(15,188)
7,070
(14,450)
537,898
(129,408)
(10,833)
(163,947)
833
(303,355)
(375,000)
300,000
300,000
(74,382)
(4,696)
2,209
(394,451)
—
(246,320)
(701)
(12,478)
50,675
38,197
10,670
9,349
147,654
452,568
47,893
2,478
(36,149)
(4,290)
(108,876)
353,624
(319,374)
(7,545)
(103,800)
5,463
(425,256)
218,000
—
—
(79,687)
—
16,032
(79,743)
(15,239)
59,363
(2,219)
(14,488)
65,163
50,675
9,561
4,890
$
$
GILDAN 2016 REPORT TO SHAREHOLDERS P. 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended January 1, 2017 and January 3, 2016
(Tabular amounts in thousands or thousands of U.S. dollars except per share data, unless otherwise indicated)
1. REPORTING ENTITY:
Gildan Activewear Inc. (the "Company") is domiciled in Canada and is incorporated under the Canada Business Corporations
Act. Its principal business activity is the manufacture and sale of activewear, socks and underwear. Beginning in fiscal 2015,
the Company changed its fiscal year to end on the Sunday closest to December 31 of each year. As a result, fiscal 2015 was
a transition year and included 15 months of operations, beginning on October 6, 2014 and ending on January 3, 2016.
The address of the Company’s registered office is 600 de Maisonneuve Boulevard West, Suite 3300, Montreal, Quebec. The
consolidated financial statements for the fiscal years ended January 1, 2017 and January 3, 2016 include the accounts of
the Company and its subsidiaries. The Company is a publicly listed entity and its shares are traded on the Toronto Stock
Exchange and New York Stock Exchange under the symbol GIL.
All earnings per share and share data in these consolidated financial statements and notes are on a post-split basis, reflecting
the effect of the two-for-one stock split of the Company’s outstanding common shares by way of a share dividend that took
effect on March 27, 2015. See note 13(c).
2. BASIS OF PREPARATION:
(a) Statement of compliance:
The Company’s consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements for the fiscal year ended January 1, 2017 were authorized for issuance by the
Board of Directors of the Company on February 22, 2017.
(b) Basis of measurement:
The consolidated financial statements have been prepared on the historical cost basis except for the following items in
the consolidated statements of financial position:
• Derivative financial instruments which are measured at fair value;
• Assets held for sale which are stated at the lower of carrying amount and fair value less costs to sell;
•
Liabilities for cash-settled share-based payment arrangements which are measured at fair value;
• Employee benefit obligations related to defined benefit plans which are measured as the net total of the fair value
of plan assets and the present value of the defined benefit obligations;
• Provisions for decommissioning, site restoration costs and onerous contracts which are measured at the present
value of the expenditures expected to be required to settle the obligation;
• Contingent consideration in connection with a business combination which is measured at fair value; and
•
Identifiable assets acquired and liabilities assumed in connection with a business combination which are initially
measured at fair value.
Certain of the comparative information has been reclassified to conform to the presentation adopted in the current fiscal
period.
The consolidated financial statements are presented in U.S. dollars, which is the Company's functional currency.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BASIS OF PREPARATION (continued):
(c) Initial application of new or amended accounting standards:
Share-based payment
On July 4, 2016, the Company early adopted the amendments to IFRS 2, Share-based payment, which were issued by
the IASB on June 20, 2016, with effect as at January 3, 2016. The amendments clarify how to classify and measure
certain types of share-based payment transactions, including share-based payment transactions with a net settlement
feature for withholding tax obligations. The adoption of the amendments to IFRS 2 did not have an impact on the Company’s
consolidated financial statements as at the effective date of adoption.
Income Taxes
In November 2016, the IFRS Interpretations Committee issued an agenda decision that prohibits the application of
guidance in IAS 12, Income Taxes, for non-depreciable property, plant and equipment by analogy to intangible assets
with an indefinite useful life when measuring deferred tax. The agenda decision clarifies that an entity must consider
whether the intangible asset with an indefinite useful life is expected to be recovered through use or through sale, or a
combination of both. The revised guidance was effective immediately. The impact of the adoption of the revised guidance
to IAS 12 is described in note 10.
3. SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, unless otherwise indicated.
(a) Basis of consolidation:
(i) Business combinations:
Business combinations are accounted for using the acquisition method. Accordingly, the consideration transferred
for the acquisition of a business is the fair value of the assets transferred, and any debt and equity interests issued
by the Company on the date control of the acquired company is obtained. The consideration transferred includes
the fair value of any asset or liability resulting from a contingent consideration arrangement. Contingent consideration
classified as an asset or a liability that is a financial instrument is subsequently remeasured at fair value, with any
resulting gain or loss recognized in the consolidated statement of earnings and comprehensive income. Acquisition-
related costs, other than those associated with the issue of debt or equity securities, are expensed as incurred and
are included in restructuring and acquisition-related costs in the consolidated statement of earnings and
comprehensive income. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are generally measured initially at their fair values at the acquisition date. The Company recognizes
any non-controlling interest in an acquired company either at fair value or at the non-controlling interest’s
proportionate share of the acquired company’s net identifiable assets. The excess of the consideration transferred
over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred
and non-controlling interest recognized is less than the fair value of the net assets of the business acquired, a
purchase gain is recognized immediately in the consolidated statement of earnings and comprehensive income.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(a) Basis of consolidation (continued):
(ii) Subsidiaries:
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases. The
accounting policies of subsidiaries are aligned with the policies adopted by the Company. Intragroup transactions,
balances and unrealized gains or losses on transactions between group companies are eliminated.
The Company’s principal subsidiaries, their jurisdiction of incorporation, and the Company’s percentage ownership
share of each are as follows:
Subsidiary
Gildan Activewear SRL
Gildan USA Inc.
Gildan Yarns, LLC
Gildan Honduras Properties, S. de R.L.
Gildan Apparel (Canada) LP
Gildan Hosiery Rio Nance, S. de R.L.
Gildan Activewear (UK) Limited
Gildan Activewear Honduras Textile Company, S. de R.L.
Gildan Activewear (Eden) Inc.
Gildan Mayan Textiles, S. de R.L.
A.K.H., S. de R. L.
Jurisdiction of
Incorporation
Barbados
Delaware
Delaware
Honduras
Ontario
Honduras
United Kingdom
Honduras
North Carolina
Honduras
Honduras
Ownership
percentage
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The Company has no other subsidiaries representing individually more than 10% of the total consolidated assets
and 10% of the consolidated net sales of the Company, or in the aggregate more than 20% of the total consolidated
assets and the consolidated net sales of the Company as at and for the fiscal year ended January 1, 2017.
(b) Foreign currency translation:
Monetary assets and liabilities of the Company’s Canadian and foreign operations denominated in currencies other than
the U.S. dollar are translated using exchange rates in effect at the reporting date. Non-monetary assets and liabilities
denominated in currencies other than U.S. dollars are translated at the rates prevailing at the respective transaction
dates. Income and expenses denominated in currencies other than U.S. dollars are translated at average rates prevailing
during the year. Gains or losses on foreign exchange are recorded in net earnings, and presented in the statement of
earnings and comprehensive income within financial expenses.
(c) Cash and cash equivalents:
The Company considers all liquid investments with maturities of three months or less from the date of purchase to be
cash equivalents.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(d) Trade accounts receivable:
Trade accounts receivable consist of amounts due from our normal business activities. An allowance for doubtful accounts
is maintained to reflect expected credit losses. Bad debts are provided for based on collection history and specific risks
identified on a customer-by-customer basis. Uncollected accounts are written off through the allowance for doubtful
accounts. Trade accounts receivable are recorded net of accrued sales discounts.
The Company may continuously sell trade receivables of certain designated customers to a third party financial institution
in exchange for a cash payment equal to the face value of the sold trade receivables, less an applicable discount. The
Company retains servicing responsibilities, including collection, for these trade receivables but does not retain any credit
risk with respect to any trade receivables that have been sold. All receivables sold under the receivables purchase
agreement are removed from the consolidated statements of financial position as the sale of the receivables qualify for
de-recognition. The net cash proceeds received by the Company are included as cash flows from operating activities
in the consolidated statements of cash flows. The difference between the carrying amount of the receivables sold under
the agreement and the cash received at the time of transfer is recorded in financial expenses in the consolidated
statements of earnings.
(e) Inventories:
Inventories are stated at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-
out principle. Inventory costs include the purchase price and other costs directly related to the acquisition of raw materials
and spare parts held for use in the manufacturing process, and the cost of purchased finished goods. Inventory costs
also include the costs directly related to the conversion of materials to finished goods, such as direct labour, and a
systematic allocation of fixed and variable production overhead, including manufacturing depreciation expense. The
allocation of fixed production overheads to the cost of inventories is based on the normal capacity of the production
facilities. Normal capacity is the average production expected to be achieved during the fiscal year, under normal
circumstances. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses. Raw materials, work in progress and spare parts inventories are not written
down if the finished products in which they will be incorporated are expected to be sold at or above cost.
(f) Assets held for sale:
Non-current assets which are classified as assets held for sale, are reported in current assets in the statement of financial
position, when their carrying amount is to be recovered principally through a sale transaction rather than through
continuing use, and a sale is considered highly probable. Assets held for sale are stated at the lower of their carrying
amount and fair value less costs to sell.
(g) Property, plant and equipment:
Property, plant and equipment are initially recorded at cost, and are subsequently carried at cost less any accumulated
depreciation and any accumulated impairment losses. The cost of an item of property, plant and equipment includes
expenditures that are directly attributable to the acquisition or construction of an asset. The cost of self-constructed
assets includes the cost of materials and direct labour, site preparation costs, initial delivery and handling costs, installation
and assembly costs, and any other costs directly attributable to bringing the assets to the location and condition necessary
for the assets to be capable of operating in the manner intended by management. The cost of property, plant and
equipment also includes, when applicable, the initial present value estimate of the costs of decommissioning or
dismantling and removing the asset and restoring the site on which it is located at the end of its useful life, and any
applicable borrowing costs, and is amortized over the remaining life of the underlying asset. Purchased software that is
integral to the functionality of the related equipment is capitalized as part of other equipment. Subsequent costs are
included in an asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits are present and the cost of the item can be measured reliably. When property, plant and
equipment are replaced, they are fully written down. Gains and losses on the disposal of an item of property, plant and
equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized in the statement of earnings and comprehensive income.
Land is not depreciated. The cost of property, plant and equipment less its residual value, if any, is depreciated on a
straight-line basis over the following estimated useful lives:
GILDAN 2016 REPORT TO SHAREHOLDERS P. 60
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(g) Property, plant and equipment (continued):
Asset
Buildings and improvements
Manufacturing equipment
Other equipment
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Useful life
5 to 40 years
3 to 10 years
2 to 25 years
Significant components of plant and equipment which are identified as having different useful lives are depreciated
separately over their respective useful lives. Depreciation methods, useful lives and residual values, if applicable, are
reviewed and adjusted, if appropriate, on a prospective basis at the end of each fiscal year.
Assets not yet utilized in operations include expenditures incurred to date for plant constructions or expansions which
are still in process and equipment not yet placed into service as at the reporting date. Depreciation on these assets
commences when the assets are available for use.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as
part of the cost of the asset. A qualifying asset is one that necessarily takes a substantial period of time to get ready for
its intended use. Capitalization of borrowing costs ceases when the asset is completed and ready for its intended use.
All other borrowing costs are recognized as financial expenses in the consolidated statement of earnings and
comprehensive income as incurred.
(h) Intangible assets:
Definite life intangible assets are measured at cost less accumulated amortization and any accumulated impairment
losses. Intangible assets include identifiable intangible assets acquired in a business combination, and consist of
customer contracts and customer relationships, license agreements, and trademarks. Intangible assets also include
computer software that is not an integral part of the related hardware. Indefinite life intangible assets represent intangible
assets which the Company controls, which have no contractual or legal expiration date, and therefore are not amortized
as there is no foreseeable time limit to their useful economic life. An assessment of indefinite life intangible assets is
performed annually to determine whether events and circumstances continue to support an indefinite useful life, and
any change in the useful life assessment from indefinite to finite is accounted for as a change in accounting estimate
on a prospective basis. Intangible assets with finite lives are amortized on a straight-line basis over the following estimated
useful-lives:
Asset
Customer contracts and customer relationships
License agreements
Computer software
Trademarks with a finite life
Non-compete agreements
Useful life
7 to 20 years
7 to 10 years
4 to 7 years
5 years
2 years
Most of the Company's trademarks are not amortized as they are considered to be indefinite life intangible assets.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 61
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(h) Intangible assets (continued):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
it is technically feasible to complete the software product so that it will be available for use;
The costs of information technology projects that are directly attributable to the design and testing of identifiable and
unique software products, including internally developed computer software are recognized as intangible assets when
the following criteria are met:
•
• management intends to complete the software product and use it;
•
•
•
there is an ability to use the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use the software product
are available; and
the expenditures attributable to the software product during its development can be reliably measured.
•
Other development expenditures that do not meet these criteria are recognized as an expense in the consolidated
statement of earnings and comprehensive income as incurred.
(i) Goodwill:
Goodwill is measured at cost less accumulated impairment losses, if any. Goodwill arises on business combinations
and is measured as the excess of the consideration transferred and the recognized amount of the non-controlling interest
in the acquired business, if any, over the fair value of identifiable assets acquired and liabilities assumed of an acquired
business.
(j) Impairment of non-financial assets:
Non-financial assets that have an indefinite useful life such as goodwill and trademarks are not subject to amortization
and are therefore tested annually for impairment or more frequently if events or changes in circumstances indicate that
the asset might be impaired. Assets that are subject to amortization are assessed at the end of each reporting period
as to whether there is any indication of impairment, or whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s value in use and fair value less
costs of disposal. The recoverable amount is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets, in which case assets are
grouped at the lowest levels for which there are separately identifiable cash inflows (i.e. cash-generating units or CGUs).
In assessing value in use, the estimated future cash flows expected to be derived from the asset or CGU by the Company
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset and or the CGU. In assessing a CGU’s fair value less costs of disposal,
the Company uses the best information available to reflect the amount that the Company could obtain, at the time of
the impairment test, from the disposal of the asset or CGU in an arm’s length transaction between knowledgeable, willing
parties, after deducting the estimated costs of disposal.
