DMG MORI
Annual Report 2023

Plain-text annual report

s r e d l o h e r a h S o t t r o p e R 3 2 0 2 2 0 2 3 REPORT TO SHAREHOLDERS 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, 2023 and January 1, 2023. 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, 2023 and the related notes. In preparing this MD&A, we have taken into account all information available to us up to February 21, 2024, 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 20, 2024.  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 2023 Annual Information Form, is available on our website at www.gildancorp.com, on the SEDAR+ website at www.sedarplus.com, and on the EDGAR section of the U.S. Securities and Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov. 2.0 CAUTION REGARDING FORWARD-LOOKING STATEMENTS Certain statements included in this MD&A constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations and are subject to important risks, uncertainties, and assumptions. This forward-looking information includes, amongst others, information with respect to our objectives and the strategies to achieve these objectives, including statements related to the Gildan's Sustainable Growth (GSG) strategy and Next Generation ESG strategy and ESG targets as well as information with respect to our beliefs, plans, expectations, anticipations, estimates, and intentions. In particular, information appearing under the headings “Our business”, “Strategy”, "Operating results", “Liquidity and capital resources - Long-term debt and net debt”, "Financial risk management", and "Risks and uncertainties" contain forward looking statements. Forward-looking statements generally can be identified by the use of conditional or forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, or the negatives of these terms or variations of them or similar terminology. We refer you to the Company’s filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the risks described under the “Financial risk management”, “Critical accounting estimates and judgments”, and “Risks and uncertainties” sections of this MD&A 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: • • • • • • • • • changes in general economic, financial or geopolitical conditions globally or in one or more of the markets we serve; our ability to implement our growth strategies and plans, including our ability to bring projected capacity expansion online; our ability to successfully integrate acquisitions and realize expected benefits and synergies; the intensity of competitive activity and our ability to compete effectively; our reliance on a small number of significant customers; the fact that our customers do not commit to minimum quantity purchases; our ability to anticipate, identify, or react to changes in consumer preferences and trends; our ability to manage production and inventory levels effectively in relation to changes in customer demand; fluctuations and volatility in the prices of raw materials from current levels and energy related inputs used to manufacture and transport our products; GILDAN 2023 REPORT TO SHAREHOLDERS 3 MANAGEMENT'S DISCUSSION AND ANALYSIS • • • • • • • • • • • • • • • • • • our reliance on key suppliers and our ability to maintain an uninterrupted supply of raw materials, intermediate materials, and finished goods; the impact of climate, political, social, and economic risks, natural disasters, epidemics, pandemics and endemics, such as the COVID-19 pandemic, in the countries in which we operate or sell to, or from which we source production; disruption to manufacturing and distribution activities due to such factors as operational issues, disruptions in transportation logistic functions, labour disruptions, political or social instability, weather-related events, natural disasters, epidemics and pandemics, such as the COVID-19 pandemic, 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 manufacturing operations or the application of safeguards thereunder; elimination of government subsidies and credits that we currently benefit from, and the non-realization of anticipated new subsidies and credits; 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, including the expected implementation in the near term of a global minimum tax rate of 15%; 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 human rights, 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; our ability to protect our intellectual property rights; operational problems with our information systems or those of our service providers 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; rapid developments in artificial intelligence; changes in accounting policies and estimates; exposure to risks arising from financial instruments, including credit risk on trade accounts receivables and other financial instruments, liquidity risk, foreign currency risk, and interest rate risk, as well as risks arising from commodity prices; and the aggregate costs to the Company for CEO separation costs and advisory fees on shareholder matters. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 3.0 OUR BUSINESS 3.1 Overview  Gildan is a leading vertically integrated manufacturer of everyday basic apparel, including activewear, underwear, and hosiery products. Our products are sold to wholesale distributors, screenprinters, and embellishers in North America, Europe, Asia-Pacific, and Latin America, as well as to retailers in North America, including mass merchants, department stores, national chains, specialty retailers, craft stores, and online retailers. We also manufacture products for global lifestyle brand companies who market these products under their own brands through their own retail establishments, e- commerce platforms, and/or to third-party retailers. Manufacturing and operating as a socially responsible producer is at the heart of what we do. The vast majority of our sales are derived from products we manufacture ourselves. Since the Company’s formation, we have made significant capital investments in developing and operating our own large-scale, vertically integrated manufacturing facilities, including yarn production, textile and sock manufacturing, as well as sewing operations, controlling all aspects of the production process from start to finish for the garments we produce. We believe the skill set that we have developed in designing, constructing, and operating our own manufacturing facilities, the level of vertical integration of our supply chain and the capital investments that we have made over the years differentiate us from our competition who are not as vertically integrated and may rely more heavily on third-party suppliers. Owning and operating the vast majority of our manufacturing facilities allows us to exercise tighter control over our production processes, efficiency levels, costs and product quality, as well as to provide reliable service with short production/delivery cycle times. In addition, running our own operations allows us to achieve adherence to high standards for environmental and social responsibility practices employed throughout our supply chain. 3.2 Our Operations 3.2.1 Brands, Products and Customers The products we manufacture and sell are marketed under Company brands, including Gildan®, American Apparel®, Comfort Colors®, Gildan® Hammer™, GoldToe®, and Peds®. Further, we manufacture for and supply products to select leading global athletic and lifestyle brands, as well as to certain retail customers who market these products under their own exclusive brands. We also sell sock products under the Under Armour® brand, for exclusive distribution in the United States and Canada, through a sock licensing agreement which will expire on March 31, 2024.  Our primary product categories include activewear tops and bottoms (activewear), socks (hosiery), and underwear tops and bottoms (underwear). In fiscal 2023, Activewear sales accounted for 83% of total net sales, and Hosiery and underwear sales accounted for 17% of total net sales.  then the products with designs and internationally. These wholesale distributors We sell our activewear products primarily in “blank” or undecorated form, without imprints or embellishment. The majority of our Activewear sales are currently derived from activewear sold to wholesale distributors in the imprintables channels in to North America and screenprinters/embellishers who decorate the embellished/imprinted activewear into a highly diversified range of end-use markets. These include educational institutions, athletic dealers, event merchandisers, promotional product distributors, charitable organizations, entertainment promoters, travel and tourism venues, and retailers. The activewear products have diverse applications, such as serving as work or school uniforms or athletic team wear or simply conveying individual, group, and team identity. We also sell activewear products in blank form directly to various retailers, or through national accounts servicing retailers, in addition to underwear and socks for men, ladies, and kids. These retailers include mass merchants, department stores, national chains, sports specialty stores, craft stores, food and drug retailers, dollar stores, and price clubs, all of which sell to consumers through their brick and mortar outlets and/or their e-commerce platforms. Additionally, we sell to pure-play online retailers who sell to consumers. We also manufacture for and sell to select leading global athletic and lifestyle consumer brand companies who distribute these products within the retail channel through their own retail establishments, e-commerce platforms, and/or through third-party retailers. the blank garments turn sell in logos, and who sell GILDAN 2023 REPORT TO SHAREHOLDERS 5 MANAGEMENT'S DISCUSSION AND ANALYSIS The following table summarizes our product offering under Company and licensed brands: Primary product categories Product-line details Activewear T-shirts, fleece tops and bottoms, and sport shirts Brands Gildan®, Gildan Performance®, Gildan® Hammer™, Gildan Softstyle®, Gildan Heavy Cotton™, Gildan Ultra Cotton®, Gildan DryBlend®, Gildan HeavyBlend™, Comfort Colors®, American Apparel® Hosiery athletic, dress, casual and workwear socks, liner socks, and socks for therapeutic purposes(1) Gildan®, Under Armour®(2), GoldToe®, Signature Gold by GoldToe®, GoldToe EditionTM, Peds®, MediPeds®, All Pro® Underwear men's and boys' underwear (tops and bottoms) and ladies panties Gildan®, Gildan Platinum® (1) Applicable only to MediPeds®. (2) Under license agreement for socks only - with exclusive distribution rights in the U.S. and Canada. License expires on March 31, 2024. 3.2.2 Manufacturing The vast majority of our products are manufactured in facilities that we own and operate. To a much lesser extent, we also use third-party contractors to supplement certain product requirements. Our vertically integrated operations range from start to finish of the garment production process and include capital-intensive yarn-spinning, textile and sock manufacturing facilities, as well as labour-intensive sewing facilities. Our manufacturing operations are situated in four main hubs, specifically in the United States, Central America, the Caribbean, and Bangladesh. All of our yarn-spinning operations are located in the United States, while textile, sewing, and sock manufacturing operations are situated in the other geographical hubs mentioned above, the largest of which is in Honduras in Central America. In order to support further sales growth, continue to drive an efficient and competitive cost structure, and enhance geographic diversification in our supply chain, we are expanding manufacturing capacity with a significant expansion in Bangladesh, which involves the development of a large multi-plant manufacturing complex expected to house two large textile facilities and related sewing operations. The construction of the first textile and sewing complex is substantially completed, while progressive ramp-up of operations is underway and will continue through 2024. GILDAN 2023 REPORT TO SHAREHOLDERS 6 MANAGEMENT'S DISCUSSION AND ANALYSIS The following table provides a summary of our primary manufacturing operations by geographic area: Yarn-spinning facilities(1): conversion of cotton, polyester and other fibres into yarn United States ■ Salisbury, NC ■ Mocksville, NC ■ Eden, NC ■ Clarkton, NC ■ Sanford, NC (2 facilities) ■ Mayodan, NC Central America Caribbean Asia Textile facilities: knitting yarn into fabric, dyeing and cutting fabric Sewing facilities(2): assembly and sewing of cut goods Garment-dyeing(3): pigment dyeing or reactive dyeing process (Pigment Pure™) Hosiery manufacturing facilities: conversion of yarn into finished socks ■ Dominican Republic ■ Dominican Republic (3 facilities) ■ Bangladesh (2 facilities) ■ Bangladesh (3 facilities) ■ Honduras (4 facilities) ■ Honduras (2 facilities) ■ Nicaragua (4 facilities) ■ Honduras ■ Honduras (1) While the majority of our yarn requirements are internally produced, we also use third-party yarn-spinning suppliers, primarily in Asia for our Bangladesh operations, to satisfy the remainder of our yarn needs. The majority of cotton used by our Asian contractors is U.S. cotton. (2) Although the majority of our sewing facilities are Company-operated, we also use the services of third-party sewing contractors, in other regions in Central America and Haiti, to satisfy the remainder of our sewing requirements. (3) Garment dyeing is a feature of our Comfort Colors® products only, a proprietary dyeing process under the name Pigment Pure™ which involves a different dyeing process than how we typically dye the majority of our products at our textile facilities. Our garment dyeing operations are located in our Rio Nance 3 facility in Honduras. 3.2.3 Sales, marketing and distribution Our global sales and marketing office is located in Christ Church, Barbados, out of which we have established customer- related functions, including sales management, marketing, customer service, credit management, sales forecasting, production planning, inventory control, and logistics, as well as finance, human resources and information technology functions. We also maintain sales support offices in the U.S. We have established extensive distribution operations primarily through internally managed and operated large distribution centres and some smaller facilities in the U.S., a large distribution facility in Honduras, as well as a distribution facility in Bangladesh. To supplement some of our distribution needs, we also use third-party warehouses in North America and Europe. 3.2.4 Employees and corporate office We currently employ over 43,000 employees worldwide. Our corporate head office is located in Montreal, Canada. 