I firmly believe that no other company is better equipped to respond to the shifting market landscape given our business model, expertise, talent and strategies.” Glenn J. ChamandyPresident & CEO®Licensed brandI firmly believe that no other company is better equipped to respond to the shifting market landscape given our business model, expertise, talent and strategies.” Glenn J. ChamandyPresident & CEO®Licensed brand I firmly believe that no other company is better equipped to respond to the shifting market landscape given our business model, expertise, talent and strategies.” Glenn J. ChamandyPresident & CEO®Licensed brand 2017 IN REVIEWMARGILDAN SIGNS A PARTNERSHIP WITH CATALYST Catalyst is a leading global, non-profit organization with a mission to accelerate progress for women through workplace inclusion. Gildan’s current management profile includes 41% women in positions of managers and above.FEBGILDAN COMPLETES ACQUISITION OF AMERICAN APPAREL® The acquisition expands the Company’s offering in the fashion basics category and provides growth opportunities through leveraging the Company’s global printwear networks and by expanding the Company’s direct-to-consumer business with an iconic premium fashion brand.GILDAN’S BOARD OF DIRECTORS APPROVED A 5TH CONSECUTIVE ANNUAL 20% INCREASE IN THE AMOUNT OF THE CURRENT QUARTERLY DIVIDENDJANGILDAN RECEIVES BRONZE CLASS DISTINCTION IN THE ROBECOSAM 2017 SUSTAINABILITY YEARBOOK For the fifth consecutive year, Gildan has qualified for inclusion in the 2017 RobecoSAM Sustainability Yearbook, receiving the Bronze Class distinction this year for its strong sustainability performance. OCTGILDAN PARTNERS WITH SANS SOUCIE TO GIVE NEW LIFE TO HOSIERY WASTE Gildan launches its partnership with Katherine Soucie, founder of Sans Soucie Textile and Design, a zero waste textile and clothing design studio, providing hosiery waste that is transformed into new garments and textiles.NOVGILDAN ORGANIZES THE 5TH ANNUAL GILDAN GLOW RUN The 5k run and fundraising event, united more than 12,000 Gildan employees and their families and raised more than $100,000 in 2017 for communities in Honduras, Nicaragua and the Dominican Republic.DECGILDAN® NEW MEXICO BOWLGildan sponsors the Gildan® New Mexico Bowl College Championship football game. Gildan has been the title sponsor of this great event since 2011.GILDAN® EXTENDS TRIPLE-A BASEBALL NATIONAL SPONSORSHIP Since 2012, Gildan has been the Official National Sponsor of Triple-A Baseball, for all 30 teams and special events such as the AAA All Star game and league championships.SEPGILDAN IS INCLUDED ON THE DOW JONES SUSTAINABILITY WORLD INDEX FOR THE 5TH CONSECUTIVE YEAR The Dow Jones Sustainability World Index comprises global sustainability leaders and represents the top 10% of the largest 2,500 companies in the S&P Global BMI (Broad Market Index) based on long-term economic, environmental and social criteria.AUGAMERICAN APPAREL E-COMMERCE SITE RELAUNCHES The brand is made available again to consumers in the U.S. with a revised offering of fashionable basics and favourite styles.GILDAN SUPPORTS JCPENNEY PAIR UP GIVING PROMOTION THROUGH ITS GOLDTOE® BRAND Gildan partners with JCPenney to donate 100,000 free pairs of socks to children in need for every pair of GOLDTOE® socks sold at JCPenney through this special “buy-one, give-one” promotion.LEAD SPONSOR OF THE ESPRIT DE SHE RACE SERIES ACROSS THE US The Gildan® Esprit de She race series, in combination with the ‘Girls on the Run®’ series, is dedicated to women and aims to encourage them in their daily lives.MAYGILDAN RECEIVES THE DISTINTIVO ESR® AWARD FOR THE 2ND YEAR The Distintivo ESR® aims to recognize companies’ efforts to voluntarily and publicly undertake the commitment to implement socially responsible management and continuous improvement initiatives as part of their culture and business strategy.SHIRLEY E. CUNNINGHAM IS APPOINTED AS A NEW BOARD MEMBER AT GILDAN’S ANNUAL MEETING OF SHAREHOLDERSAPRGILDAN ACQUIRES A 100% INTEREST IN AN AUSTRALIAN BASED ACTIVEWEAR DISTRIBUTOR The acquisition supports the Company’s international sales growth strategy and enhances the Company’s distribution capabilities in the region.JUNacquisitionsin free cash flowin revenuereturned to shareholdersTable of Contents03A message from the Chairman06A message from the President and CEO 09Financial highlights11American Apparel spotlight13Genuine ResponsibilityTM15Portfolio of brands*All numbers in this report are in U.S. dollars.JULACQUISITION OF A RING-SPUN YARN MANUFACTURER IN GEORGIAGildan acquires the assets of a ring-spun yarn manufacturer, Swift Spinning, Inc., with two facilities located in Columbus, Georgia. Production from the yarn facilities supports our sales growth of fashion basics products and rounds out our yarn requirement needs, in particular for specialty yarns. 1182017 Report to shareholders 2017 IN REVIEWMARGILDAN SIGNS A PARTNERSHIP WITH CATALYST Catalyst is a leading global, non-profit organization with a mission to accelerate progress for women through workplace inclusion. Gildan’s current management profile includes 41% women in positions of managers and above.FEBGILDAN COMPLETES ACQUISITION OF AMERICAN APPAREL® The acquisition expands the Company’s offering in the fashion basics category and provides growth opportunities through leveraging the Company’s global printwear networks and by expanding the Company’s direct-to-consumer business with an iconic premium fashion brand.GILDAN’S BOARD OF DIRECTORS APPROVED A 5TH CONSECUTIVE ANNUAL 20% INCREASE IN THE AMOUNT OF THE CURRENT QUARTERLY DIVIDENDJANGILDAN RECEIVES BRONZE CLASS DISTINCTION IN THE ROBECOSAM 2017 SUSTAINABILITY YEARBOOK For the fifth consecutive year, Gildan has qualified for inclusion in the 2017 RobecoSAM Sustainability Yearbook, receiving the Bronze Class distinction this year for its strong sustainability performance. OCTGILDAN PARTNERS WITH SANS SOUCIE TO GIVE NEW LIFE TO HOSIERY WASTE Gildan launches its partnership with Katherine Soucie, founder of Sans Soucie Textile and Design, a zero waste textile and clothing design studio, providing hosiery waste that is transformed into new garments and textiles.NOVGILDAN ORGANIZES THE 5TH ANNUAL GILDAN GLOW RUN The 5k run and fundraising event, united more than 12,000 Gildan employees and their families and raised more than $100,000 in 2017 for communities in Honduras, Nicaragua and the Dominican Republic.DECGILDAN® NEW MEXICO BOWLGildan sponsors the Gildan® New Mexico Bowl College Championship football game. Gildan has been the title sponsor of this great event since 2011.GILDAN® EXTENDS TRIPLE-A BASEBALL NATIONAL SPONSORSHIP Since 2012, Gildan has been the Official National Sponsor of Triple-A Baseball, for all 30 teams and special events such as the AAA All Star game and league championships.SEPGILDAN IS INCLUDED ON THE DOW JONES SUSTAINABILITY WORLD INDEX FOR THE 5TH CONSECUTIVE YEAR The Dow Jones Sustainability World Index comprises global sustainability leaders and represents the top 10% of the largest 2,500 companies in the S&P Global BMI (Broad Market Index) based on long-term economic, environmental and social criteria.AUGAMERICAN APPAREL E-COMMERCE SITE RELAUNCHES The brand is made available again to consumers in the U.S. with a revised offering of fashionable basics and favourite styles.GILDAN SUPPORTS JCPENNEY PAIR UP GIVING PROMOTION THROUGH ITS GOLDTOE® BRAND Gildan partners with JCPenney to donate 100,000 free pairs of socks to children in need for every pair of GOLDTOE® socks sold at JCPenney through this special “buy-one, give-one” promotion.LEAD SPONSOR OF THE ESPRIT DE SHE RACE SERIES ACROSS THE US The Gildan® Esprit de She race series, in combination with the ‘Girls on the Run®’ series, is dedicated to women and aims to encourage them in their daily lives.MAYGILDAN RECEIVES THE DISTINTIVO ESR® AWARD FOR THE 2ND YEAR The Distintivo ESR® aims to recognize companies’ efforts to voluntarily and publicly undertake the commitment to implement socially responsible management and continuous improvement initiatives as part of their culture and business strategy.SHIRLEY E. CUNNINGHAM IS APPOINTED AS A NEW BOARD MEMBER AT GILDAN’S ANNUAL MEETING OF SHAREHOLDERSAPRGILDAN ACQUIRES A 100% INTEREST IN AN AUSTRALIAN BASED ACTIVEWEAR DISTRIBUTOR The acquisition supports the Company’s international sales growth strategy and enhances the Company’s distribution capabilities in the region.JUNacquisitionsin free cash flowin revenuereturned to shareholdersTable of Contents03A message from the Chairman06A message from the President and CEO 09Financial highlights11American Apparel spotlight13Genuine ResponsibilityTM15Portfolio of brands*All numbers in this report are in U.S. dollars.JULACQUISITION OF A RING-SPUN YARN MANUFACTURER IN GEORGIAGildan acquires the assets of a ring-spun yarn manufacturer, Swift Spinning, Inc., with two facilities located in Columbus, Georgia. Production from the yarn facilities supports our sales growth of fashion basics products and rounds out our yarn requirement needs, in particular for specialty yarns. 1182017 Report to shareholders a message from
T H E C H A I R M A N
To my fellow shareholders,
On behalf of the
Board, it is my
our 2017 Annual Report.
pleasure to present
Despite a challenging business
environment, especially in the
retail sector, the management
team and our employees have
once again delivered strong
results this year, showcasing
the underlying strength of
the Company’s vertically-
integrated business model
and our mission of ‘Creating
Value in Everything We Do’.
Under Glenn’s leadership,
the Company has delivered
against our strategic growth
drivers of leveraging our
Printwear leadership to grow
market share and expand
internationally, growing retail
share in key categories such
as underwear, optimizing
investments in manufacturing
to drive further cost savings
and operational efficiencies and
returning value to shareholders
Genuine Responsibility™
The Board remains committed
to ensuring a sustainable
future and is pleased with
the efforts of our operational
and manufacturing teams in
achieving outstanding results
this past year. While in the
process of fully integrating
the manufacturing facilities
we acquired in 2016, we
managed to deliver impressive
overall results such as
recycling or repurposing
86% of the Company’s total
waste, generating 32% of
our total energy needs from
renewable sources and
further integrating several
sustainable solutions across
our manufacturing operations.
In 2017, we published our
13th Genuine Responsibility™
update, which highlighted
our accomplishments,
revealed our challenges and
presented our results across
several key sustainability
metrics. Gildan continued
to show good progress towards reaching its Genuine
while remaining well positioned to pursue strategic acquisitions.
Responsibility™ 2020 Goals, which call for a 10% reduction in
energy and water intensity, GHG emissions and landfill waste,
In this regard, we were pleased that the Company has
measured per kg of production from owned operations.
maintained a balanced capital allocation strategy returning
The Company is working hard to achieve these 2020
capital to shareholders in 2017 through the payment of
targets with specific projects and initiatives underway.
dividends and share repurchases while continuing to invest
in our brands, capacity expansion and cost saving initiatives.
In further recognition of its leadership position in the
Further, Gildan’s strong results allowed us to approve a 6th
global apparel industry, Gildan was included in the Dow
consecutive annual dividend increase of 20% for 2018 and the
Jones Sustainability World Index for the fifth consecutive
renewal of the Company’s normal course issuer bid program to
year in 2017, once again as the only North American
repurchase another 5% of the Company’s outstanding shares.
company in the Textiles, Apparel and Luxury Goods
industry group listed in this globally recognized index.
2
Product Development Innovation Center in Honduras
Code of Conduct
Board. Sheila has made many important contributions,
In 2017, the Company updated its Code of Conduct to reflect
including playing a significant role in promoting diversity
its core values and the most current international standards
and inclusion on the Board and in the Company at large, as
as set out by leading global organizations. Gildan’s new
well as in the ongoing development of the human resources
Code sets forth standards and expectations of conduct
function at Gildan, serving as a member and Chair of the
regarding our manufacturing and sourcing practices and
Compensation and Human Resources Committee.
acts as a framework in guiding its operations and business
practices. All office and administrative employees were
Looking forward
trained on the new Code in 2017 and we look forward to
In the coming year, the Board will be focused on supporting
completing the training of manufacturing employees in 2018.
the Company in its progress against its core strategies
Strong Board governance
including the recently announced consolidation of the
Branded Apparel and Printwear operating segments. The
The Board has also continued its diligent work this past year
Board strongly supports this organizational realignment,
in overseeing the Company’s strategy and organizational
which we believe will allow Gildan to better respond to
development, more specifically with Board visits to the
the changing dynamics of global markets and further
manufacturing facilities in the Rio Nance Complex in Choloma,
strengthen the Company’s business model to drive growth.
Honduras and to Barbados, where we had an opportunity to meet
the newly added E-Commerce and American Apparel teams.
Finally, I would like to take this opportunity to thank Glenn,
his leadership team and all 50,000 employees for their hard
The challenges posed by technology developments and
work and dedication to excellence this year. I would also
competitive dynamics in the apparel industry continue to
like to thank you, our shareholders, for your confidence
be a focus of your Board. In this regard, we are proposing
and continued support. Gildan has emerged from 2017
for your approval, four new Directors whose biographies
with strong fundamentals to take on new opportunities.
are included in the Management Proxy Circular for the
I look forward to a successful and sustainable future.
Annual General Meeting in May. These proposed Director
candidates are part of a rational succession plan for the Board,
Sincerely,
adding individuals who are experienced public company
Directors with skills that match our Director skills matrix.
Sheila O’Brien will be retiring at this year’s annual meeting
and I would like to thank her for 13 years of service on the
Bill Anderson
Chairman
3
In support of this growing e-commerce business
we also added a dedicated direct-to-consumer
distribution facility, located in Jurupa Valley, California
4
Our new drop-ship facility in Jurupa Valley, California, USA
a message from
T H E P R E S I D E N T & C E O
To our shareholders,
This past year, we have continued our solid track record
of delivering strong results. In the face of a rapidly
changing marketplace and ongoing challenges within the
retail segment we have once again performed well, fueled by
the competitive advantages we have built over the last decade.
Sales for the full year totaled $2.75 billion, up 6.4% from last
year, which was in line with the Company’s guidance. We
generated adjusted operating margins of 15.4% for the full year,
up 60 basis points over last year, and adjusted diluted EPS of
$1.72, up 14% over our prior year results.
Our Company continues to evolve and demonstrate our
industry leadership. Historically our sales growth was fueled
repurchase of shares in 2017, we returned $413 million to
organically from market share gains and international expansion
shareholders while continuing to make strategic investments
within the printwear channel. We then invested further in our
manufacturing operations, extended our vertical integration
in areas that will enhance our manufacturing, distribution and
e-commerce capabilities and position the Company for growth
into yarns and pursued strategic M&A opportunities, both
over the long-term.
as an entry point into the retail market and to expand our
share within the global printwear channels. By levering these
investments and our low cost manufacturing base we have
delivered strong revenue growth and returns.
As we look at the wide-spread changes happening across our
markets, I am confident we are well positioned to capture the
Building on our strengths in Printwear
Our success in 2017 was a result of continued growth in the
printwear channel driven by a combination of incremental sales
contributions from the acquisitions of Alstyle and American
Apparel®, double-digit organic volume growth in the important
fashion basics category and double-digit growth in shipments
next phase of Gildan’s growth. We are making the necessary
to international markets.
investments to further enhance our abilities to efficiently and
sustainably capture opportunities that are being created in
these changing markets, always maintaining our focus on
our brands, manufacturing excellence and global distribution
capabilities.
We ended the year with strong sales growth in Printwear,
continued growth in our underwear business and delivered
another record year of free cash flow totaling $519 million,
while continuing to execute on our priorities for capital
allocation. Through the issuance of dividends and the
The American Apparel® brand, acquired in February of this
past year, represents a great opportunity for the Company,
by providing us with a premium collection in the fashion
basics category and by adding a strong consumer brand to
our portfolio. I am very proud of the manner in which the
organization so quickly integrated the American Apparel®
brand at the beginning of 2017. This is truly a testimony to
our strong business model and how our vertical integration
and operational excellence set us apart from the industry and
position us well to best capitalize on future opportunities.
5
Our 2018 Comfort Colors® Apparel Collection
In this past year, we also expanded the Anvil®, Comfort Colors®
year with broader placement and expanded product offerings
and Gildan® brands in the fashion basics category, leaving us
featuring new technologies such as MoveFX® for better fit and
very well positioned heading into 2018. A key highlight was the
Cool Spire® for wicking performance.
successful introduction of the Gildan® Hammer™ collection at
this year’s January trade shows. This heavier weight, premium
One major trend that we saw in 2017 was the movement by
collection of soft ring-spun styles in classic silhouettes has
retailers to focus on their owned private label brands, which
clearly hit the mark.
primarily impacted our socks sales. However, given our
strength in manufacturing we see opportunity in these changes
Digital convergence creates opportunity
going forward, particularly in selected product categories.
The rapid movement of consumers to online platforms and the
increasing use of mobile devices for engaging with consumers
Investing in capabilities and capacity
have created a convergence between the retail and printwear
In the currently evolving marketplace, consumers are able
markets.
to access millions of products at their fingertips. This ease
of access and seemingly unlimited reach has broadened the
We believe this represents a tremendous opportunity for our
required skill set for companies to be successful. An important
Company and lies at the center of our strategy to consolidate
success factor to service this changing dynamic will lie in our
our Printwear and Branded Apparel business units into one
abilities to capture and fulfill orders from any origin, to market
consolidated operating division. This will better position the
our brands leveraging social media and digital platforms and
Company to capitalize on growth opportunities within the
to efficiently bring products to market quickly to meet the fast
evolving industry landscape through a more streamlined and
changing demands of a new type of consumer.
leaner organization, creating cost savings, margin accretion and
operational efficiencies as the Company leverages a common
In support of our growing e-commerce business, during 2017
infrastructure to maximize the growth potential of all its brands.
we also added a dedicated direct-to-consumer distribution
facility, located in Jurupa Valley, California to service both
We were pleased with the results from our “Not Your Dad’s
printwear and e-commerce customers. The capacity to service
Underwear” marketing campaign during 2017, designed to show
this growing business will be expanded further in early 2018
our customers that Gildan® is a brand they can truly make their
with the addition of an incremental facility located on the East
own. Our underwear business continued to grow throughout the
coast.
6
We are making the
necessary investments to
further enhance our abilities
to efficiently and sustainably
capture opportunities that are
being created in these changing
markets, always maintaining
our focus on our brands,
manufacturing excellence and
global distribution capabilities.”
Our investments
in these areas will
ensure that we are
well-positioned for
continued long-term
growth, and provide
Investing in new
capabilities in
e-commerce
In 2017, we completed
the conversion of the
goldtoe.com and
gildan.com e-commerce sites to a new platform, integrated the
us with the capability to handle both large scale and smaller
American Apparel® e-commerce store onto a shared platform
lot manufacturing to appeal to different market segments. We
and recruited a world-class e-commerce team with expertise
anticipate spending approximately $125 million in Capex in
and focus on managing all direct-to-consumer e-commerce
2018 towards these projects as well as to continue to expand
initiatives.
our capacity and capabilities to service a growing e-commerce
business in the U.S. and internationally.
In an extension of this growing channel of distribution we have
also continued to grow our product presence on a number of
Meeting challenge with opportunity
major retailers’ e-commerce sites, as well as with pure-play
I firmly believe that no other company is better equipped to
e-commerce companies, as demonstrated with the launch of the
respond to the shifting market landscape given our business
complete Gildan® Men’s Underwear collection on Amazon.com
model, expertise, talent and strategies. This new connected
in early 2018.
and digitized marketplace requires more agile organizational
models, leaner cost structures and the right people in place to
Expanding our manufacturing capacity
lead and execute through a time of rapid change. I believe we
The construction of the new facility, Rio Nance VI, in Honduras,
have everything we need to continue to be successful.
was completed late this year and is expected to start ramping
up by mid-2018 to support future growth. This state-of-the-art
I would like to take this opportunity to thank our management
facility, with flexible capacity, will produce high-value, open-
team and our now more than 50,000 employees for
width textiles for our fashion, performance and underwear
embracing change and working together to respond quickly to
collections.
opportunities. I would also like to thank our customers and our
shareholders for the confidence you place in us and our ability
Gildan added to its yarn-spinning capabilities through the
to navigate through these turbulent but exciting times.
acquisition of Swift Spinning in 2017. This acquisition has
helped Gildan meet its long-term yarn-spinning capacity
Sincerely,
growth needs and has opened the door for expansion into more
specialty yarns to support our fashion basics business. Our
yarn-spinning operations now employ close to 1,400 people in
the U.S., making us one of the largest domestic consumers of
Glenn J. Chamandy
U.S. cotton and one of the largest employers in the industry in
President & CEO
the U.S.
7
F I N A N C I A L
H I G H L I G H T S
2013
2014
2015
2016
2017
S
E
L
A
S
T
E
N
20132013
2014
2015
2016
2017
E
R
A
H
S
R
E
P
S
G
N
I
N
R
A
E
D
E
T
U
L
I
D
2,214.9
2,299.2
2,568.6
2,585.1
2,750.8
in U.S. $ millions
1.33
1.36
1.12
1.14
1.42
1.46
1.47
1.51
1.61
1.72
in U.S. $
Diluted earnings per share
Adjusted diluted earnings per share(1)
2013
2014
2015
2016
2017
D
E
T
S
U
J
D
A
)
1
(
A
D
T
I
B
E
449.4
388.4
503.8
523.8
586.1
in U.S. $ millions
S
E
R
U
T
I
D
N
E
P
X
E
L
A
T
I
P
A
C
2013
2014
2015
2016
2017
in U.S. $ millions
140.2
94.8
199.8
229.6
331.9
(1) Adjusted diluted earnings per share and adjusted EBITDA are non-GAAP financial
measures. See “Definition of non-GAAP financial measures” in the 2017 Management’s
Discussion and Analysis.