For the purpose of testing goodwill for impairment, goodwill acquired in a business combination is allocated to a CGU
or a group of CGUs that is expected to benefit from the synergies of the combination, regardless of whether other assets
or liabilities of the acquired company are assigned to those CGUs. Impairment losses recognized are allocated first to
reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other
assets in the CGU on a pro rata basis. Impairment losses are recognized in the statement of earnings and comprehensive
income.
Reversal of impairment losses
A goodwill impairment loss is not reversed. Impairment losses on non-financial assets other than goodwill recognized
in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(k) Financial instruments:
The Company initially recognizes financial assets on the trade date at which the Company becomes a party to the
contractual provisions of the instrument. Financial assets are initially measured at fair value. If the financial asset is not
subsequently accounted for at fair value through profit or loss, then the initial measurement includes transaction costs
that are directly attributable to the asset’s acquisition or origination. On initial recognition, the Company classifies its
financial assets as subsequently measured at either amortized cost or fair value, depending on its business model for
managing the financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets
Financial assets are classified into the following categories, and depend on the purpose for which the financial assets
were acquired.
(i) Financial assets measured at amortized cost
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any
impairment loss, if:
•
•
The asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows; and
The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments
of principal and/or interest.
The Company currently classifies its cash and cash equivalents, trade accounts receivable, certain other current
assets (excluding derivative financial instruments designated as effective hedging instruments), and long-term non-
trade receivables as financial assets measured at amortized cost. The Company derecognizes a financial asset
when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual
cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of
the financial asset are transferred.
(ii) Financial assets measured at fair value
These assets are measured at fair value and changes therein, including any interest or dividend income, are
recognized in profit or loss. However, for investments in equity instruments that are not held for trading, the Company
may elect at initial recognition to present gains and losses in other comprehensive income. For such investments
measured at fair value through other comprehensive income, gains and losses are never reclassified to profit or
loss, and no impairment is recognized in profit or loss. Dividends earned from such investments are recognized in
profit or loss, unless the dividend clearly represents a repayment of part of the cost of the investment. The Company
currently has no significant financial assets measured at fair value.
Financial liabilities
Financial liabilities are classified into the following categories.
(iii) Financial liabilities measured at amortized cost
A financial liability is subsequently measured at amortized cost, using the effective interest method. The Company
currently classifies accounts payable and accrued liabilities (excluding derivative financial instruments designated
as effective hedging instruments), and long-term debt as financial liabilities measured at amortized cost.
(iv) Financial liabilities measured at fair value
Financial liabilities at fair value are initially recognized at fair value and are remeasured at each reporting date with
any changes therein recognized in net earnings. The Company currently classifies its contingent consideration in
connection with a business acquisition as a financial liability measured at fair value.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and
only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize
the asset and settle the liability simultaneously.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 63
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(k) Financial instruments (continued):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair value of financial instruments
Financial instruments measured at fair value use the following fair value hierarchy to prioritize the inputs used in measuring
fair value:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data.
•
Impairment of financial assets
The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may
include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial
reorganization, and where observable data indicates that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that correlate with defaults.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the
reversal of the previously recognized impairment loss is recognized in the consolidated statement of earnings and
comprehensive income.
(l) Derivative financial instruments and hedging relationships:
The Company enters into derivative financial instruments to hedge its market risk exposures. On initial designation of
the hedge, the Company formally documents the relationship between the hedging instruments and hedged items,
including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods
that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at
the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected
to be effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period
for which the hedge is designated. For a cash flow hedge of a forecasted transaction, the transaction should be highly
probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net
earnings.
Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in net earnings as
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted
for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect
net earnings, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive
income and presented in accumulated other comprehensive income as part of equity. The amount recognized in other
comprehensive income is removed and included in net earnings under the same line item in the consolidated statement
of earnings and comprehensive income as the hedged item, in the same period that the hedged cash flows affect net
earnings. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in net earnings.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised,
or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously
recognized in other comprehensive income remains in accumulated other comprehensive income until the forecasted
transaction affects profit or loss. If the forecasted transaction is no longer expected to occur, then the balance in
accumulated other comprehensive income is recognized immediately in net earnings.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(l) Derivative financial instruments and hedging relationships (continued):
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in net
earnings, together with any changes in the fair value of the hedged asset, liability or firm commitment that are attributable
to the hedged risk. The change in fair value of the hedging instrument and the change in the hedged item attributable
to the hedged risk are recognized in the statement of earnings and comprehensive income or in the statement of financial
position caption relating to the hedged item. If the hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued
prospectively.
Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics
and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same
terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured
at fair value through profit or loss.
Other derivatives
When a derivative financial instrument is not designated in a qualifying hedge relationship, all changes in its fair value
are recognized immediately in net earnings.
(m) Accounts payable and accrued liabilities:
Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at amortized
cost using the effective interest method. Accounts payable and accrued liabilities are classified as current liabilities if
payment is due within one year, otherwise, they are presented as non-current liabilities.
(n) Long-term debt:
Long-term debt is recognized initially at fair value, and is subsequently carried at amortized cost. Initial facility fees are
deferred and treated as an adjustment to the instrument's effective interest rate and recognized as an expense over the
instrument's estimated life if it is probable that the facility will be drawn down. However, if it is not probable that a facility
will be drawn down for its entire term, then the fees are considered service fees and are deferred and recognized as an
expense on a straight-line basis over the commitment period.
(o) Employee benefits:
Short-term employee benefits
Short-term employee benefits include wages, salaries, commissions, compensated absences and bonuses. Short-term
employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit sharing plans if the
Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably. Short-term employee benefit obligations are included in accounts
payable and accrued liabilities.
Defined contribution plans
The Company offers group defined contribution plans to eligible employees whereby the Company matches employees'
contributions up to a fixed percentage of the employee's salary. Contributions by the Company to trustee-managed
investment portfolios or employee associations are expensed as incurred. Benefits are also provided to employees
through defined contribution plans administered by the governments in the countries in which the Company operates.
The Company’s contributions to these plans are recognized in the period when services are rendered.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(o) Employee benefits (continued):
Defined benefit plans
The Company maintains a liability for statutory severance obligations for active employees located in the Caribbean
Basin and Central America which is payable to the employees in a lump sum payment upon termination of employment.
The liability is based on management’s best estimates of the ultimate costs to be incurred to settle the liability and is
based on a number of assumptions and factors, including historical trends, actuarial assumptions and economic
conditions.
Liabilities related to defined benefit plans are included in other non-current liabilities in the consolidated statement of
financial position. Service costs, interest costs, and costs related to the impact of program changes are recognized in
cost of sales in the consolidated statement of earnings. Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are recognized directly to other comprehensive income in the period in which
they arise, and are immediately transferred to retained earnings without reclassification to net earnings in a subsequent
period.
(p) Provisions:
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably
estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of
the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to
passage of time is recognized as financial expense. Provisions are included in other non-current liabilities in the
consolidated statement of financial position.
Decommissioning and site restoration costs
The Company recognizes decommissioning and site restoration obligations for future removal and site restoration costs
associated with the restoration of certain property and plant should it decide to discontinue some of its activities.
Onerous contracts
A provision for onerous contracts is recognized if the unavoidable costs of meeting the obligations specified in a contractual
arrangement exceed the economic benefits expected to be received from the contract. Provisions for onerous contracts
are measured at the lower of the cost of fulfilling the contract and the expected cost of terminating the contract.
(q) Share capital:
Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and
stock options are recognized as a deduction from equity, net of any tax effects.
When the Company repurchases its own shares, the consideration paid, including any directly attributable incremental
costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. Where such common shares are subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to
the Company’s equity holders.
(r) Dividends declared:
Dividends declared to the Company’s shareholders are recognized as a liability in the consolidated statement of financial
position in the period in which the dividends are approved by the Company’s Board of Directors.
(s) Revenue recognition:
Revenue is recognized upon shipment of products to customers, since title passes upon shipment, and to the extent
that the selling price is fixed or determinable. At the time of sale, estimates are made for customer price discounts and
volume rebates based on the terms of existing programs. Sales are recorded net of these program costs and estimated
sales returns, which are based on historical experience, current trends and other known factors, and exclude sales
taxes. New sales incentive programs which relate to sales made in a prior period are recognized at the time the new
program is introduced.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(t) Cost of sales and gross profit:
Cost of sales includes all raw material costs, manufacturing conversion costs, including manufacturing depreciation
expense, sourcing costs, inbound freight and inter-facility transportation costs, and outbound freight to customers. Cost
of sales also includes the cost of purchased finished goods, costs relating to purchasing, receiving and inspection
activities, manufacturing administration, third-party manufacturing services, sales-based royalty costs, insurance,
inventory write-downs, and customs and duties. Gross profit is the result of net sales less cost of sales. The Company’s
gross profit may not be comparable to gross profit as reported by other companies, since some entities include
warehousing and handling costs, and/or exclude depreciation expense, outbound freight to customers and royalty costs
from cost of sales.
(u) Selling, general and administrative expenses:
Selling, general and administrative (“SG&A”) expenses include warehousing and handling costs, selling and
administrative personnel costs, advertising and marketing expenses, costs of leased non-manufacturing facilities and
equipment, professional fees, non-manufacturing depreciation expense, and other general and administrative expenses.
SG&A expenses also include bad debt expense and amortization of intangible assets.
(v) Product introduction expenditures:
Product introduction expenditures are one-time fees paid to retailers to allow the Company’s products to be placed on
store shelves. If the Company receives a benefit over a period of time and the fees are directly attributable to the product
placement, and certain other criteria are met, these fees are recorded as an asset and are amortized as a reduction of
revenue over the term of the arrangement. The Company evaluates the recoverability of these assets on a quarterly
basis.
(w) Restructuring and acquisition-related costs:
Restructuring and acquisition-related costs are expensed when incurred, or when a legal or constructive obligation exists.
Restructuring and acquisition-related costs are comprised of costs directly related to the closure of business locations
or the relocation of business activities, significant changes in management structure, as well as transaction and integration
costs incurred pursuant to business acquisitions. The nature of expenses included in restructuring and acquisition-related
costs include: severance and termination benefits, including the termination of employee benefit plans; gains or losses
from the remeasurement and disposal of assets held for sale; facility exit and closure costs; costs incurred to eliminate
redundant business activities pursuant to business acquisitions; legal, accounting and other professional fees (excluding
costs of issuing debt or equity) directly incurred in connection with a business acquisition; purchase gains on business
acquisitions; losses on business acquisitions achieved in stages; contingent amounts payable to selling shareholders
under their employment agreements pursuant to a business acquisition; and the remeasurement of liabilities related to
contingent consideration incurred in connection with a business acquisition.
(x) Cotton and cotton-based yarn procurements:
The Company contracts to buy cotton and cotton-based yarn with future delivery dates at fixed prices in order to reduce
the effects of fluctuations in the prices of cotton used in the manufacture of its products. These contracts are not used
for trading purposes and are not considered to be financial instruments as they are entered into for purchase and receipt
in accordance with the Company’s expected usage requirements, and therefore are not measured at fair value. The
Company commits to fixed prices on a percentage of its cotton and cotton-based yarn requirements up to eighteen
months in the future. If the cost of committed prices for cotton and cotton-based yarn plus estimated costs to complete
production exceed current selling prices, a loss is recognized for the excess as a charge to cost of sales.
(y) Government assistance:
Government assistance is recognized only when there is reasonable assurance the Company will comply with all related
conditions for receipt of the assistance. Government assistance, including grants and tax credits, related to operating
expenses is accounted for as a reduction to the related expenses. Government assistance, including monetary and non-
monetary grants and tax credits related to the acquisition of property, plant and equipment, is accounted for as a reduction
of the cost of the related property, plant and equipment, and is recognized in net earnings using the same methods,
periods and rates as for the related property, plant and equipment.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(z) Financial expenses (income):
Financial expenses (income) include: interest expense on borrowings, including realized gains and/or losses on interest
rate swaps designated for hedge accounting; bank and other financial charges; discount on the sales of trade accounts
receivable; interest income on funds invested; accretion of interest on discounted provisions; net foreign currency losses
and/or gains; and losses and/or gains on financial derivatives that do not meet the criteria for effective hedge accounting.
(aa) Income taxes:
Income tax expense is comprised of current and deferred income taxes, and is included in net earnings except to the
extent that it relates to a business acquisition, or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting
date, for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in the
financial statements. The Company recognizes deferred income tax assets for unused tax losses, and deductible
temporary differences only to the extent that, in management’s opinion, it is probable that future taxable profit will be
available against which the temporary differences can be utilized. Deferred tax assets are reviewed at each reporting
date and are derecognized to the extent that it is no longer probable that the related tax benefit will be realized. Deferred
income tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time
of the transaction, and where the timing of the reversal of the temporary difference is controlled by the Company and it
is probable that the temporary difference will not reverse in the foreseeable future. In addition, deferred tax is not
recognized for taxable temporary differences arising on the initial recognition of goodwill.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the
deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
In determining the amount of current and deferred income taxes, the Company takes into account the impact of uncertain
tax positions and whether additional taxes and interest may be due. Provisions for uncertain tax positions are measured
at the best estimate of the amounts expected to be paid upon ultimate resolution. The Company periodically reviews
and adjusts its estimates and assumptions of income tax assets and liabilities as circumstances warrant, such as changes
to tax laws, administrative guidance, change in management’s assessment of the technical merits of its positions, due
to new information, and the resolution of uncertainties through either the conclusion of tax audits or expiration of prescribed
time limits within relevant statutes.
(bb) Earnings per share:
Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares
outstanding for the year. Diluted earnings per share are computed using the weighted average number of common
shares outstanding for the period adjusted to include the dilutive impact of stock options and restricted share units. The
number of additional shares is calculated by assuming that all common shares held in trust for the purpose of settling
Non-treasury restricted share units have been delivered, all dilutive outstanding options are exercised and all dilutive
outstanding Treasury restricted share units have vested, and that the proceeds from such exercises, as well as the
amount of unrecognized share-based compensation which is considered to be assumed proceeds, are used to
repurchase common shares at the average share price for the period. For Treasury restricted share units, only the
unrecognized share-based compensation is considered assumed proceeds since there is no exercise price paid by the
holder.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 68
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(cc) Share based payments:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock options and Treasury restricted share units
Stock options and Treasury restricted share units are equity settled share based payments, which are measured at fair
value at the grant date. For stock options, the compensation cost is measured using the Black-Scholes option pricing
model, and is expensed over the award's vesting period. For Treasury restricted share units, compensation cost is
measured at the fair value of the underlying common share, and is expensed over the award's vesting period.