3.3 Competitive environment The basic apparel market for our products is highly competitive. Competition is generally based upon service and product availability, price, quality, comfort and fit, style, and brand. We compete on these factors by leveraging our competitive strengths, including our strategically located and vertically integrated manufacturing supply chain, scale, cost structure, global distribution, and our brand positioning in the markets we serve. We believe our manufacturing skill set, together with our large-scale, low-cost vertically integrated supply chain infrastructure that we have developed through significant investments over time, are key competitive strengths and differentiators from our competition. We face competition from large and smaller U.S. based and foreign manufacturers or suppliers of basic family apparel. Among the larger competing North American-based manufacturers are Hanesbrands Inc., as well as Fruit of the Loom, Inc., a subsidiary of Berkshire Hathaway Inc., which competes through its own brand offerings and those of its subsidiary, Russell Corporation. These companies manufacture out of some of the same geographies as Gildan and compete primarily within the same basic apparel product categories in similar channels of distribution in North America and international markets. In socks and underwear, our competitors also include Renfro Corporation, Jockey International, Inc., and Kayser Roth Corporation. In addition, we compete with smaller U.S. based companies selling to or operating as wholesale distributors of imprintables activewear products, including Next Level Apparel, Color Image Apparel, Inc. (owner GILDAN 2023 REPORT TO SHAREHOLDERS 7 MANAGEMENT'S DISCUSSION AND ANALYSIS of the Bella + Canvas brand), and Delta Apparel Inc., as well as Central American, Mexican and Asian manufacturers that supply products in the imprintables channel. Finally, although we also compete with some of our customers' own private brand offerings, we also supply products to certain customers that are seeking strategic suppliers with our type of manufacturing capabilities to support their private brand offerings. 4.0 STRATEGY Gildan Sustainable Growth Strategy Building on a strong foundation, in 2022 the Company launched its “Gildan Sustainable Growth” (GSG) strategy focused on driving organic top and bottom-line growth through three key pillars – capacity expansion, innovation, and ESG. We believe that by leveraging our competitive advantage as a low-cost, vertically integrated manufacturer and successfully executing on well-defined capacity expansion plans, delivering value-driven and innovative products, and leading ESG practices, we will be well positioned to drive strong revenue growth, profitability and effective asset utilization, all of which are expected to allow us to deliver compelling shareholder value creation. The three pillars of our GSG strategy are: Capacity-driven growth: Leveraging our strong competitive advantage as a low-cost vertically integrated manufacturer as we execute on well-defined plans to expand and optimize our global production capacity to support our long-term growth plans Executing on our well-defined plans, we have strengthened our vertical integration by expanding our yarn-spinning capabilities through the acquisition and modernization of Frontier Yarns. We are also executing on the first phase of development of a large vertically integrated textile and sewing complex in Bangladesh, as described in more detail in subsection 3.2.2 entitled "Manufacturing" in this MD&A. Innovation: Driving leadership in innovation across the organization and all areas of operations aimed at delivering high- quality, value-driven products, increased speed-to-market, operational efficiencies and a reduced environmental footprint The Company has identified and defined specific key initiatives, as well as investments aimed at driving innovation in our product development and manufacturing processes, distribution and final products, including fabric features, product fit, fabric adaptability to evolving printing and decorating techniques, and ESG-friendly product attributes. In early 2024, we announced the release of new products, including our improved ultra cotton 2000 T-shirt. We developed a new proprietary cotton technology by re-engineering our entire process from the yarn through to the finished process, enhancing fabric softness, all while improving printability. We are also actively investing in digital tools, predictive analytics, and artificial intelligence to accelerate decision-making across the organization, streamline processes, and optimize supply chain planning. ESG: Further increasing our ESG focus across all operations and leveraging our strong ESG standing and progress to enhance our value proposition to all our stakeholders As of 2024, Gildan is embarking on its third year of implementing its Next Generation ESG strategy, which encompasses a broad range of initiatives. These include reducing carbon footprint and water intensity, fostering a circular economy, supporting regional economic development, ensuring respect for human rights, and maintaining safety standards throughout the supply chain. The strategy also embraces a commitment to people, with a focus on investing in our workforce, promoting diversity and inclusion, in addition to enhancing ESG transparency. This strategy includes 10 core targets focused on five different pillars: Climate Energy and Water; Circularity; Human Capital Management; Long Term Value Creation; and Transparency and Disclosure. For more detailed information regarding the process of these initiatives, please refer to Gildan's 2022 ESG report. Information in our 2022 ESG Report does not form part of and is not incorporated by reference in this MD&A. Successfully executing on all of the above initiatives underpinning the three pillars of our GSG strategy is expected to position the Company to generate long-term revenue growth, sustained profitability, and effective asset utilization, all of which are expected to deliver long-term value to our shareholders. GILDAN 2023 REPORT TO SHAREHOLDERS 8 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, 2023 (fiscal 2023) and the fiscal year ended January 1, 2023 (fiscal 2022). 5.1 Non-GAAP financial measures We use non-GAAP financial measures and ratios to assess our operating performance and liquidity. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. In this MD&A, we use non-GAAP financial measures and ratios including: adjusted net earnings; adjusted diluted EPS; adjusted gross profit; adjusted selling, general and administrative expenses (adjusted SG&A); adjusted SG&A expenses as a percentage of sales; adjusted gross margin; adjusted operating income; adjusted operating margin; adjusted EBITDA; and return on adjusted average net assets (Adjusted RONA) 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 to investors on the Company’s financial performance and financial condition. We also use non-GAAP financial measures including free cash flow, total debt, net debt, net debt leverage ratio and working capital.  We refer the reader to section 16.0 entitled “Definition and reconciliation of non-GAAP financial measures” in this MD&A for the definition and complete reconciliation of all non-GAAP financial measures used and presented by the Company to the most directly comparable IFRS measures. 5.2 Overview and business environment Throughout 2023, the apparel sector faced significant challenges amid broader economic and political uncertainty, contributing to an industry-wide soft demand environment, albeit showing improvement from 2022. We observed sequential improvements in year-over-year point of sales ("POS") trends for Activewear throughout the first three quarters of the year, before stabilizing in the fourth quarter. Our net sales were down year-over-year as we faced strong 2022 comparative periods, which had benefited from distributor inventory replenishment following the COVID-19 pandemic. Nevertheless, the printwear industry showed resiliency, marked by continued enthusiasm surrounding experiences, such as travel, concerts, and large events. In the Hosiery and underwear categories, although demand remained weak across the industry, we also capitalized on a comparatively more favorable demand environment than in 2022. We delivered adjusted operating margins within our target of 18% to 20% in the second half of 2023, as the pressure from the flow through of peak cotton costs abated. Overall, we are proud to have diligently navigated through the changing environment of the past few years, which allowed us to deliver strong performance within key growth categories. Moreover, in 2023, we made significant progress on each of the three pillars of our GSG strategy, optimizing our manufacturing capacity, fostering innovation, and further reinforcing our commitment to ESG. While we believe our vertically-integrated manufacturing model and financial strength facilitates our ability to navigate through various headwinds impacting the current market landscape, it is difficult to predict the impact on our business due to the lagging effects of inflationary pressures, increased recessionary risks and other factors. 5.3 Business acquisitions/dispositions and facility closures Fiscal 2023 (year ended December 31, 2023) During fiscal 2023, Gildan closed its San Miguel sewing facility located in Choloma, Honduras. This decision was based on market conditions, global competition and the need to optimize and diversify our operations. We also closed one of two yarn spinning plants located in Salisbury, North Carolina, consolidating this capacity into the Mocksville facility, also located in North Carolina, as part of our ongoing efforts to optimize ring spun yarn production and drive an efficient, competitive manufacturing platform. Fiscal 2022 (year ended January 1, 2023) During fiscal 2022 the Company sold a yarn spinning facility located in the U.S., which was the smallest of the four facilities that the Company acquired on December 10, 2021 as part of the Frontier Yarns acquisition. The sale included the disposition of inventory, equipment, goodwill and the transfer of a leasehold interest and related lease liability. GILDAN 2023 REPORT TO SHAREHOLDERS 9 MANAGEMENT'S DISCUSSION AND ANALYSIS During the fourth quarter of fiscal 2022, the Company sold its sheer inventory and trademarks for total proceeds of $6 million. The gain on disposal of these assets was insignificant. Please refer to note 5 in the 2022 audited annual consolidated financial statements. Fiscal 2021 (year ended January 2, 2022) On December 10, 2021, the Company acquired 100% of the equity interest of Phoenix Sanford, LLC, the parent company of Frontier Yarns, for cash consideration (net of cash acquired and net of the settlement of pre-existing relationships) of $164 million. At the time of the acquisition, Frontier Yarns operations included four facilities located in North Carolina. During 2021, approximately 40% of Frontier's production was dedicated to yarn sold to Gildan for textile manufacturing in Central America and the Caribbean. 5.4 Global Minimum Tax On August 4, 2023, the Government of Canada released draft legislation in the form of the Global Minimum Tax Act for consultation which is intended to follow the model rules and guidance from the OECD initiatives against base erosion and profit shifting (BEPS). If enacted as published, the legislation would implement a 15% global minimum tax rate for fiscal years that begin on or after December 31, 2023. The proposed rules would apply to the income of certain of the Company’s non-Canadian subsidiaries that are subject to an effective tax rate of below 15%, after reflecting the impact of substance based carveout included in the rules, which together comprise the majority of the Company’s taxable income. On December 15, 2023, the Government of Barbados also released draft legislation in response to Pillar Two which would effectively subject the Company’s profits in Barbados to an effective tax rate of 15% for fiscal years that begin on or after January 1, 2024. If Pillar Two legislation would have applied in 2023, the Company’s average effective tax rate would have been approximately 18%. The Company is closely monitoring the developments in the various jurisdictions in which it operates, including specific implementation details related to Pillar Two and other unrelated legislation or programs in order to continue to assess the overall impact of such legislation on the Company’s effective tax rate and operating results. Though the timing of the potential enactment of legislation remains uncertain, we have incorporated in our 2024 financial profit and cash flow plans, the estimated impact of the implementation of draft Global Minimum Tax legislation, retroactive to January 1, 2024. For additional disclosures relating to Global Minimum Tax, including the impact of the enactment of Pillar Two legislation in Belgium and in the United Kingdom, please refer to Note 19 of the annual consolidated financial statements, as well as section 15.0 entitled "Risks and uncertainties" of this MD&A. GILDAN 2023 REPORT TO SHAREHOLDERS 10 5.5 Select annual information (in $ millions, except per share amounts or otherwise indicated) 2023 2022 2021 Variation 2023-2022 % $ Variation 2022-2021 % $ MANAGEMENT'S DISCUSSION AND ANALYSIS Net sales Gross profit Adjusted gross profit(1) SG&A expenses  3,195.9 880.1 877.0 330.4 3,240.5 992.4 2,922.6 940.2 965.5 326.3 326.3 — — 0.5 62.3 603.4 639.3 764.2 37.0 24.9 541.5 574.7 2.94 2.93 3.11 30.6 % 29.8 % 10.1 % 10.1 % 18.6 % 19.7 % 903.0 311.6 311.6 — — 8.2 (31.5) 651.9 591.4 726.8 27.3 17.4 607.2 538.1 3.08 3.07 2.72 32.2 % 30.9 % 10.7 % 10.7 % 22.3 % 20.2 % 324.1 (25.0) (74.2) 45.8 (40.8) 643.9 552.9 674.5 79.7 30.6 533.6 452.6 3.03 3.03 2.57 27.5 % 27.4 % 10.3 % 10.1 % 20.1 % 17.3 % 3,514.9 685.0 993.4 3,440.2 780.0 3,136.7 600.0 873.6 529.9 (44.6) (112.3) (88.5) 4.1 (2.2) (25.0) (74.2) 45.3 (103.1) 40.5 (86.4) (89.7) 42.7 5.7 (7.9) (122.1) 0.09 0.10 (0.54) n/a n/a n/a n/a n/a n/a 74.7 (95.0) 119.8 (1.4) % (11.3) % (9.2) % 1.3 % (0.7) % n.m. n.m. n.m. n.m. 6.7 % (13.5) % (11.7) % 115.4 % 22.9 % (1.5) % (21.2) % 3.1 % 3.4 % (17.4) % (3.1) pp (2.4) pp 0.2 pp — 1.5 pp (2.4) pp 2.2 % (12.2) % 13.7 % 176,224 184,532 197,595 n/a n/a 16.2 % 21.0 % 23.1 % n/a (4.8) pp 317.9 52.2 62.5 14.7 14.7 — — (7.7) 93.8 (48.5) 47.9 37.4 9.7 7.5 (65.7) 36.6 (0.14) (0.14) 0.39 n/a n/a n/a n/a n/a n/a 303.5 180.0 343.7 n/a n/a 10.9 % 5.6 % 6.9 % 4.7 % 4.7 % n.m. n.m. (93.9) % n.m. (7.4) % 8.1 % 5.1 % 35.5 % 43.1 % (10.8) % 6.8 % (4.5) % (4.6) % 14.3 % (1.6) pp (1.1) pp (0.6) pp (0.6) pp (3.7) pp (0.5) pp 9.7 % 30.0 % 64.9 % n/a (2.1) pp Adjusted SG&A expenses(1) Gain on sale and leaseback Net insurance gains Restructuring and acquisition-related costs Impairment of intangible assets (Impairment reversal of intangible assets, net of write- downs) 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(2) Adjusted gross margin(1) SG&A expenses as a percentage of sales(3) Adjusted SG&A expenses as a percentage of sales(1) Operating margin(4) Adjusted operating margin(1) Total assets Total non-current financial liabilities Net debt(1) Diluted weighted average number of common shares outstanding (in ‘000s) Return on adjusted average net assets (Adjusted RONA)(1) Annual cash dividends declared per common share 0.744 0.676 0.462 1.5 Net debt leverage ratio(1) n.m. = not meaningful n/a = not applicable (1) This is a non-GAAP financial measure or ratio. See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. (2) Gross margin is defined as gross profit divided by net sales. (3) SG&A as a percentage of sales is defined as SG&A divided by net sales. (4) Operating margin is defined as operating income (loss) divided by net sales. Certain minor rounding variances exist between the consolidated financial statements and this summary. 