Certain minor rounding variances exist between the consolidated financial
statements and this summary.
We are evolving with the
marketplace by taking steps
to streamline our structure
and align our operations
to operate more efficiently
and capitalize on cost
reduction opportunities,
while also making
investments in areas
that will enhance our
capabilities to drive short
and long term sales growth
and profitability.”
Rhodri Harries
Executive Vice President,
Chief Financial & Administrative Officer
8
Results shown on a calendar year basis
(In U.S.$ millions, except per share data and ratios)
2017
2016
2015
2014
2013
STATEMENT OF EARNINGS
Net sales
Adjusted EBITDA(1)
2,750.8
2,585.1
2,568.6
2,299.2
2,214.9
586.1
523.8
503.8
388.4
449.4
Adjusted operating income(1)
423.9
383.2
378.9
289.6
354.7
Net earnings
362.3
346.6
346.1
276.6
326.6
Diluted earnings per share
1.61
1.47
1.42
1.12
1.33
Adjusted net earnings(1)
386.9
356.3
355.4
281.0
334.5
Adjusted diluted earnings per share(1)
1.72
1.51
1.46
1.14
1.36
CASH FLOW
Cash flows from operating activities
613.4
537.9
384.4
244.6
370.5
Capital expenditures
Free cash flow(1)
FINANCIAL POSITION
Total assets
Net indebtedness
(cash in excess of total indebtedness)(1)
(94.8)
(140.2)
(229.6)
(331.9)
(199.8)
519.2
398.4
158.9
(81.9)
173.2
2,980.7
2,990.1
2,834.3
2,648.3
2,124.1
577.2
561.8
324.3
313.9
(15.1)
Shareholders' equity
2,051.4
2,119.6
2,188.4
1,882.2
1,742.9
FINANCIAL RATIOS
Adjusted EBITDA margin(2)
21.3%
20.3%
19.6%
16.9%
20.3%
Adjusted operating margin(3)
15.4%
14.8%
14.8%
12.6%
16.0%
Adjusted net earnings margin(4)
14.1%
13.8%
13.8%
12.2%
15.1%
Return on shareholders' equity(5)
18.6%
16.5%
17.5%
15.5%
21.0%
Net debt to adjusted EBITDA(1)
1.0x
1.0x
0.6x
0.8x
n.a.
(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 2017 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.
H
S
A
C
E
E
R
F
)
1
(
W
O
L
F
2013
173.2
2014
(81.9)
158.9
2015
2016
2017
in U.S. $ millions
398.4
519.2
1.0x
1.0x
0.8x
0.6x
)
1
(
A
D
T
I
B
E
D
E
T
S
U
J
D
A
O
T
T
B
E
D
T
E
N
0.0x
9
Rebirth of an
American Icon
American Apparel® collections remain true to the
origins of the brand, delivering fashionable basic
apparel to younger consumers looking for premium
fashion basics, freedom of expression and incredible
style. This globally-renowned brand is a great
addition to our portfolio, and expands our offering
in the fashion basics category of the market with
collections of premium quality products.
While American Apparel® is now benefitting from
Gildan’s global manufacturing infrastructure,
operational expertise and financial strength, we
have also ensured that the brand’s heart and soul
remain intact. As part of the Gildan family of brands,
American Apparel® has the opportunity to reach new
heights and expand to new markets globally.
We are most proud that our teams pulled together
and helped integrate this brand into our operations
so quickly this past year. We relaunched their
printwear business shortly after the acquisition
closing in early February. After a transition period,
the direct-to-consumers online store at www.
americanapparel.com, was relaunched to U.S.
consumers with over 200 great styles, many of which
are now produced in Gildan’s manufacturing facilities.
10
Globally Sourced,
Ethically Made,
Sweatshop Free.
The core promise of American Apparel® has
always been to deliver amazing fashion basic
styles that were manufactured ethically and
responsibly. The brand’s founding belief was
that workers were paid a fair wage, provided
progressive benefits and treated with respect
and dignity.
American Apparel® now has the support of
Gildan, one of the world’s largest apparel
manufacturers, with a strong history of
leading responsible and sustainable practices
encompassed within its Genuine Responsibility™
corporate social responsibility program.
American Apparel® was built on a strong heritage
of company-owned manufacturing, fabric
innovation and fashionable styling. Our new
Globally-Made collections were developed to
offer customers the same great fabrics, styles
and colours without compromising on being
responsibly-made. We retained a core selection
of key styles in a Made-in-U.S.A. collection, with
slightly higher prices for those customers looking
for a choice.
americanapparel.com
is Back
Online
The site offers multiple collections including the Basics Shop, the
Canada, Mexico and Barbados. The team will focus on core
Icons Shop and the Made in USA Shop to cater to all consumers.
e-commerce functions such as site experience, ecosystem
#AAClassics is found on the brand’s Instagram wall, which
design, digital marketing, analytics and conversion optimisation.
features social influencers posing and posting in our famous
Later in 2018, we are anticipating the development and launch of
styles.
a new digital platform, designed to deliver next generation user
experiences and unprecedented online performance across this
A new e-commerce team has been recruited, comprised of
and other brands.
world-class talent from the U.S., Germany, the Netherlands,
11
G E N U I N E
R E S P O N S I B I L I T Y
Our Genuine Responsibility™ program leads
the way in corporate, social and environmental
responsibility and is firmly embedded in the
Company’s long-term strategy.
Owning and operating the facilities producing
the vast majority of our products, allows us to
directly control and positively influence our
impacts and pursue continuous improvements
in every step in the manufacturing process.
Below are some of the many initiatives we
have in place.
CREATING OPP ORTUNITIES
We strive to empower our employees through access to
programs that will enrich the various aspects of their lives –
professional, personal or family. We believe that these initiatives
have the power to open up future opportunities for advancement
and growth and to ensure our people share in our success.
PRI ORI TIZING HEALTH
& WELL-B EING
Gildan’s highly-skilled and dedicated manufacturing employees
are a central part of the company’s success. Helping them stay
healthy is therefore a priority.
Gildan Entrepreneur Bazaar
In the majority of our manufacturing locations, our employees
Gildan’s annual entrepreneurship fair in Honduras showcased
benefit from 24-hour access to Gildan’s free on-site medical
the entrepreneurial activities of our employees outside of the
clinics, staffed with doctors and nurses, which provide free health
workplace, exposing their products and services to thousands of
care and medications, pre and postnatal care, vaccinations,
Gildan employees while fundraising for a cause.
preventative screenings and health education campaigns.
Primary healthcare in manufacturing facilities
Gildan’s Housing Program
An important stepping stone in the evolution of developing
Back and Shoulder Health Program
economies is home ownership. Gildan has donated over $150,000
We have established in-house clinics, accessible to employees
in down payments for employees looking to purchase a new
at all times, that focus on stretching and exercise sessions to
home. This program was developed in partnership with local
promote back and shoulder health. In 2017 alone, we delivered
banking institutions in Latin America. Gildan has given this
more than 24,000 hours of training and look to expand the
important opportunity to 240 employees.
program further in 2018.
12
E NABLING O UR COMMUNI TI ES
Gildan seeks to be an active participant in the communities where we operate, often going well beyond simply creating
employment in our facilities. Each year, Gildan organizes several employee volunteering activities enabling employees to get
involved and contribute to the enrichment of their communities.
Gildan Glow Run
Bangladesh school for girls
The Gildan Glow Run is a 5k run and fundraising event in
In 2017, the Company signed a collaborative agreement of more
Honduras, the Dominican Republic and Nicaragua, uniting
than $75,000 with Room to Read® to support more than 160 girls
more than 12,000 Gildan employees and their families yearly
in the Bangladesh Girls’ Education Program and establish a library
to celebrate a night of physical activity and entertainment in
and literacy program at a school in Dhaka.
support of their communities. Over the last 5 years, the Glow
Run has raised over $370,000 for community investments in
Latin America.
P R OTECTING THE ENVI R O NME NT
Gildan’s commitment to sustainable operations means that we continuously look for new ways to reduce our footprint. Our
focused approach ensures we look for ways to reduce our environmental impact and preserve the natural resources used in
our manufacturing processes.
BioMass
Absorption chillers
Harnessing energy from waste and converting it into renewable
Gildan’s engineers, always looking to optimize every unit of energy
energy is the core idea behind Gildan’s BioMass system. In
generated, have implemented an innovative solution that captures
highly efficient boilers, we burn agricultural and factory waste
the thermal energy from within the steam to create cool water
to create steam that is deployed throughout our operations,
that now drives the facilities’ air conditioning systems. This system
avoiding 150,000 metric tons of greenhouse gas emissions or the
generated energy savings in 2017 equivalent to 1 million gallons of
equivalent of taking 32,000 cars off the roads annually.
fossil fuels.
13
portfolio of
B R A N D S
As one of the world’s leading brands in everyday basics,
The Gildan® brand continued to break new ground this past
Gildan® is trusted by every member of the family for products
year with our all-new “Not Your Dad’s Underwear campaign”,
that deliver premium quality and long lasting durability,
helping drive the brand to 10.6% market share at the end
always at value-driven prices.
of December in the men’s underwear category according
to NPD Retail Tracking Service . In 2017 we successfully
In the printwear industry, Gildan® delivers the ultimate
introduced several new technologies to our underwear
solution for decorators in over 60 countries. Our customers
offering including Cool Spire® wicking technology and
trust Gildan® for superior quality, consistent colors and the
MoveFX® stretch properties added to cotton and polyester
broadest distribution network globally. Looking forward to
styles for added comfort and enhanced fit. As we look
2018, Gildan’s printwear Fashion Collection, already featuring
towards 2018, we will continue to invest strategically in the
the lightweight SoftStyle family of products, will see the
Gildan® brand, enhance our e-commerce offering and expand
addition of the Gildan® Hammer™ collection featuring heavier
our reach, including an early February launch of the full
weight super-soft ring spun in classic silhouettes.
collection of men’s underwear on Amazon.
14
For more than 40 years, Alstyle® has been crafting basic
tees and sweatshirts that deliver quality, style and comfort.
Pioneers in the industry for introducing the tear-away label and
personalization of apparel, Alstyle® continues to be a favourite
for printwear customers looking to rebrand their decorated
The Anvil® brand delivers affordable fashion and effortless chic
apparel. From infants to adults, Alstyle® tees, tanks and
for everyone. The collection is built upon platforms of great
sweatshirts are available in a variety of colours and brilliant, eye-
fabrics, body-inclusive silhouettes and on-trend blends for
catching shades. There’s a choice for every style and occasion.
individual style. Anvil® is one of our fastest growing printwear
fashion basics brands and in 2018, we will add four all-new
fabric offerings including the Freedom, Light Terry, Curve and
Stretch collections, which address several growing trends with
comfort, quality and style.
Comfort Colors® offers the ultimate comfort in clothes designed
with a nature-inspired colour palette that inspires the soul. From
The iconic brand that is now part of the growing family of
the favourite Saturday morning tee to the cozy hoody for that
Gildan® brands is the printwear industry’s leading premium
chilly night, people love to get together and relax in Comfort
fashion brand. American Apparel® has a rich history of
Colors® apparel with that vintage look.
amazing fabrics, fashion-forward styling and distinct
marketing. American Apparel® now benefits from a new global
Over the past 40 years this brand has perfected the dyeing
infrastructure, while keeping its heart and soul. American
process, resulting in craftsmanship that is loved by our
Apparel® relaunched its e-commerce platform in 2017 and
customers and unmatched in the industry. In 2018 Comfort
continues to create new trends for consumers looking for
Colors® will continue to lead the way with more styles and an
inspiration in timeless fashion styles.
even wider palette of simply irresistible hues.
15
Our collection of legwear brands, Silks®, Secret® and Secret
Silky® have redefined this category with new technologies,
such as LYCRA® xtralife™, Xceptionelle and HIEQ Smart Temp.
These innovations provide women durability and the freedom
of movement while keeping them cool, dry and comfortable
all day. We are driven to continue to revitalize the legwear
industry in the North American marketplace, keeping women in
Created in 1934 built on the idea of adding gold linen yarns to
step with the latest fashion and technology trends.
the toe of the socks for durability, GOLDTOE® has been one
of American’s favourite socks for generations. GOLDTOE®’s
collections have always delivered superior quality, fit and
comfort, from classic blacks and browns to argyles, checks and
patterns. New collections like the Harrington GoldToe® have
expanded the brand’s appeal to a wider range of consumers by
delivering superior comfort cushioning, premium quality and
inspiring styles to casual dress sock consumers. GOLDTOE® for
women now includes a wide array of styles ranging from boot
socks to leggings, always delivering softer feel, better quality
and ultimate fit.
PEDS® continues to lead the way with socks and legwear
for women and girls. The collections, which deliver premium
features, new technologies and unparalleled style, are sold
across several channels within the U.S. retail market. PEDS® is
As the official licensee of Under Armour® socks in North
now the # 2 women’s sock brand in the U.S.* MEDIPEDS® range
America, Gildan continues to drive innovation and superior
of therapeutic products are specially engineered to provide a
performance with this industry-leading brand. Cutting-edge
wide array of foot and leg solutions for a growing number of
technology and advanced engineering are built into some of
consumers with specific needs.
the world’s highest performance socks for almost every sport.
*NPD TMM Data as of January 2018
16
2017
REPORT TO
SHAREHOLDERS
February 23, 2018
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
1.0
PREFACE
2.0
3.0
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
OUR BUSINESS
3.1 Overview
3.2 Operating segment reporting
3.3 Our operations
3.4 Competitive environment
4.0
5.0
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 FINANCIAL RISK MANAGEMENT
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
INTERNAL CONTROL OVER FINANCIAL REPORTING
16.0 RISKS AND UNCERTAINTIES
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. 8
P. 10
P. 21
P. 23
P. 25
P. 27
P. 27
P. 27
P. 32
P. 34
P. 35
P. 36
P. 36
P. 45
P. 48
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.
This MD&A comments on our operations, financial performance and financial condition as at and for the years ended
December 31, 2017 and January 1, 2017. 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 December 31, 2017 and the related notes.
In preparing this MD&A, we have taken into account all information available to us up to February 22, 2018, 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 on February 21, 2018.
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.
Additional information about Gildan, including our 2017 Annual Information Form, is available on our website at
www.gildancorp.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and
Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov.
GILDAN 2017 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”, "Operating results", “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:
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 ability to implement our growth strategies and plans;
• our ability to successfully integrate acquisitions and realize expected benefits and synergies;
•
•
• our reliance on a small number of significant customers;
•
• 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;
•
the fact that our customers do not commit to minimum quantity purchases;
fluctuations and volatility in the price of raw materials used to manufacture our products, such as cotton, polyester
fibres, dyes and other chemicals;
• our reliance on key suppliers and our ability to maintain an uninterrupted supply of raw materials and finished goods;
the impact of climate, political, social and economic risks 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;
the imposition of trade remedies, or changes to duties and tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs that the Company is currently relying on in conducting
its 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;
•
• exposure to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk, and interest
changes in accounting policies and estimates; and
rate risk, as well as risks arising from commodity prices.
GILDAN 2017 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
3.1 Overview
Gildan is a leading manufacturer of everyday basic apparel which markets its products in North America, Europe, Asia-Pacific,
and Latin America, under a diversified portfolio of Company-owned brands, including Gildan®, American Apparel®, Comfort
Colors®, Gildan® Hammer™, Gold Toe®, Anvil®, Alstyle®, Secret®, Silks®, Kushyfoot®, Secret Silky®, Therapy Plus™,
Peds® and MediPeds®, and under the Under Armour® brand through a sock licensing agreement providing exclusive
distribution rights in the United States and Canada.
Gildan designs, manufactures, and markets activewear, underwear, socks, hosiery, and legwear products. Our products are
sold to wholesale distributors, screenprinters or embellishers, as well as to retailers that sell to consumers through their
physical stores and/or e-commerce platforms. In addition, we sell directly to consumers through our own direct-to-consumer
platforms.
Since its formation, the Company has made significant capital investments in developing its own large-scale, low-cost vertically
integrated supply chain, encompassing yarn production, textile manufacturing, and final product assembly. The vast majority of
Gildan's manufacturing operations are internally run and are primarily located in Central America, the Caribbean Basin, North
America, and Bangladesh. Running its own operations enables the Company to ensure it operates as a socially responsible
manufacturer employing industry-leading labour and environmental practices in adherence to its comprehensive corporate
social responsibility program, which is consistently applied across all geographies in which it has a presence.
3.1.1 Recent Developments
Effective January 1, 2018, the Company consolidated its organizational structure and implemented executive leadership
changes to better leverage its go-to-market strategy across its brand portfolio and to drive greater operational efficiency across
the organization. The Company combined its Printwear and Branded Apparel operating businesses into one consolidated
divisional operating structure centralizing marketing, merchandising, sales, distribution, and administrative functions to better
position the Company to capitalize on growth opportunities within the evolving industry landscape. The combination of the two
operating businesses is intended to drive a leaner and more streamlined organization, which is expected to provide operational
efficiencies as the Company leverages a common infrastructure to maximize the growth potential of its brands.
3.2 Operating segment reporting
For years ended December 31, 2017 and January 1, 2017, the Company managed and reported its business under two
operating segments, Printwear and Branded Apparel, each of which was a reportable segment for financial reporting purposes
with its own management that was accountable and responsible for the segment’s operations, results, and financial
performance. These segments were principally organized by the major customer markets they served.
The Printwear segment serviced wholesale distributors and screenprinters in imprintables markets in over 60 countries across
North America, Europe, Asia-Pacific, and Latin America by distributing undecorated activewear products in large quantities
primarily to this customer base. The Branded Apparel segment marketed branded family apparel, including socks, underwear,
activewear, sheer hosiery, and shapewear products to retailers and consumers in the United States and Canada.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company is currently reviewing its operating segment reporting in order to reflect the new organizational structure (as
discussed in section 3.1.1, "Recent Developments") under which the business will be managed, and expects to report under
one reportable business segment going forward.
3.3 Our Operations
3.3.1 Brands, Products and Customers
We manufacture and market a broad range of basic apparel products across a diversified portfolio of brands sold to a
customer base which includes wholesale distributors, screenprinters/embellishers, retailers, and individual consumers.
Our primary product categories generating the greater part of our sales include activewear, socks, underwear, and hosiery, the
vast majority of which we manufacture. Some of the brands also extend to other categories such as intimates, shapewear,
denim, and peripheral or fringe products like caps, totes, towels, and other accessories which are primarily sourced through
third-party suppliers.
The majority of our activewear products are sold as “blanks” or undecorated, without imprints or embellishment. Our
activewear products are primarily sold to wholesale distributors who buy our products and sell the blanks to
screenprinters/embelishers who decorate the products with designs and logos and in turn 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.
The activewear products have diverse applications, such as serving as work or school uniforms or athletic team wear or simply
conveying individual, group, and team identity. In addition to activewear, as part of our basic family apparel product offering we
sell socks and underwear for men, ladies, and kids, as well as hosiery, through various distribution tiers within the retail
channel, including mass and dollar stores, department stores, national chains, sports specialty stores, craft stores, food and
drug retailers, and price clubs, all of which sell to consumers. In addition, our products are sold to consumers through the e-
commerce platforms of our retail customers and our own websites. The Company also manufactures products for select
leading global athletic and lifestyle consumer brands against which our brands do not compete.
The following table summarizes our product and brand offerings:
Primary product
categories
Product-line details
Activewear
T-shirts, fleece tops and bottoms, sport
shirts
Socks
athletic, dress, casual, workwear,
legwear, therapeutic(5)
Brands
Gildan®, Gildan Performance®, Gildan Platinum®(1), Gildan® Hammer™,
Smart Basics®, Comfort Colors®(2), American Apparel®, Anvil®,
Alstyle®(2), Gold Toe®, Mossy Oak®(3)
Gildan®, Gildan Platinum®(1), Smart Basics®, Under Armour®(4), Gold
Toe®, PowerSox®, GT a Gold Toe Brand®, Silver Toe®, Signature Gold
by Goldtoe®, Peds®, MediPeds®, Kushyfoot®(1), Therapy Plus®(1), All
Pro®, Mossy Oak®(3)
Underwear
men's and boys' underwear (tops and
bottoms), ladies panties
Gildan®, Gildan Platinum®(1),Smart Basics®, American Apparel®
Hosiery
sheer panty hose, tights, leggings
Secret®(1), Silks®(1), Secret Silky®, Peds®, American Apparel®
Intimates
ladies shapewear, intimates accessories Secret®, American Apparel®
Other
To round out our product offerings for certain brands, we also offer other products, including but not limited to denim,
jackets, sweaters, bodysuits, skirts, dresses, accessories, which are mainly sourced through third-party suppliers
(1) Gildan Platinum®, and Kushyfoot® are registered trademarks in the U.S. Secret®, Silks®, and Therapy Plus® are registered trademarks in Canada.
(2) Comfort Colors® and Alstyle® are registered trademarks in the U.S.
(3) Under license agreement - with worldwide distribution rights and exclusivity for certain product categories.
(4) Under license agreement for socks only - with exclusive distribution rights in the U.S. and Canada.
(5) Applicable only to Therapy Plus® and MediPeds®.