Compensation expense is recognized in net earnings with a corresponding increase in contributed surplus. Any
consideration paid by plan participants on the exercise of stock options is credited to share capital. Upon the exercise
of stock options and the vesting of Treasury restricted share units, the corresponding amounts previously credited to
contributed surplus are transferred to share capital. Stock options and Treasury restricted share units that are dilutive
and meet the non-market performance conditions as at the reporting date are considered in the calculation of diluted
earnings per share, as per note 3(bb) to these consolidated financial statements.
Non-Treasury restricted share units expected to be settled in cash
Prior to January 4, 2016, non-Treasury restricted share units in which the Company had a choice to settle in either cash
or equity were accounted for as cash settled awards, except to the extent that common shares had been purchased on
the open market and held in a trust for the purpose of settling the Non-Treasury restricted share units in shares in lieu
of cash (as described in Note 13(e) to these consolidated financial statements). Compensation expense was initially
measured at fair value at the grant date and recognized in net earnings over the vesting period, with the recognized
compensation expense included in accounts payable and accrued liabilities. The liability was remeasured at fair value,
based on the market price of the Company’s common shares, at each reporting date. Remeasurements during the
vesting period were recognized immediately to net earnings to the extent that they related to past services, and recognition
was amortized over the remaining vesting period to the extent that they related to future services. The cumulative
compensation cost that was ultimately recognized was the fair value of the Company's shares at the settlement date.
Non-Treasury restricted share units expected to be settled in common shares
As at January 3, 2016, all non-Treasury restricted share units in which the Company had a choice to settle in either cash
or equity are accounted for as equity-settled awards as the Company has the intent and ability to settle these in common
shares to be purchased on the open market. These were previously accounted for as described above. As a result, the
Company reclassified $6.2 million from accounts payable and accrued liabilities to contributed surplus in the consolidated
statement of financial position, which represents the fair value as at January 4, 2016 of non-Treasury restricted share
unit awards previously accounted for as cash-settled awards. Compensation cost is measured at the fair value of the
underlying common share, and is expensed over the award's vesting period. Compensation expense is recognized in
net earnings with a corresponding increase in contributed surplus. Upon delivery of the common shares for settlement
of vesting non-Treasury restricted share units, the corresponding amounts previously credited to contributed surplus are
transferred to share capital. The number of non-Treasury restricted share units remitted to the participants upon settlement
is equal to the number of non-Treasury restricted share units awarded less units withheld to satisfy the participants'
statutory withholding tax requirements.
Estimates for forfeitures and performance conditions
The measurement of compensation expense for stock options, Treasury restricted share units and non-Treasury restricted
share units is net of estimated forfeitures. For the portion of Treasury restricted share units and Non-Treasury restricted
share units that are issuable based on non-market performance conditions, the amount recognized as an expense is
adjusted to reflect the number of awards for which the related service and performance conditions are expected to be
met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the
related service and non-market performance conditions at the vesting date.
Deferred share unit plan
The Company has a deferred share unit plan for independent members of the Company’s Board of Directors, who receive
a portion of their compensation in the form of deferred share units (“DSUs”). These DSUs are cash settled awards, and
are initially recognized in net earnings based on fair value at the grant date. The DSU obligation is included in accounts
payable and accrued liabilities and is remeasured at fair value, based on the market price of the Company’s common
shares, at each reporting date.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(cc) Share based payments (continued):
Employee share purchase plans
For employee share purchase plans, the Company's contribution, on the employee's behalf, is recognized as
compensation expense with an offset to share capital, and consideration paid by employees on purchase of common
shares is also recorded as an increase to share capital.
(dd) Leases:
Leases in which a significant portion of the risks and rewards of ownership are not assumed by the Company are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged
to net earnings on a straight-line basis over the lease term.
Leases of property, plant and equipment where the Company has substantially all of the risks and rewards of ownership
are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair
value of the leased property and the present value of the minimum lease payments. The property, plant and equipment
acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.
Determining whether an arrangement contains a lease
At inception of an arrangement where the Company receives the right to use an asset, the Company determines whether
such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is
dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement
conveys to the Company the right to control the use of the underlying asset.
(ee) Use of estimates and judgments:
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected.
Critical judgments in applying accounting policies:
The following are critical judgments that management has made in the process of applying accounting policies and that
have the most significant effect on the amounts recognized in the consolidated financial statements:
Determination of cash generating units (CGUs)
The identification of CGUs and grouping of assets into the respective CGUs is based on currently available information
about actual utilization experience and expected future business plans. Management has taken into consideration various
factors in identifying its CGUs. These factors include how the Company manages and monitors its operations, the nature
of each CGU’s operations and the major customer markets they serve. As such, the Company has identified its CGUs
for purposes of testing the recoverability and impairment of non-financial assets to be Printwear, Branded Apparel and
Yarn-Spinning (yarn-spinning manufacturing division).
Income taxes
The Company’s income tax provisions and income tax assets and liabilities are based on interpretations of applicable
tax laws, including income tax treaties between various countries in which the Company operates as well as underlying
rules and regulations with respect to transfer pricing. These interpretations involve judgments and estimates and may
be challenged through government taxation audits that the Company is regularly subject to. New information may become
available that causes the Company to change its judgment regarding the adequacy of existing income tax assets and
liabilities; such changes will impact net earnings in the period that such a determination is made.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(ee) Use of estimates and judgments (continued):
Key sources of estimation uncertainty
Key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying
amount of assets and liabilities within the next financial year are as follows:
Allowance for doubtful accounts
The Company makes an assessment of whether accounts receivable are collectable, which considers the credit-
worthiness of each customer, taking into account each customer’s financial condition and payment history in order to
estimate an appropriate allowance for doubtful accounts. Furthermore, these estimates must be continuously evaluated
and updated. The Company is not able to predict changes in the financial condition of its customers, and if circumstances
related to its customers’ financial condition deteriorate, the estimates of the recoverability of trade accounts receivable
could be materially affected and the Company may be required to record additional allowances. Alternatively, if the
Company provides more allowances than needed, a reversal of a portion of such allowances in future periods may be
required based on actual collection experience.
Sales promotional programs
In the normal course of business, certain incentives are granted to our customers including discounts and rebates. At
the time of sale, estimates are made for customer price discounts and rebates based on the terms of existing programs.
Accruals required for new programs, which relate to prior sales, are recorded at the time the new program is introduced.
Sales are recorded net of these program costs and a provision for estimated sales returns, which is based on historical
experience, current trends and other known factors. If actual price discounts, rebates or returns differ from estimates,
significant adjustments to net sales could be required in future periods.
Inventory valuation
The Company regularly reviews inventory quantities on hand and records a provision for those inventories no longer
deemed to be fully recoverable. The cost of inventories may no longer be recoverable if those inventories are slow
moving, discontinued, damaged, if they have become obsolete, or if their selling prices or estimated forecast of product
demand decline. If actual market conditions are less favorable than previously projected, or if liquidation of the inventory
which is no longer deemed to be fully recoverable is more difficult than anticipated, additional provisions may be required.
Business combinations
Business combinations are accounted for in accordance with the acquisition method. On the date that control is obtained,
the identifiable assets, liabilities and contingent liabilities of the acquired company are measured at their fair value.
Depending on the complexity of determining these valuations, the Company uses appropriate valuation techniques
which are generally based on a forecast of the total expected future net discounted cash flows. These valuations are
linked closely to the assumptions made by management regarding the future performance of the related assets and the
discount rate applied as it would be assumed by a market participant.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 71
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(ee) Use of estimates and judgments (continued):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recoverability and impairment of non-financial assets
The calculation of fair value less costs of disposal or value in use for purposes of measuring the recoverable amount of
non-financial assets involves the use of significant assumptions and estimates with respect to a variety of factors,
including expected sales, gross margins, SG&A expenses, cash flows, capital expenditures, and the selection of an
appropriate earnings multiple or discount rate, all of which are subject to inherent uncertainties and subjectivity. The
assumptions are based on annual business plans and other forecasted results as well as earnings multiples obtained
by using market comparables as a reference, and discount rates which are used to reflect market based estimates of
the risks associated with the projected cash flows, based on the best information available as of the date of the impairment
test. Changes in circumstances, such as technological advances, adverse changes in third party licensing arrangements,
changes to the Company’s business strategy, and changes in economic conditions can result in actual useful lives and
future cash flows differing significantly from estimates and could result in increased charges for amortization or
impairment. Revisions to the estimated useful lives of finite life non-financial assets or future cash flows constitute a
change in accounting estimate and are applied prospectively. There can be no assurance that the estimates and
assumptions used in the impairment tests will prove to be accurate predictions of the future. If the future adversely differs
from management’s best estimate of key economic assumptions, and if associated cash flows materially decrease, the
Company may be required to record material impairment charges related to its non-financial assets.
Valuation of statutory severance obligations and the related costs
The valuation of the statutory severance obligations and the related costs requires economic assumptions, including
discount rates and expected rates of compensation increases, and participant demographic assumptions. The actuarial
assumptions used may differ materially from year to year due to changing market and economic conditions, resulting in
significant increases or decreases in the obligations and related costs.
Measurement of the estimate of expected costs for decommissioning and site restoration
The measurement of the provision for decommissioning and site restoration costs requires assumptions to be made
including expected timing of the event which would result in the outflow of resources, the range of possible methods of
decommissioning and site restoration, and the expected costs that would be incurred to settle any decommissioning
and site restoration liabilities. The Company has measured the provision using the present value of the expected costs
which requires assumptions on the discount rate to use. Revisions to any of the assumptions and estimates used by
management may result in changes to the expected expenditures to settle the liability which would require adjustments
to the provision and which may have an impact on the operating results of the Company in the period the change occurs.
Income taxes
The Company has unused available tax losses and deductible temporary differences in certain jurisdictions. The Company
recognizes deferred income tax assets for these unused tax losses and deductible temporary differences only to the
extent that, in management’s opinion, it is probable that future taxable profit will be available against which these available
tax losses and temporary differences can be utilized. The Company’s projections of future taxable profit involve the use
of significant assumptions and estimates with respect to a variety of factors, including future sales and operating expenses.
There can be no assurance that the estimates and assumptions used in our projections of future taxable income will
prove to be accurate predictions of the future, and in the event that our assessment of the recoverability of these deferred
tax assets changes in the future, a material reduction in the carrying value of these deferred tax assets could be required,
with a corresponding charge to net earnings.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED:
Revenues from contracts with customers
In May 2014, the IASB released IFRS 15, Revenue from Contracts with Customers, which establishes principles for reporting
and disclosing the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods and services.
IFRS 15 provides a single model in order to depict the transfer of promised goods or services to customers, and supersedes
IAS 11, Construction Contracts, IAS 18, Revenue, and a number of revenue-related interpretations (IFRIC 13, Customer
Loyalty Programmes, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfers of Assets from
Customers, and SIC-31, Revenue - Barter Transactions Involving Advertising Service). IFRS 15 is effective for the Company’s
fiscal year beginning on January 1, 2018, with earlier application permitted. The Company is currently evaluating the impact
of the adoption of IFRS 15 on the consolidated financial statements, including the transition options. Based on a preliminary
assessment, the Company does not expect that the adoption of IFRS 15 will have a material impact on the consolidated
financial statements. The Company will finalize its assessment during fiscal 2017.
Financial Instruments
In July 2014, the IASB issued the complete IFRS 9 (2014), Financial Instruments. IFRS 9 (2014) differs in some regards
from IFRS 9 (2013) which the Company early adopted effective March 31, 2014. IFRS 9 (2014) includes updated guidance
on the classification and measurement of financial assets. The final standard also amends the impairment model by introducing
a new expected credit loss model for calculating impairment, and new general hedge accounting requirements. The mandatory
effective date of IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively
with some exemptions. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this
standard on its consolidated financial statements.
Leases
In January 2016, the IASB issued IFRS 16 Leases, which specifies how an entity will recognize, measure, present, and
disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities
for all leases unless the lease term is twelve months or less, or the underlying asset has a low monetary value. Lessors
continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged
from its predecessor, IAS 17. IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019, with earlier
application permitted only if IFRS 15, Revenue from Contracts with Customers, has also been applied. The Company is
currently evaluating the impact of the adoption of this standard on its consolidated financial statements, and expects that the
majority of its operating leases will need to be recognized in the consolidated statement of financial position on initial adoption
of IFRS 16.
5. BUSINESS ACQUISITIONS:
Peds Legwear, Inc.
On August 22, 2016, the Company acquired a 100% interest in Peds Legwear, Inc. (Peds) for total consideration of $51.9
million (net of cash acquired and income tax liabilities assumed), of which $47.9 million was paid at closing and a balance
due of $4.0 million is expected to be paid within twelve months of closing. Excluding the income tax liabilities and certain
non-operational liabilities assumed, the gross consideration was $55.0 million. The acquisition was financed by the utilization
of the Company's long-term bank credit facilities. Peds is a marketer of quality foot apparel and legwear products, including
ladies no-show liners, socks and sheer, and therapeutic hosiery sold mainly under the Peds® and MediPeds® brands to
U.S. and Canadian retailers. The acquisition is expected to create revenue growth opportunities by leveraging Gildan's
existing customer relationships to broaden the channels of distribution for the Peds® and MediPeds® brands and by extending
these brands into Gildan’s other product categories. In addition, Peds' current distribution into the footwear channel provides
broader access in this channel for Gildan’s brands and product portfolio.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. BUSINESS ACQUISITIONS (continued):
The Company accounted for this acquisition using the acquisition method in accordance with IFRS 3, Business Combinations.