0.7 1.1 0.068 n/a 10.1 % n/a 0.214 n/a 46.3 % n/a GILDAN 2023 REPORT TO SHAREHOLDERS 11 5.6 Consolidated operating review 5.6.1 Net sales MANAGEMENT'S DISCUSSION AND ANALYSIS 2023 (in $ millions, or otherwise indicated) Activewear Hosiery and underwear(1) Total net sales (1) Also includes intimates and other fringe products. Certain minor rounding variances exist between the consolidated financial statements and this summary. 2,668.0 2,762.5 2,364.7 557.8 3,195.9 3,240.5 2,922.5 (94.5) 49.9 (44.6) 527.9 478.0 2022 2021 Variation 2023-2022 Variation 2022-2021 % % $ $ (3.4) % 10.5 % (1.4) % 397.8 (79.8) 318.0 16.8 % (14.3)% 10.9 % Fiscal 2023 compared to fiscal 2022 Net sales for the year ended December 31, 2023 of $3,196 million, were down 1.4%, reflecting a decrease in Activewear sales of 3.4%, partly offset by an increase in the Hosiery and underwear category of 10.5%. The decrease in Activewear sales was primarily driven by lower sales volumes compared to the prior year where we saw stronger levels of distributor inventory replenishment, partly offset by slightly higher net selling prices. While overall Activewear POS was soft for the full year, we saw year over year POS trends for this category improve sequentially through the first three quarters of the year, before stabilizing in the fourth quarter. International sales of $225 million were down 17% versus the prior year period mainly due to the non-recurrence of prior year restocking in addition to distributors' cautious inventory management throughout the year, in a challenged market. The increase in the Hosiery and underwear category, primarily reflected the impact of higher unit sales volumes stemming from the expansion of our private label offering and the roll-out of new underwear programs in the mass retail channel, as well as strength in hosiery. Additionally, even though industry-wide demand remained weak for these categories, we benefited from a more favorable demand environment in comparison to 2022, along with the normalization of inventories at retailers. The expiration of the Under Armour sock license agreement on March 31, 2024 will negatively impact our net sales in fiscal 2024, with a minimal impact on our profitability.  Fiscal 2022 compared to fiscal 2021  Net sales for the year ended January 1, 2023, were $3,240 in 2022, up 10.9% over the same period last year, reflecting an increase in Activewear sales, partly offset by lower sales in the Hosiery and underwear category. The year-over-year increase in Activewear sales was primarily driven by higher net selling prices which were up on average in the mid-teen range, and favorable product-mix. While sales volumes were up in the first nine months reflecting the continuing demand recovery in imprintables and the impact of higher distributor replenishment to rebuild inventories to more optimal levels (as customer inventories were impacted by our production constraints due to the 2020 hurricanes in Central America and yarn labour shortages), these volume increases were offset in the fourth quarter by the absence of inventory replenishment versus a year ago and lower POS mainly in retail end-markets. The decline in the Hosiery and underwear category, where we generated sales of $478 million, primarily reflected the impact of lower unit sales volumes due to weaker demand in retail and the continued impact of tight inventory management at the retailer level. 5.6.2 Gross profit/margin and adjusted gross profit/margin (in $ millions, or otherwise indicated) Gross profit Adjustments for: Impact of strategic product line initiatives(1) 2023 2022 2021 Variation 2023-2022 Variation 2022-2021 880.1 992.4 940.2 (112.3) 52.2 (9.8) — 20.1 Net insurance gains(1) (3.1) 62.5 Adjusted gross profit(2) 877.0 Gross margin (1.6) pp 27.5 % (1.1) pp 27.4 % Adjusted gross margin(2) (1) See subsection entitled "Certain adjustments to non-GAAP measures" for additional information on adjustments in section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. (2) This is a non-GAAP financial measure or ratio. See section 16.0 "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. 1.0 22.8 (88.5) (3.1) pp (2.4) pp (1.0) (25.9) 965.5 30.6 % 29.8 % 8.8 (46.0) 903.0 32.2 % 30.9 % GILDAN 2023 REPORT TO SHAREHOLDERS 12 MANAGEMENT'S DISCUSSION AND ANALYSIS 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 duties, as well as net insurance gains as described in note 17c to the audited consolidated financial statements as at and for the year ended December 31, 2023. Our reporting of gross profit and gross margin may not be comparable to these metrics as reported by other companies, since some entities include warehousing and handling costs and/or exclude depreciation expense, outbound freight to customers, and royalty costs from cost of sales. Fiscal 2023 compared to fiscal 2022 The decrease in gross profit and non-GAAP adjusted gross profit in fiscal 2023 reflected lower sales and lower margins. The decline in GAAP gross margin also reflected lower net insurance gains included in cost of sales compared to last year (2023: $3 million, 2022: $26 million) which had a 70 basis point impact on margins. These net insurance gains resulted from accrued insurance recoveries from the Company's claim for losses relating to the two hurricanes in Central America in November 2020. Insurance gains in fiscal 2023 relating to business interruption losses are included in a separate caption “Net Insurance Gains” in the Consolidated Statement of Earnings and Comprehensive Income. The decline in both GAAP and adjusted gross margin also reflected the flow-through impact of peak fiber costs on our cost of sales in fiscal 2023, and to a lesser extent higher manufacturing input costs including the impact of lower volumes, partly offset by slightly higher net selling prices.  Fiscal 2022 compared to fiscal 2021 The increase in gross profit and non-GAAP adjusted gross profit in fiscal 2022 reflected higher sales partially offset by lower margins. The decline in GAAP gross margin mainly reflected lower net insurance gains, as described above, compared to last year (2022: $26 million, 2021: $46 million), which had a 70 basis point impact on margins. Both the GAAP gross margin and the adjusted gross margin reflected higher fiber costs and other manufacturing costs, which more than offset the benefit of higher net selling prices and favorable product mix. The change in GAAP and adjusted gross margins also reflected an $18 million or 60 basis point impact of the non-recurrence of a one-time USDA payment in connection to its Pandemic Assistance for Cotton Users program recorded in the first quarter of 2021. 5.6.3 Selling, general and administrative expenses (SG&A)  (in $ millions, or otherwise indicated) SG&A expenses Adjustment for: 2023 330.4 2022 326.3 2021 311.6 Variation 2023-2022 Variation 2022-2021 4.1 14.7 CEO separation costs and related advisory fees on — shareholder matters 14.7 Adjusted SG&A expenses(1) (0.6) pp SG&A expenses as a percentage of sales (0.6) pp Adjusted SG&A expenses as a percentage of sales(1) (1) This is a non-GAAP financial measure or ratio. See section 16.0 "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. 6.3 (2.2) 0.2 pp — 311.6 10.7 % 10.7 % 326.3 10.1 % 10.1 % 324.1 10.3 % 10.1 % 6.3 — — Fiscal 2023 compared to fiscal 2022 The $4 million increase in SG&A expenses in fiscal 2023 compared to fiscal 2022 was primarily due to the impact of the CEO separation costs and related advisory fees on shareholder matters of $6 million (refer to section 5.8 "Fourth quarter operating results" of this MD&A for additional information) and the impact of inflation on overall costs, partially offset by the reversal of impairment of trade receivables, lower variable compensation expenses and the benefit from our cost containment measures. On an adjusted basis, SG&A expenses decreased by $2 million and adjusted SG&A expenses as percentage of sales came in line with prior year at 10.1%.  GILDAN 2023 REPORT TO SHAREHOLDERS 13 MANAGEMENT'S DISCUSSION AND ANALYSIS On December 15, 2023, the Government of Barbados released draft legislation, proposing two new tax credits, a jobs credit and a research & development credit, in order to foster economic activity and employment in Barbados. The proposed tax credits, which if enacted would be retroactively effective to January 1, 2024, are designed to be “qualified refundable tax credits” under Pillar Two rules. The Company expects to qualify for the jobs credit at a credit rate of 100% of eligible payroll expenses and the amount of the credit would be recorded as a reduction of SG&A expenses beginning in fiscal 2024, and as such this expected benefit has been incorporated in our 2024 financial profit and cash flow plans. However, there can be no assurance that this draft legislation will be enacted, and if enacted, that the Company will fully qualify for these tax credits. Fiscal 2022 compared to fiscal 2021 The $15 million increase in SG&A expenses in fiscal 2022 compared to fiscal 2021 was primarily due to the impact of inflation on overall costs, and the impact of a trade accounts receivables impairment charge of $2 million, partially offset by lower variable compensation expenses and the benefit of our cost containment measures. As a percentage of sales, the 60 basis point improvement in SG&A expenses primarily reflected the benefit of sales leverage. 5.6.4 Gain on sale and leaseback and net insurance gains During the first quarter of fiscal 2023, the Company entered into an agreement to sell and leaseback one of its distribution centres located in the U.S. The proceeds of disposition were $51 million. The Company recognized a right-of-use asset of $4 million and a lease obligation of $16 million. In addition, a pre-tax gain on sale of $25 million ($16 million after tax) was recognized in the consolidated statements of earnings and comprehensive income in gain on sale and leaseback. During the second quarter, the Company finalized an agreement with the insurer to close its insurance claims related to the two hurricanes which occurred in Central America in November 2020, and received a final insurance claims payment of $74 million, relating to the business interruption portion of its claims. This payment resulted in the recognition of a corresponding gain in the Company’s consolidated statement of earnings and comprehensive income. 5.6.5 Restructuring and acquisition-related costs (in $ millions) Employee termination and benefit costs Exit, relocation and other costs Net loss (gain) on disposal, write-downs and accelerated depreciation of property, plant and equipment, right-of-use assets, and software related to exit activities 2023 16.6 10.9 2022 1.0 2.2 2021 0.3 3.3 Variation 2023-2022 Variation 2022-2021 15.6 8.7 21.4 (0.6) 45.1 0.7 (1.1) (6.4) (0.9) (7.7) Acquisition-related transaction costs Restructuring and acquisition-related costs Certain minor rounding variances exist between the consolidated financial statements and this summary. 18.1 — 45.6 (3.3) 0.6 0.5 3.1 1.5 8.2 Restructuring and acquisition-related costs are comprised of costs directly related to significant exit activities, including 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 2023 related to the following: $28 million primarily for the consolidation and closure of manufacturing facilities in Central America in the second quarter of 2023, $11 million related to the closure of a yarn-spinning facility in the U.S. in the fourth quarter of fiscal 2023, $4 million related to the December 2022 closure of a yarn-spinning plant in the U.S. and the exit cost from terminating a lease on a previously closed yarn facility, and $3 million in other costs, including costs incurred to complete restructuring activities that were initiated in fiscal 2022. Restructuring and acquisition-related costs in fiscal 2022 related to the following: $5 million for the closure of a yarn- spinning plant in the U.S, $2 million in accelerated depreciation of right-of-use assets relating to facilities no longer in use, $1 million in employee termination and benefit costs related to the closure of a distribution center in the U.S., as well $2 million related to the completion of previously initiated restructuring activities, partly offset by a gain of $6 million on business dispositions (refer to note 5 of the consolidated financial statements), and a gain of $3 million on the sale of a former manufacturing facility in Mexico. GILDAN 2023 REPORT TO SHAREHOLDERS 14 MANAGEMENT'S DISCUSSION AND ANALYSIS Restructuring and acquisition-related costs in fiscal 2021 related to the following: $4 million for post-closure costs relating to the Company's former textile manufacturing and sewing operations in Mexico; $2 million for a yarn-spinning plant in the U.S. that was closed in 2020, including a lease exit charge; $1 million in transaction costs incurred in connection with the acquisition of Frontier Yarns; and $1 million in other costs to complete restructuring activities that were initiated in prior years. 