3.3.2 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
GILDAN 2017 REPORT TO SHAREHOLDERS P. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
All of our yarn-spinning operations are in the United States, where we manufacture the majority of the yarn used to produce
our products. We have seven facilities, including two facilities which were acquired as part of the July 2017 acquisition of
substantially all of the assets of Swift Spinning, Inc. 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 Central America, in
Honduras, and is strategically located to efficiently service 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 in Honduras outside of the Rio Nance complex. The majority of our socks are produced at
our Rio Nance complex in two sock manufacturing facilities and we own and operate a sock manufacturing facility in Hildebran,
North Carolina. Sheer hosiery manufacturing is located in a facility in Canada. 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. Also in Central America, we have screenprinting and decorating capabilities to support our sales to leading global
athletic and lifestyle consumer brands, as well as garment-dyeing operations. In the Caribbean Basin, we operate a large-
scale, vertically integrated textile facility in the Dominican Republic and assemble the cut goods from that facility at our sewing
facilities in the Dominican Republic and at dedicated third-party sewing contractors in Haiti. Another manufacturing hub is
based in Mexico, where we operate a large integrated textile, sewing, and distribution facility, as well as cut and sew facilities,
all of which were acquired in 2016 as part of the Alstyle acquisition. 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 primarily for international
markets. 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(1)
Textile
facilities
Garment-dyeing
facility
Sewing facilities(2)
Sock / Sheer
manufacturing
facilities
■ Clarkton, NC
■ Cedartown, GA
■ Columbus, GA
(2 facilities)
■ Salisbury, NC
(2 facilities)
■ Mocksville, NC
■ Dominican
Republic
■ Agua Prieta ■ Bangladesh
■ Dominican
Republic
(2 facilities)
■ Ensenada
■ Hermosillo
■ Agua Prieta
■ Bangladesh
■ Honduras
(4 facilities)
■ Honduras
■ Honduras
(4 facilities)
■ Nicaragua
(3 facilities)
■ Honduras
(2 facilities)
■ Montreal, QC ■ Hildebran, NC
(1) We also use third-party yarn-spinning suppliers, primarily in the U.S., to satisfy the remainder of our yarn requirements.
(2) We also use the services of third-party sewing contractors to satisfy the remainder of our sewing requirements.
3.3.3 Sales, marketing and distribution
Our primary sales and marketing office is located in Christ Church, Barbados, out of which we have established customer-
related functions, including sales management, marketing, customer service, credit management, sales forecasting, and
production planning, as well as inventory control and logistics. We also maintain other sales offices in the U.S. We distribute
our products out of Company-operated large distribution centres in the United States, in Eden, NC, Charleston, SC,
Jurupa Valley, CA, and other smaller facilities in the U.S. and Canada, as well as Company-owned distribution facilities in
Honduras and Mexico. To supplement some of our distribution needs, we use third-party warehouses in the U.S., Canada,
Mexico, Colombia, Europe, and Asia. In order to drive more efficient distribution operations, some distribution facilities ship
exclusively full-case and truckload orders, while other distribution facilities are geared to support direct-to-consumer shipping,
which is typically smaller orders which require pick-and-pack capabilities.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
3.3.4 Employees and corporate office
We currently employ over 50,000 employees worldwide. Our corporate head office is located in Montreal, Canada.
3.4 Competitive environment
The basic apparel market for our products is highly competitive. Over the last few years, changing market dynamics, such as
the growth in on-line shopping, weaker store traffic trends, and overall store shelf space reductions driven by retailer store
closures have intensified competition but at the same time presented opportunities for potential growth. For instance, the
growth of on-line shopping has reduced barriers to entry and provided greater opportunity for new brands to emerge as space
limitation to sell products has diminished. At the same time, retailers and wholesale distributors have increasingly developed
their own private label brands as a means of differentiation from their competitors.
Competition is generally based upon price, brand, quality, consistency of quality features, comfort, fit, style and service. We
believe we differentiate ourselves from our competition with our expertise in designing, constructing, and operating large-scale,
vertically integrated, and strategically-located manufacturing hubs. Having developed this skill set and made significant capital
investments in our manufacturing infrastructure allows 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 has also enabled us to deliver enhanced product features, further improving the value
proposition of our product offering to our customers. Operating as a socially responsible manufacturer is also an important
competitive advantage and is an increasingly important purchase consideration for our customers. Owning and internally
operating the vast majority of our manufacturing capacity allows us to exercise tighter control in how we operate and in
ensuring we employ high standards for environmental and social responsibility practices. Distribution reach and capabilities
are also key success factors, including the ability to provide quick and efficient fulfillment of large orders as well as small
orders which are more typical in direct-to-consumer fulfillment. We have established efficient broad-based distribution
operations to service the replenishment needs of all of our customers, be they wholesale distributors or big-box retailers who
purchase in large quantities, or consumers, who purchase in small quantities.
We face competition from large and smaller U.S.-based and foreign manufacturers or suppliers of basic family apparel.
Among the larger competing North American manufacturers are Fruit of the Loom, Inc., a subsidiary of Berkshire
Hathaway Inc., which competes through its own offerings and those of its subsidiary, Russell Corporation, as well as
Hanesbrands Inc. (Hanesbrands), both of which have manufacturing operations in similar geographies producing goods in the
same basic apparel product categories and selling into North America and international markets. Other competitors that
compete in specific product categories such as socks and underwear include Garan Incorporated, Renfro Corporation,
Jockey International, Inc., Kayser Roth Corporation, and Spanx, Inc. We also compete with smaller U.S.-based competitors
selling to or operating as wholesale distributors of imprintable activewear products, including Delta Apparel Inc., Color Image
Apparel, Inc., Next Level Apparel, and Bella + Canvas, as well as Central American and Mexican manufacturers. Additionally,
we compete with well-established U.S. fashion apparel and sportswear companies. Within the imprintables channel, competing
brands include various private label brands controlled and sold by many of our customers. Similarly, within the retail channel
and from an on-line perspective, we compete with some of our retail customers and pure-play e-commerce customers that
market and sell basic apparel products under their private labels that compete directly with our brands.
4.0 STRATEGY AND OBJECTIVES
Our growth strategy is composed of the following strategic drivers:
4.1 Driving market leadership in imprintable fashion basics
We intend to continue to pursue growth in imprintable fashion basics. While the majority of the products we manufacture and
market are considered basic, non-fashion apparel, and are replenishment-driven in nature, some of the brands under which we
market our activewear products have more fashion and/or performance-driven elements. Within the imprintables channel,
there are three brand positioning categories for activewear, namely “basics”, “fashion basics”, and “performance basics”. In
basics, Gildan® is the leading brand. In more recent years, we have seen an acceleration of industry growth in the fashion
basics and performance basics categories, due in part to end users shifting preference to lighter weight, softer fabrics (fashion
basics), or garments offering attributes featuring moisture wicking and anti-microbial properties for long-lasting comfort and
performance (performance basics). Fashion basics products are produced with higher quality ring-spun yarns in cotton and/or
blended yarn fibres and may feature more fitted silhouettes, side seam stitching, and stretch attributes, among other
characteristics. Currently, our share in these categories is not as high as in basics. Over the last few years, we have developed
and acquired brands which are well positioned to drive growth in these categories. We have also invested in developing our
own yarn-spinning manufacturing facilities, thereby securing our own cost-effective ring-spun yarn supply. In the fashion basics
category, we sell our products under the Gildan® and Gildan® Hammer™ brands, as part of our opening-price-point offering,
GILDAN 2017 REPORT TO SHAREHOLDERS P. 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
the Anvil® brand, the American Apparel® brand, which is positioned as a premium brand in fashion basics, and the Comfort
Colors® brand, also a premium brand, featuring garment-dyed activewear products. In the sports performance category, we
market our products under our Gildan Performance® brand offering. With strong brand positioning in these categories
supported by cost-effective manufacturing operations, including yarn capabilities, we believe we are well positioned to drive
further share penetration within imprintable fashion and performance basics.
4.2 Leveraging brand portfolio across channels, geographies, and e-commerce platforms
We are targeting to grow our sales by leveraging our brand portfolio across channels of distribution, geographical regions, and
across our e-commerce infrastructure and on-line platforms of our customers. In addition, we believe we can leverage our
extensive distribution network and capabilities to broaden the customer base and reach of our brands. Growth in on-line
shopping is changing the overall market landscape. Printwear and retail channels are converging, accessibility to consumers
and end-users through e-commerce is increasing, and "space" to market products on-line is not a limiting factor for growth as
in the traditional brick and mortar retailer channel. Consequently, e-commerce is creating opportunities for our brands and is an
area of focus and investment for the Company, including investments in enhancing direct-to-consumer distribution capabilities.
At the same time, we are seeing a resurgence of private label brands by traditional retailers or wholesale distributors trying to
differentiate their offerings and enhance profitability. While continuing to focus on our own brands, in light of the rising trend of
retailers growing their own private label brands, the Company would consider supplying retailers with product for retailer
private label programs which meet certain criteria, including size of program, financial return targets, terms of agreement, and
working capital investment requirements among other factors of consideration. We have also developed strong relationships
with, and are targeting to grow our sales as a supply chain partner to, a small number of select leading global athletic and
lifestyle brands for which we manufacture products, but against which our brands do not compete.
4.3 Growing internationally
We are pursuing further growth in international markets where we estimate that the addressable market opportunity is large.
Currently our sales outside the United States and Canada represent less than 10% of our total consolidated net sales. Our
market presence internationally is focused in Europe, Asia-Pacific, and Latin America. We intend to continue to pursue further
sales growth by leveraging the extensive breadth of our U.S. product line to further develop and widen our international
product offering. Our current sales base has been established primarily through the sale of products marketed mainly under
the Gildan® brand. We believe that, as the Company has and continues to build out its portfolio of brands, a number of our
other brands, such as the Anvil®, American Apparel®, and Comfort Colors® brands, among others, can be well positioned to
grow internationally by selling to wholesale distributors and screenprinters or embellishers, and directly to consumers through
our own e-commerce platforms and international online retailers.
4.4 Further leveraging manufacturing infrastructure and enhancing distribution capabilities
We plan to continue to increase capacity to support our sales growth and to optimize our cost structure by investing in projects
for cost reduction and further vertical integration. This will also support additional product quality enhancements. Specifically,
we are currently investing in textile capacity and technology to enhance our capabilities in the production of fashion and
performance garments where we expect a greater opportunity for growth. We are also evaluating opportunities to optimize
production in existing facilities, which may contribute to increased capacity or cost reduction opportunities. The Company's
current plans in expanding its manufacturing capacity include the development of a new facility in Honduras, Rio Nance 6, and
the further ramp-up of production at its Mexican facility in Agua Prieta which was acquired as part of the Alstyle acquisition.
We have established extensive distribution operations worldwide through internally managed and operated distribution centres
and through third-party logistics providers. In the context of a market landscape where e-commerce is growing quickly and
where the Company plans to pursue this opportunity both domestically and internationally, we are investing in enhancing our
direct-to-consumer fulfillment capabilities and speed to market. At the same time, we are evaluating our current infrastructure
for potential opportunities for consolidation to drive operational efficiencies and/or to extend our reach by establishing
capabilities in various geographies.
4.5 Pursue acquisitions to complement organic growth
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 for 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 under normal
course issuer bid programs. The Company has set a net debt leverage target ratio of one to two times pro-forma adjusted
EBITDA for the trailing twelve months, which it believes will provide an efficient capital structure and a framework within which
it can execute on its capital allocation priorities.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.0 OPERATING RESULTS
This MD&A comments on our operations, financial performance and financial condition as at and for the fiscal year ended
December 31, 2017 (Fiscal 2017) and the fiscal year ended January 1, 2017 (Fiscal 2016). Fiscal 2015 refers to the 15-month
transition period ended January 3, 2016, as the Company transitioned in fiscal 2015 to a new fiscal year end (the Sunday
closest to December 31, rather than the first Sunday following September 28).
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,
adjusted operating income, adjusted operating margin, adjusted EBITDA, free cash flow, total indebtedness, net indebtedness
(total indebtedness net of cash and cash equivalents), and net debt leverage ratio to measure our performance and financial
condition from one period to the next, which excludes the variation caused by certain adjustments that could potentially distort
the analysis of trends in our operating performance, and because we believe such measures provide meaningful information
on the Company’s financial condition and financial performance.
We refer the reader to section 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
5.2.1 American Apparel
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 $88.0 million.
The Company also acquired inventory from American Apparel for approximately $10.5 million. The total consideration
transferred for this acquisition was therefore $98.5 million (of which $91.9 million was paid in fiscal 2017 and $6.6 million was
paid in the fourth quarter of fiscal 2016). The acquisition was financed by the utilization of the Company's long-term bank credit
facilities. The American Apparel® brand is a highly recognized brand among consumers and within the North American
printwear channel and is 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 share in the fashion basics category of these markets. The audited annual
consolidated financial statements for the year ended December 31, 2017 include the results of American Apparel from
February 8, 2017 to December 31, 2017. The results of American Apparel are included in the Printwear segment.
5.2.2 Other
On July 17, 2017, the Company acquired substantially all of the assets of a ring-spun yarn manufacturer with two facilities
located in Columbus, Georgia for cash consideration of $13.5 million, including a balance due of $1.3 million to be paid within
eighteen months of closing. The transaction also resulted in the effective settlement of $1.2 million of trade accounts payable
owed by Gildan to the manufacturer prior to the acquisition.
On April 4, 2017, the Company acquired a 100% interest in an Australian based activewear distributor for cash consideration of
$5.7 million. The transaction also resulted in the effective settlement of $2.9 million of trade accounts receivable due to Gildan
prior to the acquisition.
The Company accounted for its acquisitions using the acquisition method in accordance with IFRS 3, Business Combinations.
The Company determined the fair value of the assets acquired based on management's best estimate of their fair values and
taking into account all relevant information available at that time. Please refer to note 5 of the audited annual consolidated
financial statements for the year ended December 31, 2017 for a summary of the amounts recognized for the assets acquired
at the date of acquisition and for post-acquisition and pro-forma net sales and net earnings disclosures.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 10
5.3 Selected annual information
(in $ millions, except per share amounts or
otherwise indicated)
2017
2016
2015
Variation 2017-2016 Variation 2016-2015
%
$
%
$
MANAGEMENT'S DISCUSSION AND ANALYSIS
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)
Gross margin
SG&A expenses as a percentage of sales
Operating margin
Adjusted operating margin (1)
Total assets
Total non-current financial liabilities
Annual cash dividends declared per
2,750.8
801.2
377.3
2,585.1
719.7
336.4
(15 months)
2,959.2
730.1
388.0
165.7
81.5
40.9
6.4 %
11.3 %
12.2 %
(374.1 )
(10.4 )
(51.6 )
(12.6 )%
(1.4 )%
(13.3 )%
22.9
401.0
423.9
586.1
24.2
14.5
362.3
386.9
1.62
1.61
1.72
29.1 %
13.7 %
14.6 %
15.4 %
11.7
371.5
383.2
523.8
19.7
5.2
346.6
356.3
1.47
1.47
1.51
27.8 %
13.0 %
14.4 %
14.8 %
14.9
327.2
342.1
488.5
17.8
4.5
304.9
317.8
1.26
1.25
1.30
24.7 %
13.1 %
11.1 %
11.6 %
11.2
29.5
40.7
62.3
4.5
9.3
15.7
30.6
0.15
0.14
0.21
n/a
n/a
n/a
n/a
2,980.7
630.0
2,990.1
600.0
2,834.3
380.9
(9.4 )
30.0
95.7 %
7.9 %
10.6 %
11.9 %
22.8 %
178.8 %
4.5 %
8.6 %
10.2 %
9.5 %
13.9 %
1.3 pp
0.7 pp
0.2 pp
0.6 pp
(0.3 )%
5.0 %
(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
(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
155.8
219.1
5.5 %
57.5 %
common share
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.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
19.9 %
0.062
0.374
(0.013 )
0.325
0.312
(4.0 )%
GILDAN 2017 REPORT TO SHAREHOLDERS P. 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4 Consolidated operating review
5.4.1 Net sales
(in $ millions, or otherwise indicated)
2017
2016
2015
Variation 2017-2016 Variation 2016-2015
%
$
%
$
(15 months)
Segmented net sales
1,822.0
Printwear
928.8
Branded Apparel
2,750.8
Total net sales
Certain minor rounding variances exist between the consolidated financial statements and this summary.
1,794.8
1,164.5
2,959.3
1,651.1
934.0
2,585.1
170.9
(5.2 )
165.7
10.4 %
(0.6 )%
(143.7 )
(230.5 )
(8.0 )%
(19.8 )%
6.4 %
(374.2 )
(12.6 )%
Fiscal 2017 compared to Fiscal 2016
The $165.7 million, or 6.4%, increase in consolidated net sales was due to a 10.4% increase in Printwear segment sales, while
Branded Apparel sales were slightly down from the prior year's level. Sales growth in 2017 included an incremental sales
contribution of approximately $133 million from the 2016 acquisitions of Alstyle and Peds and the American Apparel
acquisition, which was completed on February 8, 2017. Additionally, the increase in sales over the prior year reflected higher
net selling prices, double-digit organic unit sales volume growth in fashion and performance basics, favourable Printwear
product mix, higher underwear sales volumes, and increased shipments in international markets, partially offset by lower unit
sales of socks and activewear basics, and unfavourable foreign exchange.
Net sales for fiscal 2017 were in line with the Company’s sales guidance provided on November 2, 2017, projecting sales
growth in the mid to high single-digit range, as higher than anticipated unit sales volumes of Printwear products in the fourth
quarter of 2017 offset lower than anticipated unit sales volumes in Branded Apparel.
Fiscal 2016 compared to Fiscal 2015
The $374.2 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 in 2015 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.
5.4.2 Gross profit
(in $ millions, or otherwise indicated)
Gross profit
Gross margin
2017
2016
2015
Variation
2017-2016
Variation
2016-2015
(15 months)
801.2
29.1 %
719.7
27.8 %
730.1
24.7 %
81.5
1.3 pp
(10.4)
3.1 pp
Certain minor rounding variances exist between the consolidated financial statements and this summary.
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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal 2017 compared to fiscal 2016
Gross margin increased by 130 basis points in fiscal 2017 over the prior year, mainly due to higher net selling prices and a
richer Printwear product mix resulting from higher sales of fashion basics and fleece products, partly offset by unfavourable
product mix in Branded Apparel due to lower sales of higher margin sock products.
Fiscal 2016 compared to fiscal 2015
Gross margin increased by 310 basis points in fiscal 2016, mainly due to the 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.
5.4.3 Selling, general and administrative expenses
(in $ millions, or otherwise indicated)
2017
2016
2015
Variation
2017-2016
Variation
2016-2015
SG&A expenses
SG&A expenses as a percentage of sales
377.3
13.7 %
336.4
13.0 %
388.0
13.1 %
40.9
0.7 pp
(51.6)
(0.1) pp
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(15 months)
Fiscal 2017 compared to fiscal 2016
The increase in selling, general and administrative expenses (SG&A) in 2017 compared to 2016 was mainly due to the impact
of acquisitions and other expenses, including distribution and e-commerce costs, as well as higher variable compensation
expenses.
Fiscal 2016 compared to fiscal 2015
The decrease in 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.
5.4.4 Restructuring and acquisition-related costs
(in $ millions)
2017
2016
2015
Variation
2017-2016
Variation
2016-2015
Employee termination and benefit costs
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
4.0
13.8
0.9
—
(15 months)
5.0
8.5
0.2
(1.0 )
5.0
7.9
1.1
0.6
Remeasurement of contingent consideration in
Acquisition-related transaction costs
connection with a business acquisition
1.1
1.1
14.9
Restructuring and acquisition-related costs
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(6.2 )
3.3
11.7
—
4.2
22.9
(1.0 )
5.9
(0.2 )
(0.6 )
6.2
0.9
11.2
—
(0.6 )
0.9
1.6
(7.3 )
2.2
(3.2 )
GILDAN 2017 REPORT TO SHAREHOLDERS P. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
Restructuring and acquisition-related costs in fiscal 2017 related primarily to the following: the American Apparel business
acquisition, including transaction costs and integration costs relating to the relocation of acquired assets and the re-launching
of this brand's direct-to-consumer e-commerce site; the consolidation of the Company's West Coast distribution centres for
Printwear brands pursuant to the acquisitions of American Apparel and Alstyle; the Company's internal organizational
realignment of its Branded Apparel business unit, including severance costs, legal fees, and other professional fees; the
rationalization of the Company's remaining retail store outlets, including lease exit costs, severance costs, and the write-off of
leasehold improvement assets; transaction costs relating to other business acquisitions completed or evaluated during fiscal
2017; and the completion of the integration of prior years' business acquisitions, primarily for the integration of Alstyle and
Peds.
Restructuring and acquisition-related costs in fiscal 2016 related primarily to costs incurred in connection with the integration of
acquired businesses, including the 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.
5.4.5 Operating income and adjusted operating income
(in $ millions, or otherwise indicated)
2017
2016
2015
(15 months)
401.0
Operating income
Adjustment for:
Restructuring and acquisition-related costs
Adjusted operating income(1)
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.
14.4 %
14.8 %
14.6 %
15.4 %
383.2
371.5
423.9
22.9
11.7
11.1 %
11.6 %
327.2
342.1
14.9
Variation
2017-2016
Variation
2016-2015
29.5
44.3
11.2
40.7
0.2 pp
0.6 pp
(3.2)
41.1
3.3 pp
3.2 pp
Fiscal 2017 compared to fiscal 2016
The increase in operating income in 2017 compared to 2016 was mainly due to the increase in gross profit, partially offset by
higher SG&A expenses and higher restructuring and acquisition-related costs. Excluding the impact of restructuring and
acquisition-related costs, adjusted operating margin in 2017 was up 60 basis points driven by higher gross margin in the year,
partially offset by higher SG&A expenses as a percentage of sales.