The Company has determined the fair value of the assets acquired and liabilities assumed based on management's preliminary
best estimate of their fair values and taking into account all relevant information available at that time. The Company has not
yet finalized the assessment of the estimated fair values of certain assets acquired, which the Company expects to finalize
by the end of the second quarter of fiscal 2017. Goodwill is attributable primarily to Peds' assembled workforce and expected
synergies, which were not recorded separately since they did not meet the recognition criteria for identifiable intangible
assets. Goodwill recorded in connection with this acquisition is partially deductible for tax purposes. The operating results
of Peds are included in the Branded Apparel segment. The consolidated results of the Company for fiscal 2016 include net
sales of $30.3 million and net earnings of $0.8 million relating to Peds' results of operations since the date of acquisition.
Alstyle Apparel, LLC
On May 26, 2016, the Company acquired a 100% interest in Alstyle Apparel, LLC and its subsidiaries (Alstyle) for cash
consideration of $110 million. The acquisition was financed by the utilization of the Company’s long-term bank credit facilities.
Alstyle manufactures and markets activewear products such as T-shirts and fleece, the majority of which are sold under the
Alstyle® brand. Alstyle sells its products to screenprinters, embellishers, and mass-marketers largely in the U.S., as well as
in Canada and Mexico. Its manufacturing and distribution operations include a large-scale textile manufacturing facility and
cut and sew facilities in Mexico, as well as distribution centers located in the U.S., Canada, and Mexico. The acquisition of
Alstyle expands Gildan’s penetration in printwear markets in the U.S., Canada, and Mexico, and broadens and complements
Gildan’s position in the Western United States where Alstyle has a strong presence.
The Company accounted for this acquisition using the acquisition method in accordance with IFRS 3, Business Combinations.
The Company has determined the fair value of the assets acquired and liabilities assumed based on management's preliminary
best estimate of their fair values and taking into account all relevant information available at that time. The Company has not
yet finalized the assessment of the estimated fair values of the inventories acquired, which the Company expects to finalize
by the end of the first quarter of fiscal 2017. Goodwill is attributable primarily to Alstyle's assembled workforce, which was
not recorded separately since it did not meet the recognition criteria for identifiable intangible assets. Goodwill recorded in
connection with this acquisition is fully deductible for tax purposes. The operating results of Alstyle are included in the Printwear
segment. The consolidated results of the Company for fiscal 2016 include net sales of $88.3 million and net earnings of $1.0
million relating to Alstyle’s results of operations since the date of acquisition.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 74
5. BUSINESS ACQUISITIONS (continued):
The following table summarizes the provisional amounts recognized for the assets acquired and liabilities assumed at the
date of acquisition:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets acquired:
Trade accounts receivable
Inventories
Prepaid expenses, deposits and other current assets
Property, plant and equipment
Intangible assets (1)
Deferred income taxes
Liabilities assumed:
Accounts payable and accrued liabilities
Income taxes payable
Deferred income taxes
Goodwill
Net assets acquired at fair value
Cash consideration paid at closing, net of cash acquired
Balance due
Peds
Alstyle
Total
$
11,821
20,548
1,180
5,442
26,484
1,380
66,855
(16,376)
(2,521)
(4,069)
(22,966)
$
19,113
62,677
3,831
26,337
7,500
—
119,458
(11,629)
—
—
(11,629)
7,980
51,869
47,869
4,000
51,869
$
$
1,649
109,478
109,478
—
109,478
$
$
30,934
83,225
5,011
31,779
33,984
1,380
186,313
(28,005)
(2,521)
(4,069)
(34,595)
9,629
161,347
157,347
4,000
161,347
$
$
$
(1) The intangible assets acquired relating to Peds are comprised of customer relationships in the amount of $9.7 million which are being
amortized on a straight line basis over their estimated useful lives of fifteen years, trademarks in the amount of $16.3 million which are not
being amortized as they are considered to be indefinite life intangible assets, and computer software in the amount of $0.5 million. The
intangible assets acquired relating to Alstyle are comprised of customer relationships in the amount of $4.0 million which are being amortized
on a straight line basis over their estimated useful lives of fifteen years, and trademarks in the amount of $3.5 million, which are being
amortized over five years.
If the acquisitions of Peds and Alstyle were accounted for on a pro forma basis as if they had occurred at the beginning of
the Company’s fiscal year, the Company’s consolidated net sales and net earnings for the year ended January 1, 2017 would
have been $2,704.3 million and $352.6 million, respectively. These pro forma figures have been estimated based on the
results of Alstyle's and Peds' operations prior to being purchased by the Company, adjusted to reflect fair value adjustments
which arose on the date of the acquisitions, as if the acquisitions occurred on January 1, 2017, and should not be viewed
as indicative of the Company’s future results.
Comfort Colors
On March 2, 2015, the Company acquired substantially all of the operating assets of a company operating under the Comfort
Colors trade name for cash consideration of $103.3 million. The transaction also resulted in the effective settlement of $8.4
million of trade accounts receivable from Comfort Colors prior to the acquisition. The acquisition was financed by the utilization
of the Company’s revolving long-term bank credit facility. Comfort Colors is a leading supplier of garment-dyed undecorated
basic T-shirts and sweatshirts for the North American printwear market. The Comfort Colors® brand is highly recognized
among consumers purchasing from college bookstores, specialty retail stores, and destination and resort shops. The
acquisition of Comfort Colors reinforces Gildan’s strategy to increase its penetration of the growing fashion basics segment
of the North American printwear market.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. BUSINESS ACQUISITIONS (continued):
The Company accounted for the acquisition using the acquisition method in accordance with IFRS 3, Business Combinations.
The Company determined the fair value of the assets acquired and liabilities assumed based on management's best estimate
of their fair values and taking into account all relevant information available at that time. Goodwill is attributable primarily to
Comfort Colors’ assembled workforce and expected synergies, which were not recorded separately since they did not meet
the recognition criteria for identifiable intangible assets. Goodwill recorded in connection with this acquisition is partially
deductible for tax purposes. The operating results of Comfort Colors are included in the Printwear segment.
The following table summarizes the amounts recognized for the assets acquired and liabilities assumed at the date of
acquisition:
Assets acquired:
Trade accounts receivable
Inventories
Prepaid expenses, deposits and other current assets
Property, plant and equipment
Intangible assets (1)
Liabilities assumed:
Accounts payable and accrued liabilities
Goodwill
Net assets acquired at fair value
$
14,446
21,078
69
1,668
62,300
99,561
(2,064)
(2,064)
14,181
111,678
$
Cash consideration paid at closing
Settlement of pre-existing relationship
103,300
8,378
111,678
(1) The intangible assets acquired are comprised of customer relationships in the amount of $25.0 million, which are being amortized on
a straight line basis over their estimated useful lives of twelve years, and trademarks in the amount of $37.3 million, which are not being
amortized as they are considered to be indefinite life intangible assets.
$
6. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consisted entirely of bank balances as at January 1, 2017 and January 3, 2016.
7. TRADE ACCOUNTS RECEIVABLE:
Trade accounts receivable
Allowance for doubtful accounts
January 1,
2017
January 3,
2016
$
$
283,322
(5,589)
277,733
$
$
310,733
(4,601)
306,132
As at January 1, 2017, trade accounts receivables being serviced under a receivables purchase agreement amounted to
$80.5 million. The receivables purchase agreement, which allows for the sale of a maximum of $175 million of accounts
receivables at any one time, expires on June 26, 2017, subject to annual extensions. The difference between the carrying
amount of the receivables sold under the agreement and the cash received at the time of transfer was not significant for the
year ended January 1, 2017.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 76
7. TRADE ACCOUNTS RECEIVABLE (continued):
The movement in the allowance for doubtful accounts in respect of trade receivables was as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Balance, beginning of fiscal year
Bad debt recovery (expense)
Write-off of trade accounts receivable
Increase due to business acquisitions
Balance, end of fiscal year
8. INVENTORIES:
Raw materials and spare parts inventories
Work in progress
Finished goods
January 1,
2017
$
$
(4,601)
92
524
(1,604)
(5,589)
January 1,
2017
$
$
119,155
56,397
779,324
954,876
January 3,
2016
(15 months)
(4,423)
(560)
455
(73)
(4,601)
January 3,
2016
119,826
54,737
676,470
851,033
$
$
$
$
The amount of inventories recognized as an expense and included in cost of sales was $1,810.3 million for fiscal 2016 (2015
- $2,165.4 million), which included an expense of $11.3 million (2015- $4.6 million) related to the write-down of inventory to
net realizable value.
9. PROPERTY, PLANT AND EQUIPMENT:
2016
Cost
Land
Buildings and
improvements
Manufacturing
equipment
Other
equipment
Assets not
yet utilized in
operations
Total
Balance, January 3, 2016
$
65,687
$
439,276
$
903,502
$ 156,492
$
75,576
$ 1,640,533
Additions
Additions through business acquisitions
Transfers from assets held for sale
Transfers
Disposals
2,727
839
120
—
—
17,390
17,672
3,855
28,028
(2,035)
46,165
12,651
—
45,140
(9,465)
9,870
50,607
126,759
617
248
2,408
(1,984)
—
—
(75,576)
31,779
4,223
—
—
(13,484)
Balance, January 1, 2017
$
69,373
$
504,186
$
997,993
$ 167,651
$
50,607
$ 1,789,810
Accumulated depreciation
Balance, January 3, 2016
Depreciation
Transfers from assets held for sale
Disposals
Balance, January 1, 2017
Carrying amount, January 1, 2017
$
$
$
— $
109,204
$
404,663
$
82,277
$
— $
596,144
—
—
—
22,828
1,732
(788)
— $
132,976
69,373
$
371,210
$
$
86,242
—
(7,163)
483,742
514,251
$
$
15,668
248
(1,984)
96,209
71,442
$
$
—
—
—
124,738
1,980
(9,935)
— $
712,927
50,607
$ 1,076,883
GILDAN 2016 REPORT TO SHAREHOLDERS P. 77
9. PROPERTY, PLANT AND EQUIPMENT (continued):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Land
Buildings and
improvements
Manufacturing
equipment
Other
equipment
Assets not
yet utilized in
operations
Total
2015
Cost
Balance, October 5, 2014
Additions
Additions through business acquisitions
Transfers
Disposals
$
45,541
$
314,823
$
687,369
$ 129,688
$
166,872
20,146
—
—
—
66,450
—
58,671
(668)
117,896
1,568
107,024
(10,355)
26,647
100
1,177
(1,120)
75,576
—
(166,872)
—
$ 1,344,293
306,715
1,668
—
(12,143)
$ 1,640,533
Balance, January 3, 2016
$
65,687
$
439,276
$
903,502
$ 156,492
$
75,576
Accumulated depreciation
Balance, October 5, 2014
Depreciation
Disposals
Balance, January 3, 2016
Carrying amount, January 3, 2016
—
—
—
— $
86,611
22,655
(62)
109,204
65,687
$
330,072
316,566
96,036
(7,939)
404,663
498,839
$
$
67,390
15,997
(1,110)
82,277
74,215
$
$
$
$
—
—
—
470,567
134,688
(9,111)
— $
596,144
75,576
$ 1,044,389
$
$
Assets not yet utilized in operations include expenditures incurred to date for plant expansions which are still in process, and
equipment not yet placed into service as at the end of the reporting period.
During fiscal 2016, the Company ceased to classify certain property and equipment as held for sale since the criteria for this
classification were no longer met. The Company transferred these assets to property, plant and equipment at the lower of
their carrying amounts as adjusted for depreciation not recognized during the period the assets were held for sale, and their
recoverable amount.
As at January 1, 2017, there were contractual purchase obligations outstanding of approximately $44.7 million for the
acquisition of property, plant and equipment compared to $51.1 million as of January 3, 2016.
10. INTANGIBLE ASSETS AND GOODWILL:
Additions through business acquisitions
13,700
19,800
Intangible assets
2016
Cost
Balance, January 3, 2016
Additions
Disposals
Balance, January 1, 2017
Accumulated amortization
Balance, January 3, 2016
Amortization
Disposals
Balance, January 1, 2017
Carrying amount, January 1, 2017
$
$
$
$
Customer
contracts and
customer
relationships
Trademarks
License
agreements
Computer
software
Non-
compete
agreements
$
191,831
$ 154,972
$
58,300
$
44,972
$
1,880
$
—
—
1,198
—
—
—
—
4,084
484
(764)
—
—
—
Total
451,955
5,282
33,984
(764)
205,531
$ 174,772
$
59,498
$
48,776
$
1,880
$
490,457
50,740
$
— $
36,140
$
26,600
$
1,722
$
115,202
11,445
—
62,185
$
125
—
125
143,346
$ 174,647
6,446
—
42,586
16,912
$
$
3,183
(255)
29,528
19,248
$
$
$
$
90
—
1,812
68
$
$
21,289
(255)
136,236
354,221
GILDAN 2016 REPORT TO SHAREHOLDERS P. 78
10. INTANGIBLE ASSETS AND GOODWILL (continued):
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Customer
contracts and
customer
relationships
Trademarks
License
agreements
Computer
software
Non-
compete
agreements
Total
2015
Cost
Balance, October 5, 2014
Additions
Additions through business acquisitions
25,000
37,300
—
—
—
—
—
(3)
$
166,831
$ 117,672
$
53,300
$
36,931
$
—
—
5,000
8,044
1,700
180
—
—
$
376,434
13,224
62,300
(3)
Disposals
Balance, January 3, 2016
Accumulated amortization
Balance, October 5, 2014
Amortization
Disposals
Balance, January 3, 2016
Carrying amount, January 3, 2016
$
$
$
$
191,831
$ 154,972
$
58,300
$
44,972
$
1,880
$
451,955
38,007
$
— $
26,349
$
23,025
$
1,700
$
12,733
—
—
—
9,791
—
50,740
$
— $
36,140
141,091
$ 154,972
$
22,160
3,578
(3)
26,600
18,372
$
$
22
—
$
$
1,722
158
$
$
89,081
26,124
(3)
115,202
336,753
The carrying amount of internally-generated assets within computer software was $13.9 million as at January 1, 2017 and
$10.4 million as at January 3, 2016. Included in computer software as at January 1, 2017 is $9.9 million (January 3, 2016 -
$9.1 million) of assets not yet utilized in operations.