5.6.6 Impairment (Impairment reversal) of intangible assets, net of write downs During fiscal 2023, based on the results of the impairment test performed on December 31, 2023, the estimated recoverable amount for the Hosiery cash-generating unit (CGU) was in excess of its carrying value, and as such the Company recorded a non-cash impairment reversal of $41 million at December 31, 2023, relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions, as described in note 11 to the audited annual consolidated financial statements for the year ended December 31, 2023. The events and circumstances that led to this reversal included improved forecasted earnings, and the prevailing outlook for this category. During fiscal 2022, based on the results of the impairment test performed on January 1, 2023, we recorded an impairment charge for our hosiery cash-generating unit (CGU) of $62 million, relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions, as described in note 11 to the audited annual consolidated financial statements for the year ended January 1, 2023. The impairment charge resulted from a decline in the fair value of the Hosiery CGU, mainly due to the impact of the macroeconomic environment on market conditions at the time. During fiscal 2021, based on the results of the impairment test performed on January 2, 2022, the estimated recoverable amount for the Hosiery cash-generating unit (CGU) was in excess of its carrying value, and as such the Company recorded an impairment reversal of $56 million at January 2, 2022, relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions, as described in note 11 to the audited annual consolidated financial statements for the year ended January 2, 2022. The events and circumstances that led to this reversal included improved margins and forecasted earnings, as well as the improvement of the economic environment and the prevailing outlook for this category. The Company also wrote off certain intangible assets of $24 million, that were assessed as having no future economic benefit. These asset write-offs related to the Company’s plan to exit its sheer panty hose, tights, leggings, ladies shapewear, intimates, and accessories products, marketed under the Secret®, Silks®, Secret Silky® and Therapy Plus® brands. 5.6.7 Operating income and adjusted operating income (in $ millions, or otherwise indicated) Operating income Adjustments for: Restructuring and acquisition-related costs(1) Impairment (Impairment reversal) of intangible assets, net of write-downs(1) Impact of strategic product line initiatives Gain on sale and leaseback Net insurance gains CEO separation costs and related advisory fees on 2023 643.9 2022 603.4 2021 651.9 Variation 2023-2022 Variation 2022-2021 40.5 (48.5) 45.8 0.5 8.2 (40.8) — (25.0) (77.3) 62.3 (1.0) — (25.9) (31.5) 8.8 — (46.0) 45.3 (103.1) 1.0 (25.0) (51.4) (7.7) 93.8 (9.8) — 20.1 6.3 shareholder matters — 47.9 Adjusted operating income(2) 552.9 (3.7) pp Operating margin 20.1 % (0.5) pp 17.3 % Adjusted operating margin(2) (1) See subsection entitled "Certain adjustments to non-GAAP measures" for additional information on adjustments in section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. (2) This is a non-GAAP financial measure or ratio. See section 16.0 "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. 6.3 (86.4) 1.5 pp (2.4) pp 639.3 18.6 % 19.7 % 591.4 22.3 % 20.2 % — — GILDAN 2023 REPORT TO SHAREHOLDERS 15 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal 2023 compared to fiscal 2022 The increase in operating income mainly reflected the favorable impact from the reversal of a portion of a prior year non- cash impairment charge for our Hosiery cash-generating unit (CGU) recorded in 2022, the higher insurance accounting gains compared to last year and the gain on sale and leaseback partly offset by higher restructuring costs. On an adjusted basis, we generated lower operating income which was driven primarily by the year-over-year decrease in sales and lower adjusted operating margin. The decrease of 240 basis points on an adjusted operating margin basis largely reflected gross margin pressure in the year. Fiscal 2022 compared to fiscal 2021 The decline in operating income reflected the non-cash impairment charge for our Hosiery cash-generating unit (CGU) taken in the fourth quarter of 2022 compared to a reversal of impairment in fiscal 2021 and lower insurance accounting gains compared to fiscal 2021 (which accounted for most of the decline in operating margin), which more than offset the contribution from higher sales in fiscal 2022. On an adjusted basis, we generated higher operating income which was driven primarily by the year-over-year increase in sales, partly offset by a lower adjusted operating margin. The decrease of 50 basis points on an adjusted basis largely reflected lower gross margins which offset the benefit of SG&A sales leverage. 5.6.8 Financial expenses, net  (in $ millions) Interest expense on financial liabilities recorded at amortized cost 2023 2022 2021 Variation 2023-2022 Variation 2022-2021 Bank and other financial charges Interest accretion on discounted lease obligation Interest accretion on discounted provisions Foreign exchange loss (gain) Financial expenses, net Certain minor rounding variances exist between the consolidated financial statements and this summary. 53.4 22.3 3.4 0.4 0.2 79.7 25.7 10.5 3.1 — (2.3) 37.0 14.9 8.8 2.6 0.2 0.8 27.3 27.7 11.8 0.3 0.4 2.5 42.7 10.8 1.7 0.5 (0.2) (3.1) 9.7 Fiscal 2023 compared to fiscal 2022 The increase in interest expense in fiscal 2023 compared to fiscal 2022 was mainly due to the impact of higher effective interest rates on our long-term debt bearing interest at variable rates, representing an increase of 210 basis points compared to fiscal 2022, as well as higher average borrowing levels. The increase in bank and other financial charges was mainly due to higher fees incurred for our receivables sale program, primarily relating to higher variable rates and to a lesser extent increased volumes under this program. Foreign exchange gains and losses in both periods relate primarily to the revaluation of net monetary assets denominated in foreign currencies. Fiscal 2022 compared to fiscal 2021 The increase in interest expense in fiscal 2022 compared to fiscal 2021 was mainly due to higher average borrowing levels, as well as the impact of higher interest rates. The increase in bank and other financial charges was mainly due to higher fees incurred relating to increased volumes in our receivable sale program. Foreign exchange gains and losses are related primarily to the revaluation of net monetary assets denominated in foreign currencies. GILDAN 2023 REPORT TO SHAREHOLDERS 16 5.6.9 Income taxes The Company’s average effective tax rate is calculated as follows: MANAGEMENT'S DISCUSSION AND ANALYSIS (in $ millions, or otherwise indicated) Earnings before income taxes Income tax expense Average effective income tax rate Certain minor rounding variances exist between the consolidated financial statements and this summary. 2022 566.4 24.9 4.4 % 564.2 30.6 5.4 % 2021 624.6 17.4 2.8 % 2023 Variation 2023-2022 Variation 2022-2021 (2.2) 5.7 1.0 pp (58.2) 7.5 1.6 pp Fiscal 2023 compared to fiscal 2022 The income tax expense of $31 million in fiscal 2023 includes a $10 million tax charge mainly related to the gain on the sale and leaseback of a distribution centre located in the U.S. The income tax expense in fiscal 2022 of $25 million includes income tax expenses of $7 million relating to gains on asset disposals included within restructuring and acquisition-related costs and $10 million in income tax recoveries relating to the re-recognition of previously de- recognized deferred income tax assets that we expect to recover as a result of the Company's reassessment of the recoverability of its U.S. deferred income tax assets. Excluding the impact of the aforementioned income tax recoveries and excluding the pretax impact of impairment reversals and charges, restructuring and acquisition related costs, CEO separation costs and related advisory fees on shareholder matters, insurance gains and the gain on sale and leaseback, the average adjusted effective income tax rate for both years was comparable. Disclosures relating to draft Global Minimum Tax legislation are included in section 5.4 entitled "Global Minimum Tax" of this MD&A. Fiscal 2022 compared to fiscal 2021 The income tax expense of $25 million and $17 million in fiscal 2022 and fiscal 2021, respectively, both include income tax recoveries relating to the re-recognition of previously de-recognized deferred income tax assets that we expect to recover as a result of the Company's reassessment of the recoverability of its U.S. deferred income tax assets. In addition, fiscal 2022 includes income tax expenses relating to gains on asset disposals included within restructuring and acquisition-related costs. Excluding the impact of the aforementioned income tax recoveries and excluding the impact of impairment charges and reversals, net insurance gains and restructuring and acquisition related costs, the average adjusted effective income tax rate for both years was comparable. GILDAN 2023 REPORT TO SHAREHOLDERS 17 MANAGEMENT'S DISCUSSION AND ANALYSIS 5.6.10 Net earnings, adjusted net earnings, earnings per share measures, and adjusted earnings per share (in $ millions, except per share amounts) Net earnings Adjustments for: Restructuring and acquisition-related costs Impairment (Impairment reversal) of intangible assets, net of write-downs Impact of strategic product line initiatives Gain on sale and leaseback Net insurance gains CEO separation costs and related advisory fees on shareholder matters Income tax expense (recovery) relating to the above- noted adjustments Income tax (recovery) expense related to the 2023 533.6 45.8 (40.8) — (25.0) (77.3) 6.3 10.0 2022 541.5 2021 607.2 Variation 2023-2022 Variation 2022-2021 (7.9) (65.7) 0.5 8.2 45.3 62.3 (1.0) — (25.9) — 7.2 (31.5) 8.8 — (46.0) — — (103.1) 1.0 (25.0) (51.4) 6.3 2.8 (7.7) 93.8 (9.8) — 20.1 — 7.2 revaluation of deferred income tax assets and liabilities(1) (1.3) 36.6 Adjusted net earnings(2) Diluted EPS (0.14) 0.39 Adjusted diluted EPS(2) (1) Includes an income tax recovery of nil (2022 - $9.9 million) pursuant to the recognition of previously de-recognized (in fiscal 2018 and fiscal 2017 pursuant to the organizational realignment plan) deferred income tax assets as a result of a re-assessment of the probability of realization of such deferred income tax assets. (2) This is a non-GAAP financial measure or ratio. See section 16.0 "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. 9.9 (122.1) 0.10 (0.54) (9.9) 574.7 2.93 3.11 — 452.6 3.03 2.57 (8.6) 538.1 3.07 2.72 Fiscal 2023 compared to fiscal 2022 In fiscal 2023, the slight decrease in GAAP net earnings compared to the previous year was primarily driven by increased financial and income tax expenses, which more than offset the higher operating income. EPS increased to $3.03 reflecting the impact of the Company's share repurchase program. The decline in adjusted net earnings was driven by both lower adjusted operating income and increased financial expenses, partly offset by lower income tax expenses on an adjusted basis. Fiscal 2022 compared to fiscal 2021 The decline in net earnings and diluted EPS for 2022 was mainly due to the lower operating income and higher financial and income tax expenses. Adjusted net earnings for 2022 of $575 million reflected the increase in adjusted operating income slightly offset by higher financial expenses. The adjusted diluted EPS of $3.11 in 2022 also reflected the benefit of a lower year-over-year share count resulting from Company repurchases of shares under its share repurchase program. GILDAN 2023 REPORT TO SHAREHOLDERS 18 5.7 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 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. MANAGEMENT'S DISCUSSION AND ANALYSIS For the three months ended (in $ millions, except share and per share amounts or otherwise indicated) Net sales Net earnings Net earnings per share Basic(1) Diluted(1) Weighted average number of shares outstanding (in ‘000s) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 774.9 146.4 840.4 155.3 782.7 153.3 720.0 83.9 869.9 127.4 702.9 97.6 850.0 153.0 895.6 158.2 0.89 0.89 0.73 0.73 0.87 0.87 0.54 0.54 0.47 0.47 0.84 0.84 0.85 0.85 0.77 0.77 Basic Diluted (1) 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. 171,495 175,087 177,624 179,543 179,680 181,980 185,506 189,344 171,806 175,348 177,902 179,843 179,897 182,239 185,869 190,214 5.7.1 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’ decisions to increase or decrease their inventory levels, changes in our sales mix, and fluctuations in selling prices and raw material costs. While our products are sold on a year-round basis, our business experiences seasonal changes in demand which result in quarterly fluctuations in operating results. Although certain products have seasonal peak periods of demand, competitive dynamics may influence the timing of customer purchases causing seasonal trends to vary somewhat from year to year. Historically, demand for T-shirts is lowest in the fourth quarter and highest in the second quarter of the year, when distributors purchase inventory for the peak summer selling season. Historically, demand for fleece is typically highest in advance of the fall and winter seasons, in the second and third quarters of the year. Sales of hosiery and underwear are typically 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 and 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. In addition, management decisions to consolidate or reorganize operations, including the closure of facilities, may result in significant restructuring costs in an interim or annual period. Subsection 5.6.5 entitled "Restructuring and acquisition-related costs" in this MD&A contains a discussion of costs related to the Company’s restructuring actions and business acquisitions. Share repurchases have reduced our number of shares outstanding and increased our net earnings per share (EPS) in each of the last five quarters. The Company may repurchase more shares in the future as deemed appropriate, but this remains uncertain. The effect of asset write-downs, including allowances for expected credit losses, provisions for discontinued inventories, and impairments of long-lived assets can also affect the variability of our results. In the fourth quarter of fiscal 2023, we recorded a reversal of impairment of $41 million, compared to an impairment charge of $62 million in fiscal 2022 relating to our Hosiery cash- generating unit (CGU). Our results of operations over the past two years also include net insurance gains resulting from accrued insurance recoveries for the Company’s claims for losses relating to the two hurricanes in Central America in November 2020 (Q1 2022: $0.3 million; Q4 2022: $25.6 million, Q1 2023: $3.3 million and Q2 2023: $74 million), as well as a $16 million after-tax gain on the sale and leaseback of a distribution facility located in the United States. GILDAN 2023 REPORT TO SHAREHOLDERS 19 MANAGEMENT'S DISCUSSION AND ANALYSIS Our reported amounts for net sales, cost of sales, SG&A expenses, and financial expenses/income are impacted by fluctuations in certain foreign currencies versus the U.S. dollar as described in the “Financial risk management” section of this MD&A. The Company periodically uses derivative financial instruments to manage risks related to fluctuations in foreign exchange rates. 