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 the 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 the five fiscal
quarters of 2015. On a calendar year basis, operating margin in 2016 was 14.4%, essentially the same level as the 14.3%
operating margin in 2015.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4.6 Financial expenses, net
(in $ millions)
Interest expense on financial liabilities recorded at
2017
2016
2015
Variation
2017-2016
Variation
2016-2015
(15 months)
amortized cost
Bank and other financial charges
Interest accretion on discounted provisions
Foreign exchange loss (gain)
8.6
4.7
0.4
4.0
17.7
Financial expenses, net
Certain minor rounding variances exist between the consolidated financial statements and this summary.
17.1
8.0
0.3
(1.3 )
24.1
12.6
6.3
0.3
0.4
19.6
4.5
1.7
—
(1.7 )
4.5
4.0
1.6
(0.1 )
(3.6 )
1.9
Fiscal 2017 compared to fiscal 2016
The increase in net financial expenses in fiscal 2017 compared to fiscal 2016 was due to higher interest expense as a result of
slightly higher borrowing levels and higher effective interest rates on our long-term debt relating mainly to higher U.S. short-
term interest rates and the interest rates on the notes payable that were issued in August 2016 as described under “Liquidity
and capital resources” in section 8.0 of this MD&A. Bank and other financial charges increased in fiscal 2017 compared to
fiscal 2016 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. Foreign exchange gains for fiscal 2017 relate primarily to the
revaluation of net monetary assets denominated in foreign currencies.
Fiscal 2016 compared to fiscal 2015
The increase in net financial expenses in fiscal 2016 compared to fiscal 2015 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.
5.4.7 Income taxes
The Company’s average effective tax rate is calculated as follows:
(in $ millions, or otherwise indicated)
2017
2016
2015
Earnings before income taxes
Income tax expense
376.8
14.5
351.8
5.2
(15 months)
309.4
4.5
Average effective income tax rate
1.5 %
Certain minor rounding variances exist between the consolidated financial statements and this summary.
3.8 %
1.5 %
Variation
2017-2016
Variation
2016-2015
25.0
9.3
2.3 pp
42.4
0.7
—
Fiscal 2017 compared to fiscal 2016
The higher income tax expense and average effective tax rate compared to last year were in part due to higher operating
profits earned in higher tax rate jurisdictions compared to last year. In addition, the fiscal 2017 income tax expense included
$1.6 million of income tax recoveries relating to prior taxation years, compared with $4.8 million of prior year income tax
recoveries in fiscal 2016. As a result of the internal reorganization referred to in section 3.1.1 of this annual MD&A, the
Company revalued and reassessed the deferred tax liabilities and deferred tax assets in the respective jurisdictions affected,
resulting in an increase in net deferred tax expense of $3.3 million. There was no corresponding amount for fiscal 2016. Fiscal
2016 also reflected an income tax recovery on restructuring and acquisition-related costs of $2.0 million.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (U.S. Tax Reform). The
U.S. Tax Reform reduces the statutory federal corporate income tax rate from 35% to 21% effective January 1, 2018, and
makes other changes to U.S. corporate tax laws. During the fourth quarter of fiscal 2017, the Company revalued the net
deferred tax liability position in its U.S. subsidiaries, to reflect the change in the statutory federal corporate income tax rate that
will take effect in 2018, resulting in an income tax recovery of $1.6 million.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal 2016 compared to fiscal 2015
The income tax expense and average effective income tax rate for fiscal 2016 were 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.
5.4.8 Net earnings, adjusted net earnings, and earnings per share measures
(in $ millions, except per share amounts)
Net earnings
Adjustments for:
Restructuring and acquisition-related costs
Income tax expense (recovery) on restructuring
and acquisition-related costs and U.S. Tax
Reform
2017
2016
2015
362.3
346.6
(15 months)
304.9
22.9
11.7
14.9
Adjusted net earnings(1)
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.
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.
(2.0 )
356.3
1.47
1.47
1.51
(2.0 )
317.8
1.26
1.25
1.30
1.7
386.9
1.62
1.61
1.72
Variation
2017-2016
Variation
2016-2015
15.7
11.2
3.7
30.6
0.15
0.14
0.21
41.7
(3.2 )
—
38.5
0.21
0.22
0.21
Fiscal 2017 compared to fiscal 2016
The increases in net earnings and adjusted net earnings were due to higher operating income, partially offset by higher
financial expenses and a higher income tax expense. Additionally, diluted EPS and adjusted diluted EPS reflected the benefit
of share repurchases.
Adjusted diluted EPS of $1.72 was at the top end of the Company's guidance provided on November 2, 2017.
Fiscal 2016 compared to fiscal 2015
The increases in net earnings and adjusted net earnings in fiscal 2016 compared to the 2015 15-month transition period were
mainly due to the $41.2 million net loss in the first of the five fiscal quarters of 2015. The increases in diluted EPS and adjusted
diluted EPS were 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 slightly higher operating income and slightly lower income taxes were offset by higher financial expenses. The
increase in adjusted diluted EPS for fiscal 2016 compared to the same period in 2015 was primarily due to the favourable
impact of share repurchases under the Company's NCIB during 2016, as discussed in section 8.6 of this MD&A.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 16
5.5 Segmented operating review
(in $ millions, or otherwise indicated)
2017
2016
Variation $
Variation %
MANAGEMENT'S DISCUSSION AND ANALYSIS
Segmented net sales:
Printwear
Branded Apparel
Total net sales
Segment operating income:
Printwear
Branded Apparel
Total segment operating income
Amortization of intangible assets, excluding software
Corporate expenses
Restructuring and acquisition-related costs
1,822.0
928.8
2,750.8
1,651.1
934.0
2,585.1
438.3
86.6
524.9
(20.8 )
(80.2 )
(22.9 )
401.0
388.1
85.4
473.5
(18.1 )
(72.1 )
(11.7 )
371.6
170.9
(5.2 )
165.7
50.2
1.2
51.4
(2.7 )
(8.1 )
(11.2 )
29.4
10.4 %
(0.6 )%
6.4 %
12.9 %
1.4 %
10.9 %
14.9 %
11.2 %
95.7 %
7.9 %
Total operating income
Certain minor rounding variances exist between the financial statements and this summary.
Segment operating margin:
Printwear
Branded Apparel
2017
2016
Variation
24.1 %
9.3 %
23.5 %
9.1 %
0.6 pp
0.2 pp
5.5.1 Printwear
Net sales
The $170.9 million, or 10.4% increase in Printwear sales in 2017 over the prior year was mainly due to an incremental sales
contribution of approximately $94 million from the combined acquisitions of Alstyle and American Apparel, higher net selling
prices, and double-digit organic unit sales volume growth in fashion and performance basics, which translated to favourable
product mix and increased shipments in international markets. These positive factors were partly offset by lower unit sales of
basics and unfavourable foreign exchange.
Printwear sales growth of 10.4% was above the Company's guidance provided on November 2, 2017, projecting high single-
digit Printwear sales growth primarily as a result of higher than anticipated sales volumes in the fourth quarter.
Operating income
The $50.2 million increase in Printwear operating income in 2017 compared to 2016 was driven by increased sales and higher
operating margin. The 60 basis point improvement in Printwear operating margin was primarily due to the benefit of higher net
selling prices and favourable product mix reflecting higher sales of fashion basics and fleece products, partially offset by higher
SG&A expenses primarily related to acquisitions and other expenses, including distribution and e-commerce costs.
5.5.2 Branded Apparel
Net sales
The $5.2 million decrease in Branded Apparel sales in 2017 compared to fiscal 2016 was mainly due to lower sock sales and
the impact from the planned exit of private label programs. These factors more than offset the benefit of higher sales in
underwear and the incremental sales contribution of approximately $39 million from the Peds acquisition which was completed
in the third quarter of 2016. Branded Apparel segment sales were below the Company's guidance which projected low single-
digit growth, primarily as a result of lower than anticipated unit sales volumes of socks.
Operating income
Branded Apparel operating income and operating margin in 2017 was slightly higher than in 2016. The 20 basis point
improvement in Branded Apparel operating margin in 2017 was primarily due to higher net selling prices and the benefit of
manufacturing cost reductions, which more than offset unfavourable product mix driven by lower sales of higher margin sock
products, while SG&A expenses as a percentage of sales were flat compared to last year, despite lower unit sales volumes.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.6 Summary of quarterly results
The table below sets forth certain summarized unaudited quarterly financial data for the eight most recently completed
quarters. This quarterly information is unaudited and has been prepared in accordance with IFRS. The operating results for
any quarter are not necessarily indicative of the results to be expected for any future period.
For the three months ended
(in $ millions, except per share amounts)
Dec 31,
2017
Oct 1,
2017
Jul 2,
2017
Apr 2,
2017
(1)
Jan 1,
2017
Oct 2,
2016
(2)
Jul 3,
2016
(3)
Apr 3,
2016
Net sales
Net earnings
Net earnings per share
Basic(4)
Diluted(4)
Weighted average number of shares
outstanding (in ‘000s)
Basic
Diluted
653.7
54.9
716.4
116.1
715.4
107.7
0.25
0.25
0.52
0.52
0.48
0.48
665.4
83.5
0.36
0.36
587.9
74.3
0.32
0.32
715.0
114.4
0.49
0.49
688.9
94.7
0.40
0.40
593.3
63.2
0.26
0.26
219,387 223,017 224,859 229,474
219,758 223,481 225,389 229,943
231,364 231,924
231,855 232,715
235,496
236,272
242,637
243,355
(1) Reflects the acquisition of American Apparel from February 8, 2017.
(2) Reflects the acquisition of Peds from August 22, 2016.
(3) Reflects the acquisition of Alstyle from May 26, 2016.
(4) Quarterly EPS may not add to year-to-date EPS due to rounding.
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. For our Printwear segment, historically, demand for T-shirts is lowest in the fourth quarter and highest in the second
quarter of the year, when distributors purchase inventory for the peak summer selling season. Demand for fleece is typically
highest in advance of the fall and winter seasons, in the second and third quarters of the year. 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. These seasonal sales trends of our business also result in fluctuations in our inventory levels throughout 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 and derivative financial instruments in advance of delivery to establish firm prices for the cotton component
of our yarn requirements, our realized cotton costs can fluctuate significantly between interim and annual reporting periods.
Energy costs in our results of operations are also affected by fluctuations in crude oil, natural gas, and petroleum prices, which
can also influence transportation costs and the cost of related items used in our business, such as polyester fibers, chemicals,
dyestuffs, and trims. Changes in raw material costs are initially reflected in the cost of inventory and only impact net earnings
when the respective inventories are sold.
Business acquisitions may affect the comparability of results. As noted in the table under “Summary of quarterly results”, the
quarterly financial data reflect results of companies acquired from their effective date of acquisition. 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
Annual MD&A contains a discussion of costs related to the Company’s restructuring activities and business acquisitions.
Our reported amounts for net sales, cost of sales, SG&A expenses, and financial expenses/income are impacted by
fluctuations in certain currencies versus the U.S. dollar as described in section 11 entitled the “Financial risk management” in
this annual MD&A. The Company periodically uses derivative financial instruments to manage risks related to fluctuations in
foreign exchange rates.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 18
5.7 Fourth quarter operating results
For the three months ended
(in $ millions, except per share amounts or otherwise indicated)
December 31,
2017
January 1,
2017
Variation $
Variation %
MANAGEMENT'S DISCUSSION AND ANALYSIS
653.7
177.0
103.9
11.0
62.0
73.0
114.0
5.9
1.2
54.9
67.6
65.8
20.1
17.1
10.8
(7.8)
3.0
11.4
0.1
11.5
(19.4)
(6.9)
587.9
156.9
86.8
0.2
69.8
70.0
102.6
5.8
(10.3)
74.3
74.5
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
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.
27.1 %
15.9 %
9.5 %
11.2 %
26.7 %
14.8 %
11.9 %
11.9 %
(0.07)
(0.07)
(0.01)
n/a
n/a
n/a
n/a
0.32
0.32
0.32
0.25
0.25
0.31
11.2 %
12.8 %
19.7 %
n.m.
(11.2 )%
4.3 %
11.1 %
1.7 %
n.m.
(26.1 )%
(9.3 )%
(21.9 )%
(21.9 )%
(3.1 )%
0.4 pp
1.1 pp
(2.4) pp
(0.7) pp
For the three months ended
(in $ millions, or otherwise indicated)
Segmented net sales:
Printwear
Branded Apparel
Total net sales
Segment operating income:
Printwear
Branded Apparel
Total segment operating income
Amortization of intangible assets, excluding software
Corporate expenses
Restructuring and acquisition-related costs
Total operating income
n.m. = not meaningful
December 31,
2017
January 1,
2017
Variation $
Variation %
415.6
238.1
653.7
82.8
16.8
99.6
(5.0 )
(21.6 )
(11.0 )
62.0
325.8
262.1
587.9
68.6
24.0
92.6
(4.7 )
(17.7 )
(0.2 )
70.0
89.8
(24.0 )
65.8
14.2
(7.2 )
7.0
(0.3 )
(3.9 )
(10.8 )
(8.0 )
27.6 %
(9.2 )%
11.2 %
20.7 %
(30.0 )%
7.6 %
6.4 %
22.0 %
n.m.
(11.4 )%
GILDAN 2017 REPORT TO SHAREHOLDERS P. 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three months ended
Segment operating margin:
Printwear
Branded Apparel
n/a - not applicable
December 31,
2017
January 1,
2017
Variation $
Variation %
19.9 %
7.1 %
21.0 %
9.1 %
n/a
n/a
(1.1) pp
(2.0) pp
Consolidated net sales of $653.7 million for the fourth quarter of 2017 increased 11.2% compared to the corresponding quarter
in 2016 and reflected a sales increase of 27.6% in the Printwear segment, including the impact of the acquisition of American
Apparel, partly offset by a decline of 9.2% in Branded Apparel.
The Printwear business delivered strong double-digit sales growth in the fourth quarter of 2017. Printwear sales in the fourth
quarter of 2017 were $415.6 million, up 27.6% from $325.8 million in the fourth quarter of 2016 primarily due to strong unit
sales volume growth in both domestic and international markets, the benefit of favourable product mix, a $16.6 million sales
contribution from American Apparel, and higher net selling prices compared to the fourth quarter in 2016. Excluding the impact
of the American Apparel acquisition, sales in the quarter increased 22.5% organically. While we continued to see growth
momentum in fashion basics, unit volumes for basics were also up in the quarter and included strong fleece shipments as we
anticipated.
Net sales for the Branded Apparel segment in the quarter were $238.1 million, down 9.2% from $262.1 million in the fourth
quarter of 2016 mainly due to lower unit sales volumes of socks and activewear, unfavourable product mix driven by a lower
proportion of sales of higher-priced socks and activewear, and the impact of the planned exit of certain private label programs,
partly offset by increased underwear sales and higher net selling prices.
Consolidated gross margin in the fourth quarter increased 40 basis points to 27.1% compared to the prior year quarter. The
increase was mainly due to higher net selling prices and favourable product mix in Printwear, partly offset by unfavourable
product mix in Branded Apparel, higher raw material costs, and the impact of additional manufacturing expenses of
approximately $6 million, or 95 basis points of gross margin resulting from temporary production interruptions related to the
recent election in Honduras.
Consolidated SG&A expenses as a percentage of sales were 15.9%, up from 14.8% in the fourth quarter last year, primarily
due to the impact of the American Apparel acquisition, lower fixed cost absorption in Branded Apparel, and higher distribution
and e-commerce expenses.
The Company incurred $11.0 million of restructuring and acquisition-related costs in the fourth quarter of 2017 primarily
associated with the Company’s organizational consolidation, as well as integration costs related to current and prior year
acquisitions. As part of the organizational realignment, we incurred costs in connection with the combination of our Printwear
and Branded Apparel divisions, consolidating marketing, merchandising, sales, and administrative functions, and further
refining our direct-to-consumer approach, including the rationalization of our retail store outlets.
Consolidated operating margin and adjusted operating margin in the fourth quarter of 2017 were 9.5% and 11.2%, respectively,
down from consolidated operating margin and adjusted operating margin of 11.9% in the fourth quarter of 2016, as the benefit
of higher gross margin was offset by higher SG&A as a percentage of sales.
Operating income in Printwear for the three months ended December 31, 2017 totaled $82.8 million, up 20.7% compared to
$68.6 million in the fourth quarter of 2016, driven by the increase in sales. Operating margins were 19.9% in the fourth quarter
of 2017, down 110 basis points over the same quarter last year primarily due to higher raw material costs, expenses related to
unanticipated production shut downs, as well as increased SG&A expenses due to the American Apparel acquisition, higher
distribution costs, and expenses related to the further development of our e-commerce infrastructure. These factors were partly
offset by the benefit of more favourable product mix driven by the strong growth in fashion basics and a higher proportion of
fleece shipments, as well as the benefit of higher net selling prices.
For the three months ended December 31, 2017, operating income in Branded Apparel was $16.8 million, down from
$24.0 million in the same quarter last year due to lower sales volumes and a lower operating margin. Branded Apparel
operating margins for the quarter were 7.1%, down from 9.1% in the same quarter last year. The operating margin decline was
primarily due to the impact of unfavourable product mix, higher raw material costs, and SG&A de-leverage resulting from the
decline in sales.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net earnings totaled $54.9 million or $0.25 per share on a diluted basis for the three months ended December 31, 2017,
compared with net earnings of $74.3 million or $0.32 per share for the three months ended January 1, 2017. Excluding after-
tax restructuring and acquisition-related costs of $12.7 million in the fourth quarter and $0.2 million in the same quarter last
year, Gildan reported adjusted net earnings of $67.6 million, or $0.31 per share on a diluted basis for the fourth quarter of
2017, down from $74.5 million, or $0.32 per share in the prior year quarter. The decline in adjusted diluted EPS versus the
prior year was primarily due to the expected non-recurrence of the income tax recovery in the fourth quarter of 2016.
6.0 FINANCIAL CONDITION
6.1 Current assets and current liabilities
(in $ millions)
Cash and cash equivalents
Trade accounts receivable
Income taxes receivable
Inventories
Prepaid expenses, deposits and other current assets
Accounts payable and accrued liabilities
Income taxes payable
December 31,
2017
January 1,
2017
Variation
52.8
243.4
3.9
945.7
62.1
(258.5 )
—
1,049.4
38.2
277.7
—
954.9
69.7
(234.1 )
(1.9 )
1,104.5
14.6
(34.3 )
3.9
(9.2 )
(7.6 )
(24.4 )
1.9
(55.1 )
Total working capital
Certain minor rounding variances exist between the consolidated financial statements and this summary.
• The decrease in trade accounts receivable (which are net of accrued sales discounts) was mainly due to a higher offset
for accrued sales discounts as a result of higher rebates in fiscal 2017 and the earlier timing of payments in 2016, the
impact of lower days sales outstanding (DSO), and the impact of higher sales of trade accounts receivables to a financial
institution under a receivables purchase agreement as disclosed in note 7 of the audited consolidated financial statements
for the year ended December 31, 2017, all of which were partially offset by the impact of higher sales in the fourth quarter
of fiscal 2017 compared to the fourth quarter of fiscal 2016.
• The decrease in inventories was mainly due to lower activewear, sock, and underwear unit inventories, partially offset by
higher raw material costs and activewear inventories added from the American Apparel business acquisition.
• The decrease in prepaid expenses, deposits and other current assets was mainly due to the lower fair value of derivative
financial instruments outstanding and designated as effective hedging instruments.
• The increase in accounts payable and accrued liabilities was mainly due to higher payables for raw materials and higher
accruals for variable compensation and restructuring costs, partially offset by a decrease in purchases of sourced finished
goods.
• Working capital was $1,049.4 million as at December 31, 2017, compared to $1,104.5 million as at January 1, 2017. The
current ratio at the end of fiscal 2017 was 5.1, compared to 5.7 at the end of fiscal 2016.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 21
6.2 Property, plant and equipment, intangible assets and goodwill
(in $ millions)
Balance, January 1, 2017
Net capital additions
Additions through business acquisitions
Other
Depreciation and amortization
MANAGEMENT'S DISCUSSION AND ANALYSIS
Property, plant
and equipment
Intangible
assets
Goodwill
1,076.9
90.6
4.5
—
(136.2 )
1,035.8
354.2
2.6
70.4
—
(25.6 )
401.6
202.1
0.4
24.1
—
—
226.6
Balance, December 31, 2017
Certain minor rounding variances exist between the consolidated financial statements and this summary.
• Additions to property, plant and equipment were for investments in textile capacity, including the development of the Rio
Nance 6 facility in Honduras and textile capacity expansion in Bangladesh, as well as investments in yarn-spinning,
distribution, and garment-dyeing expansion.
•
Intangible assets are comprised of customer contracts and relationships, trademarks, license agreements, non-compete
agreements, and computer software. The increase in intangible assets reflects additions of $70.4 million mainly related to
the American Apparel business acquisition and other capital additions primarily related to software, partially offset by
amortization of $25.6 million.
• The increase in goodwill is mainly due to the goodwill recorded in connection with the American Apparel business
acquisition.
6.3 Other non-current assets and non-current liabilities
(in $ millions)
Deferred income taxes
Other non-current assets
Long-term debt
Other non-current liabilities
December 31,
2017
January 1,
2017
Variation
(3.7 )
8.8
(630.0 )
(37.1 )
1.5
14.9
(600.0 )
(34.6 )
(5.2 )
(6.1 )
(30.0 )
(2.5 )
Certain minor rounding variances exist between the consolidated financial statements and this summary.
• The decrease in other non-current assets is mainly due to the use of the deposit of $6.6 million made in the fourth quarter
of fiscal 2016 with respect to the American Apparel business acquisition which closed on February 8, 2017.
• Other non-current liabilities include provisions and employee benefit obligations. The increase is mainly due to the
statutory severance benefits earned by employees located in the Caribbean Basin and Central America during fiscal 2017.
• See the section entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt.