Goodwill:
Balance, beginning of fiscal year
Goodwill acquired (note 5)
Other (1)
Balance, end of fiscal year
January 1,
2017
January 3,
2016
$
$
190,626
9,629
1,853
202,108
$
$
176,445
14,181
—
190,626
(1) The increase in goodwill relates to the acquisition of Doris Inc. ("Doris") in fiscal 2014, and reflects additional deferred income tax liabilities
in accordance with the revised guidance to IAS 12 issued in November 2016 as described in Note 2(c).
Recoverability of cash-generating units:
Goodwill acquired through business acquisitions and trademarks with indefinite useful lives have been allocated to CGUs
that are expected to benefit from the synergies of the acquisition, as follows:
Branded Apparel:
Goodwill
Trademarks with an indefinite life
Printwear:
Goodwill
Trademarks with an indefinite life
January 1,
2017
January 3,
2016
$
$
$
$
180,482
129,272
309,754
21,626
42,000
63,626
$
$
$
$
170,649
112,972
283,621
19,977
42,000
61,977
GILDAN 2016 REPORT TO SHAREHOLDERS P. 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INTANGIBLE ASSETS AND GOODWILL (continued):
In assessing whether goodwill and indefinite life intangible assets are impaired, the carrying amount of the CGUs (including
goodwill and indefinite life intangible assets) are compared to their recoverable amount. The recoverable amounts of CGUs
are based on the higher of the value in use and fair value less costs of disposal. The Company performed the annual
impairment review for goodwill and indefinite life intangible assets during fiscal 2016, and the estimated recoverable amounts
exceeded the carrying amounts of the CGUs and as a result, there was no impairment identified.
Recoverable amount
The Company determined the recoverable amount of the Branded Apparel and Printwear CGU’s based on the fair value less
costs of disposal method. The fair values of the Branded Apparel and Printwear CGU’s were based on an earnings multiple
applied to forecasted adjusted EBITDA for the next year, which takes into account financial budgets approved by senior
management. The key assumptions for the fair value less costs of disposal method include estimated sales volumes, selling
prices and input costs in determining future forecasted adjusted EBITDA, as well as the earnings multiple applied to forecasted
adjusted EBITDA. The earnings multiple used was obtained by using market comparables as a reference. Assuming the
continued level of profitability of the Company, no reasonably possible change in the key assumptions used in determining
the recoverable amount would result in any impairment of goodwill or indefinite life intangible assets.
11. LONG-TERM DEBT:
Effective
interest
rate (1)
Principal amount
January 1,
2017
January 3,
2016
Maturity
date
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-
based interest rate plus a spread ranging from 1% to 2% (2)
1.6%
$
— $
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-
based interest rate plus a spread ranging from 1% to 1.25% (3)
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread
ranging from 1% to 2% (4)
1.5%
—
1.9%
300,000
Notes payable, interest at fixed rate of 2.70%, payable semi-annually (5)
2.7%
100,000
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a
spread of 1.53% payable quarterly (5)
2.7%
50,000
Notes payable, interest at fixed rate of 2.91%, payable semi-annually (5)
2.9%
100,000
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a
spread of 1.57% payable quarterly (5)
2.9%
50,000
375,000
April
2021
— March
2018
— June
2021
— August
2023
— August
2023
— August
2026
— August
2026
$
600,000 $
375,000
(1) Represents the effective interest rate for the year ended January 1, 2017, including the cash impact of interest rate swaps, where
applicable.
(2) The Company’s committed unsecured revolving long-term bank credit facility of $1 billion provides for an annual extension which is
subject to the approval of the lenders. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net
debt to EBITDA ratio (as defined in the credit facility agreement). In addition, an amount of $19.0 million (January 3, 2016 - $27.1
million) has been committed against this facility to cover various letters of credit.
(3) During March 2016, the Company entered into an unsecured revolving long-term bank credit facility agreement for a total principal
amount of $300 million, which has a one year revolving period followed by a one year term-out period, and provides for an annual
extension of the revolving period which is subject to the approval of the lenders. A fixed spread of 1.0% during the revolving period and
1.25% during the term-out period is added to the U.S. LIBOR-based variable interest rate.
(4) During June 2016, the Company entered into an unsecured five-year term loan agreement for a total principal amount of $300 million.
The term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the U.S.
LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreement).
(5) During July 2016, the Company entered into a Note Purchase Agreement and subsequently issued unsecured notes for a total aggregate
principal amount of $300 million to accredited investors in the U.S. private placement market. The notes can be prepaid in whole or in
part at any time, subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LONG-TERM DEBT (continued):
During fiscal 2016, the Company entered into a total of $250 million of floating-to-fixed interest rate swaps to fix the floating
rate exposure on certain long term debt agreements. A $50 million 7-year floating-to-fixed interest rate swap maturing in
August 2023 is converting the interest rate on the $50 million variable-rate notes payable maturing in August 2023 to an all-
in fixed rate of 2.7%, and a $50 million 10-year floating-to-fixed interest rate swap maturing in August 2026 is converting the
interest rate on the $50 million variable-rate notes payable maturing in August 2026 to an all-in fixed rate of 2.9%. In addition,
$150 million of 5-year floating-to-fixed interest rate swaps maturing in June 2021 are converting the variable-rate LIBOR
component of an equivalent portion of the term loan to a fixed rate of 0.96%.
Under the terms of the revolving facilities, term loan facility, and notes, the Company is required to comply with certain
covenants, including maintenance of financial ratios. The Company was in compliance with all covenants at January 1, 2017.
12. OTHER NON-CURRENT LIABILITIES:
Employee benefit obligation - Statutory severance and pre-notice
Employee benefit obligation - Defined contribution plan
Provisions
Contingent consideration (note 14(a))
(a) Statutory severance and pre-notice obligations:
Obligation, beginning of fiscal year
Service cost
Interest cost
Actuarial loss(1)
Pre-notice obligation reduction(2)
Foreign exchange gain
Benefits paid
Obligation, end of fiscal year
January 1,
2017
14,579
2,444
17,546
—
34,569
January 1,
2017
8,882
10,953
5,839
5,239
—
(527)
(15,807)
14,579
$
$
$
$
January 3,
2016
(15 months)
8,882
2,185
20,630
5,919
37,616
January 3,
2016
(15 months)
17,556
13,473
7,268
10,000
(11,426)
(403)
(27,586)
8,882
$
$
$
$
(1) The actuarial loss is due to changes in the actuarial assumptions used to determine the statutory severance obligations.
(2) The reduction in the pre-notice obligation is due to the impact of program changes relating to the Company’s pre-notice obligations
for active employees located in Central America, to align with statutory requirements. As a result of these program changes, pre-
notice costs for employees in Central America will now be recognized when an employer-initiated termination occurs.
Significant assumptions for the calculation of the statutory severance obligations included the use of a discount rate of
between 9.75% and 9.85% (2015 - between 10% and 10.5%) and rates of compensation increases between 7.25% and
7.50% (2015 - between 6.5% and 8.0%). A 1% increase in the discount rates would result in a corresponding decrease
in the statutory severance obligations of $4.2 million, and a 1% decrease in the discount rates would result in a
corresponding increase in the statutory severance obligations of $5.0 million. A 1% increase in the rates of compensation
increases used would result in a corresponding increase in the statutory severance obligations of $5.1 million, and a
1% decrease in the rates of compensation increases used would result in a corresponding decrease in the statutory
severance obligations of $4.3 million.
The cumulative amount of actuarial losses recognized in other comprehensive income as at January 1, 2017 was
$22.0 million (January 3, 2016 - $16.8 million) which have been reclassified to retained earnings in the period in which
they were recognized.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. OTHER NON-CURRENT LIABILITIES (continued):
(b) Defined contribution plan:
During fiscal 2016, defined contribution expenses were $3.4 million (2015 - $3.2 million).
(c) Provisions:
Balance, January 3, 2016
Changes in estimates made during the fiscal year
Provisions utilized during the fiscal year
Accretion of interest
Balance, January 1, 2017
Decommissioning
and site
restoration costs
Lease exit
costs
$
$
17,545
(1,857)
—
336
16,024
$
$
3,085
(465)
(1,098)
—
1,522
$
$
Total
20,630
(2,322)
(1,098)
336
17,546
Provisions include estimated future costs of decommissioning and site restoration for certain assets located at the
Company’s textile and sock facilities and a distribution centre in the U.S., for which the timing of settlement is uncertain,
but has been estimated to be in excess of twenty years. The lease exit costs were incurred in connection with the
integration of acquired businesses.
13. EQUITY:
(a) Shareholder rights plan:
The Company has a shareholder rights plan which provides the Board of Directors and the shareholders with additional
time to assess any unsolicited take-over bid for the Company and, where appropriate, pursue other alternatives for
maximizing shareholder value.
(b) Accumulated other comprehensive income (“AOCI”):
Accumulated other comprehensive income includes the changes in the fair value of the effective portion of qualifying
cash flow hedging instruments outstanding at the end of the period, and the balances remaining from hedging relationships
for which hedge accounting no longer applied at the end of the period.
(c) Share capital:
Authorized:
Common shares, authorized without limit as to number and without par value. First preferred shares, without limit as to
number and without par value, issuable in series and non-voting. Second preferred shares, without limit as to number
and without par value, issuable in series and non-voting. As at January 1, 2017 and January 3, 2016, none of the first
and second preferred shares were issued.
Issued:
As at January 1, 2017, there were 230,218,171 common shares (January 3, 2016 - 243,571,188) issued and outstanding,
which are net of 21,125 common shares (January 3, 2016 - 269,281) that have been purchased and are held in trust
as described in note 13(e).
On February 4, 2015, the Board of Directors of the Company approved a share dividend of one common share for each
issued and outstanding common share of the Company, which has the same effect as a two-for-one stock split of the
Company’s outstanding common shares. The Company’s share dividend on the common shares was paid on March
27, 2015 to shareholders of record at the close of business on March 20, 2015 and is designated as an “eligible dividend”
for Canadian tax purposes. The outstanding share data reflects the effect of the two-for-one stock split which took effect
on March 27, 2015.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EQUITY (continued):
(d) Normal course issuer bid:
On February 24, 2016, the Company announced the initiation of a normal course issuer bid ("NCIB") beginning February
26, 2016 and expiring February 25, 2017, to purchase for cancellation up to 12,192,814 outstanding common shares of
the Company, representing approximately 5% of the Company’s issued and outstanding common shares, on the TSX
and the NYSE or alternative trading systems, if eligible, or by such other means as the TSX, the NYSE, or a securities
regulatory authority may permit, including by private agreements under an issuer bid exemption order issued by securities
regulatory authorities in Canada. The price paid by Gildan for common shares was the market price at the time of the
acquisition plus brokerage fees, and purchases made under an issuer bid exemption order were at a discount to the
prevailing market price in accordance with the terms of the order.
On July 26, 2016, the Company obtained approval from the TSX to amend its NCIB in order to increase the maximum
number of common shares that could be repurchased from 12,192,814 common shares, or 5% of the Company’s issued
and outstanding common shares as at February 19, 2016 (the reference date for the NCIB), to 20,727,784 common
shares, representing 8.5% of the Company’s issued and outstanding common shares or 8.6% of the public float of
239,683,863 common shares as at February 19, 2016. No other terms of the NCIB were amended.
During the year ended January 1, 2017, the Company repurchased for cancellation a total of 13,775,248 common shares
for a total cost of $394.5 million, of which a total of 4,025,000 common shares were repurchased by way of private
agreements with arm’s length third party sellers. Of the total cost, $8.6 million was charged to share capital and $385.8
million was charged to retained earnings. During the fiscal year ended January 3, 2016, the Company repurchased and
cancelled a total of 3,050,000 common shares under a previous NCIB by way of private agreements with an arm’s-length
third-party seller for a total cost of $79.7 million, which reflected a discount to the prevailing market price of the Company’s
common shares on the TSX at the time of the purchases. Of the total cost, $1.6 million was charged to share capital
and $78.1 million was charged to retained earnings.
On February 22, 2017, the Board of Directors of the Company approved the initiation of a new NCIB commencing on
February 27, 2017 to purchase for cancellation up to 11,512,267 common shares, representing approximately 5% of the
Company’s issued and outstanding common shares. Gildan is authorized to make purchases under the NCIB during the
period from February 27, 2017 to February 26, 2018 in accordance with the requirements of the TSX. Purchases will be
made by means of open market transactions on both the TSX and the NYSE, or alternative trading systems, if eligible,
or by such other means as the TSX, the NYSE, or a securities regulatory authority may permit, including by private
agreements under an issuer bid exemption order issued by securities regulatory authorities in Canada.
(e) Common shares purchased as settlement for non-Treasury RSUs:
In September 2011, the Company established a trust for the purpose of settling the vesting of non-Treasury RSUs. For
non-Treasury RSUs that are to be settled in common shares in lieu of cash, the Company directs the trustee to purchase
common shares of the Company on the open market to be held in trust for and on behalf of the holders of non-Treasury
RSUs until they are delivered for settlement, when the non-Treasury RSUs vest. For accounting purposes, the common
shares are considered as held in treasury, and recorded as a temporary reduction of outstanding common shares and
share capital. Upon delivery of the common shares for settlement of the non-Treasury RSUs, the number of common
shares outstanding is increased, and the amount in contributed surplus is transferred to share capital. The common
shares purchased as settlement for non-Treasury RSUs were as follows:
Balance, beginning of year
Purchased
Distributed
Balance, end of year
Shares Amount
2016
Average
cost
Shares
Amount
2015
Average
Cost
269
—
$ 7,464
—
(248)
21
(6,873)
591
$
$
$
27.75
—
27.71
28.14
294
560
$ 7,055
15,239
(585)
269
(14,830)
$ 7,464
$ 24.00
27.21
25.35
$ 27.75
GILDAN 2016 REPORT TO SHAREHOLDERS P. 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EQUITY (continued):
(f) Contributed surplus:
The contributed surplus account is used to record the initial value of equity-settled share based compensation
transactions. Upon the exercise of stock options, the vesting of Treasury RSUs, and the delivery of common shares for
settlement of vesting non-Treasury RSUs, the corresponding amounts previously credited to contributed surplus are
transferred to share capital.