5.8 Fourth quarter operating results For the three months ended (in $ millions, except per share amounts or otherwise indicated) December 31, 2023 January 1, 2023 Variation $ Variation % Net sales Gross profit Adjusted gross profit(1) SG&A expenses Adjusted SG&A expenses(1) Restructuring and acquisition-related costs Impairment (Impairment reversal) of intangible assets 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 Adjusted gross margin(1) SG&A expenses as a percentage of sales Adjusted SG&A expenses as a percentage of sales(1) Operating margin Adjusted operating margin(1) Diluted weighted average number of common shares outstanding (in ‘000s) 782.7 236.6 236.6 88.3 82.0 10.9 (40.8) 178.1 154.5 185.3 21.2 3.6 153.3 129.2 0.89 0.89 0.75 30.2 % 30.2 % 11.3 % 10.5 % 22.8 % 19.7 % 720.0 234.8 209.2 73.6 73.6 6.3 62.3 92.6 135.6 163.6 13.3 (4.6) 83.9 117.2 0.47 0.47 0.65 32.6 % 29.1 % 10.2 % 10.2 % 12.9 % 18.8 % 62.7 1.8 27.4 14.7 8.4 4.6 (103.1) 85.5 18.9 21.7 7.9 8.2 69.4 12.0 0.42 0.42 0.10 n/a n/a n/a n/a n/a n/a 8.7 % 0.8 % 13.1 % 20.0 % 11.4 % 73.0 % n.m. 92.3 % 13.9 % 13.3 % 59.4 % n.m. 82.7 % 10.2 % 89.4 % 89.4 % 15.4 % (2.4) pp 1.1 pp 1.1 pp 0.3 pp 9.9 pp 0.9 pp 171,806 179,897 n/a n/a n.m. = not meaningful n/a = not applicable (1) This is a non-GAAP financial measure or ratio. See section 16.0 "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. Net sales of $783 million for the fourth quarter ending December 31, 2023, were up 9% over the prior year, consisting of Activewear sales of $644 million, up 8%, and sales of $139 million in the Hosiery and underwear category, up 11%. The increase in Activewear sales was due to higher volumes, driven by POS as well as higher levels of customer replenishment than the prior year. POS also reflected strength in key product categories including fleece and ring spun products, which also drove favorable mix. While we saw some POS recovery in International markets, sales were down 24% reflecting continued macro-economic challenges in these markets and the lack of inventory replenishment compared to the prior year. In the Hosiery and underwear category, the increase was mainly due to higher volumes, driven by a combination of better POS and the rollout of new programs in the mass retail channel. Despite continued industry-wide weak demand for men’s underwear and socks, we achieved a solid performance in this category. GILDAN 2023 REPORT TO SHAREHOLDERS 20 MANAGEMENT'S DISCUSSION AND ANALYSIS We generated gross profit of $237 million, or 30.2% of sales, versus $235 million, or 32.6% in the prior year which included an insurance gain of $26 million. On an adjusted basis, gross profit of $237 million, or 30.2% of sales, was up $28 million. The resulting adjusted gross margin improvement of 110 basis points was primarily due to lower raw material costs slightly offset by lower net selling prices. As expected, we saw a sequential improvement of 270 basis points to our adjusted gross margin, as pressure from the flow-through of peak cotton costs subsided significantly in the fourth quarter. SG&A expenses of $88 million, or 11.3% of sales, were up $15 million compared to last year, reflecting the impact of higher volumes on distribution costs, as well as a charge of $6 million related to CEO separation costs and related advisory fees on shareholder matters. Adjusting for this charge, adjusted SG&A expenses as a percentage of sales of 10.5% in the quarter compares to 10.2% last year, as the impact of higher expenses more than offset the benefit of sales leverage. In the quarter, we incurred restructuring and acquisition-related costs of $11 million, mainly due to the previously announced closure of a yarn-spinning plant in the U.S., compared to $6 million of restructuring and acquisition-related costs in the prior year. Given fiscal 2023 performance and profitability projections related to our hosiery sales, we also recorded a $41 million reversal of prior hosiery-related impairment charges. After reflecting the net impact of these items in both years, operating income of $178 million was up from $93 million last year. On an adjusted basis, operating income1 of $155 million, or 19.7% of sales, compares to $136 million, or 18.8% of sales in the prior year. The increase in adjusted operating income reflected higher sales and higher adjusted gross margin. The 90-basis point improvement in adjusted operating margin1 was mainly due to the increase in adjusted gross margin. After reflecting net financial expenses of $21 million, up $8 million over the prior year due to higher interest rates and average net borrowing levels, and the positive benefit of a lower outstanding share base, we reported diluted EPS and adjusted diluted EPS of $0.89 and $0.75, up 89% and 15% respectively versus diluted EPS and adjusted diluted EPS of $0.47 and $0.65 respectively, in the same quarter last year. 6.0 FINANCIAL CONDITION 6.1 Current assets and current liabilities (in $ millions) December 31, 2023 January 1, 2023 Variation Cash and cash equivalents Trade accounts receivable Inventories Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities Current portion of lease obligations Income taxes payable Current portion of long-term debt Total working capital(1) Current ratio(2) n.m. = not meaningful (1) This is a non-GAAP financial measure or ratio. See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. (2) Current ratio is defined as current assets divided by current liabilities. Certain minor rounding variances exist between the consolidated financial statements and this summary. 150.4 248.8 1,225.9 101.8 (471.2) (13.8) (6.6) (150.0) 1,085.3 2.7 89.6 412.5 1,089.4 96.0 (408.3) (14.2) (1.6) (300.0) 963.4 2.3 (60.8) 163.7 (136.5) (5.8) 62.9 (0.4) 5.0 (150.0) (121.9) n.m • • • The decrease in cash and cash equivalents mainly reflects share repurchases under the Company's NCIB program, the payment of dividends, partially offset by net long-term debt proceeds and the free cash flow generated during fiscal 2023. The increase in trade accounts receivable (which are net of accrued sales discounts) compared to the end of fiscal 2022 was mainly due to the impact of longer average payment terms, and higher net sales compared to the fourth quarter of 2022, as well as the timing of sales within the quarter compared to the fourth quarter of last year. The decrease in inventories during fiscal 2023 was mainly due to decreases in raw materials and work-in-process inventories, resulting from lower volumes in these inventories and lower raw material costs, as well as lower unit costs for finished goods inventory due to lower fiber costs, partially offset by higher finished goods volumes. GILDAN 2023 REPORT TO SHAREHOLDERS 21 MANAGEMENT'S DISCUSSION AND ANALYSIS • • Prepaid expenses, deposits and other current assets are lower mainly due to a decrease in the fair value of derivative financial instrument assets which reflected the maturity of commodity forward swap contracts that were designated as hedges for the Company's cotton purchases for fiscal 2023. The decrease in accounts payable and accrued liabilities is mainly due to the impact of lower raw material costs and lower purchase volumes, as well as lower accruals for variable compensation. • Working capital was $963 million as at December 31, 2023, compared to $1,085 million as at January 1, 2023. The current ratio at the end of fiscal 2023 of 2.3 is lower than the current ratio of 2.7 at the end of fiscal 2022, mainly due an increase in the current portion of long-term debt. 6.2 Property, plant and equipment, right-of-use assets, intangible assets, and goodwill (in $ millions) Balance, January 1, 2023 Additions Depreciation and amortization Net carrying amounts of disposals, write-downs and impairments Property, plant and equipment Right-of-use assets Intangible assets 1,115.2 195.7 (101.2) 78.0 18.5 (13.4) (35.2) 1,174.5 (1.7) 81.4 230.0 4.5 (13.8) 40.7 261.4 Goodwill 271.7 — — — 271.7 Balance, December 31, 2023 Certain minor rounding variances exist between the consolidated financial statements and this summary. • Additions to property, plant and equipment are mainly due to expenditures related to the expansion of textile and sewing manufacturing operations, as well as modernization of the yarn facilities acquired through the December 2021 acquisition of Frontier Yarns. Disposals and write-downs are mainly due to the sale and leaseback of one of our U.S. distribution facilities, as well write-downs for certain equipment at one of our yarn spinning facilities in the U.S. • • The slight increase in right-of-use assets mainly reflects increases from the distribution facility lease that was entered into, as part of the sale and leaseback, as well as manufacturing and distribution facility lease renewals entered into during 2023, partially offset by the impact of depreciation and write-downs. Intangible assets are comprised of customer contracts and relationships, trademarks, license agreements, non- compete agreements, and computer software. The $31 million increase in intangible assets mainly reflects the impairment reversal of $41 million relating to the Hosiery CGU, partially offset by amortization of $14 million. GILDAN 2023 REPORT TO SHAREHOLDERS 22 MANAGEMENT'S DISCUSSION AND ANALYSIS 6.3 Other non-current assets and non-current liabilities (in $ millions) December 31, 2023 January 1, 2023 Variation Deferred income tax assets Other non-current assets Long-term debt Lease obligations Deferred income tax liabilities Other non-current liabilities(1) (1) Other non-current liabilities include provisions and employee benefit obligations. Certain minor rounding variances exist between the consolidated financial statements and this summary. 24.0 14.3 (685.0) (83.9) (18.1) (46.3) 16.0 2.5 (780.0) (80.2) — (56.2) 8.0 11.8 95.0 (3.7) (18.1) 9.9 • • See section 8.0 entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt. The net decrease in deferred income tax assets is mainly due to the utilization of prior year tax losses to offset the gain recognized on the sale and leaseback of one of our U.S. distribution facilities. • Other non-current assets include a loan receivable from a third-party yarn supplier. • The slight increase in lease obligations mainly reflects the impact of manufacturing and distribution facility lease renewals entered into during 2023, and the lease obligation resulting from the sale and leaseback on one of our U.S. distribution facilities, partially offset by the impact of payments made during the year, including a payment to terminate a lease relating to a former yarn facility. • Other non-current liabilities include provisions and employee benefit obligations. The decrease relates to the payout of employee benefit obligations in connection with the closure of manufacturing facilities in Central America. GILDAN 2023 REPORT TO SHAREHOLDERS 23 7.0 CASH FLOWS 7.1 Cash flows from (used in) operating activities (in $ millions) Net earnings Adjustments for: Depreciation and amortization Non-cash restructuring (gains) costs related to property, plant and equipment, right-of-use assets, and computer software Impairment (Impairment reversal ) of intangible assets (Gain) Loss on disposal of property, plant and equipment (PP&E), MANAGEMENT'S DISCUSSION AND ANALYSIS 2023 2022 Variation 533.6 541.5 121.6 124.9 (7.9) (3.3) 18.1 (40.8) (3.3) 62.3 21.4 (103.1) including insurance recoveries relating to PP&E Share-based compensation Deferred income taxes Other (24.6) 27.0 10.1 (14.0) (84.5) Changes in working capital balances 546.5 Cash flows from operating activities Certain minor rounding variances exist between the consolidated financial statements and this summary. (34.2) 32.4 (0.2) (3.0) (307.1) 413.3 9.6 (5.4) 10.3 (11.0) 222.6 133.2 • Cash flows from operating activities were $547 million in fiscal 2023, compared to $413 million in fiscal 2022. Operating cash flows were mainly impacted in fiscal 2023 by a lower increase in working capital, as explained below, and the 2023 proceeds relating to the finalization of the Company’s insurance claim as explained in section 5.6.4 "Gain on sale and leaseback and net insurance gains" of this MD&A, partially offset by lower gross profit. • The net increase in working capital was $84 million in fiscal 2023, compared to a net increase of $307 million during fiscal 2022. The lower increase in working capital compared to last year was mainly due to a decrease in inventories compared to an increase in the same period last year, partially offset by an increase in trade accounts receivable compared to a decrease in fiscal 2022, as well as a decrease in accounts payable and accrued liabilities compared to an increase in the same period last year. GILDAN 2023 REPORT TO SHAREHOLDERS 24 MANAGEMENT'S DISCUSSION AND ANALYSIS 7.2 Cash flows from (used in) investing activities (in $ millions) Purchase of property, plant and equipment Purchase of intangible assets Business dispositions (acquisitions) Proceeds from sale and leaseback, insurance related to property, plant and equipment (PP&E) and other disposals of PP&E 53.2 (154.8) Cash flows used in investing activities Certain minor rounding variances exist between the consolidated financial statements and this summary. 2023 (203.3) (4.7) — 2022 Variation (239.1) (5.4) 33.5 28.6 (182.4) 35.8 0.7 (33.5) 24.6 27.6 • The decrease in cash flows used in investing activities in fiscal 2023 was mainly due to lower capital expenditures and proceeds from the sale and leaseback of one of our distribution centres located in the U.S., partially offset by proceeds in 2022 from the sale of one of our U.S. yarn spinning facilities that was part of the 2021 acquisition of Frontier yarns. • Capital expenditures1 during fiscal 2023 are described in section 6.2 of this MD&A entitled "6.2 Property, plant and equipment, right-of-use assets, intangible assets, and goodwill", and our projected capital expenditures for the next fiscal year are discussed in section 8.0 entitled “Liquidity and capital resources” in this MD&A. 7.3 Free cash flow (in $ millions) 2023 2022 Variation Cash flows from operating activities Cash flows used in investing activities Adjustment for: Business (dispositions) acquisitions Free cash flow(1) (1) This is a non-GAAP financial measure or ratio. See section 16.0 "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. 