Total assets were $2,980.7 million as at December 31, 2017, compared to $2,990.1 million as at January 1, 2017.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 22
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
MANAGEMENT'S DISCUSSION AND ANALYSIS
2016
346.6
158.4
32.8
537.8
Variation
15.7
16.8
43.0
75.5
2017
362.3
175.2
75.8
613.3
Cash flows from operating activities
(1) Includes $162.2 million (2016 - $140.6 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 $75.5 million was mainly due to a higher decrease in non-cash
working capital, as explained below, and the impact of higher net earnings.
• Non-cash working capital decreased by $75.8 million during fiscal 2017, compared to a decrease of $32.8 million during
fiscal 2016. The higher decrease in non-cash working capital in fiscal 2017 as compared to fiscal 2016 was due to
decreases in inventories and an increase in accounts payable and accrued liabilities, partially offset by a lower decrease
in trade accounts receivable.
7.2 Cash flows from (used in) investing activities
(in $ millions)
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
2017
(92.0 )
(2.8 )
(115.8 )
0.5
Cash flows used in investing activities
Certain minor rounding variances exist between the consolidated financial statements and this summary.
(210.1 )
2016
Variation
(129.4 )
(10.8 )
(163.9 )
0.8
(303.3 )
37.4
8.0
48.1
(0.3 )
93.2
• The lower use of cash in investing activities during fiscal 2017 compared to fiscal 2016 was mainly due to lower capital
spending as a result of a reduction in yarn spinning investments. Cash used for business acquisitions during fiscal 2017
included $91.9 million for the American Apparel business acquisition (the deposit of $6.6 million made in the fourth quarter
of fiscal 2016 brings the total consideration to $98.5 million), $8.6 million for the acquisition of an Australian based
activewear distributor, $11.2 million for the acquisition of a U.S.-based ring-spun yarn manufacturer, and the payment of
$4.0 million of the balance due for the fiscal 2016 acquisition of Peds. Cash used for business acquisitions during fiscal
2016 was related to the acquisitions of Alstyle and Peds and the deposit made for the American Apparel business
acquisition which was completed in fiscal 2017.
• Capital expenditures during fiscal 2017 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 2017 REPORT TO SHAREHOLDERS P. 23
7.3 Free cash flow
(in $ millions)
2017
2016
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.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
115.8
519.2
613.4
(210.0 )
537.9
(303.4 )
163.9
398.4
75.5
93.4
(48.1 )
120.8
• For fiscal 2017, the year-over-year increase in free cash flow of $120.8 million reflects higher operating cash flows and
lower capital expenditures.
7.4 Cash flows from (used in) financing activities
(in $ millions)
2017
2016
Variation
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 settlement of non-Treasury RSUs
Cash flows used in financing activities
30.0
—
—
(84.8 )
(4.5 )
4.9
(328.6 )
(6.3 )
(389.3 )
(375.0 )
300.0
300.0
(74.4 )
(4.7 )
2.2
(394.5 )
—
(246.4 )
405.0
(300.0 )
(300.0 )
(10.4 )
0.2
2.7
65.9
(6.3 )
(142.9 )
Certain minor rounding variances exist between the consolidated financial statements and this summary.
• Cash flows used in financing activities during fiscal 2017 mainly reflect cash outflows of $328.6 million for the repurchase
and cancellation of common shares under the NCIB, as discussed in section 8.4 of this MD&A, and the payments of
dividends. During fiscal 2016, cash flows used in financing activities reflect cash outflows of $394.5 million for the
repurchase and cancellation of common shares under a previous NCIB, a $375.0 million repayment on our long-term
bank credit facilities, and the payments of dividends, which were mostly offset by proceeds of $600.0 million from the term
loan and the issuance of notes. See the section entitled “Liquidity and capital resources” in this MD&A for the discussion
on long-term debt.
• The Company paid $84.8 million of dividends during fiscal 2017 compared to $74.4 million of dividends during fiscal 2016.
The year-over-year increase is due to the 20% increase in the amount of the quarterly dividend approved by the Board of
Directors on February 22, 2017, partially offset by the impact of lower common shares outstanding as a result of the
repurchase and cancellation of common shares executed since last year.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 for the repurchase of shares. We fund our requirements with cash generated from
operations and with funds drawn from our long-term debt facilities. The Company's long-term debt as at December 31, 2017 is
described below.
Effective
interest
rate (1)
Principal amount
December 31,
2017
January 1,
2017
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)
2.3%
$
30,000
$
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)
2.1%
2.2%
2.7%
2.7%
2.9%
2.9%
—
300,000
100,000
50,000
100,000
50,000
April
2022
March
2019
—
—
300,000
100,000
50,000
100,000
50,000
June
2021
August
2023
August
2023
August
2026
August
2026
$
630,000 $
600,000
(1) Represents the effective interest rate for the year ended December 31, 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 $14.6 million (January 1, 2017 - $19.0 million) has
been committed against this facility to cover various letters of credit.
(3) The Company's unsecured revolving long-term bank credit facility agreement of $300 million, 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) The unsecured 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) The unsecured notes issued for a total aggregate principal amount of $300 million to accredited investors in the U.S. private placement
market 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.
In March 2017, the Company amended its unsecured revolving long-term bank credit facility of $1 billion to extend the maturity
date from April 2021 to April 2022, and amended its unsecured revolving long-term bank credit facility agreement of
$300 million to extend the maturity date from March 2018 to March 2019.
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 financial covenants at
December 31, 2017.
(in $ millions)
December 31,
2017
January 1,
2017
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.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
630.0
(52.8 )
577.2
600.0
(38.2 )
561.8
GILDAN 2017 REPORT TO SHAREHOLDERS P. 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
The primary measure used by the Company to monitor its financial leverage is its net debt leverage ratio as defined in section
17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. Gildan’s net debt leverage ratio as at
December 31, 2017 was 1.0 times (1.0 times as at January 1, 2017), which was at the lower end of its previously
communicated target net debt leverage ratio of one to two times pro-forma adjusted EBITDA for the trailing twelve months. The
Company’s net debt leverage ratio is calculated as follows:
(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(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.
December 31,
2017
586.1
0.3
586.4
577.2
1.0
January 1,
2017
523.8
12.5
536.3
561.8
1.0
For fiscal 2018, the Company is projecting capital expenditures of approximately $125 million primarily for the continued
development of the Rio Nance 6 facility in Honduras, investments in existing textile facilities and distribution capabilities, 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 to 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 16, 2018, there were 219,207,838 common shares issued and outstanding along with 3,021,879
stock options and 102,169 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 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.
8.3 Declaration of dividend
The Company paid dividends of $84.8 million during the year ended December 31, 2017. On February 21, 2018, the Board of
Directors approved a 20% increase in the amount of the quarterly dividend and declared a cash dividend of $0.112 per share
for an expected aggregate payment of $24.6 million which will be paid on April 2, 2018 on all of the issued and outstanding
common shares of the Company, rateably and proportionately to the holders of record on March 8, 2018. 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.
As part of the Company's capital allocation framework as described in section 4.5 of this MD&A, 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 2017 REPORT TO SHAREHOLDERS P. 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
8.4 Normal course issuer bid
On February 23, 2017, the Company announced the renewal of a normal course issuer bid (NCIB) beginning February 27,
2017 and ending on February 26, 2018, to purchase for cancellation up to 11,512,267 common shares of the Company,
representing approximately 5% of the Company’s issued and outstanding common shares as of February 17, 2017. On
November 1, 2017, the Company obtained approval from the TSX to amend its NCIB program in order to increase the
maximum number of common shares that may be repurchased from 11,512,267 common shares, or 5% of the Company’s
issued and outstanding common shares as at February 17, 2017 (the reference date for the NCIB), to 16,117,175 common
shares, representing approximately 7.2% of the public float (or 7% of the Company’s issued and outstanding common shares)
as at February 17, 2017. No other terms of the NCIB were amended.
During the year ended December 31, 2017, the Company repurchased for cancellation a total of 11,512,267 common shares
under the NCIB for a total cost of $328.6 million, of which a total of 877,000 common shares were repurchased by way of
private agreements with arm’s length third-party sellers. Of the total cost of $328.6 million, $7.7 million was charged to share
capital and $320.9 million was charged to retained earnings.
On February 21, 2018, the Board of Directors of the Company approved the initiation of a new NCIB commencing on February
27, 2018 to purchase for cancellation up to 10,960,391 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, 2018 to February 26, 2019 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
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 114,889 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 2018 is contained in our earnings results press release
dated February 22, 2018 under the section entitled “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.gildancorp.com.
11.0 FINANCIAL RISK MANAGEMENT
The Company is exposed to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk,
interest rate risk, commodity price risk, as well as risks arising from changes in the price of our common shares in connection
with our share-based compensation plans. The disclosures under this section, in conjunction with the information in note 14 to
the 2017 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 2017 audited annual consolidated
financial statements.
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
GILDAN 2017 REPORT TO SHAREHOLDERS P. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
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, the Company may continuously sell trade accounts 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 accounts receivables, less an applicable discount. The Company retains servicing responsibilities, including
collection, for these trade accounts receivables but does not retain any credit risk with respect to any trade accounts
receivables that have been sold. All trade accounts receivables sold under the receivables purchase agreement are removed
from the consolidated statements of financial position as the sale of the trade accounts receivables qualify for de-recognition.
As at December 31, 2017, trade accounts receivables being serviced under a receivables purchase agreement amounted to
$92.8 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, 2018, 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 December 31, 2017, the Company’s ten largest trade debtors accounted for 63% of trade accounts receivable;
one wholesale customer within the Printwear segment accounted for 18% and one mass-market retailer within the Branded
Apparel segment accounted for 9%, before factoring in the impact of the receivables purchase agreement described above. Of
the Company’s top ten trade debtors, five are in the Printwear segment, five 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
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 primary sales offices in Christ Church,
Barbados. 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, where circumstances warrant, the Company will temporarily transact with customers on a
GILDAN 2017 REPORT TO SHAREHOLDERS P. 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
prepayment basis. 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
December 31,
2017
January 1,
2017
208.2
14.7
20.5
243.4
159.7
83.7
243.4
237.5
20.5
19.7
277.7
158.1
119.6
277.7
December 31,
2017
January 1,
2017
197.6
31.7
9.8
2.0
7.4
248.5
(5.1 )
243.4
235.4
20.0
12.2
3.8
11.9
283.3
(5.6 )
277.7
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, 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 be 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
2017 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 as
transactions such as the declaration of dividends, the initiation of share repurchase programs, mergers, acquisitions, and other
major investments or divestitures.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 December 31, 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 Contractual Less than 1
amount
fiscal year
cash flows
1 to 3
fiscal years
4 to 5 More than 5
fiscal years
fiscal years
258.5
630.0
—
—
888.5
258.5
630.0
72.9
173.5
1,134.9
258.5
—
72.9
62.4
393.8
—
—
—
35.1
35.1
—
330.0
—
24.0
354.0
—
300.0
—
52.0
352.0
As disclosed in note 23 to our 2017 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 December 31, 2017, the maximum potential liability under
these guarantees was $50.6 million, of which $12.5 million was for surety bonds and $38.1 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 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, as well as in Canadian dollars.
Significant changes in the Lempira, Dominican Peso, Mexican Peso, Cordoba, Taka, or in the Canadian dollar 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 with maturities of up to three years, to economically hedge a portion of foreign currency cash flows. The Company
had forward foreign exchange contracts outstanding as at December 31, 2017, consisting primarily of contracts to sell and buy
Canadian dollars, sell Euros, sell Pounds sterling, sell Australian dollars, and buy Mexican pesos in exchange for U.S. dollars.
The outstanding contracts and other foreign exchange contracts that were settled during fiscal 2017 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 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
2017 audited annual consolidated financial statements for details of these financial derivative contracts and the impact of
applying hedge accounting.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following tables provide an indication of the Company’s significant foreign currency exposures included in the consolidated
statement of financial position as at December 31, 2017 arising from financial instruments:
(in U.S. $ millions)
Cash and cash equivalents
Trade accounts receivable
Prepaid expenses, deposits and other current assets
Accounts payable and accrued liabilities
December 31, 2017
CAD
0.2
14.3
0.3
(22.7 )
EUR
1.7
1.8
1.2
(5.2 )
GBP
0.8
3.0
—
(0.8 )
MXN
5.9
3.7
1.5
(4.0 )
CNY
3.6
2.8
0.2
(0.7 )
AUD
0.5
2.3
—
—
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)
Impact on earnings before income taxes
Impact on other comprehensive income before income
taxes
For the year ended December 31, 2017
CAD
0.4
EUR
—
GBP
MXN
CNY
AUD
(0.1 )
(0.4 )
(0.3 )
(0.1 )
(0.2 )
1.8
1.8
(0.3 )
—
0.3
An assumed 5 percent weakening of the U.S. dollar during the year ended December 31, 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 the
prices of crude oil and petrochemicals as they influence the cost of polyester fibers which are 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 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 2017, the Company
entered into commodity derivative contracts as described in note 14 to the 2017 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 costs, we did not experience any significant ineffectiveness on our hedges. We refer the reader to
note 14 to the 2017 audited annual consolidated financial statements for details of these derivative contracts and the impact of
applying hedge accounting.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 31
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. The Company has $250 million of floating-to-fixed interest rate swaps outstanding
to hedge its floating interest rate exposure on a designated portion of certain long-term debt agreements. The interest rate
swap contracts are designated as cash flow hedges qualify for hedge accounting.
Based on the value of interest-bearing financial instruments during the year ended December 31, 2017, an assumed 0.5
percentage point increase in interest rates during such period would have decreased earnings before income taxes by
$1.4 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 2017 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
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
GILDAN 2017 REPORT TO SHAREHOLDERS P. 32
MANAGEMENT'S DISCUSSION AND ANALYSIS
customers’ financial condition deteriorate, the estimates of the recoverability of trade accounts receivable could be materially
affected and the Company could 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, including discounts and rebates, are granted to our customers. 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
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 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, earnings multiples obtained by using market comparables as references,
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 and market conditions can result in actual useful lives and future cash flows that differ 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 the associated cash flows
materially decrease, the Company may be required to record material impairment charges related to its non-financial assets.
Please refer to note 10 of the audited annual consolidated financial statements for the year ended December 31, 2017 for
additional details on the recoverability of the Company’s cash-generating units.
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 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 an assumed discount
rate. 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 2017 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 2016
audited annual consolidated financial statements.
13.2 New accounting standards and interpretations not yet applied
The following new accounting standards are not effective for the year ended December 31, 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 Services). The standard prescribes a five-step
approach to revenue recognition: (1) identify the contracts with the customer; (2) identify the separate performance obligations
in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and
(5) recognize revenue when, or as, each performance obligation is satisfied. New disclosures about the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers are also required. IFRS 15 is effective for the
Company’s fiscal year beginning on January 1, 2018, and can be applied retrospectively to each prior reporting period
presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized
as an adjustment to opening retained earnings at the date of initial adoption (modified retrospective method). Upon transition,
an entity can elect to apply IFRS 15 with or without certain practical expedients.
The Company has reviewed the new standard against its existing accounting policies and practices, including reviewing
standard purchase orders, invoices, shipping terms, and contracts with customers, including discount arrangements, within its
significant revenue streams in order to assess any terms that can represent additional performance obligations and to evaluate
transaction price considerations. The majority of the Company’s contracts with customers are contracts in which the sale of
finished products is generally expected to be the only performance obligation. The Company has concluded that the revenue
recognition occurs at a point in time when control of the asset is transferred to the customer, generally upon shipment of
products to customers, consistent with its current practice. Some contracts with customers provide incentive programs,
including discounts, promotions, advertising allowances, and other volume-based incentives. Currently, the Company
recognizes revenue from the sale of goods measured at the fair value of the consideration received or receivable, net of
provisions for customer incentives and for sales returns. Such incentives give rise to variable consideration under IFRS 15,
which is also estimated at contract inception.
The Company will adopt the new standard in the first quarter of fiscal 2018 using the modified retrospective transition method.
The Company has concluded that the new guidance under IFRS 15 will not have a material impact on recognition and
amounts in its consolidated financial statements. The Company expects to record a non-cash adjustment to reduce
retained earnings by less than $2.0 million at January 1, 2018 on initial adoption, representing the gross margin on estimated
GILDAN 2017 REPORT TO SHAREHOLDERS P. 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
net sales for which revenue recognition should be delayed under the guidance of IFRS 15. The Company is completing the
assessment of the overall impact on the Company’s disclosures and is addressing any system and process changes
necessary to compile the information to meet the recognition and disclosure requirements of the new guidance starting in the
first quarter of fiscal 2018.
Financial Instruments
In July 2014, the IASB issued 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. IFRS 9 (2014) must be applied retroactively;
however, it contains significant exemptions from retroactive application for the classification and measurement requirements of
the new standard, including impairment. The Company expects to record a non-cash adjustment of approximately $1.0 million
to reduce retained earnings at January 1, 2018, as a result of the adoption of IFRS 9 (2014), reflecting additional allowance for
doubtful accounts from the new expected credit loss model.
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
adoption permitted only if IFRS 15, Revenue from Contracts with Customers, has also been applied. The Company will adopt
the new standard in the first quarter of fiscal 2019, and expects to use the modified retrospective transition method. The
Company expects that the initial adoption of IFRS 16 will result in approximately $120 million of operating lease liabilities
(primarily for the rental of premises), being recognized in the consolidated statement of financial position, with a corresponding
right-of-use asset being recognized. The Company also expects a decrease of its operating lease costs, offset by a
corresponding increase of its financial expenses and depreciation and amortization resulting from the changes in the
recognition, measurement and presentation requirements. However, no significant impact on net earnings is expected at this
time.
Uncertain Income Tax Treatments
In June 2017, the IASB issued IFRIC 23, Uncertainty Over Income Tax Treatments, which clarifies how to apply the recognition
and measurement requirements in IAS 12, Income Taxes, when there is uncertainty regarding income tax treatments. The
Interpretation addresses whether an entity needs to consider uncertain tax treatments separately, the assumptions an entity
should make about the examination of tax treatments by taxation authorities, how an entity should determine taxable profit and
loss, tax bases, unused tax losses, unused tax credits and tax rates, and how an entity considers changes in facts and
circumstances in such determinations. IFRIC 23 applies to annual reporting periods beginning on or after January 1, 2019, with
earlier adoption permitted. The Company is currently evaluating the impact of the adoption of IFRIC 23 on the consolidated
financial statements.
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
December 31, 2017. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of December 31, 2017.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
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
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 December 31, 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). Based on that evaluation under this framework, our Chief Executive
Officer and our Chief Financial Officer concluded that our internal control over financial reporting was effective as of
December 31, 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 December 31, 2017.
15.3 Changes in internal control over financial reporting
There have been no changes that occurred during the period beginning on October 2, 2017 and ended on December 31, 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
and 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 36
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 successful in increasing our penetration in the North American and international markets for
imprintable products, including growing our sales of fashion basics, 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 growing our sales and profitability through our own brands in the U.S. retail channel, including brick and mortar
retailers, on-line retailers and our own e-commerce platforms. Our opportunities for growth may be limited, and we may lose
market share if we fail to successfully develop new business in existing and 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 grow our sales with and service major retailers' e-commerce businesses or fail to adequately develop our
capabilities to service consumers directly. In addition, future sales growth opportunities may be limited or negatively impacted
by customers, including wholesale distributors and retailers pursuing growth of their own private label brands. From a
manufacturing perspective, there can be no assurance that we will successfully add new capacity or that we will not encounter
operational issues that may affect or disrupt our current production or supply chain or delay the ramp-up of new facilities
required to support sales growth. 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 benefits and 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, brand,
quality, and service. Our competitive strengths include our expertise in building and operating large-scale, vertically-integrated
manufacturing hubs which have allowed us to operate efficiently and reduce costs, offer competitive pricing, and provide 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, brand appeal, quality, and service. 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 our own customers, including retailers and wholesale distributors that are increasingly focused on
selling basic apparel products under their own private label brands that compete directly with our brands. In addition, shopping
trends are also evolving, on-line shopping is growing rapidly, and e-commerce is further intensifying competition in the market
as it facilitates competitive entry and comparison shopping. Failure to compete effectively and respond to evolving trends in the
market, including intensifying competition from private label brands and e-commerce, and failure to adapt our operations to
service the changing needs of our customers within an evolving market landscape could have a negative impact on our
business and results of operations. 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, and 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 impacts with new business or cost reductions.
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 2017, our largest and second
largest customers accounted for 16.5% and 11.9% (2016 - 18.2% and 12.4%) of total sales respectively, and our top ten
customers accounted for 58.3% (2016 - 59.1%) 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:
GILDAN 2017 REPORT TO SHAREHOLDERS P. 37
MANAGEMENT'S DISCUSSION AND ANALYSIS
• 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;
• a large customer exercises its purchasing power to negotiate lower prices or higher price discounts or 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
GILDAN 2017 REPORT TO SHAREHOLDERS P. 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
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, fail to
qualify under our social compliance program, experience transportation disruptions or encounter financial difficulties. These
events can result in lost sales, cancellation charges or excessive markdowns, all of which 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 and related costs, 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,
GILDAN 2017 REPORT TO SHAREHOLDERS P. 39
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
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, including the potential imposition of anti-dumping or
countervailing duties on our raw materials and finished goods, 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 including anti-dumping and countervailing duties, tariffs, and trade restrictions that could
impact our approach to global manufacturing and sourcing, and makes adjustments as needed. 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 (CBTPA), 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.
Recently there has been an increasing focus on U.S. domestic manufacturing that has drawn worldwide attention.The current
U.S. 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, the implementation of anti-dumping or countervailing duties on the imports of our raw materials and finished goods
into the U.S. from other countries, or lead to further tax reform in the U.S. that could increase our effective income tax rate.
Furthermore, the imposition of non-tariff barriers by the countries into which we sell our products internationally may also
impact our ability to service such markets. Any of such outcomes could negatively impact our ability to compete effectively and
negatively affect our results of operations.