14. FINANCIAL INSTRUMENTS:
Disclosures relating to the nature and extent of the Company’s exposure to risks arising from financial instruments, including
credit risk, liquidity risk, foreign currency risk and interest rate risk, as well as risks arising from commodity prices, and how
the Company manages those risks, are included in the section entitled “Financial risk management” of the Management’s
Discussion and Analysis of the Company’s operations, financial performance and financial position as at January 1, 2017
and January 3, 2016. Accordingly, these disclosures are incorporated into these consolidated financial statements by cross-
reference.
(a) Financial instruments - carrying amounts and fair values:
The carrying amounts and fair values of financial assets and liabilities included in the consolidated statements of financial
position are as follows:
January 1,
2017
January 3,
2016
Financial assets
Amortized cost:
Cash and cash equivalents
Trade accounts receivable
Financial assets included in prepaid expenses, deposits and other current assets
Long-term non-trade receivables included in other non-current assets
Derivative financial instruments designated as effective hedging instruments
included in prepaid expenses, deposits and other current assets
Derivative financial instruments included in prepaid expenses, deposits and other
current assets - total return swap
Financial liabilities
Amortized cost:
Accounts payable and accrued liabilities
Long-term debt - bearing interest at variable rates
Long-term debt - bearing interest at fixed rates (1)
Derivative financial instruments designated as effective hedging instruments
included in accounts payable and accrued liabilities
Derivative financial instruments included in accounts payable and accrued liabilities
- total return swap
$
$
38,197
277,733
22,722
476
32,572
—
231,927
400,000
200,000
1,515
620
—
$
$
50,675
306,132
25,140
2,372
4,034
51
230,739
375,000
—
1,529
—
5,919
Contingent consideration (2)
(1) The fair value of the long-term debt bearing interest at fixed rates was $192.5 million as at January 1, 2017.
(2) The contingent consideration was included in other non-current liabilities as at January 3, 2016.
Short-term financial assets and liabilities
The Company has determined that the fair value of its short-term financial assets and liabilities approximates their
respective carrying amounts as at the reporting dates due to the short-term maturities of these instruments, as they bear
variable interest-rates or because the terms and conditions are comparable to current market terms and conditions for
similar items.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(a) Financial instruments - carrying amounts and fair values (continued):
Non-current assets and long-term debt bearing interest at variable rates
The fair values of the long-term non-trade receivables included in other non-current assets and the Company’s long-
term debt bearing interest at variable rates also approximate their respective carrying amounts because the interest
rates applied to measure their carrying amounts approximate current market interest rates.
Long-term debt bearing interest at fixed rates
The fair value of the long-term debt bearing interest at fixed rates is determined using the discounted future cash flows
method and at discount rates based on yield to maturities for similar issuances.
Contingent consideration
The contingent consideration in connection with a business combination is payable based on the achievement of sales
revenue targets for the 12-month period ended June 30, 2017, or December 31, 2017, as applicable per the terms of
the agreement. The contingent consideration was initially measured at fair value, and is remeasured at fair value at each
reporting date through net earnings, within restructuring and acquisition-related costs. The fair value measurement of
the contingent consideration is determined using unobservable (Level 3) inputs. These inputs include (i) the estimated
amount and timing of projected cash flows; (ii) the probability of the achievement of the factors on which the contingency
is based; and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Fair value
has been estimated based on the best estimate of the probability of the sales revenue targets being achieved, as well
as using a discount rate which is based on the risk associated with the sales revenue targets being met. The discount
rate applied to the contingent consideration was 13.5%. As at January 1, 2017, management estimated that none of the
revenue targets will be achieved, and as a result the fair value of the contingent consideration has been reduced to nil.
Derivatives
The derivative financial instruments designated as effective hedging instruments consist of foreign exchange and
commodity forward, option, and swap contracts, as well as floating-to-fixed interest rate swaps to fix the variable interest
rates on a designated portion of borrowings under the term loan and unsecured notes. The fair value of the forward
contracts is measured using a generally accepted valuation technique which is the discounted value of the difference
between the contract’s value at maturity based on the rate set out in the contract and the contract’s value at maturity
based on the rate that the counterparty would use if it were to renegotiate the same contract at the measurement date
under the same conditions. The fair value of the option contracts is measured using option pricing models that utilize a
variety of inputs that are a combination of quoted prices and market-corroborated inputs, including volatility estimates
and option adjusted credit spreads. The fair value of the interest rate swaps is determined based on market data, by
measuring the difference between the fixed contracted rate and the forward curve for the applicable floating interest
rates.
The Company also has a total return swap (“TRS”) outstanding that is intended to reduce the variability of net earnings
associated with deferred share units, which are settled in cash. The TRS is not designated as a hedging instrument and,
therefore, the fair value adjustment at the end of each reporting period is recognized in selling, general and administrative
expenses. The fair value of the TRS is measured by reference to the market price of the Company’s common shares,
at each reporting date. The TRS has a one-year term, may be extended annually, and the contract allows for early
termination at the option of the Company. As at January 1, 2017, the notional amount of TRS outstanding was 245,854
shares.
The fair values of financial assets, financial liabilities, and derivative financial instruments were measured using Level
1 or 2 inputs in the fair value hierarchy, with the exception of the contingent consideration which was measured using
Level 3 inputs. In determining the fair value of financial assets and financial liabilities, including derivative financial
instruments, the Company takes into account its own credit risk and the credit risk of the counterparties.
(b) Derivative financial instruments - hedge accounting:
During fiscal 2016, the Company entered into foreign exchange and commodity forward, option, and swap contracts in
order to minimize the exposure of forecasted cash inflows and outflows in currencies other than the U.S. dollar and to
manage its exposure to movements in commodity prices, as well as floating-to-fixed interest rate swaps to fix the variable
interest rates on a designated portion of borrowings under the term loan and unsecured notes.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(b) Derivative financial instruments - hedge accounting (continued):
The forward foreign exchange contracts were designated as cash flow hedges and qualified for hedge accounting. The
forward foreign exchange contracts outstanding as at January 1, 2017 consisted primarily of contracts to reduce the
exposure to fluctuations in Canadian dollars, Euros, Australian dollars, Pounds sterling, and Mexican pesos, against the
U.S. dollar.
The commodity forward, option, and swap contracts were designated as cash flow hedges and qualified for hedge
accounting. The commodity contracts outstanding as at January 1, 2017 consisted primarily of forward, collar, and swap
contracts to reduce the exposure to movements in commodity prices.
The floating-to-fixed interest rate swaps were designated as cash flow hedges and qualified for hedge accounting. The
floating-to-fixed interest rate swaps contracts outstanding as at January 1, 2017 served to fix the variable interest rates
on the designated interest payments of a portion of the Company's long term debt.
The following table summarizes the Company’s commitments to buy and sell foreign currencies as at January 1, 2017:
Notional
foreign
currency
amount
equivalent
Average
exchange
rate
Cash flow hedges:
Forward foreign exchange contracts:
expenses,
Notional deposits and
U.S. $ other current
Carrying and fair value
Prepaid Accounts
payable
and
accrued
assets liabilities
equivalent
Maturity
0 to 12
months
Sell GBP/Buy USD
Sell EUR/Buy USD
Sell CAD/Buy USD
Buy CAD/Sell USD
Sell AUD/Buy USD
Buy MXN/Sell USD
29,828
31,596
68,498
30,116
4,507
408,010
1.2840
1.1082
0.7681
0.7094
0.7494
0.0507
$
38,300
35,015
52,613
21,365
3,378
20,696
$ 171,367
$
$
1,529
1,575
1,747
975
134
—
5,960
$ — $
—
—
—
—
(1,515)
$ (1,515)
$
1,529
1,575
1,747
975
134
(1,515)
4,445
The following table summarizes the Company's commodity contracts outstanding as at January 1, 2017:
Type of commodity
Notional amount
Carrying and fair value
Prepaid expenses,
deposits and other
current assets
Cash flow hedges:
Forward contracts
Collar contracts (1)
Swap contracts
Cotton
Cotton
Energy
173,500 pounds
19,000 pounds
94 barrels
$
$
12,534
1,344
1,104
14,982
$
$
Maturity
0 to 12
months
12,534
1,344
1,104
14,982
(1) A collar contract is a combination of two option contracts that limit the holder’s exposure to changes in prices within a specific range.
This is achieved by simultaneously buying a call option (the acquisition of a right to purchase) and selling a put option (the sale to the
counterparty of a right to sell).
GILDAN 2016 REPORT TO SHAREHOLDERS P. 86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(b) Derivative financial instruments - hedge accounting (continued):
The following table summarizes the Company’s floating-to-fixed interest rate swap contracts outstanding as at January 1,
2017:
Notional
amount of
borrowings
Maturity date
Pay / Receive
Fixed
rate
Carrying and fair
value
Prepaid expenses,
Floating deposits and other
current assets
rate
Cash flow hedges:
$
150,000
June 17, 2021
50,000 August 25, 2023
50,000 August 25, 2026
$
250,000
Pay fixed rate /
receive floating rate
Pay fixed rate /
receive floating rate
Pay fixed rate /
receive floating rate
0.96% US LIBOR
$
4,964
1.18% US LIBOR
1.34% US LIBOR
2,785
3,881
$
11,630
The following table summarizes the Company’s hedged items as at January 1, 2017:
Cash flow hedges:
Foreign currency risk:
Forecast sales
Forecast expenses
Commodity risk:
Forecast purchases
Interest rate risk:
Forecast interest payments
Carrying amount of
the hedged item
Liabilities
Assets
Change in
value used for
calculating hedge
ineffectiveness
Cash flow
hedge reserve
(AOCI)
$
— $
— $
4,520
$
(4,520)
—
—
—
—
—
—
(540)
540
24,953
(24,953)
11,678
(11,678)
No ineffectiveness was recognized in net earnings as the change in value of the hedging instrument used for calculating
ineffectiveness was the same or smaller as the change in value of the hedged items used for calculating the
ineffectiveness.
As at January 1, 2017, the balances remaining in the cash flow hedge reserve from hedging relationships for cotton
commodities for which hedge accounting no longer applied was $10.0 million.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(c) Financial expenses, net:
Interest expense on financial liabilities recorded at amortized cost (1)
Bank and other financial charges
Interest accretion on discounted provisions
Foreign exchange loss
(1) Net of capitalized borrowing costs of $0.2 million (2015 - $1.0 million).
(d) Hedging components of other comprehensive income (“OCI”):
Net gain (loss) on derivatives designated as cash flow hedges:
Foreign currency risk
Commodity price risk
Interest rate risk
Income taxes
Amounts reclassified from OCI to inventory, related to commodity
price risk
Amounts reclassified from OCI to net earnings, related to foreign currency risk,
and included in:
Net sales
Selling, general and administrative expenses
Financial expenses, net (1)
Income taxes
Cash flow hedging gain
2016
12,568
6,348
336
434
19,686
2015
(15 months)
$
$
8,649
4,747
409
3,992
17,797
2016
161
33,963
11,678
(3)
2015
(15 months)
$
3,631
(836)
—
(36)
(4,356)
8,355
19
(668)
(1,295)
19
39,518
(2,155)
472
(629)
23
8,825
$
$
$
$
$
(1) The amount reclassified from OCI to net earnings included a loss of $48 related to interest rate risk for the year ended January 1,
2017.
The change in the time value element of option and swap contracts designated as cash flow hedges to reduce the
exposure in movements of commodity prices was not significant for the year ended January 1, 2017.
The change in the forward element of derivatives designated as cash flow hedges to reduce foreign currency risk was
not significant for the year ended January 1, 2017.
For the year ended January 1, 2017, the derivatives designated as cash flow hedges were considered to be fully effective
and no ineffectiveness has been recognized in net earnings.
Approximately $29.0 million of net gains presented in accumulated other comprehensive income are expected to be
reclassified to inventory or net earnings within the next twelve months.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SHARE-BASED COMPENSATION:
(a) Employee share purchase plans:
The Company has employee share purchase plans which allow eligible employees to authorize payroll deductions of
up to 10% of their salary to purchase from Treasury, common shares of the Company at a price of 90% of the then
current share price as defined in the plans. Employees purchasing shares under the plans subsequent to January 1,
2008 must hold the shares for a minimum of two years. The Company has reserved 5,000,000 common shares for
issuance under the plans. As at January 1, 2017, a total of 794,193 shares (January 3, 2016 - 740,123) were issued
under these plans. Included as compensation costs in selling, general and administrative expenses is $0.2 million (2015
- $0.2 million) relating to the employee share purchase plans.
(b) Stock options and restricted share units:
The Company’s Long-Term Incentive Plan (the "LTIP") includes stock options and restricted share units. The LTIP allows
the Board of Directors to grant stock options, dilutive restricted share units ("Treasury RSUs") and non-dilutive restricted
share units ("non-Treasury RSUs") to officers and other key employees of the Company and its subsidiaries. The number
of common shares that are issuable pursuant to the exercise of stock options and the vesting of Treasury RSUs for the
LTIP is fixed at 12,000,632. As at January 1, 2017, 2,039,863 common shares remained authorized for future issuance
under this plan.
The exercise price payable for each common share covered by a stock option is determined by the Board of Directors
at the date of the grant, but may not be less than the closing price of the common shares of the Company on the trading
day immediately preceding the effective date of the grant. Stock options granted since fiscal 2007 vest equally beginning
on the second, third, fourth and fifth anniversary of the grant date, with limited exceptions.
Holders of Treasury RSUs, non-Treasury RSUs and deferred share units are entitled to dividends declared by the
Company which are recognized in the form of additional equity awards equivalent in value to the dividends paid on
common shares. The vesting conditions of the additional equity awards are subject to the same performance objectives
and other terms and conditions as the underlying equity awards. The additional awards related to outstanding Treasury
RSUs and non-Treasury RSUs expected to be settled in common shares are credited to contributed surplus when the
dividends are declared.
Outstanding stock options were as follows:
Stock options outstanding, October 5, 2014
Changes in outstanding stock options:
Granted(1)
Exercised
Forfeited
Stock options outstanding, January 3, 2016
Changes in outstanding stock options:
Granted
Exercised
Stock options outstanding, January 1, 2017
(1) Fiscal 2015 includes an extra grant as a result of an additional three months in the fiscal year.