546.6 (154.9) 413.5 (182.4) — 391.7 (33.5) 197.6 133.1 27.5 33.5 194.1 • For fiscal 2023, the year-over-year increase in free cash flow of $194 million was mainly due to the $133 million increase in operating cash flows, $51 million of proceeds from the sale and leaseback of a distribution centre located in the U.S, as well as lower capital expenditures compared to the same period last year. 1 Capital expenditures include purchases of property, plant & equipment and intangible assets. GILDAN 2023 REPORT TO SHAREHOLDERS 25 7.4 Cash flows from (used in) financing activities (in $ millions) 2023 2022 Variation MANAGEMENT'S DISCUSSION AND ANALYSIS (Decrease) Increase in amounts drawn under revolving long-term bank credit facility (95.0) (150.0) Payment of notes 300.0 Proceeds from delayed draw term loan (24.9) Payment of lease obligations (131.8) Dividends paid 55.1 Proceeds from the issuance of shares (360.5) Repurchase and cancellation of shares (26.2) Share repurchases for settlement of non-Treasury RSUs (19.5) Withholding taxes paid pursuant to the settlement of non-Treasury RSUs (452.8) Cash flows used in financing activities Certain minor rounding variances exist between the consolidated financial statements and this summary. 330.0 — — (16.6) (123.8) 15.0 (449.2) (8.3) (5.5) (258.4) (425.0) (150.0) 300.0 (8.3) (8.0) 40.1 88.7 (17.9) (14.0) (194.4) • Cash flows used in financing activities for fiscal 2023 mainly reflected the repurchase and cancellation of common shares under NCIB programs as discussed in section 8.5 of this MD&A, the payment of dividends, and payments made during the period on lease obligations, partially offset by net long-term debt proceeds and proceeds from the issuance of shares relating to the exercise of employee stock options. See section 8.0 of this MD&A entitled “Liquidity and capital resources” for the discussion on long-term debt. • Cash flows used in financing activities for fiscal 2022 mainly reflected the repurchase and cancellation of common shares under NCIB programs, the payment of dividends, and payments made during the period on lease obligations, partially offset by cash inflows of $330 million from funds drawn on our long-term bank credit facilities. • The Company paid $132 million of dividends during fiscal 2023 compared to $124 million of dividends during fiscal 2022. The year-over-year increase is due to the 10% increase in the amount of the quarterly dividend approved by the Board of Directors on February 21, 2023, partially offset by the impact of lower common shares outstanding as a result of the repurchase and cancellation of common shares under NCIB programs. GILDAN 2023 REPORT TO SHAREHOLDERS 26 MANAGEMENT'S DISCUSSION AND ANALYSIS 8.0 LIQUIDITY AND CAPITAL RESOURCES 8.1 Capital allocation framework Historically, our primary uses of funds have been for working capital requirements, capital expenditures, business acquisitions, and the payment of dividends and share repurchases, which we have funded with cash generated from operations and with funds drawn from our long-term debt facilities. We have established a capital allocation framework intended to enhance sales and earnings growth as well as shareholder returns. After funding working capital needs, our first priority of cash use is to fund our organic growth with the required capital investments. Beyond these requirements, our next priorities for capital allocation are to support our dividends and for opportunistic complementary acquisitions with a preference towards opportunities that could enhance our supply chain model. In addition, we have used excess cash to repurchase shares under normal course issuer bid programs. The Company has set a fiscal year-end net debt leverage target ratio2 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. 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 to fund our organic growth strategy, including anticipated working capital and projected capital expenditures of 5% of sales in 2024, as well as returning capital to shareholders through dividends and continued share repurchases in line with our leverage framework and value considerations. Refer to note 26 of the audited annual consolidated financial statements for the year ended December 31, 2023 for an update on the Company’s liquidity risk. 2 This is a non-GAAP financial measure or ratio. See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. GILDAN 2023 REPORT TO SHAREHOLDERS 27 MANAGEMENT'S DISCUSSION AND ANALYSIS 8.2 Long-term debt and net debt and net debt leverage ratio The Company's long-term debt as at December 31, 2023 is described below. (in $ millions, or otherwise indicated) Non-current portion of long-term debt Revolving long-term bank credit facility, interest at variable U.S. interest rate(2)(3) Term loan, interest at variable U.S. interest rate, payable monthly(2)(4) Notes payable, interest at fixed rate of 2.91%, payable semi- annually(5) Notes payable, interest at Adjusted SOFR plus a spread of 1.57%, payable quarterly(5)(6) Current portion of long-term debt Notes payable, interest at fixed rate of 2.70%, payable semi- annually(5) Notes payable, interest at Adjusted LIBOR plus a spread of 1.53%, payable quarterly(5)(7) Delayed draw term loan (DDTL), interest at variable U.S. interest rate, payable monthly(2)(4) Effective interest rate (1) Principal amount December 31, 2023 January 1, 2023 Maturity date 6.4% 4.6% 2.9% 2.9% 2.7% 2.7% 7.0% 235.0 300.0 100.0 50.0 685.0 330.0 March 2027 June 2026 300.0 100.0 August 2026 50.0 August 2026 780.0 — 100.0 — 300.0 50.0 — Matured and repaid in August 2023 Matured and repaid in August 2023 May 2024 Long-term debt (1) Represents the annualized effective interest rate for the year ended December 31, 2023, including the cash impact of interest rate swaps, where applicable. (2) Secured Overnight Financing Rate (SOFR) advances at adjusted Term SOFR (includes a 0% to 0.25% reference rate adjustment) plus a spread ranging from 1% to 3%. 300.0 985.0 150.0 930.0 (3) 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 adjusted Term SOFR is a function of the total net debt to EBITDA ratio (as defined in the credit facility agreement and its amendments). In addition, an amount of $36.0 million (January 1, 2023 - $43.9 million) has been committed against this facility to cover various letters of credit. (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 adjusted Term SOFR is a function of the total net debt to EBITDA ratio (as defined in the term loan agreements and its amendments). (5) The unsecured notes issued 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. (6) Adjusted SOFR rate is determined on the basis of floating rate notes that bear interest at a floating rate plus a spread of 1.57%. (7) Adjusted LIBOR rate is determined on the basis of floating rate notes that bear interest at a floating rate plus a spread of 1.53%. The Company repaid the current portion of notes payable, which matured in August 2023. On May 26, 2023, the Company amended its $300 million term loan to include an additional $300 million delayed draw term loan ("DDTL") with a one year maturity from the effective date. All other terms of the agreement remained unchanged. The proceeds of this term loan were in part used to pay the $150 million of notes payable that matured in August 2023. On June 30, 2022, the Company amended its notes purchase agreement to include LIBOR fallback provisions to replace LIBOR with adjusted term SOFR, adjusted daily simple SOFR or any relevant alternate rate selected by the note holders and the Company upon a benchmark transition event or early opt-in election. On March 25, 2022, the Company amended and extended its unsecured revolving long-term bank credit facility of $1 billion to March 2027. As part of the amendment, LIBOR references were replaced with Term Secured Overnight Financing Rate (‘‘Term SOFR’’) and the revolving facility includes a sustainability-linked loan ("SLL") structure, whereby its applicable margins are adjusted upon achievement of certain sustainability targets, which commenced in 2023. GILDAN 2023 REPORT TO SHAREHOLDERS 28 MANAGEMENT'S DISCUSSION AND ANALYSIS On March 25, 2022, the Company amended its $300 million term loan to replace LIBOR references by Term SOFR references. During fiscal 2022, the Company applied the IFRS 9 interest rate benchmark reform practical expedient for amendments required by the interest rate reform to the revolving-long term bank credit facility, term loan and related interest rate swap agreements. The Company was in compliance with all financial covenants as at December 31, 2023. The Company expects to maintain compliance with its covenants over the next twelve months, based on its current expectations and forecasts. January 1, 2023 (in $ millions) Long-term debt (including current portion) 930.0 Bank indebtedness — Lease obligations (including current portion) 94.0 1,024.0 Total debt(1) Cash and cash equivalents (150.4) 873.6 Net debt(1) (1) This is a non-GAAP financial measure or ratio. See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. December 31, 2023 985.0 — 98.1 1,083.1 (89.6) 993.4 Certain minor rounding variances exist between the consolidated financial statements and this summary. The primary measure used by the Company to monitor its financial leverage is its net debt leverage ratio as defined in section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. Gildan’s net debt leverage ratio as at December 31, 2023, was 1.5 times (January 1, 2023 - 1.1 times) which was within the Company's target range of 1.0 times to 2.0 times. The Company’s net debt leverage ratio is calculated as follows: December 31, 2023 January 1, 2023 674.5 764.2 (in $ millions, or otherwise indicated) Adjusted EBITDA for the trailing twelve months(1) Adjustment for: Business acquisitions Pro-forma adjusted EBITDA for the trailing twelve months(1) Net debt(1) — 764.2 873.6 1.1 Net debt leverage ratio(1)(2) (1) This is a non-GAAP financial measure or ratio. See section 16.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. (2) The Company's net debt to EBITDA ratio for purposes of its loan and note agreements was 1.6 at December 31, 2023 Certain minor rounding variances exist between the consolidated financial statements and this summary. — 674.5 993.4 1.5 The total net debt to EBITDA ratios (as defined in the credit facility agreement and its amendments) vary from the definition of the Company’s non-GAAP ratio and non-GAAP financial measures “net debt leverage ratio” and “adjusted EBITDA”, respectively, as presented in this MD&A in certain respects. The definitions in the loan and note agreements are based on accounting for all leases in accordance with previous accounting principles whereby the Company’s leases for premises were accounted for as operating leases, while the Company’s reported net debt leverage ratio reflects lease accounting in accordance with the Company’s current accounting policies. In addition, adjustments permitted to EBITDA in the loan and note agreements vary from the adjustments used by the Company in calculating its adjusted EBITDA non- GAAP financial measure. As a result of these differences, our total net debt to EBITDA ratio for purposes of our loan and note agreements was 1.6 at the end of fiscal 2023 (2022 - 1.3). 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. GILDAN 2023 REPORT TO SHAREHOLDERS 29 MANAGEMENT'S DISCUSSION AND ANALYSIS 8.3 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 19, 2024, there were 168,661,402 common shares issued and outstanding along with 467,401 stock options and 60,528 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 exercise 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. Treasury RSUs are used exclusively for one-time awards to attract candidates or for retention purposes and their vesting conditions, including any performance objectives, are determined by the Board of Directors at the time of grant. 8.4 Declaration of dividend The Company paid dividends of $131.8 million during the year ended December 31, 2023. On February 20, 2024, the Board of Directors approved a 10% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.205 per share for an expected aggregate payment of $34 million which will be paid on April 8, 2024, on all of the issued and outstanding common shares of the Company, rateably and proportionately, to the holders of record on March 13, 2024. 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 8.1 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 for working capital requirements, capital expenditures, debt covenant and repayment obligations, capital requirements, the macro-economic environment, and present and/or future regulatory and legal restrictions. The Company's dividend payout policy and the declaration of dividends are subject to the discretion of the Board of Directors and, consequently, there can be no assurances that Gildan's dividend policy will be maintained or that dividends will be declared in respect of any quarter or other future periods. The declaration of dividends by the Board of Directors is ultimately dependent on the Company’s operations and financial results which are, in turn, subject to various assumptions and risks, including those set out in this MD&A. 8.5 Normal course issuer bid (NCIB) In August 2022, the Company received approval from the TSX to renew its normal course issuer bid (NCIB) program commencing on August 9, 2022, to purchase for cancellation a maximum of 9,132,337 common shares, representing 5% of the Company's issued and outstanding common shares, as at July 31, 2022 (the reference date for the NCIB). Under the NCIB, the Company was authorized to make purchases under the normal course issuer bid during the period from August 9, 2022 to August 8, 2023 in accordance with the requirements of the TSX. In August 2023, the Company received approval from the TSX to renew its NCIB program commencing on August 9, 2023, to purchase for cancellation a maximum of 8,778,638 common shares, representing approximately 5% of the Company's issued and outstanding common shares, as at July 31, 2023 (the reference date for the renewed NCIB). The Company is authorized to make purchases under the renewed NCIB until August 8, 2024 in accordance with the requirements of the TSX. Purchases can be made by means of open market transactions on both the TSX and the NYSE, or alternative Canadian trading systems, if eligible, or by such other means as may be permitted by securities regulatory authorities, including pre-arranged crosses, exempt offers, private agreements under an issuer bid exemption order issued by securities regulatory authorities and block purchases of common shares. The average daily trading volume of common shares on the TSX (ADTV) for the six-month period ended July 31, 2023 was 370,447. Consequently, and in accordance with the requirements of the TSX, the Company may purchase, in addition to purchases made on other exchanges including the NYSE, up to a maximum of 92,611 common shares daily through the facilities of the TSX, which represents 25% of the ADTV for the six-month period noted above. In connection with each of its 2022-2023 and 2023-2024 NCIB programs, the Company entered into an automatic share purchase plan (ASPP) with a designated broker which allows for the purchase of common shares under the NCIB at times when the Company would ordinarily not be permitted to purchase its common shares due to regulatory restrictions or self- imposed trading blackout periods. During the fiscal year ended December 31, 2023, the Company repurchased for cancellation a total of 11,830,618 common shares under its NCIB programs for a total cost of $370 million; $15 million was charged to share capital and the balance was charged to retained earnings. GILDAN 2023 REPORT TO SHAREHOLDERS 30   MANAGEMENT'S DISCUSSION AND ANALYSIS 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 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 under our share-based compensation plans. Please refer to note 26 of the audited annual consolidated financial statements for the year ended December 31, 2023 for additional details. 