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.
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. For example, United States domestic law provides for the application of anti-dumping or
countervailing duties on imports of products from certain countries into the United States should determinations be made by
the relevant agencies that such imported products have been subsidized and/or are being sold at less than “fair value” and that
such imports are causing a material injury to the domestic industry. The mechanism to implement anti-dumping and
countervailing duties is available to every World Trade Organization member country. The impact of the imposition of such
duties on products we import into the U.S. or other markets 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). However, in January 2017, the U.S. Administration issued a Presidential Memorandum directing the
withdrawal of the United States from the TPP agreement. In January 2018, the remaining countries currently participating in
the TPP, namely Australia, Brunei, Canada, Chile, Mexico, Malaysia, New Zealand, Peru, Singapore, Japan, and Vietnam,
agreed to a revised trade agreement excluding the United States. Should the revised TPP agreement, or any other new free
trade agreement which our competitors leverage, come into force in the future, it may negatively affect our competitive position
in the various countries in which we sell our products.
The participating countries of NAFTA are currently engaged in a renegotiation of the agreement. The resulting renegotiation of
NAFTA, the termination of NAFTA or 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Overall, new agreements or arrangements that further liberalize access to our key country markets could negatively impact our
competitiveness in those markets. The likelihood that any such agreements, measures, or programs will be adopted, or 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.
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 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 prices could potentially have a negative impact on our business. In
addition, unilateral and multilateral sanctions and restrictions on dealings with certain countries and persons 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; or other factors. For example, the Organization for Economic Cooperation and Development (“OECD”), an
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
On December 22, 2017, the United States signed into law the Tax Cuts and Jobs Act (U.S. Tax Reform) which reduces the
federal corporate income tax rate from 35% to 21% effective January 1, 2018. In addition, other changes to U.S. corporate tax
laws resulting from the U.S. tax reform include the limitation on deductibility of interest expense paid by U.S. corporations and
the introduction of the base erosion anti-abuse tax that applies an additional tax related to certain payments made by U.S.
corporations to foreign related parties. Although we do not expect a significant adverse effect to our tax rate resulting from the
U.S. tax reform, any further significant changes to the current tax rules which govern the manner in which sales and profits are
taxed in the U.S. 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 December 31, 2017, the estimated
income tax liability that would result in the event of a full repatriation of these undistributed profits is approximately $68 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.
Compliance with environmental, health, and safety regulations
We are subject to various federal, state, local, and other 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 all 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, local, or other 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 Gold Toe subsidiary has been 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
enacted 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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 apply 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 and risk of business interruption, if any, due to
failures 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 50,000 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 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.
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 its sewing operations in Nicaragua and 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 and contractor 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 choose to cease licensing these brands to us in the future, our sales and results of operations would be
negatively affected.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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
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. Our information systems consist of a full range of supply chain and
financial systems. The systems include applications related to product development, planning, manufacturing, distribution,
sales, human resources, and financial reporting. We depend on our information systems to operate our business and make
key decisions. These activities include forecasting demand, purchasing raw materials and supplies, designing products,
scheduling and managing production, selling to our customers, responding to customer, supplier and other inquiries, managing
inventories, shipping goods on a timely basis, managing our employees, and summarizing results. There can be no assurance
that we will not experience operational problems with our information systems as a result of system failures, viruses,
information security incidents, cyber security incidents, disasters or other causes, or in connection with upgrade to our systems
or implementation of new systems. 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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 security incident, 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, including related
income tax expenses and recoveries, and in fiscal 2017, the income tax adjustment related to rate enactments from the U.S.
Tax Reform. 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.
(in $ millions, except per share amounts)
Net earnings
Adjustments for:
Restructuring and acquisition-related costs
Three months ended
Twelve months ended
December 31,
2017
January 1,
2017
December 31,
2017
January 1,
2017
54.9
11.0
74.3
0.2
362.3
346.6
22.9
11.7
Income tax expense (recovery) relating to restructuring
and acquisition-related costs and U.S. Tax Reform(1)
(2.0 )
356.3
Adjusted net earnings
1.47
Basic EPS
1.47
Diluted EPS
1.51
Adjusted diluted EPS
(1) For fiscal 2017, reflects an income tax expense of $3.3 million relating to restructuring and acquisition-related activities, and an income
tax recovery of $1.6 million relating to the impact of U.S. tax reform. The income tax recovery results from the revaluation of the net deferred
tax liability position in U.S. subsidiaries, to reflect the change in the statutory federal corporate income tax rate that will take effect in 2018.
For fiscal 2016, the recovery of $2.0 million is related to restructuring and acquisition related costs.
Certain minor rounding variances exist between the consolidated financial statements and this summary.
1.7
386.9
1.62
1.61
1.72
1.7
67.6
0.25
0.25
0.31
—
74.5
0.32
0.32
0.32
GILDAN 2017 REPORT TO SHAREHOLDERS P. 45
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 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.
(in $ millions, or otherwise indicated)
Operating income
Adjustment for:
Restructuring and acquisition-related costs
Adjusted operating income
Three months ended
Twelve months ended
December 31,
2017
January 1,
2017
December 31,
2017
January 1,
2017
62.0
69.8
401.0
371.5
11.0
73.0
0.2
70.0
22.9
423.9
14.6 %
15.4 %
11.7
383.2
14.4 %
14.8 %
11.9 %
Operating margin
Adjusted operating margin
11.9 %
Certain minor rounding variances exist between the consolidated financial statements and this summary.
9.5 %
11.2 %
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. Excluding these items does
not imply they are necessarily non-recurring.
(in $ millions)
Net earnings
Restructuring and acquisition-related costs
Depreciation and amortization
Financial expenses, net
Income tax expense (recovery)
Three months ended
Twelve months ended
December 31,
2017
January 1,
2017
December 31,
2017
January 1,
2017
54.9
11.0
41.0
5.9
1.2
114.0
74.3
0.2
32.6
5.8
(10.3 )
102.6
362.3
22.9
162.2
24.2
14.5
586.1
346.6
11.7
140.6
19.7
5.2
523.8
Adjusted EBITDA
Certain minor rounding variances exist between the consolidated financial statements and this summary.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 46
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 liquidity of its
business, and it is a key metric which indicates 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.
2017
613.4
(210.0 )
115.8
519.2
2016
537.9
(303.4 )
163.9
398.4
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.
December 31,
2017
630.0
(52.8 )
577.2
January 1,
2017
600.0
(38.2 )
561.8
(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.
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 reflects business acquisitions made during the 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 for the trailing twelve months. The Company uses, and believes that
certain investors and analysts use the net debt leverage ratio to measure the financial leverage of the Company.
(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
December 31,
2017
586.1
0.3
586.4
577.2
1.0
January 1,
2017
523.8
12.5
536.3
561.8
1.0
Certain minor rounding variances exist between the consolidated financial statements and this summary.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 47
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 December 31, 2017. Management is also responsible for the
preparation and presentation of other financial information included in the 2017 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 December 31, 2017. KPMG LLP has direct access to the Audit and Finance Committee of the Board of
Directors.
(Signed: Glenn J. Chamandy)
(Signed: Rhodri J. Harries)
Glenn J. Chamandy
President and Chief Executive Officer
Rhodri J. Harries
Executive Vice-President,
Chief Financial and Administrative Officer
February 21, 2018
GILDAN 2017 REPORT TO SHAREHOLDERS P. 48
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Gildan Activewear Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Gildan Activewear Inc. (the “Entity”), which comprise
the consolidated statements of financial position as at December 31, 2017 and January 1, 2017, the consolidated statements
of earnings and comprehensive income, changes in equity and cash flows for the years then ended, and the related notes,
comprising a summary of significant accounting policies and other explanatory information (collectively referred to as the
“consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of
the Entity as at December 31, 2017 and January 1, 2017, and its consolidated financial performance and its consolidated cash
flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Report on Internal Control Over Financial Reporting
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Entity’s internal control over financial reporting as of December 31, 2017, based on the criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission,
and our report dated February 21, 2018 expressed an unqualified (unmodified) opinion on the effectiveness of the Entity’s
internal control over financial reporting.
Basis for Opinion
A - 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.
B - 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) (“PCAOB”). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due
to error or fraud. Those standards also require that we comply with ethical requirements, including independence. We are
required to be independent with respect to the Entity in accordance with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Canada, the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB. We are a public accounting firm registered with the PCAOB.
An audit includes performing procedures to assess the risks of material misstatements of the consolidated financial
statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included
obtaining and examining, on a test basis, audit evidence regarding 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 entity’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 and principles used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 49
CONSOLIDATED FINANCIAL STATEMENTS
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis
for our audit opinion.
We have served as the Entity's auditor since fiscal 1996.
Montreal, Canada
February 21, 2018
*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 2017 REPORT TO SHAREHOLDERS P. 50
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Gildan Activewear Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Gildan Activewear Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2017,
based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Report on the Consolidated Financial Statements
We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company,
which comprise the consolidated statements of financial position as at December 31, 2017 and January 1, 2017, the
consolidated statements of earnings and comprehensive income, changes in equity and cash flows for the years then ended,
and the related notes, comprising a summary of significant accounting policies and other explanatory information (collectively
referred to as the “consolidated financial statements”), and our report dated February 21, 2018 expressed an unmodified
(unqualified) opinion on those consolidated financial statements.
Basis for Opinion
The Company’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 included in accompanying “Management’s Annual
Report on Internal Control over Financial Reporting” included in Management’s Discussion and Analysis for the year ended
December 31, 2017. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB and in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 51
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.
CONSOLIDATED FINANCIAL STATEMENTS
Montreal, Canada
February 21, 2018
*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 2017 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)
Income taxes receivable
Inventories (note 8)
Prepaid expenses, deposits and other current assets
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)
Deferred income taxes (note 18)
Other non-current liabilities (note 12)
Total non-current liabilities
Total liabilities
Commitments, guarantees and contingent liabilities (note 23)
Equity (note 13):
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total equity attributable to shareholders of the Company
Total liabilities and equity
See accompanying notes to consolidated financial statements.
On behalf of the Board of Directors:
December 31,
2017
January 1, 2017
$
$
$
$
$
$
$
52,795
243,365
3,891
945,738
62,092
1,307,881
1,035,818
401,605
226,571
—
8,830
1,672,824
2,980,705
258,476
—
258,476
630,000
3,713
37,141
670,854
929,330
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
159,170
25,208
1,853,457
13,540
2,051,375
2,980,705
$
152,313
23,198
1,903,525
40,611
2,119,647
2,990,144
(Signed: Glenn J. Chamandy)
Glenn J. Chamandy
Director
(Signed: Russell Goodman)
Russell Goodman
Director
GILDAN 2017 REPORT TO SHAREHOLDERS P. 53
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal years ended December 31, 2017 and January 1, 2017
(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
Diluted
See accompanying notes to consolidated financial statements.
2017
2,750,816
1,949,597
801,219
377,323
22,894
401,002
24,186
376,816
14,482
362,334
(27,071 )
(64 )
(27,135 )
335,199
1.62
1.61
$
$
$
$
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
$
$
$
$
GILDAN 2017 REPORT TO SHAREHOLDERS P. 54
CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Fiscal years ended December 31, 2017 and January 1, 2017
(in thousands or thousands of U.S. dollars)
Share capital Contributed
surplus
Amount
Number
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
equity
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
—
53
77
—
15,225
1,532
1,278
—
(453 )
291
7,632
(12,185 )
Shares repurchased for cancellation
(note 13(d))
(13,775 )
(8,626 )
—
Change in classification of non-Treasury
RSUs to equity-settled
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
—
—
(13,354 )
—
—
—
—
—
—
1,816
—
—
—
—
6,234
370
9,191
—
—
—
—
—
—
—
—
—
—
—
—
39,518
—
—
39,518
—
—
—
15,225
1,532
825
(143 )
(4,696 )
(385,825 )
(394,451 )
—
(74,752 )
(460,720 )
—
(5,239 )
346,638
341,399
6,234
(74,382 )
(449,713 )
39,518
(5,239 )
346,638
380,917
Balance, January 1, 2017
230,218
$ 152,313
$
23,198
$
40,611
$ 1,903,525
$ 2,119,647
—
15,706
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
—
58
269
364
1,671
5,304
7,709
Shares repurchased for cancellation
(note 13(d))
(11,512 )
(7,692 )
Share repurchases for 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
(198 )
—
(11,019 )
—
—
—
—
(135 )
—
6,857
—
—
—
—
Balance, December 31, 2017
219,199 $ 159,170 $
See accompanying notes to consolidated financial statements.
—
—
—
—
—
—
—
—
(27,071 )
—
—
—
—
15,706
1,671
3,390
(4,520 )
(320,924 )
(328,616 )
(6,145 )
(85,269 )
(412,338 )
—
(6,280 )
(84,822 )
(403,471 )
(27,071 )
—
(1,914 )
(12,229 )
—
—
447
2,010
—
—
—
—
25,208 $
(64 )
(64 )
—
362,334
—
362,334
335,199
362,270
(27,071 )
13,540 $ 1,853,457 $ 2,051,375
GILDAN 2017 REPORT TO SHAREHOLDERS P. 55
CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended December 31, 2017 and January 1, 2017
(in thousands of U.S. dollars)
2017
2016
$
362,334
$
346,638
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 (note 5)
Proceeds on disposal of 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 settlement of non-Treasury RSUs (note 13(e))
Cash flows used in financing activities
Effect of exchange rate changes on cash and cash equivalents denominated in
foreign currencies
Net increase (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.
$
$
175,199
537,533
38,924
(5,424 )
27,102
(5,227 )
20,452
613,360
(91,951 )
(2,845 )
(115,776 )
542
(210,030 )
30,000
—
—
(84,822 )
(4,520 )
4,900
(328,616 )
(6,280 )
(389,338 )
606
14,598
38,197
52,795
16,658
15,209
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
$
$
GILDAN 2017 REPORT TO SHAREHOLDERS P. 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended December 31, 2017 and January 1, 2017
(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" or "Gildan") 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. The
Company's fiscal year ends on the Sunday closest to December 31 of each year.
The address of the Company’s registered office is 600 de Maisonneuve Boulevard West, Suite 3300, Montreal, Quebec. These
consolidated financial statements are as at and for the fiscal years ended December 31, 2017 and January 1, 2017 and
include the accounts of the Company and its subsidiaries. The Company is a publicly listed entity and its shares are traded on
the Toronto Stock Exchange and New York Stock Exchange under the symbol GIL.
2. BASIS OF PREPARATION:
(a) Statement of compliance:
These 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 December 31, 2017 were authorized for issuance by the
Board of Directors of the Company on February 21, 2018.
(b) Basis of measurement:
These 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;
• Employee benefit obligations related to defined benefit plans which are measured at the present value of the defined
benefit obligations, net of advance payments made to employees thereon;
• 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; and
Identifiable assets acquired and liabilities assumed in connection with a business combination which are initially
measured at fair value.
These consolidated financial statements are presented in U.S. dollars, which is the Company's functional currency.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
(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 Branded Apparel SRL
Gildan USA Inc.
Gildan Yarns, LLC
Gildan Honduras Properties, S. de R.L.
Gildan Apparel (Canada) LP
Gildan Activewear (UK) Limited
Gildan Hosiery Rio Nance, S. de R.L.
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
Ownership
percentage
Barbados
Barbados
Delaware
Delaware
Honduras
Ontario
United Kingdom
Honduras
Honduras
North Carolina
Honduras
Honduras
100 %
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 December 31, 2017.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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.
(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 accounts 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 accounts receivables but
does not retain any credit risk with respect to any trade accounts receivables that have been sold. All trade accounts
receivables sold under the receivables purchase agreement are removed from the consolidated statements of financial
position as the sale of the trade accounts 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 trade accounts receivables sold under the agreement and the cash received at the
time of transfer is recorded in the statement of earnings and comprehensive income within financial expenses.
(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 overhead 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 of finished goods 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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:
Asset
Buildings and improvements
Manufacturing equipment
Other equipment
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 available for use.
All other borrowing costs are recognized as financial expenses in the consolidated statement of earnings and
comprehensive income as incurred.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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.
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;
•
•
• adequate technical, financial, and other resources to complete the development and to use the software product are
there is an ability to use the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
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").
GILDAN 2017 REPORT TO SHAREHOLDERS P. 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(j)
Impairment of non-financial assets (continued):
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.
(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 de-recognizes 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(k) Financial instruments (continued):
(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 bearing interest at variable and fixed rates 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 has no significant financial liabilities
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.
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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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.
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 within a financial liability 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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.
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
Provisions for onerous contracts are 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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. When the shares are cancelled, the excess of the consideration paid over the average stated value
of the shares purchased for cancellation is charged to retained earnings.
(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.
(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 regularly evaluates the recoverability of these assets.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(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 may 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; 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.
(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; amortization of debt facility fees, 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(aa) Income taxes (continued):
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.
(cc) Share based payments:
Stock options, Treasury, and non-Treasury restricted share units
Stock options, Treasury restricted share units, and non-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 and non-
Treasury restricted share units, compensation cost is measured at the fair value of the underlying common share at the
grant date, 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, the vesting of Treasury restricted share units, and 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. 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.
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 2017 REPORT TO SHAREHOLDERS P. 68
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.
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:
GILDAN 2017 REPORT TO SHAREHOLDERS P. 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(ee) Use of estimates and judgments (continued):
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 could 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, including discounts and rebates, are granted to our customers. 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 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 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, earnings multiples obtained by using
market comparables as references, 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 and market conditions can result in actual useful
lives and future cash flows that differ 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 the associated cash flows materially decrease, the
Company may be required to record material impairment charges related to its non-financial assets. Please refer to note
10 of the audited annual consolidated financial statements for the year ended December 31, 2017 for additional details on
the recoverability of the Company’s cash-generating units.
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
GILDAN 2017 REPORT TO SHAREHOLDERS P. 70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (continued):
(ee) Use of estimates and judgments (continued):
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 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 an assumed discount rate. 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.
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 Services). The standard prescribes a five-step
approach to revenue recognition: (1) identify the contracts with the customer; (2) identify the separate performance obligations
in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and
(5) recognize revenue when, or as, each performance obligation is satisfied. New disclosures about the nature, amount, timing,
and uncertainty of revenue and cash flows arising from contracts with customers are also required. IFRS 15 is effective for the
Company’s fiscal year beginning on January 1, 2018, and can be applied retrospectively to each prior reporting period
presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized
as an adjustment to opening retained earnings at the date of initial adoption (modified retrospective method). Upon transition,
an entity can elect to apply IFRS 15 with or without certain practical expedients.
The Company has reviewed the new standard against its existing accounting policies and practices, including reviewing
standard purchase orders, invoices, shipping terms, and contracts with customers, including discount arrangements, within its
significant revenue streams in order to assess any terms that can represent additional performance obligations and to evaluate
transaction price considerations. The majority of the Company’s contracts with customers are contracts in which the sale of
finished products is generally expected to be the only performance obligation. The Company has concluded that the revenue
recognition occurs at a point in time when control of the asset is transferred to the customer, generally upon shipment of
products to customers, consistent with its current practice. Some contracts with customers provide incentive programs,
including discounts, promotions, advertising allowances, and other volume-based incentives. Currently, the Company
recognizes revenue from the sale of goods measured at the fair value of the consideration received or receivable,
GILDAN 2017 REPORT TO SHAREHOLDERS P. 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED (continued):
Revenues from contracts with customers (continued):
net of provisions for customer incentives and for sales returns. Such incentives give rise to variable consideration under IFRS
15, which is also estimated at contract inception.
The Company will adopt the new standard in the first quarter of fiscal 2018 using the modified retrospective transition method.
The Company has concluded that the new guidance under IFRS 15 will not have a material impact on recognition and
amounts in its consolidated financial statements. The Company expects to record a non-cash adjustment to reduce retained
earnings by less than $2.0 million at January 1, 2018 on initial adoption, representing the gross margin on estimated net sales
for which revenue recognition should be delayed under the guidance of IFRS 15. The Company is completing the assessment
of the overall impact on the Company’s disclosures and is addressing any system and process changes necessary to compile
the information to meet the recognition and disclosure requirements of the new guidance starting in the first quarter of fiscal
2018.
Financial Instruments
In July 2014, the IASB issued 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. IFRS 9 (2014) must be applied retroactively;
however, it contains significant exemptions from retroactive application for the classification and measurement requirements of
the new standard, including impairment. The Company expects to record a non-cash adjustment of approximately
$1.0 million to reduce retained earnings at January 1, 2018, as a result of the adoption of IFRS 9 (2014), reflecting additional
allowance for doubtful accounts from the new expected credit loss model.
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
adoption permitted only if IFRS 15, Revenue from Contracts with Customers, has also been applied. The Company will adopt
the new standard in the first quarter of fiscal 2019, and expects to use the modified retrospective transition method. The
Company expects that the initial adoption of IFRS 16 will result in approximately $120 million of operating lease liabilities
(primarily for the rental of premises), being recognized in the consolidated statement of financial position, with a corresponding
right-of-use asset being recognized. The Company also expects a decrease of its operating lease costs, offset by a
corresponding increase of its financial expenses and depreciation and amortization resulting from the changes in the
recognition, measurement and presentation requirements. However, no significant impact on net earnings is expected at this
time.