Weighted exercise
price
(CA$)
Number
2,202
$
14.47
1,339
(1,462)
(184)
1,895
714
(77)
2,532
$
36.53
12.51
32.85
29.78
33.01
13.76
31.18
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SHARE-BASED COMPENSATION (continued):
(b) Stock options and restricted share units (continued):
As at January 1, 2017, 468,813 outstanding options were exercisable at the weighted average exercise price of CA
$19.43 (January 3, 2016 - 201,016 options at CA$15.52). For stock options exercised during fiscal 2016, the weighted
average share price at the date of exercise was CA$37.32 (2015 - CA$40.02). Based on the Black-Scholes option pricing
model, the grant date weighted average fair value of options granted during the twelve months ended January 1, 2017
was $4.07 (January 3, 2016 - $8.60). The following table summarizes the assumptions used in the Black-Scholes option
pricing model for the stock option grants for fiscal 2016 and 2015:
Exercise price
Risk-free interest rate
Expected volatility
Expected life
Expected dividend yield
2016
2015
CA$33.01
0.66%
21.85%
4.63 years
1.27%
CA$36.53
1.19%
31.41%
6.04 years
0.86%
Expected volatilities are based on the historical volatility of Gildan’s share price. The risk-free rate used is equal to the
yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options.
The following table summarizes information about stock options issued and outstanding and exercisable at January 1,
2017:
Exercise prices (CA$)
Options issued and outstanding
Remaining
contractual life (yrs)
Number
Options exercisable
Number
$13.60
$14.32
$15.59
$24.22
$30.46
$33.01
$38.01
$42.27
125
25
227
287
296
714
575
283
2,532
2
1
3
4
5
7
6
9
125
25
131
114
74
—
—
—
469
A Treasury RSU represents the right of an individual to receive one common share on the vesting date without any
monetary consideration being paid to the Company. With limited exceptions, all Treasury RSUs awarded to date vest
within a five-year vesting period. The vesting of at least 50% of each Treasury RSU grant is contingent on the achievement
of performance conditions that are primarily based on the Company’s average return on assets performance for the
period as compared to the S&P/TSX Capped Consumer Discretionary Index, excluding income trusts, or as determined
by the Board of Directors.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 90
15. SHARE-BASED COMPENSATION (continued):
(b) Stock options and restricted share units (continued):
Outstanding Treasury RSUs were as follows:
Treasury RSUs outstanding, October 5, 2014
Changes in outstanding Treasury RSUs:
Granted
Granted for dividends declared
Settled through the issuance of common shares
Forfeited
Treasury RSUs outstanding, January 3, 2016
Changes in outstanding Treasury RSUs:
Granted
Granted for dividends declared
Settled through the issuance of common shares
Forfeited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Number
Weighted average
fair value per unit
665
$
12.07
128
4
(428)
(77)
292
8
3
(43)
(11)
249
30.60
29.92
9.81
25.25
20.25
30.08
29.08
17.78
29.20
20.70
$
Treasury RSUs outstanding, January 1, 2017
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
As at January 1, 2017 and January 3, 2016, none of the awarded and outstanding Treasury RSUs were vested.
The compensation expense included in selling, general and administrative expenses and cost of sales, in respect of the
options and Treasury RSUs, for fiscal 2016 was $4.5 million (2015 - $4.5 million), and the counterpart has been recorded
as contributed surplus. When the underlying shares are issued to the employees, the amounts previously credited to
contributed surplus are transferred to share capital.
Outstanding non-Treasury RSUs were as follows:
Non-Treasury RSUs outstanding, beginning of fiscal year
Changes in outstanding non-Treasury RSUs:
Granted(1)
Granted for performance
Granted for dividends declared
Settled - common shares
Settled - payment of withholding taxes
Forfeited
Non-Treasury RSUs outstanding, end of fiscal year
(1) Fiscal 2015 includes an extra grant as a result of an additional three months in the fiscal year.
2016
953
431
113
10
(248)
(178)
(34)
1,047
2015
768
660
158
12
(594)
—
(51)
953
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SHARE-BASED COMPENSATION (continued):
(b) Stock options and restricted share units (continued):
Non-Treasury RSUs have the same features as Treasury RSUs, except that their vesting period is a maximum of three
years and they can be settled in cash based on the Company’s share price on the vesting date, or through the delivery
of common shares purchased on the open market, at the Company's option. Non-Treasury RSUs are settled in common
shares purchased on the open market, and to the extent that the Company has an obligation under tax laws to withhold
an amount for an employee’s tax obligation associated with the share-based payment the Company settles Non-Treasury
RSUs on a net basis. Beginning in fiscal 2010, 100% of non-Treasury RSUs awarded to executive officers have vesting
conditions that are dependent upon the financial performance of the Company relative to a benchmark group of Canadian
publicly listed companies. In addition, up to two times the actual number of non-Treasury RSUs awarded to executive
officers can vest if exceptional financial performance is achieved. As at January 1, 2017 and January 3, 2016, none of
the outstanding non-Treasury RSUs were vested.
The compensation expense included in selling, general and administrative expenses and cost of sales, in respect of the
non-Treasury RSUs, for fiscal 2016 was $11.1 million (2015 - $15.9 million), and the counterpart has been recorded as
contributed surplus. When the underlying common shares are delivered to employees for settlement upon vesting, the
amounts previously credited to contributed surplus are transferred to share capital.
(c) Deferred share unit plan:
The Company has a deferred share unit plan for independent members of the Company’s Board of Directors who must
receive at least 50% of their annual board retainers in the form of deferred share units ("DSUs"). The value of these
DSUs is based on the Company’s share price at the time of payment of the retainers or fees. DSUs granted under the
plan will be redeemable and the value thereof payable in cash only after the director ceases to act as a director of the
Company. As at January 1, 2017, there were 255,472 (January 3, 2016 - 226,456) DSUs outstanding at a value of
$6.5 million (January 3, 2016 - $6.4 million). This amount is included in accounts payable and accrued liabilities based
on a fair value per deferred share unit of $25.37 (January 3, 2016 - $28.42). The DSU obligation is adjusted each quarter
based on the market value of the Company’s common shares. The Company includes the cost of the DSU plan in selling,
general and administrative expenses, which for fiscal 2016 was $0.7 million (2015 - $1.6 million).
Changes in outstanding DSUs were as follows:
DSUs outstanding, beginning of fiscal year
Granted
Granted for dividends declared
Forfeited
Redeemed
DSUs outstanding, end of fiscal year
2016
2015
226
36
2
(9)
—
255
271
41
3
—
(89)
226
16. SUPPLEMENTARY INFORMATION RELATING TO THE NATURE OF EXPENSES:
(a) Selling, general and administrative expenses:
Selling expenses
Administrative expenses
Distribution expenses
2016
113,340
121,702
101,391
336,433
$
$
2015
(15 months)
139,157
143,292
105,514
387,963
$
$
GILDAN 2016 REPORT TO SHAREHOLDERS P. 92
16. SUPPLEMENTARY INFORMATION RELATING TO THE NATURE OF EXPENSES (continued):
(b) Employee benefit expenses:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Salaries, wages and other short-term employee benefits
Share-based payments
Post-employment benefits
2016
461,668
15,756
25,089
502,513
$
$
2015
(15 months)
515,854
20,537
17,338
553,729
$
$
(c) Lease expenses:
During the year ended January 1, 2017 an amount of $26.6 million was recognized in the consolidated statement of
earnings and comprehensive income relating to operating leases (2015 - $28.9 million).
As at January 1, 2017, the future minimum lease payments under non-cancellable leases were as follows:
Within 1 year
Between 1 and 5 years
More than 5 years
(d) Government assistance:
January 1,
2017
$
$
18,163
36,683
15,436
70,282
During the year ended January 1, 2017 an amount of $9.3 million was recognized in the consolidated statement of
earnings and comprehensive income relating to government assistance for yarn production (2015 - $8.4 million).
17. RESTRUCTURING AND ACQUISITION-RELATED COSTS:
Restructuring and acquisition-related costs are presented in the following table, and are comprised of costs directly related
to the closure of business locations or the relocation of business activities, significant changes in management structure, as
well as transaction, exit and integration costs incurred pursuant to business acquisitions.
Employee termination and benefit costs
Exit, relocation and other costs
Loss on disposal of property, plant and equipment related to exit activities
Loss (gain) on disposal or transfer of assets held for sale
Remeasurement of contingent consideration in connection with a business
acquisition
Acquisition-related transaction costs
2016
5,006
7,898
1,119
597
(6,176)
3,302
11,746
$
$
2015
(15 months)
4,976
8,545
161
(994)
1,118
1,102
14,908
$
$
GILDAN 2016 REPORT TO SHAREHOLDERS P. 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. RESTRUCTURING AND ACQUISITION-RELATED COSTS (continued):
Restructuring and acquisition-related costs in fiscal 2016 related primarily to costs incurred in connection with the integration
of acquired businesses, including the integrations of the more recent Alstyle and Peds acquisitions, the completion of the
integration of other businesses acquired in previous years, involving consolidation of customer service, distribution, and
administrative functions, and costs incurred in connection with the rationalization of our retail store outlets as part of our
overall direct to consumer channel strategy. Restructuring and acquisition-related costs also included transaction costs related
to the acquisitions of Alstyle and Peds. Restructuring and acquisition-related costs were partially offset by a gain on the re-
measurement of the fair value of contingent consideration in connection with the Doris acquisition.
Restructuring and acquisition-related costs in fiscal 2015 related primarily to costs incurred in connection with the integration
of acquired businesses, including the integrations of the Doris and Comfort Colors acquisitions, and the completion of the
integration of other businesses acquired in previous years, involving consolidation of customer service, distribution and
administrative functions, and screenprinting operations. Restructuring and acquisition-related costs also included transaction
costs related to the acquisition of the operating assets of Comfort Colors as well as costs incurred in connection with the
consolidation of sewing operations.
18. INCOME TAXES:
The income tax provision differs from the amount computed by applying the combined Canadian federal and provincial tax
rates to earnings before income taxes. The reasons for the difference and the related tax effects are as follows:
Earnings before income taxes
Applicable tax rate
Income taxes at applicable statutory rate
(Decrease) increase in income taxes resulting from:
Effect of different tax rates on earnings of foreign subsidiaries
Income tax recovery and other adjustments related to prior taxation years
Non-recognition of tax benefits related to tax losses
and temporary differences
Effect of non-deductible expenses and other
Total income tax expense
Average effective tax rate
2016
$
351,838
$
26.8%
94,398
(83,208)
(4,822)
1,545
(2,713)
5,200
1.5%
$
$
2015
(15 months)
309,440
26.9%
83,085
(76,150)
(5,086)
14,341
(11,664)
4,526
1.5%
The Company’s applicable statutory tax rate is the Canadian combined rate applicable in the jurisdictions in which the
Company operates.
The details of income tax expense are as follows:
Current income taxes, includes a recovery of $2,725
(2015 - expense of $3,904) relating to prior taxation years
Deferred income taxes:
Origination and reversal of temporary differences
Recognition of tax benefits relating to prior taxation years
2016
2015
(15 months)
$
8,356
$
7,036
(1,059)
(2,097)
(3,156)
(2,510)
—
(2,510)
Total income tax expense
$
5,200
$
4,526
GILDAN 2016 REPORT TO SHAREHOLDERS P. 94
18. INCOME TAXES (continued):
Significant components of the Company’s deferred income tax assets and liabilities relate to the following temporary
differences and unused tax losses:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets:
Non-capital losses
Non-deductible reserves and accruals
Property, plant and equipment
Other items
Unrecognized deferred tax assets
Deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
Deferred tax liabilities
Deferred income taxes
The details of changes to deferred income tax assets and liabilities were as follows:
Balance, beginning of fiscal year, net
Recognized in the statements of earnings:
Non-capital losses
Non-deductible reserves and accruals
Property, plant and equipment
Intangible assets
Other
Unrecognized deferred tax assets
Business acquisitions
Other
Balance, end of fiscal year, net
January 1,
2017
January 3,
2016
$
$
$
$
$
76,345
49,856
7,239
4,946
138,386
(27,529)
110,857
(32,703)
(76,654)
(109,357)
1,500
$
$
$
$
$
65,914
46,824
4,866
4,091
121,695
(25,372)
96,323
(18,872)
(74,658)
(93,530)
2,793
2016
2015
$
2,793
$
(349)
9,847
3,004
(11,438)
498
2,790
(1,545)
3,156
(4,542)
93
1,500
$
3,005
22,589
(16,445)
7,385
317
(14,341)
2,510
—
632
2,793
$
As at January 1, 2017, the Company has tax credits, capital and non-capital loss carryforwards and other deductible temporary
differences available to reduce future taxable income for tax purposes representing a tax benefit of approximately $27.5
million, for which no deferred tax asset has been recognized (January 3, 2016 - $25.4 million), because the criteria for
recognition of the tax asset was not met. The tax credits and capital and non-capital loss carryforwards expire between 2021
and 2036. The recognized deferred tax asset is supported by projections of future profitability of the Company.
The Company has not recognized a deferred income tax liability for the undistributed profits of subsidiaries operating in
foreign jurisdictions, as the Company currently has no intention to repatriate these profits. If expectations or intentions change
in the future, the Company may be subject to an additional tax liability upon distribution of these earnings in the form of
dividends or otherwise. As at January 1, 2017, a deferred income tax liability of approximately $71 million would result from
the recognition of the taxable temporary differences of approximately $267 million.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 95
19. EARNINGS PER SHARE:
Reconciliation between basic and diluted earnings per share is as follows:
Net earnings - basic and diluted
Basic earnings per share:
Basic weighted average number of common shares outstanding
Basic earnings per share
Diluted earnings per share:
Basic weighted average number of common shares outstanding
Plus dilutive impact of stock options, Treasury RSUs and common
shares held in trust
Diluted weighted average number of common shares outstanding
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2016
$
346,638
235,355
1.47
$
2015
(15 months)
304,914
242,502
1.26
$
$
235,355
242,502
693
236,048
1.47
1,819
244,321
1.25
Diluted earnings per share
All earnings per share data and share data reflect the effect of the two-for-one stock split which took effect on March 27, 2015.
$
$
Excluded from the above calculation for the year ended January 1, 2017 are 1,572,273 stock options (2015 - 858,153) and
7,500 Treasury RSUs (2015 - 61,919) which were deemed to be anti-dilutive.