10.1 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. Our material short-term cash requirements include payments under our lease obligations, purchase obligations; related to capital expenditures, cotton commitments as well as raw material and finished goods inventory, and other working capital needs. Working capital, defined as total current assets less total current liabilities, fluctuates depending on effective management of receivables from our customers, inventory levels and payables to our suppliers, as well as commodity pricing. Our long-term material cash requirements from currently known obligations include repayment of outstanding borrowings, interest payment obligations under our credit agreement, settlements on our outstanding derivative hedge contracts, long term lease obligations, as well as minimum royalty payments. All commitments have been reflected in our consolidated statements of financial position except for purchase obligations, as well as minimum royalty payments, which are included in the table of contractual obligations below. We have no off- balance sheet arrangements, other than as discussed in this section. The following table sets forth the maturity of our contractual obligations by period as at December 31, 2023. (in $ millions) Carrying Contractual Less than Between 1 Between 4 More than 5 years amount 1 year and 3 years and 5 years cash flows Accounts payable and accrued liabilities Long-term debt — — — Interest obligations(1) Purchase and other obligations — Lease obligations 49.4 49.4 Total contractual obligations (1) Interest obligations include expected interest payments on long-term debt as at December 31, 2023 (assuming balances remain outstanding through to maturity). For variable rate debt, the Company has applied the rate applicable at December 31, 2023 to the currently established maturity dates. 408.3 300.0 43.7 327.8 20.8 2,146.3 1,100.6 408.3 985.0 — — 98.1 1,491.4 — 450.0 66.9 99.7 39.7 656.3 — 235.0 3.9 74.8 26.3 340.0 408.3 985.0 114.5 502.3 136.2 As disclosed in note 24 to our 2023 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, 2023, the maximum potential liability under these guarantees was $131 million, of which $15 million was for surety bonds and $116 million was for financial guarantees and standby letters of credit. GILDAN 2023 REPORT TO SHAREHOLDERS 31 MANAGEMENT'S DISCUSSION AND ANALYSIS 11.0 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Our significant accounting policies are described in note 3 to our fiscal 2023 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. 11.1 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 each CGU serves. As such, the Company has identified two CGUs for purposes of testing the recoverability and impairment of non-financial assets: Textile & Sewing, and Hosiery. 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, the Company being regularly subject to such audits. 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. 11.2 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: 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 or accelerated depreciation and amortization charges related to its non-financial assets. Please refer to note 11 of the audited annual consolidated financial statements for the year ended December 31, 2023 for additional details on the recoverability of the Company’s cash-generating units. GILDAN 2023 REPORT TO SHAREHOLDERS 32 MANAGEMENT'S DISCUSSION AND ANALYSIS Other sources of estimation uncertainty The cost of inventories may no longer be recoverable if inventories are discontinued, damaged, in excess quantities, or if their selling prices or estimated forecast of product demand decline. Discontinued, damaged, and excess inventories are carried at the net realizable value, as those inventories are sold below cost in liquidation channels. In determining the net realizable value of finished goods, the Company considers recent recovery rates and current market conditions in these channels. The Company regularly reviews inventory quantities on hand, current production plans, and forecasted future sales, and inventories are written down to net realizable value when it is determined that they are no longer fully recoverable. There is estimation uncertainty in relation to the identification of excess inventories used in establishing the net realizable value. As at December 31, 2023, a 10% decrease or increase in the expected selling prices used to establish the net realizable value of discontinued, damaged, and excess inventories would not result in either a material decrease or an increase in inventories. 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 write- downs may be required. 12.0 ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS NOT YET APPLIED 12.1 Accounting policies The Company’s audited consolidated financial statements for fiscal 2023 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 2022 audited annual consolidated financial statements, except as described below. IAS 12 Amendment International Tax Reform - Pillar Two Model Rules In May 2023, the International Accounting Standards Board issued the IAS 12 Amendment International Tax Reform - Pillar Two Model Rules on mandatory relief for accounting for deferred taxes from the global minimum taxation. The amendments provide a temporary exception from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments also introduce targeted disclosure requirements in the notes for affected entities to enable users of financial statements to understand the extent to which an entity will be affected by the minimum tax, particularly before the legislation comes into force. The amendments to IAS 12 are effective for annual periods beginning on or after January 1, 2023. The Company has updated its disclosures in the annual consolidated financial statements for the year ended December 31, 2023. Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policy Information In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by: – Replacing the requirement to disclose “significant” accounting policies under IAS 1 with a requirement to disclose “material” accounting policies. Under this, an accounting policy would be material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that primary users of general purpose financial statements make on the basis of those financial statements. – Providing guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures. The amendments shall be applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. Once an entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2. The Company has updated its accounting policy information disclosures in the annual consolidated financial statements for the year ended December 31, 2023. GILDAN 2023 REPORT TO SHAREHOLDERS 33 MANAGEMENT'S DISCUSSION AND ANALYSIS Amendments to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction On May 7, 2021, the IASB amended IAS 12 Income Taxes, to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments are effective for annual periods beginning on or after January 1, 2023. The Company has updated its disclosures in the annual consolidated financial statements for the year ended December 31, 2023.The adoption of these amendments resulted in a $11.1 million gross-up presentation of the lease liability deferred tax asset and right-of-use deferred tax liability as at January 1, 2023, for note disclosure purposes, with no impact on the net amount of deferred tax asset recognized. 12.2 New accounting standards and interpretations not yet applied The following new accounting standards are not effective for the year ended December 31, 2023 and have not been applied in preparing the audited annual consolidated financial statements. Amendments to IAS 1, Presentation of Financial Statements On January 23, 2020, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, to clarify how to classify debt and other liabilities as current or non-current. The amendments (which affect only the presentation of liabilities in the statement of financial position) clarify that the classification of liabilities as current or non- current should be based on rights that are in existence at the end of the reporting period to defer settlement by at least twelve months and make explicit that only rights in place at the end of the reporting period should affect the classification of a liability; clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets, or services. On October 31, 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1). These further amendments clarify how to address the effects on classification and disclosure of covenants which an entity is required to comply with on or before the reporting date and covenants which an entity must comply with only after the reporting date. The 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective for annual periods beginning on or after January 1, 2024, and are not expected to have an impact on the Company's consolidated financial statements. Early adoption is permitted. These amendments will be effective for annual periods beginning on or after January 1, 2024, with earlier application permitted and are to be applied retrospectively. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. GILDAN 2023 REPORT TO SHAREHOLDERS 34 MANAGEMENT'S DISCUSSION AND ANALYSIS 13.0 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, as amended, 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 of the effectiveness of our disclosure controls and procedures as of December 31, 2023 was carried out under the supervision of, and with the participation of, our management, including our Chief Executive Officer and our Chief Financial Officer. 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, 2023. 14.0 INTERNAL CONTROL OVER FINANCIAL REPORTING 14.1 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 at December 31, 2023, 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, 2023. 14.2 Attestation report of independent registered public accounting firm KPMG LLP, an independent registered public accounting firm, which audited and reported on our consolidated financial statements, has issued an unqualified report on the effectiveness of our internal control over financial reporting as of December 31, 2023. GILDAN 2023 REPORT TO SHAREHOLDERS 35 MANAGEMENT'S DISCUSSION AND ANALYSIS 14.3 Changes in internal control over financial reporting There have been no changes that occurred during the quarter beginning on October 2, 2023 and ended December 31, 2023 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 15.0 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, 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. Many risks are driven by external factors beyond the Company's control or are of a nature which cannot be eliminated. The key areas of business risks and uncertainties described in this section are not the only ones that can affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our financial condition, results of operations, cash flows, or business. Our ability to implement our growth strategies and plans The growth of our business depends on the successful execution of key strategic initiatives as part of the Gildan Sustainable Growth strategy, which is described in section 4.0 entitled "Strategy" of this MD&A. We are implementing our plan or plan to execute on various initiatives aimed at expanding and optimizing our global production capacity and maintaining or enhancing our cost structure, driving innovation across the organization, in our manufacturing and product- development processes, distribution and final products. Our ability to implement our growth strategy and plans is dependent upon a number of factors, some of which are beyond our control, and include but are not limited to our ability to leverage the Company's strengths, general economic conditions and other risk factors as described in this MD&A. Further, achieving these objectives will require significant investments which may result in both short-term and long-term costs. The Company has historically relied on cash generated from its operating activities and its credit facilities as its primary source of liquidity. To support the Company’s business and execute on its growth strategy and its plan to increase its manufacturing capacity, the Company will need to continue to generate significant amounts of cash from operations. If the Company’s business does not generate cash flow from operating activities sufficient to fund these activities, and if sufficient funds are not otherwise available from its credit facilities, the Company may need to seek additional capital to fund its business or execute its growth strategy in which case there is no assurance the Company will be successful in obtaining such additional capital if and when needed on favorable terms or at all. There can be no assurance that we will be successful in the execution of these strategic initiatives, including the timely expansion of our manufacturing capacity to pursue growth or that the successful execution of these strategic initiatives will deliver the results we expect or grow our business. If we fail to effectively implement our strategy, our financial condition, results of operations, business or cash flows could be adversely affected. Our ability to compete effectively The markets and geographies for our products are highly competitive and evolving rapidly. Competition is generally based upon service and product availability, price, quality, comfort and fit, style, and brand. Our competitive strengths include our expertise in building and operating large-scale, vertically integrated manufacturing hubs which allows us to operate efficiently and reduce costs, offer competitive pricing, and provide a reliable supply chain. As discussed in section 4.0 of this MD&A entitled "Strategy", we intend to increase our global production capacity, and any failure or delay in efficiently implementing or managing such increase in capacity, or doing so in a cost-effective manner, could negatively impact our manufacturing and distribution cost structure, which would negatively impact our ability to compete. There can be no assurance that we will be able to maintain our low cost manufacturing and distribution structure and remain competitive. Higher-than-normal levels of cost inflation could lead to pressure on retail prices, margins and operational costs. As discussed in section 3.3 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 selling basic apparel products under their own private label brands that compete directly with our brands. In addition, evolving e-commerce customer preferences and behaviours continue to facilitate 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 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 GILDAN 2023 REPORT TO SHAREHOLDERS 36 MANAGEMENT'S DISCUSSION AND ANALYSIS orders or shelf space, lower prices or 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 sales volumes or 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 may 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, or 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 anticipated synergies and other benefits expected from acquisitions. 