Uncertain Income Tax Treatments
In June 2017, the IASB issued IFRIC 23, Uncertainty Over Income Tax Treatments, which clarifies how to apply the recognition
and measurement requirements in IAS 12, Income Taxes, when there is uncertainty regarding income tax treatments. The
Interpretation addresses whether an entity needs to consider uncertain tax treatments separately, the assumptions an entity
should make about the examination of tax treatments by taxation authorities, how an entity should determine taxable profit and
loss, tax bases, unused tax losses, unused tax credits and tax rates, and how an entity considers changes in facts and
circumstances in such determinations. IFRIC 23 applies to annual reporting periods beginning on or after January 1, 2019, with
earlier adoption permitted. The Company is currently evaluating the impact of the adoption of IFRIC 23 on the consolidated
financial statements.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. BUSINESS ACQUISITIONS:
Fiscal 2017 Acquisitions:
American Apparel
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
$88.0 million. The Company also acquired inventory from American Apparel for approximately $10.5 million. The total
consideration transferred for this acquisition was therefore $98.5 million (of which $91.9 million was paid in fiscal 2017 and
$6.6 million was paid in the fourth quarter of fiscal 2016). The acquisition was financed by the utilization of the Company's
long-term bank credit facilities. The American Apparel® brand is a highly recognized brand among consumers and within the
North American printwear channel and is 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 share in the fashion basics category of these markets.
Goodwill recorded in connection with this acquisition is fully deductible for tax purposes. Goodwill is primarily attributable to
expected synergies, which were not recorded separately since they did not meet the recognition criteria for identifiable
intangible assets. Results from the sale of products under the American Apparel® brand are included in the Printwear
segment. The consolidated results of the Company for fiscal 2017 include net sales of $49.1 million and a net loss of $1.0
million (including restructuring and acquisition-related costs) relating to American Apparel since the date of acquisition.
If the acquisition of American Apparel was accounted for on a pro forma basis as if it had occurred at the beginning of the
Company’s fiscal year, the Company’s consolidated net sales and net earnings for fiscal 2017 would have been $2,755.6
million and $361.2 million respectively. These pro forma figures are based on estimated results of American Apparel's
operations prior to being purchased by the Company, adjusted to reflect fair value adjustments which arose on the date of the
acquisition, as if the acquisition occurred on January 2, 2017, and should not be viewed as indicative of the Company’s
future results.
Other
On July 17, 2017, the Company acquired substantially all of the assets of a ring-spun yarn manufacturer with two facilities
located in Columbus, Georgia for cash consideration of $13.5 million, including a balance due of $1.3 million to be paid within
eighteen months of closing. The transaction also resulted in the effective settlement of $1.2 million of trade accounts payable
owed by Gildan to the manufacturer prior to the acquisition. Goodwill recorded in connection with this acquisition is fully
deductible for tax purposes. Goodwill is attributable primarily to the assembled workforce and was not recorded separately
since it did not meet the recognition criteria for identifiable intangible assets. The net sales and net earnings attributable to this
acquisition since July 17, 2017 were not significant.
On April 4, 2017, the Company acquired a 100% interest in an Australian based activewear distributor for cash consideration of
$5.7 million. The transaction also resulted in the effective settlement of $2.9 million of trade accounts receivable due to Gildan
prior to the acquisition. The net sales and net earnings attributable to this acquisition since April 4, 2017 were not significant.
The Company accounted for its acquisitions using the acquisition method in accordance with IFRS 3, Business Combinations.
The Company determined the fair value of the assets acquired based on management's 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 and equipment acquired for the acquisitions made on April 4, 2017 and July 17, 2017.
The Company expects to finalize its assessment during the first half of fiscal 2018.
The following table summarizes the amounts recognized for the assets acquired and liabilities assumed at the date of
acquisition for the fiscal 2017 acquisitions:
GILDAN 2017 REPORT TO SHAREHOLDERS P. 73
5. BUSINESS ACQUISITIONS (continued):
Assets acquired:
Trade accounts receivable
Income taxes receivable
Inventories
Prepaid expenses, deposits and other current assets
Property, plant and equipment
Intangible assets (1)
Liabilities assumed:
Accounts payable and accrued liabilities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
American
Apparel
Other
Total
$
— $
—
11,052
—
1,527
67,400
79,979
1,893 $
235
7,235
4,100
3,011
2,958
19,432
1,893
235
18,287
4,100
4,538
70,358
99,411
(3,822 )
Goodwill
Net assets acquired at fair value
Cash consideration paid at closing, net of cash acquired
Settlement of pre-existing relationships
Balance due
24,087
119,676
116,610
1,766
1,300
119,676
(1) The intangible assets acquired relating to American Apparel are comprised of trademarks in the amount of $51.4 million which are not
being amortized as they are considered to be indefinite life intangible assets, and customer relationships in the amount of $16.0 million which
are being amortized on a straight line basis over their estimated useful lives of ten years. The intangible assets acquired relating to other
acquisitions is comprised of customer relationships in the amount $3.0 million which are being amortized on a straight line basis over their
estimated useful lives of fifteen years.
$
$
—
18,562
98,541 $
98,541
—
—
98,541 $
(3,822 )
5,525
21,135 $
18,069
1,766
1,300
21,135 $
Fiscal 2016 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 paid in fiscal 2017. 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. Goodwill recorded in connection with this acquisition is partially deductible for tax
purposes. 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. The operating results of Peds are
included in the Branded Apparel segment.
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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. BUSINESS ACQUISITIONS (continued):
Goodwill recorded in connection with this acquisition is fully deductible for tax purposes. 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. The operating results of Alstyle 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 for the fiscal 2016 acquisitions:
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
Peds
Alstyle
Total
$
11,821 $
20,548
1,180
5,442
26,484
1,380
66,855
19,113 $
62,677
3,831
26,337
7,500
—
119,458
(16,376 )
(2,521 )
(4,069 )
(22,966 )
(11,629 )
—
—
(11,629 )
30,934
83,225
5,011
31,779
33,984
1,380
186,313
(28,005 )
(2,521 )
(4,069 )
(34,595 )
Goodwill
Net assets acquired at fair value
7,980
51,869 $
1,649
109,478 $
9,629
161,347
$
Cash consideration paid at closing, net of cash acquired
Balance due (paid in fiscal 2017)
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.
47,869
4,000
51,869 $
109,478 $
109,478
—
$
6. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consisted entirely of bank balances as at December 31, 2017 and January 1, 2017.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 75
7. TRADE ACCOUNTS RECEIVABLE:
Trade accounts receivable
Allowance for doubtful accounts
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2017
January 1,
2017
$
$
248,419
(5,054 )
243,365
$
$
283,322
(5,589 )
277,733
As at December 31, 2017, trade accounts receivables being serviced under a receivables purchase agreement amounted to
$92.8 million (January 1, 2017 - $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, 2018, 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 $1.7 million for fiscal 2017 (2016 - $0.7 million), and was recorded in bank and other financial charges.
The movement in the allowance for doubtful accounts in respect of trade receivables was as follows:
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
December 31,
2017
January 1,
2017
$
$
(5,589 )
(3,689 )
4,224
—
(5,054 )
December 31,
2017
$
$
128,414
60,743
756,581
945,738
$
$
$
$
(4,601 )
92
524
(1,604 )
(5,589 )
January 1,
2017
119,155
56,397
779,324
954,876
The amount of inventories recognized as an expense and included in cost of sales was $1,884.8 million for fiscal 2017 (2016 -
$1,810.3 million), which included an expense of $18.0 million (2016 - $11.3 million) related to the write-down of inventory to net
realizable value.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 76
9. PROPERTY, PLANT AND EQUIPMENT:
2017
Cost
Balance, January 1, 2017
Additions
Additions through business acquisitions
Transfers
Disposals
Balance, December 31, 2017
Accumulated depreciation
Balance, January 1, 2017
Depreciation
Disposals
Balance, December 31, 2017
Carrying amount, December 31, 2017
$
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Land
Buildings and
improvements
Manufacturing
equipment
Other
equipment
Assets not
yet utilized in
operations
Total
69,373 $
630
—
—
—
70,003 $
504,186 $
7,515
29
2,601
(1,933 )
997,993 $ 167,651 $
17,565
4,153
25,062
(4,799 )
512,398 $ 1,039,974 $ 175,640 $
10,852
356
1,195
(4,414 )
50,607 $ 1,789,810
92,202
55,640
4,538
—
—
(28,858 )
—
(11,146 )
77,389 $ 1,875,404
— $
—
—
— $
132,976 $
24,719
(655 )
157,040 $
483,742 $
92,904
(4,799 )
571,847 $
96,209 $
18,610
(4,120 )
110,699 $
— $
—
—
— $
712,927
136,233
(9,574 )
839,586
70,003
$
355,358
$
468,127
$
64,941
$
77,389
$ 1,035,818
2016
Cost
Balance, January 3, 2016
Additions
Additions through business acquisitions
Transfers from assets held for sale
Transfers
Disposals
$
Balance, January 1, 2017
Accumulated depreciation
Balance, January 3, 2016
Depreciation
Transfers from assets held for sale
Disposals
Balance, January 1, 2017
Carrying amount, January 1, 2017
$
$
$
$
Land
Buildings and
improvements
Manufacturing
equipment
Other
equipment
Assets not yet
utilized in
operations
Total
65,687 $
2,727
839
120
—
—
69,373 $
— $
—
—
—
— $
439,276 $
17,390
17,672
3,855
28,028
(2,035 )
504,186 $
109,204 $
22,828
1,732
(788 )
132,976 $
903,502 $ 156,492 $
46,165
12,651
—
45,140
(9,465 )
9,870
617
248
2,408
(1,984 )
997,993 $ 167,651 $
75,576 $ 1,640,533
126,759
50,607
31,779
—
4,223
—
—
(75,576 )
—
(13,484 )
50,607 $ 1,789,810
404,663 $
86,242
—
(7,163 )
483,742 $
82,277 $
15,668
248
(1,984 )
96,209 $
— $
—
—
—
— $
596,144
124,738
1,980
(9,935 )
712,927
69,373
$
371,210
$
514,251
$
71,442
$
50,607
$ 1,076,883
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 December 31, 2017, there were contractual purchase obligations outstanding of approximately $46.2 million for the
acquisition of property, plant and equipment compared to $44.7 million as of January 1, 2017.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INTANGIBLE ASSETS AND GOODWILL:
Intangible assets:
Balance, December 31, 2017
$
224,489 $ 226,172 $
2017
Cost
Balance, January 1, 2017
Additions
Additions through business acquisitions
Disposals
Accumulated amortization
Balance, January 1, 2017
Amortization
Disposals
Balance, December 31, 2017
Carrying amount, December 31, 2017
$
$
$
2016
Cost
Balance, January 3, 2016
Additions
Additions through business acquisitions
Disposals
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
Total
$
205,531 $ 174,772 $
—
18,958
—
—
51,400
—
59,498 $
—
—
—
59,498 $
48,776 $
2,852
—
(1,857 )
49,771 $
62,185 $
13,287
—
75,472 $
125 $
983
—
1,108 $
42,586 $
6,448
—
49,034 $
29,528 $
4,808
(1,625 )
32,711 $
1,880 $
—
—
—
1,880 $
1,812 $
68
—
1,880 $
490,457
2,852
70,358
(1,857 )
561,810
136,236
25,594
(1,625 )
160,205
149,017
$ 225,064
$
10,464
$
17,060
$
—
$
401,605
Customer
contracts and
customer
relationships Trademarks
License
agreements
Computer
software
Non-compete
agreements
Total
$
191,831 $ 154,972 $
—
13,700
—
—
19,800
—
58,300 $
1,198
—
—
59,498 $
44,972 $
4,084
484
(764 )
48,776 $
50,740 $
11,445
—
62,185 $
— $
125
—
125 $
36,140 $
6,446
—
42,586 $
26,600 $
3,183
(255 )
29,528 $
1,880 $
—
—
—
1,880 $
1,722 $
90
—
1,812 $
451,955
5,282
33,984
(764 )
490,457
115,202
21,289
(255 )
136,236
143,346
$ 174,647
$
16,912
$
19,248
$
68
$
354,221
Balance, January 1, 2017
$
205,531 $ 174,772 $
The carrying amount of internally-generated assets within computer software was $11.7 million as at December 31, 2017 and
$13.9 million as at January 1, 2017. Included in computer software as at December 31, 2017 is $5.1 million (January 1, 2017 -
$9.9 million) of assets not yet utilized in operations.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 78
10. INTANGIBLE ASSETS AND GOODWILL (continued):
Goodwill:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2017
January 1,
2017
190,626
Balance, beginning of fiscal year
9,629
Goodwill acquired (note 5)
Other (1)
1,853
202,108
Balance, end of fiscal year
(1) The increase in goodwill for fiscal 2016 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 which was adopted in fiscal 2016.
202,108
24,087
376
226,571
$
$
$
$
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
Yarn-Spinning:
Goodwill
December 31,
2017
January 1,
2017
$
$
$
$
$
$
180,860
129,272
310,132
40,186
93,400
133,586
5,525
5,525
$
$
$
$
$
$
180,482
129,272
309,754
21,626
42,000
63,626
—
—
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 2017, 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, Printwear, and Yarn-Spinning CGU’s based on the
fair value less costs of disposal method. The fair values of the Branded Apparel, Printwear, and Yarn-Spinning CGU’s were
based on a multiple applied to forecasted adjusted EBITDA for the next year, which takes into account financial forecasts
approved by senior management. The key assumptions for the fair value less costs of disposal method include estimated sales
volumes, selling prices, input costs, and SG&A expenses in determining future forecasted adjusted EBITDA, as well as the
multiple applied to forecasted adjusted EBITDA. The adjusted EBITDA multiple was obtained by using market comparables as
a reference. The values assigned to the key assumptions represent management’s assessment of future trends and have
been based on historical data from external and internal sources. For the Printwear and Yarn-spinning CGU’s, 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INTANGIBLE ASSETS AND GOODWILL (continued):
Branded Apparel CGU
The estimated recoverable amount of the Branded Apparel CGU exceeded its carrying amount by approximately 10%. The key
assumptions used in the estimation of the recoverable amount for the Branded Apparel CGU are the risk adjusted forecasted
adjusted EBITDA for the next year and the adjusted EBITDA multiple of 11. The most significant assumptions that form part of
the risk adjusted forecasted adjusted EBITDA for the Branded Apparel CGU relate to continuing sales trends in the retail
market and the reduction in SG&A expenses arising from the internal organizational realignment of the Branded Apparel
business unit initiated in December 2017 to be in line with these sales trends in this market.
Management has identified that a reasonably possible change in forecasted adjusted EBITDA or adjusted EBITDA multiple
could cause the carrying amount of the Branded Apparel CGU to exceed its recoverable amount. A decrease in the risk
adjusted forecasted adjusted EBITDA of 10% in the Branded Apparel CGU or a decrease in the adjusted EBITDA multiple by a
factor of 1 would result in the estimated recoverable amount being equal to the carrying amount. A further decrease in the risk
adjusted forecasted adjusted EBITDA or the adjusted EBITDA multiple may result in the Company recording an impairment
charge relating to the Branded Apparel CGU.
11. LONG-TERM DEBT:
Effective
interest
rate (1)
Principal amount
December 31,
2017
January 1,
2017
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)
2.3%
$
30,000
$
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)
2.1%
2.2%
2.7%
2.7%
2.9%
2.9%
—
300,000
100,000
50,000
100,000
50,000
—
—
April
2022
March
2019
300,000
100,000
50,000
100,000
50,000
June
2021
August
2023
August
2023
August
2026
August
2026
$
630,000 $
600,000
(1) Represents the effective interest rate for the year ended December 31, 2017, including the cash impact of interest rate swaps, where
applicable.
(2) The Company’s 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 $14.6 million (January 1, 2017 - $19.0 million) has been
committed against this facility to cover various letters of credit.
(3) The Company's unsecured revolving long-term bank credit facility agreement of $300 million, 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% during the revolving period and 1.25% during the term-out period is added to the U.S. LIBOR-based variable interest
rate.
(4) The unsecured five-year term loan of $300 million 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) The unsecured notes issued for a total aggregate principal amount of $300 million to accredited investors in the U.S. private placement
market 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.
In March 2017, the Company amended its unsecured revolving long-term bank credit facility of $1 billion to extend the maturity
date from April 2021 to April 2022, and amended its unsecured revolving long-term bank credit facility agreement of
$300 million to extend the maturity date from March 2018 to March 2019.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LONG-TERM DEBT (continued):
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 financial covenants at
December 31, 2017.
12. OTHER NON-CURRENT LIABILITIES:
Employee benefit obligation - Statutory severance and pre-notice
Employee benefit obligation - Defined contribution plan
Provisions
(a) Statutory severance and pre-notice obligations:
December 31,
2017
January 1,
2017
$
$
16,096
3,216
17,829
37,141
December 31,
2017
14,579
12,424
6,171
64
(389 )
(16,753 )
16,096
$
$
$
14,579
2,444
17,546
34,569
January 1,
2017
8,882
10,953
5,839
5,239
(527 )
(15,807 )
14,579
Obligation, beginning of fiscal year
Service cost
Interest cost
Actuarial loss(1)
Foreign exchange gain
Benefits paid
$
Obligation, end of fiscal year
(1) The actuarial loss is due to changes in the actuarial assumptions used to determine the statutory severance obligations.
$
$
Significant assumptions for the calculation of the statutory severance obligations included the use of a discount rate of
between 9.20% and 9.65% (2016 - between 9.75% and 9.85%) and rates of compensation increases between 8.0% and
10.0% (2016 - between 7.25% and 7.50%). A 1% increase in the discount rates would result in a corresponding decrease
in the statutory severance obligations of $5.3 million, and a 1% decrease in the discount rates would result in a
corresponding increase in the statutory severance obligations of $6.6 million. A 1% increase in the rates of compensation
increases used would result in a corresponding increase in the statutory severance obligations of $6.6 million, and a 1%
decrease in the rates of compensation increases used would result in a corresponding decrease in the statutory
severance obligations of $5.4 million.
The cumulative amount of actuarial losses recognized in other comprehensive income as at December 31, 2017 was
$22.1 million (January 1, 2017 - $22.0 million) which have been reclassified to retained earnings in the period in which
they were recognized.
(b) Defined contribution plan:
During fiscal 2017, defined contribution expenses were $4.4 million (2016 - $3.4 million).
GILDAN 2017 REPORT TO SHAREHOLDERS P. 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. OTHER NON-CURRENT LIABILITIES (continued):
(c) Provisions:
Balance, January 1, 2017
Changes in estimates made during the fiscal year
Provisions utilized during the fiscal year
Accretion of interest
Balance, December 31, 2017
Decommissioning
and site
restoration costs
Lease exit
costs
$
$
16,024 $
237
—
311
16,572 $
1,522
—
(265 )
—
1,257
$
$
Total
17,546
237
(265 )
311
17,829
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.
(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 December 31, 2017 and January 1, 2017, none of the first and
second preferred shares were issued.
Issued:
As at December 31, 2017, there were 219,198,989 common shares (January 1, 2017 - 230,218,171) issued and outstanding,
which are net of 4,308 common shares (January 1, 2017 - 21,125) that have been purchased and are held in trust as
described in note 13(e).
(d) Normal course issuer bid:
On February 23, 2017, the Company announced the renewal of a normal course issuer bid ("NCIB") beginning
February 27, 2017 and ending on February 26, 2018, to purchase for cancellation up to 11,512,267 common shares of the
Company, representing approximately 5% of the Company’s issued and outstanding common shares as of
February 17, 2017.
On November 1, 2017, the Company obtained approval from the TSX to amend its NCIB program in order to increase the
maximum number of common shares that may be repurchased from 11,512,267 common shares, or 5% of the Company’s
issued and outstanding common shares as at February 17, 2017 (the reference date for the NCIB), to 16,117,175 common
shares, representing approximately 7.2% of the public float (or 7% of the Company’s issued and outstanding common shares)
as at February 17, 2017. No other terms of the NCIB were amended.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EQUITY (continued):
(d) Normal course issuer bid (continued):
During the year ended December 31, 2017, the Company repurchased for cancellation a total of 11,512,267 common shares
under the NCIB for a total cost of $328.6 million, of which a total of 877,000 common shares were repurchased by way of
private agreements with arm’s length third-party sellers. Of the total cost of $328.6 million, $7.7 million was charged to share
capital and $320.9 million was charged to retained earnings.
During the fiscal year ended January 1, 2017, the Company repurchased for cancellation a total of 13,775,248 common
shares under a previous NCIB 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 of $394.5 million, $8.6 million
was charged to share capital and $385.8 million was charged to retained earnings.
On February 21, 2018, the Board of Directors of the Company approved the initiation of a new NCIB commencing on
February 27, 2018 to purchase for cancellation up to 10,960,391 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, 2018 to February 26, 2019 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 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 114,889
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.
(e) Common shares purchased as settlement for non-Treasury RSUs:
The Company has 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. As at December 31, 2017, a total of 4,308 common shares
purchased as settlement for non-Treasury RSUs were considered as held in treasury, and recorded as a temporary reduction
of outstanding common shares and share capital (January 1, 2017 - 21,125 common shares).
(f) Contributed surplus:
The contributed surplus account is used to record the accumulated compensation expense related to 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 31, 2017
and January 1, 2017. 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:
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
December 31,
2017
January 1,
2017
$
52,795
243,365
$
38,197
277,733
28,711
2,781
15,688
1,232
22,722
476
32,572
—
$
$
255,832
430,000
200,000
231,927
400,000
200,000
2,644
—
1,515
620
(1) The fair value of the long-term debt bearing interest at fixed rates was $197.6 million as at December 31, 2017 (January 1, 2017
- $192.5 million).
Short-term financial assets and liabilities
The Company has determined that the fair value of its short-term financial assets and liabilities approximates their
respective carrying amounts as at the reporting dates due to the short-term maturities of these instruments, as they bear
variable interest-rates or because the terms and conditions are comparable to current market terms and conditions for
similar items.
Non-current assets and long-term debt 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(a) Financial instruments - carrying amounts and fair values (continued):
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. The fair value of the long-term debt
bearing interest at fixed rates was measured using Level 2 inputs in the fair value hierarchy. In determining the fair value
of the long-term debt bearing interest at fixed rates, the Company takes into account its own credit risk and the credit risk
of the counterparties.