20. DEPRECIATION AND AMORTIZATION:
Depreciation of property, plant and equipment (note 9)
$
124,738
Adjustment for the variation of depreciation of property, plant and equipment included
in inventories at the beginning and end of the year
Depreciation of property, plant and equipment included in net earnings
Amortization of intangible assets, excluding software (note 10)
Amortization of software (note 10)
Depreciation and amortization included in net earnings
(5,430)
119,308
18,106
3,183
140,597
$
2016
2015
(15 months)
134,688
$
(14,399)
120,289
22,546
3,578
146,413
$
GILDAN 2016 REPORT TO SHAREHOLDERS P. 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. SUPPLEMENTAL CASH FLOW DISCLOSURE:
(a) Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization (note 20)
Restructuring charges related to property, plant and equipment (note 17)
$
140,597
1,716
2016
(Gain) loss on remeasurement of contingent consideration in connection with a
business acquisition (note 17)
Loss on disposal of property, plant and equipment and intangible assets
Share-based compensation
Deferred income taxes (note 18)
Unrealized net loss on foreign exchange and financial derivatives
Timing differences between settlement of financial derivatives and transfer of
deferred gains and losses in accumulated OCI to net earnings
Other non-current assets
Other non-current liabilities
(b) Variations in non-cash transactions:
(6,176)
1,631
15,373
(3,156)
1,993
10,840
(2,202)
(2,169)
158,447
2016
$
Change in classification of non-Treasury RSUs to equity-settled (note 3(cc))
$
6,234
$
Additions to property, plant and equipment and intangible assets included in
accounts payable and accrued liabilities
Proceeds on disposal of property, plant and equipment included in other current
assets
Assets held for sale transferred to property, plant and equipment
Balance due on business acquisition (note 5)
Settlement of pre-existing relationship (note 5)
Transfer from accounts payable and accrued liabilities to contributed surplus in
connection with share repurchases for future settlement of non-Treasury
RSUs
Non-cash ascribed value credited to contributed surplus for dividends attributed
to Treasury RSUs
Non-cash ascribed value credited to share capital from shares issued or
distributed pursuant to vesting of restricted share units and exercise of stock
options
(8,200)
(475)
2,243
(4,000)
—
—
370
8,085
26,496
2015
(15 months)
146,413
(833)
$
1,118
1,167
12,320
(2,510)
226
5,042
2,011
(17,300)
147,654
$
2015
(15 months)
—
(6,980)
(234)
—
—
8,378
7,488
85
GILDAN 2016 REPORT TO SHAREHOLDERS P. 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. RELATED PARTY TRANSACTIONS:
Key management personnel compensation:
Key management personnel includes those individuals that have authority and responsibility for planning, directing and
controlling the activities of the Company, directly or indirectly, and is comprised of the members of the executive management
team and the Board of Directors. The amount for compensation expense recognized in net earnings for key management
personnel was as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
2016
7,422
157
10,132
17,711
$
$
2015
(15 months)
7,579
200
11,274
19,053
$
$
The amounts in accounts payable and accrued liabilities for share-based compensation awards to key management personnel
were as follows:
Non-Treasury RSUs
DSUs
January 1,
2017
January 3,
2016
$
$
—
6,481
6,481
$
$
1,463
6,436
7,899
23. COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES:
(a) Claims and litigation
The Company is a party to claims and litigation arising in the normal course of operations. The Company does not expect
the resolution of these matters to have a material adverse effect on the financial position or results of operations of the
Company.
(b) Guarantees
The Company, and some of its subsidiaries, have granted financial guarantees, irrevocable standby letters of credit,
and surety bonds to third parties to indemnify them in the event the Company and some of its subsidiaries do not perform
their contractual obligations. As at January 1, 2017, the maximum potential liability under these guarantees was
$53.8 million (January 3, 2016 - $55.4 million), of which $10.4 million was for surety bonds and $43.4 million was for
financial guarantees and standby letters of credit (January 3, 2016 - $10.6 million and $44.8 million, respectively).
As at January 1, 2017, the Company has recorded no liability with respect to these guarantees, as the Company does
not expect to make any payments for the aforementioned items.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. CAPITAL DISCLOSURES:
The Company’s objective in managing capital is to ensure sufficient liquidity to pursue its organic growth strategy and
undertake selective acquisitions, while maintaining a strong credit profile and taking a conservative approach towards financial
risk management.
The Company’s capital is composed of net debt and shareholders’ equity. Net debt consists of interest-bearing debt less
cash and cash equivalents. The Company’s use of capital is to finance working capital requirements, capital expenditures,
business acquisition, payment of dividends, as well as share repurchases. The Company currently funds these requirements
out of its internally-generated cash flows and with funds drawn from its long-term debt facilities.
The primary measure used by the Company to monitor its financial leverage is its net debt leverage ratio. The Company’s
net debt leverage ratio is defined as the ratio of net indebtedness to earnings before financial expenses/income, taxes,
depreciation and amortization, and restructuring and acquisition-related costs (“adjusted EBITDA”) for the trailing twelve
months, on a pro-forma basis to reflect business acquisitions made during the trailing twelve month period, as if they had
occurred at the beginning of the trailing twelve month period. The Company has set a target net debt leverage ratio of one
to two times adjusted EBITDA. As at January 1, 2017, the Company’s net debt leverage ratio was 1.0 times.
In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may issue or
repay long-term debt, issue shares, repurchase shares, pay dividends or undertake other activities as deemed appropriate
under the specific circumstances.
The Board of Directors will consider several factors when deciding to declare quarterly cash dividends, including the
Company’s present and future earnings, cash flows, capital requirements and present and/or future regulatory and legal
restrictions. There can be no assurance as to the declaration of future quarterly cash dividends. Although the Company’s
revolving facilities, term loan facility, and notes require compliance with lending covenants in order to pay dividends, these
covenants are not currently, and are not expected to be, a constraint to the payment of dividends under the Company’s
dividend policy.
The Company paid dividends of $74.4 million during the year ended January 1, 2017, representing dividends declared per
common share of $0.312. On February 22, 2017, the Board of Directors approved a 20% increase in the amount of the current
quarterly dividend and declared a cash dividend of $0.0935 per share for an expected aggregate payment of $21.5 million
which will be paid on April 3, 2017 on all of the issued and outstanding common shares of the Company, rateably and
proportionately to the holders of record on March 9, 2017. This dividend is an “eligible dividend” for the purposes of the
Income Tax Act (Canada) and any other applicable provincial legislation pertaining to eligible dividends.
The Company is not subject to any capital requirements imposed by a regulator.
25. SEGMENT INFORMATION:
The Company manages and reports its business as two operating segments, Printwear and Branded Apparel, each of which
is a reportable segment for financial reporting purposes. Each segment has its own management that is accountable and
responsible for the segment’s operations, results and financial performance. These segments are principally organized by
the major customer markets they serve. The following summary describes the operations of each of the Company’s operating
segments:
Printwear: The Printwear segment, headquartered in Christ Church, Barbados, designs, manufactures, sources, markets
and distributes undecorated activewear products in large quantities primarily to wholesale distributors in printwear markets
in over 55 countries across North America, Europe, Asia-Pacific and Latin America.
Branded Apparel: The Branded Apparel segment, headquartered in Charleston, South Carolina, designs, manufactures,
sources, markets and distributes branded family apparel, which includes athletic, casual and dress socks, sheer hosiery,
legwear, shapewear, underwear and activewear products, primarily to U.S. and Canadian retailers.
The chief operating decision-maker assesses segment performance based on segment operating income which is defined
as operating income before corporate head office expenses, restructuring and acquisition-related costs, and amortization of
intangible assets, excluding software. The accounting policies of the segments are the same as those described in note 3
of these consolidated financial statements.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 99
25. SEGMENT INFORMATION (continued):
Segmented net sales:
Printwear
Branded Apparel
Total net sales
Segment operating income:
Printwear
Branded Apparel
Total segment operating income
Reconciliation to consolidated earnings before income taxes:
Total segment operating income
Amortization of intangible assets, excluding software
Corporate expenses
Restructuring and acquisition-related costs
Financial expenses, net
Earnings before income taxes
Additions to property, plant and equipment and intangible assets
(including additions from business acquisitions and transfers):
Printwear
Branded Apparel
Corporate
Assets not yet utilized in operations, net of transfers
Depreciation of property, plant and equipment:
Printwear
Branded Apparel
Corporate
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2016
$ 1,651,079
933,991
$ 2,585,070
2015
(15 months)
$ 1,794,754
1,164,484
$ 2,959,238
$
$
$
$
$
$
$
$
388,052
85,445
473,497
473,497
(18,106)
(72,121)
(11,746)
(19,686)
351,838
146,556
71,022
4,357
(24,131)
197,804
77,436
38,924
2,948
119,308
$
$
$
$
$
$
$
$
363,607
91,033
454,640
454,640
(22,546)
(89,949)
(14,908)
(17,797)
309,440
392,635
73,911
4,682
(87,321)
383,907
77,468
39,273
3,548
120,289
GILDAN 2016 REPORT TO SHAREHOLDERS P. 100
25. SEGMENT INFORMATION (continued):
The reconciliation of total assets to segmented assets is as follows:
Segmented assets:
(1)
Printwear
Branded Apparel
Total segmented assets
Unallocated assets:
Cash and cash equivalents
Assets held for sale
Deferred income taxes
Assets not yet utilized in operations
Other - primarily corporate assets
Consolidated assets
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 1,
2017
January 3,
2016
$ 1,640,739
1,177,843
2,818,582
38,197
—
1,500
60,552
71,313
$ 2,990,144
$ 1,453,823
1,197,838
2,651,661
50,675
2,840
2,793
84,683
41,628
$ 2,834,280
(1) Segmented assets include the net carrying amounts of intangible assets and goodwill.
Property, plant and equipment, intangible assets, and goodwill, were allocated to geographic areas as follows:
United States
Canada
Honduras
Caribbean Basin
Other
Net sales by major product group were as follows:
Activewear and underwear
Socks and hosiery
Net sales were derived from customers located in the following geographic areas:
United States
Canada
Europe and other
January 1,
2017
January 3,
2016
$
841,694
151,508
400,438
159,419
80,153
$ 1,633,212
$
857,082
120,152
400,774
156,562
37,198
$ 1,571,768
2016
$ 1,993,012
592,058
$ 2,585,070
2015
(15 months)
$ 2,246,524
712,714
$ 2,959,238
2016
$ 2,253,910
118,955
212,205
$ 2,585,070
2015
(15 months)
$ 2,585,533
136,516
237,189
$ 2,959,238
GILDAN 2016 REPORT TO SHAREHOLDERS P. 101
25. SEGMENT INFORMATION (continued):
The Company has two customers accounting for at least 10% of total net sales.
Customer A
Customer B
26. EVENTS AFTER THE REPORTING PERIOD:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2016
18.2%
12.4%
2015
(15 months)
15.7%
13.1%
On February 8, 2017, the Company acquired the American Apparel® brand and certain assets from American Apparel, LLC,
(American Apparel) which filed for Chapter 11 bankruptcy protection on November 14, 2016. The acquisition was effected
through a court supervised auction during which Gildan emerged as the successful bidder with a final cash bid of approximately
$88 million. The American Apparel® brand will be a strong complementary addition to Gildan’s growing brand portfolio. The
acquisition provides the opportunity to grow American Apparel® sales by leveraging the Company’s extensive printwear
distribution networks in North America and internationally to drive further market share penetration in the fashion basics
segment of these markets.
Results from the sale of products under the American Apparel® brand will be consolidated with those of the Company from
the date of acquisition and will be reflected as part of the results of the Printwear segment.
A deposit of $6.6 million was made with respect to the acquisition during December 2016, and was recorded in other non
current assets in the statement of financial position, and as cash used in a business acquisition in the statement of cash
flows.
GILDAN 2016 REPORT TO SHAREHOLDERS P. 102
Shareholder Information
Board of
Dir ect ors
Executive
Management
Team
W illiam D. Anderson
Chair of the Board of Directors
Director since 2006
Donald C. Berg
Director since 2015
George Hel ler
Director since 2009
Anne Martin-Va chon
Director since 2015
Glenn J. Chamandy
President and Chief Executive Officer
Director since 1984
She ila O’Brien
Chair of the Compensation and Human
Resources Committee
Director since 2005
R us s ell Goodman
Chair of the Audit
Gonza lo F. Valdes-Fauli
Chair of the Corporate Governance and
and Finance Committee
Social Responsibility Committee
Director since 2010
Director since 2004
Gle nn J. Cham andy
President and Chief Executive Officer
Rhodri J. Harr i es
Executive Vice-President,
Chief Financial and Administrative
Officer
Mi chael R. Hof fm an
President, Printwear
Eric R. Lehm an
President, Branded Apparel
Be nit o A. Ma si
Executive Vice-President,
Manufacturing
Investor Re la tion s
C orpo ra te Co mmunica tion s
Legal Af fa irs
S ophie Argiriou
Vice-President,
Investor Communications
514-343-8815
Toll free: 1-866-755-2023
investors@gildan.com
Garr y Bell
Vice-President,
Corporate Communications
and Marketing
Lindsay Ma tthew s
Vice-President,
General Counsel
and Corporate Secretary
514-744-8600
Toll free: 1-866-755-2023
514-340-8790
Toll free: 1-866-755-2023
communications@gildan.com
corporate.governance@gildan.com
Gilda n Corporate Off ice
600 de Maisonneuve Boulevard West,
33rd Floor
Montreal, QC H3A 3J2
CANADA
Stock In form atio n
Toronto Stock Exchange
New York Stock Exchange
Symbol: GIL
514-735-2023
Toll free: 1-866-755-2023
Fax: 514-735-6810
www.gildancorp.com
www.GenuineGildan.com
Stock trans fer agen t
+ registr ar
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1
CANADA
Aud itor s
KPMG LLP
1-800-564-6253
Toll free fax: 1-888-453-0330
service@computershare.com
An nual Meeting
of Sh areholde rs
Thursday, May 4, 2017
At 10:00 AM E.D.T.
Windsor Ballroom
1170 Peel Street
Montreal, QC H3B 4P2
CANADA
cover_final_EN_update2103.pdf 1 2017-03-21 4:20 PM
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Our
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