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 terms at the measurement
date under current 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 December 31, 2017, the notional amount of TRS outstanding was
284,761 shares.
Derivative financial instruments were measured using Level 2 inputs in the fair value hierarchy. In determining the fair
value of 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 2017, 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.
The forward foreign exchange contracts were designated as cash flow hedges and qualified for hedge accounting. The
forward foreign exchange contracts outstanding as at December 31, 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 December 31, 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 December 31, 2017 served to fix the variable interest rates
on the designated interest payments of a portion of the Company's long term debt.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FINANCIAL INSTRUMENTS (continued):
(b) Derivative financial instruments - hedge accounting (continued):
The following table summarizes the Company’s commitments to buy and sell foreign currencies as at
December 31, 2017:
Notional
foreign
currency
Average
amount exchange
rate
equivalent
Prepaid
expenses,
Notional deposits and
U.S. $ other current
assets
Carrying and fair value
Accounts
payable
and
accrued
liabilities
equivalent
Maturity
0 to 12
months
Cash flow hedges:
Forward foreign exchange contracts:
Sell GBP/Buy USD
Sell EUR/Buy USD
Sell CAD/Buy USD
Buy CAD/Sell USD
Sell AUD/Buy USD
Buy MXN/Sell USD
Sell MXN/Buy USD
28,290
31,625
45,596
52,425
7,542
145,025
19,040
1.3207 $
1.1866
0.7845
0.7747
0.7608
0.0515
0.0491
37,363 $
37,526
35,768
40,613
5,738
7,472
935
$ 165,415 $
— $
64
62
1,189
6
—
—
1,321 $
(859 ) $
(687 )
(629 )
(26 )
(142 )
(280 )
(21 )
(2,644 ) $
(859 )
(623 )
(567 )
1,163
(136 )
(280 )
(21 )
(1,323 )
The following table summarizes the Company's commodity contracts outstanding as at December 31, 2017:
Cash flow hedges:
Forward contracts
Swap and collar contracts
Type of commodity Notional amount
Carrying and fair value
Prepaid expenses,
deposits and other
current assets
Cotton
Energy
20,232 pounds
144 barrels
$
$
507 $
1,706
2,213 $
Maturity
0 to 12
months
507
1,706
2,213
GILDAN 2017 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
December 31, 2017:
Notional
amount of
borrowings
Maturity date
Pay / Receive
Carrying and fair
value
Fixed
rate
Prepaid expenses,
Floating deposits and other
current assets
rate
Cash flow hedges:
$
150,000
June 17, 2021
Pay fixed rate /
receive floating rate 0.96 % US LIBOR
$
5,617
50,000
August 25, 2023
August 25, 2026
50,000
250,000
$
Pay fixed rate /
receive floating rate 1.18 % US LIBOR
Pay fixed rate /
receive floating rate 1.34 % US LIBOR
2,787
3,750
12,154
$
The following table summarizes the Company’s hedged items as at December 31, 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)
$
— $
—
— $
—
1,658 $
(883 )
(1,658 )
883
—
—
(2,213 )
2,213
—
— $
—
— $
$
(12,102 )
(13,540 ) $
12,102
13,540
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.
GILDAN 2017 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 (gain) loss
(1) Net of capitalized borrowing costs of $1.2 million (2016 - $0.2 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
Cost of sales
Selling, general and administrative expenses
Financial expenses, net (1)
Income taxes
$
$
$
2017
2016
17,126
8,025
311
(1,276 )
24,186
$
$
12,568
6,348
336
434
19,686
2017
2016
$
(6,076 )
11,087
425
60
161
33,963
11,678
(3 )
(33,294 )
(4,356 )
1,626
(1,042 )
(2,087 )
2,234
(4 )
(27,071 )
19
—
(668 )
(1,295 )
19
39,518
Cash flow hedging (loss) gain
(1) The amount reclassified from OCI to net earnings related to interest rate risk was not significant for the year ended December 31,
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 December 31, 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 December 31, 2017.
Approximately $3.1 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 2017 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 December 31, 2017, a total of 852,255 shares (January 1, 2017 - 794,193) were issued under these
plans. Included as compensation costs in selling, general and administrative expenses is $0.2 million (2016 - $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 December 31, 2017, 1,278,661 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 issued in Canadian dollars and to be exercised on the TSX:
Stock options outstanding, January 3, 2016
Changes in outstanding stock options:
Granted
Exercised
Stock options outstanding, January 1, 2017
Changes in outstanding stock options:
Exercised
Stock options outstanding, December 31, 2017
Stock options issued in U.S. dollars and to be exercised on the NYSE:
Stock options outstanding, January 1, 2017
Changes in outstanding stock options:
Granted
Stock options outstanding, December 31, 2017
Number
Weighted exercise
price (CA$)
1,895
$
29.78
714
(77 )
2,532
(269 )
2,263
$
33.01
13.76
31.18
16.43
32.94
Number
Weighted exercise
price (US$)
—
759
759
$
$
—
29.01
29.01
GILDAN 2017 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 December 31, 2017, 599,562 outstanding options, all of which were issued in Canadian dollars and to be exercised
on the TSX, were exercisable at the weighted average exercise price of CA$26.68 (January 1, 2017 - 468,813 options at
CA$19.43). For stock options exercised during fiscal 2017, the weighted average share price at the date of exercise was
CA$39.23 (2016 - CA$37.32). Based on the Black-Scholes option pricing model, the grant date weighted average fair
value of options granted during the twelve months ended December 31, 2017 was $5.15 (January 1, 2017 - $4.07). The
following table summarizes the assumptions used in the Black-Scholes option pricing model for the stock option grants for
fiscal 2017 and 2016:
2017
2016
Exercise price
Risk-free interest rate
Expected volatility
Expected life
Expected dividend yield
CA$33.01
0.66%
21.85%
US$29.01
1.90%
20.78%
4.63 years 4.63 years
1.29%
1.27%
Expected volatilities are based on the historical volatility of Gildan’s share price. The risk-free rate used for stock options
issued in Canadian dollars and to be exercised on the TSX 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 risk-free rate used for stock options
issued in U.S. dollars and to be exercised on the NYSE is equal to the yield available on U.S Department of Treasury
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 December 31,
2017:
Exercise prices
CA$13.60
CA$15.59
CA$24.22
CA$30.46
CA$33.01
CA$38.01
CA$42.27
US$29.01
Options issued and outstanding
Options exercisable
Number
Remaining
contractual life (yrs)
Number
63
81
261
286
714
575
283
2,263
759
3,022
1
2
3
4
6
5
8
7
63
81
174
138
—
144
—
600
—
600
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. 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 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.
GILDAN 2017 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, January 3, 2016
Changes in outstanding Treasury RSUs:
Granted
Granted for dividends declared
Settled through the issuance of common shares
Forfeited
Treasury RSUs outstanding, January 1, 2017
Changes in outstanding Treasury RSUs:
Granted for dividends declared
Settled through the issuance of common shares
Treasury RSUs outstanding, December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Number
Weighted average
fair value per unit
292
$
20.25
8
3
(43 )
(11 )
249
2
(149 )
102
$
30.08
29.08
17.78
29.20
20.70
29.04
14.12
30.46
As at December 31, 2017 and January 1, 2017, none of the awarded and outstanding Treasury RSUs were vested.
The compensation expense included in selling, general and administrative expenses for fiscal 2017 was $3.8 million
(2016 - $3.7 million) in respect of the stock options and $0.9 million (2016 - $0.8 million) in respect of Treasury RSUs, 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, January 3, 2016
Changes in outstanding non-Treasury RSUs:
Granted
Granted for performance
Granted for dividends declared
Settled - common shares
Settled - payment of withholding taxes
Forfeited
Non-Treasury RSUs outstanding, January 1, 2017
Changes in outstanding non-Treasury RSUs:
Granted
Granted for performance
Granted for dividends declared
Settled - common shares
Settled - payment of withholding taxes
Forfeited
Non-Treasury RSUs outstanding, December 31, 2017
Number
Weighted average
fair value per unit
953
$
28.42
431
113
10
(248 )
(178 )
(34 )
1,047
471
88
13
(215 )
(142 )
(62 )
1,200
$
25.40
28.42
28.99
28.42
28.42
28.42
27.18
29.38
28.42
29.86
28.34
28.42
27.66
27.79
GILDAN 2017 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 December 31, 2017 and January 1, 2017, none of
the outstanding non-Treasury RSUs were vested.
The compensation expense included in selling, general and administrative expenses, in respect of the non-Treasury
RSUs, for fiscal 2017 was $11.2 million (2016 - $11.1 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 December 31, 2017, there were 292,873 (January 1, 2017 - 255,472) DSUs outstanding at a value of $9.5 million
(January 1, 2017 - $6.5 million). This amount is included in accounts payable and accrued liabilities based on a fair value
per deferred share unit of $32.30 (January 1, 2017 - $25.37). 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 2017 was $1.1 million (2016 - $0.7 million).
Changes in outstanding DSUs were as follows:
DSUs outstanding, beginning of fiscal year
Granted
Granted for dividends declared
Forfeited
DSUs outstanding, end of fiscal year
2017
255
35
3
—
293
2016
226
36
2
(9 )
255
GILDAN 2017 REPORT TO SHAREHOLDERS P. 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. SUPPLEMENTARY INFORMATION RELATING TO THE NATURE OF EXPENSES:
(a) Selling, general and administrative expenses:
Selling expenses
Administrative expenses
Distribution expenses
(b) Employee benefit expenses:
Salaries, wages and other short-term employee benefits
Share-based payments
Post-employment benefits
2017
118,560
141,325
117,438
377,323
2017
504,366
16,065
30,376
550,807
$
$
$
$
$
$
$
$
2016
113,340
121,702
101,391
336,433
2016
459,041
15,756
25,089
499,886
(c) Lease expenses:
During the year ended December 31, 2017 an amount of $35.7 million was recognized in the consolidated statement of
earnings and comprehensive income relating to operating leases (2016 - $26.6 million).
As at December 31, 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:
December 31,
2017
$
$
22,862
50,205
46,703
119,770
During the year ended December 31, 2017 an amount of $10.2 million was recognized in the consolidated statement of
earnings and comprehensive income relating to government assistance for yarn production (2016 - $9.3 million).
GILDAN 2017 REPORT TO SHAREHOLDERS P. 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 on disposal or transfer of assets held for sale
Remeasurement of contingent consideration in connection with a business
acquisition
Acquisition-related transaction costs
2017
3,958
13,805
930
—
—
4,201
22,894
$
$
2016
5,006
7,898
1,119
597
(6,176 )
3,302
11,746
$
$
Restructuring and acquisition-related costs in fiscal 2017 related primarily to the following: the American Apparel business
acquisition, including transaction costs and integration costs relating to the relocation of acquired assets and the re-launching
of this brand's direct-to-consumer e-commerce site; the consolidation of the Company's West Coast distribution centres for
Printwear brands pursuant to the acquisitions of American Apparel and Alstyle; the Company's internal organizational
realignment of its Branded Apparel business unit, including severance costs, legal fees, and other professional fees; the
rationalization of the Company's remaining retail store outlets, including lease exit costs, severance costs, and the write-off of
leasehold improvement assets; transaction costs relating to other business acquisitions completed or evaluated during fiscal
2017; and the completion of the integration of prior years' business acquisitions, primarily for the integration of Alstyle and
Peds.
Restructuring and acquisition-related costs in fiscal 2016 related primarily to costs incurred in connection with the integration of
acquired businesses, including the 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
Effect of reduction in tax rate
Effect of revaluation of deferred taxes on intangible assets
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
2017
2016
$
376,816
$
351,838
26.8 %
101,100
26.8 %
94,398
(89,722 )
(1,676 )
(1,633 )
(62,228 )
62,488
6,153
14,482
$
(83,208 )
(4,822 )
—
—
1,545
(2,713 )
5,200
$
3.8 %
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 $1,368
(2016 - recovery of $2,725) relating to prior taxation years
Deferred income taxes:
Reduction in tax rate
Revaluation of deferred taxes on intangible assets
Origination and reversal of temporary differences
Non-recognition of tax benefits related to tax losses and temporary differences
Recognition of tax benefits relating to prior taxation years
Total income tax expense
$
2017
2016
$
9,587
$
8,356
(1,633 )
(62,228 )
6,576
62,488
(308 )
4,895
14,482
$
—
—
(1,059 )
—
(2,097 )
(3,156 )
5,200
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (U.S. Tax Reform). The
U.S. Tax Reform reduces the statutory federal corporate income tax rate from 35% to 21% effective January 1, 2018, and
makes other changes to U.S. corporate tax laws. During the fourth quarter of fiscal 2017, the Company revalued the net
deferred tax liability position in its U.S. subsidiaries, to reflect the change in the statutory federal corporate income tax rate that
will take effect in 2018, resulting in an income tax recovery of $1.6 million. In addition, the Company incurred a net deferred tax
expense of $3.3 million in fiscal 2017 relating to an internal organizational realignment of its Branded Apparel business unit,
consisting of a $56.5 million increase in the non-recognition of deferred income tax assets and a $9.0 million reduction in
deferred income tax assets relating to the reversal of temporary differences, less a $62.2 million revaluation of deferred income
tax liabilities.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
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
Reduction in tax rate
Unrecognized deferred tax assets
Business acquisitions
Other
Balance, end of fiscal year, net
December
31, 2017
January 1,
2017
75,433
5,712
9,629
6,609
97,383
(67,152 )
30,231
(24,239 )
(9,705 )
(33,944 )
(3,713 )
2017
1,500
31,202
(41,052 )
(3,062 )
66,888
1,984
1,633
(62,488 )
(4,895 )
—
(318 )
(3,713 )
$
$
$
$
$
$
$
76,345
49,856
7,239
4,946
138,386
(27,529 )
110,857
(32,703 )
(76,654 )
(109,357 )
1,500
2016
2,793
9,847
3,004
(11,438 )
498
2,790
—
(1,545 )
3,156
(4,542 )
93
1,500
$
$
$
$
$
$
$
As at December 31, 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
$67.2 million, for which no deferred tax asset has been recognized (January 1, 2017 - $27.5 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 2018
and 2037. 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 December 31, 2017, a deferred income tax liability of approximately $68 million would result from the
recognition of the taxable temporary differences of approximately $305 million.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
Diluted earnings per share
2017
2016
$
362,334
$
346,638
224,184
1.62
$
235,355
1.47
$
224,184
235,355
351
224,535
1.61
$
693
236,048
1.47
$
Excluded from the above calculation for the year ended December 31, 2017 are 1,903,101 stock options (2016 - 1,572,273)
and nil Treasury RSUs (2016 - 7,500) which were deemed to be anti-dilutive.
20. DEPRECIATION AND AMORTIZATION:
Depreciation of property, plant and equipment (note 9)
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
$
2017
2016
$
136,233
$
124,738
323
136,556
20,786
4,808
162,150
$
(5,430 )
119,308
18,106
3,183
140,597
GILDAN 2017 REPORT TO SHAREHOLDERS P. 97
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)
$
Gain 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 (gain) 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:
2017
162,150
930
—
368
15,867
4,895
(863 )
(10,070 )
(523 )
2,445
175,199
$
$
Change in classification of non-Treasury RSUs to equity-settled
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)
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
2017
$
—
$
258
36
—
2,700
447
2016
140,597
1,716
(6,176 )
1,631
15,373
(3,156 )
1,993
10,840
(2,202 )
(2,169 )
158,447
2016
6,234
(8,200 )
(475 )
2,243
(4,000 )
370
9,623
8,085
GILDAN 2017 REPORT TO SHAREHOLDERS P. 98
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
2017
9,446
205
10,932
20,583
$
$
2016
7,422
157
10,132
17,711
$
$
The amounts in accounts payable and accrued liabilities for share-based compensation awards to key management personnel
were as follows:
DSUs
23. COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES:
(a) Claims and litigation
December 31,
2017
January 1,
2017
$
9,460
$
6,481
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 December 31, 2017, the maximum potential liability under these guarantees was
$50.6 million (January 1, 2017 - $53.8 million), of which $12.5 million was for surety bonds and $38.1 million was for
financial guarantees and standby letters of credit (January 1, 2017 - $10.4 million and $43.4 million, respectively).
As at December 31, 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 2017 REPORT TO SHAREHOLDERS P. 99
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 debt 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 December 31, 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 have not been and are not currently, a constraint to the payment of dividends under the Company’s dividend policy.
The Company paid dividends of $84.8 million during the year ended December 31, 2017, representing dividends declared per
common share of $0.374. On February 21, 2018, the Board of Directors approved a 20% increase in the amount of the current
quarterly dividend and declared a cash dividend of $0.112 per share for an expected aggregate payment of $24.6 million which
will be paid on April 2, 2018 on all of the issued and outstanding common shares of the Company, rateably and proportionately
to the holders of record on March 8, 2018. 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.
GILDAN 2017 REPORT TO SHAREHOLDERS P. 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. SEGMENT INFORMATION:
For the years ended December 31, 2017 and January 1, 2017, the Company managed and reported its business under two
operating segments, Printwear and Branded Apparel, each of which was a reportable segment for financial reporting purposes
with its own management that was accountable and responsible for the segment’s operations, results, and financial
performance. These segments were principally organized by the major customer markets they served.
The Printwear segment serviced wholesale distributors/screenprinters in imprintables markets in over 60 countries across
North America, Europe, Asia-Pacific, and Latin America by distributing undecorated activewear products in large quantities
primarily to this customer base. The Branded Apparel segment marketed branded family apparel, including socks, underwear,
activewear, sheer hosiery and shapewear products to retailers and consumers in the United States and Canada.
The chief operating decision-maker assessed segment performance based on segment operating income which was 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.
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, intangible assets, and goodwill
(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
2017
2016
$ 1,821,995
928,821
$ 2,750,816
$ 1,651,079
933,991
$ 2,585,070
$
$
$
$
$
$
$
$
438,307
86,570
524,877
524,877
(20,786 )
(80,195 )
(22,894 )
(24,186 )
376,816
147,737
17,811
7,401
21,464
194,413
93,353
35,674
7,529
136,556
$
$
$
$
$
$
$
$
388,052
85,445
473,497
473,497
(18,106 )
(72,121 )
(11,746 )
(19,686 )
351,838
148,205
80,855
4,357
(24,131 )
209,286
77,436
38,924
2,948
119,308
GILDAN 2017 REPORT TO SHAREHOLDERS P. 101
25. SEGMENT INFORMATION (continued):
The reconciliation of total assets to segmented assets is as follows:
(1)
Segmented assets:
Printwear
Branded Apparel
Total segmented assets
Unallocated assets:
Cash and cash equivalents
Income taxes receivable
Deferred income taxes
Assets not yet utilized in operations
Other - primarily corporate assets
Consolidated assets
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2017
January 1,
2017
$
$
1,726,945
1,065,474
2,792,419
$ 1,640,739
1,177,843
2,818,582
52,795
3,891
—
82,467
49,133
2,980,705
38,197
—
1,500
60,552
71,313
$ 2,990,144
(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
December 31,
2017
January 1,
2017
$
$
487,228
141,820
386,348
559,422
89,176
1,663,994
$
841,694
151,508
400,438
159,419
80,153
$ 1,633,212
2017
2016
$ 2,169,709
581,107
$ 2,750,816
$ 1,993,012
592,058
$ 2,585,070
2017
2016
$ 2,382,800
131,025
236,991
$ 2,750,816
$ 2,253,910
118,955
212,205
$ 2,585,070
GILDAN 2017 REPORT TO SHAREHOLDERS P. 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. SEGMENT INFORMATION (continued):
The Company has two customers accounting for at least 10% of total net sales.
Customer A
Customer B
2017
16.5 %
11.9 %
2016
18.2 %
12.4 %
GILDAN 2017 REPORT TO SHAREHOLDERS P. 103
Chair of the Board of Directors
Director since 2006
S William D. Anderson
R
O
T
C
E
R
Donald C. Berg
Chair of the Compensation
& Human Resources Committee
Director since 2015
I
D
F
O
D
R
A
O
B
Glenn J. Chamandy
President & Chief Executive Officer
Director since 1984
Shirley E. Cunningham
Director since 2017
Russell Goodman
Chair of the Audit & Finance Committee
Director since 2010
George Heller
Director since 2009
Anne Martin-Vachon
Director since 2015
Sheila O’Brien
Director since 2005
Gonzalo F. Valdes-Fauli
Chair of the Corporate Governance
& Social Responsibility Committee
Director since 2004
Gildan Corporate Office
600 de Maisonneuve Boulevard West,
33rd Floor
Montreal, QC H3A 3J2 CANADA
514-735-2023
Toll free: 1-866-755-2023
Fax: 514-735-6810
www.GildanCorp.com
www.GenuineGildan.com
Auditors
KPMG LLP
S Glenn J. Chamandy
E
V
President & Chief Executive Officer
Rhodri J. Harries
Executive Vice-President, Chief Financial
& Administrative Officer
Michael R. Hoffman
President, Sales, Marketing & Distribution
Benito A. Masi
President, Manufacturing
I
T
U
C
E
X
E
Investor Relations
Sophie Argiriou
Vice-President, Investor Communications
514-343-8815
Toll free: 1-866-755-2023
investors@gildan.com
Corporate Communications
Garry Bell
Vice-President, Corporate Communications
& Marketing
514-744-8600
Toll free: 1-866-755-2023
communications@gildan.com
Legal Affairs
Lindsay Matthews
Vice-President, General Counsel & Corporate Secretary
514-340-8790
Toll free: 1-866-755-2023
corporate.governance@gildan.com
Stock Information
Toronto Stock Exchange
New York Stock Exchange
Symbol: GIL
Stock transfer agent + registrar
Annual Meeting of Shareholders
Thursday, May 3rd 2018
at 10:00 AM E.T.
Windsor Ballroom
1170 Peel Street
Montreal, QC H3B 4P2 CANADA
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1
1-800-564-6253
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