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 adverse financial conditions exist in the credit markets, as in the case of the global credit crisis in 2008 and 2009 or the COVID-19 pandemic, 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. We rely on a small number of significant customers In any given period, we rely on a small number of customers for a significant portion of our total sales. In fiscal 2023, our top three customers accounted for 22.4%, 16.3%, and 7.6% (2022 - 18.1%, 18.6%, and 10.7%) of total sales respectively, and our top ten customers accounted for 69.0% (2022 - 67.9%) of total sales. We expect that these customers will continue to represent a significant portion of our sales in the future. Future sales volumes and profitability could be negatively affected should one or more of the following events occur: • • • • • a significant customer substantially reduces its purchases or ceases to buy from us, or we elect to reduce the 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 requires us to incur additional service and other costs; a customer experiences operational disruptions due to fires, extreme weather conditions, natural disasters or pandemics (such as COVID-19), information system failures or incidents, and other factors; further industry consolidation leads to greater customer concentration and competition; and a 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, including potential shifts in consumer and customer preferences favouring more sustainable and circular brands and suppliers in the markets we serve. 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 fail to effectively anticipate, identify, or respond to changing styles or trends, or increased preferences for sustainable and/or circular products, or if we misjudge the market for our products, our sales could be adversely affected. This could result in 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. GILDAN 2023 REPORT TO SHAREHOLDERS 37 MANAGEMENT'S DISCUSSION AND ANALYSIS 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 and cadence of distributor inventory replenishment. 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, including the overall state of the economy and expectations for economic growth (including as a result of the current inflationary environment). In addition, fluctuations in energy prices, including prices for crude oil or petroleum, natural gas, biomass and electricity 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. Fluctuations in energy prices are partly influenced by government policies to address climate change, which could increase our energy costs beyond our current expectations. In addition, the Company is subject to carbon tax regulations in various jurisdictions where it operates. The carbon tax rates and the scope of emissions covered by these regulations may change over time, which could cause fluctuations in our energy consumption and other costs. Geopolitical and economic risks, including from existing or threatened military conflicts and volatility in the energy markets, have raised concerns in international economies. Beyond any immediate impact, these developments may also negatively affect the evolution of the global economy. 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 twenty-four 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 a negative effect on our business, results of operations, and financial condition, if the increase or part of the increase is not mitigated through additional manufacturing and distribution cost reductions and/or higher selling prices, or if resulting selling price increases negatively impact demand for the Company’s products. In addition, when the Company fixes its cotton and polyester fiber costs for future delivery periods and the cost of cotton or polyester fibers subsequently decreases significantly for that delivery period, the Company may need to reduce selling prices, which could have a negative effect on our business, results of operations and financial condition. GILDAN 2023 REPORT TO SHAREHOLDERS 38 MANAGEMENT'S DISCUSSION AND ANALYSIS We rely on key suppliers Our ability to meet our customers’ needs depends on our ability to maintain an uninterrupted supply of raw materials, energy (including biomass, oil, natural gas and electricity) 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 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, energy 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, violate labour laws and regulations, 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, natural disasters, pandemics, and endemics 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 Nicaragua, as well as the Caribbean and Bangladesh, as described in the section entitled “Our operations” in this MD&A. We also purchase a portion of our sock requirements 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 and those of our key suppliers are located in geographic regions that are exposed to the risk of, and have experienced in the past, hurricanes, floods, earthquakes, pandemics, and endemics. 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 operations at our facilities or those of our suppliers and customers, increase our cost of sales and other operating expenses, result in a loss of sales, asset losses, or require additional capital expenditures to be incurred: • • • • • fires, extraordinary weather conditions, or natural disasters, such as hurricanes, tornadoes, floods, extreme heat, droughts, tsunamis, typhoons, and earthquakes; pandemics, such as COVID-19; political instability, social and labour unrest, human rights violations, 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 sales and 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. Furthermore, we may not always be able to obtain adequate insurance coverage in regions in which we operate that have a higher likelihood of experiencing natural disasters. 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, sanctions or other trade restrictions, lobbying or similar activities, competition, taxation, environmental, health and safety, human rights including forced labour, 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, the detainment of goods by government bodies, 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. GILDAN 2023 REPORT TO SHAREHOLDERS 39 MANAGEMENT'S DISCUSSION AND ANALYSIS Laws and regulations are constantly changing and are often complex, and future compliance cannot be assured. Changes necessary to maintaining compliance with these laws and regulations may increase future compliance costs and have other negative impacts on our business, results of operations, and financial condition. As part of the regulatory and legal environments in which we operate, Gildan is subject to anti-bribery laws that prohibit improper payments directly or indirectly to government officials, authorities, or persons defined in those anti-bribery laws in order to obtain business or other improper advantages in the conduct of business. Failure by our employees, subcontractors, suppliers, agents, and/or partners to comply with anti-bribery laws could impact Gildan in various ways that include, but are not limited to, criminal, civil and administrative legal sanctions, negative publicity, and could have a negative effect on our reputation as well as our business, results of operations, and financial condition. We rely on certain international trade (including multilateral and bilateral) agreements and preference programs and are subject to evolving international trade regulations As a multinational corporation, we are affected by import tariffs, including the potential imposition of anti-dumping or countervailing duties or other trade remedies on our raw materials and finished goods, international trade legislation, and bilateral and multilateral trade agreements, trade preference programs, and trade incentives in the countries in which we operate, source, and sell products. 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 trade, including the application and eligibility of incentives, anti-dumping and countervailing duties, tariffs, quantitative limitations and proposed trade restrictions that could impact our approach to global manufacturing and sourcing, and adjusts accordingly 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 Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR), the Caribbean Basin Trade Partnership Act (CBTPA), and the Haiti Economic Lift Program (HELP) previously referred to as the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE). Collectively, these agreements strengthen U.S. economic relations and expand trade with Central America, the Dominican Republic, and Haiti, where we have substantial manufacturing operations and activities. The Company also relies on preferential trade agreements to access the European Union, Canada, and other markets. Changes to trade agreements, trade preference programs, or trade incentives on which the Company currently relies or the entry into force of trade- restricting legislation may negatively impact our global competitive position. The likelihood that the agreements, preference programs and trade incentives around which we have built our manufacturing supply chain will be modified, repealed, phased-out, 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 U.S. focus on domestic manufacturing that has drawn worldwide attention. While a significant proportion of our costs to manufacture our products originate in the United States, the Company also has significant operations and sourcing outside the United States. 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, or lead to adverse changes in the international trade agreements and preference programs on which the Company currently relies, the implementation of additional tariffs on imports of our raw materials or finished goods into the United States, or further U.S. tax reform 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 these outcomes could negatively impact our ability to compete effectively and negatively affect our results of operations. Many 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 import tariffs in any of the countries in which we operate may also negatively impact our global competitive position. For example, United States domestic laws provide for the application of anti- dumping or countervailing duties on imports of products into the United States where determinations are made by the relevant agencies that such imported products have been subsidized and/or are being sold at less than “fair value” in the case of anti-dumping determinations, or have been subsidized by a foreign government, in the case of countervailing duty determinations, 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 United States or other markets cannot be determined with certainty. GILDAN 2023 REPORT TO SHAREHOLDERS 40 MANAGEMENT'S DISCUSSION AND ANALYSIS The United States withdrew from the Trans-Pacific Partnership Agreement (TPP) in 2017, but the other negotiating countries went on to conclude the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) in 2018. Thus far, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam have ratified and implemented CPTPP. Also, the United Kingdom’s (UK) accession protocol was signed in July 2023, to enable the UK to join. CPTPP may negatively affect our competitive position in some of the countries in which we sell our products. The European Union has an Association Agreement with Central America, including Honduras and Nicaragua, where we have production operations. The European Union also has preferential trade arrangements with other countries. Further, the European Union maintains a Generalized System of Preferences (GSP) and the Everything But Arms programs (EBA). These programs allow free or reduced duty entry into the European Union of qualifying articles, including apparel, from developing countries and least developed countries where we have manufacturing operations, including Haiti and Bangladesh. The European Union also affords preference to qualifying apparel from notable production venues including Vietnam, Myanmar and Pakistan, which could negatively impact our competitive position in the European Union. Any changes to these agreements could have a negative impact on our operations. On June 23, 2016, the UK voted to leave the European Union (“Brexit”). The transition period for the UK’s withdrawal ended on December 31, 2020, and the UK formally left the European Union on January 1, 2021. While the UK has entered into continuity agreements with Central American and CARIFOROM trade partners and has officially published regulations governing the new UK Generalized System of Preferences program, the competitiveness or our supply chain in the UK and the European Union could be negatively impacted if the UK fails to effectively implement these agreements and programs or make them permanent. China extends duty-free and quota-free trade benefits to apparel under the Asia-Pacific Trade Agreement and under a special preferential tariff program for least developed countries, including to chief-weight cotton apparel from Bangladesh. Changes to the agreement or preference program could have a negative impact on our operations. In 2021, the United Nations General Assembly passed a resolution to “graduate” Bangladesh from the least developed country category to the developing country category. Although, the resolution established a five-year grace period, this change in Bangladesh’s status could lead to a preemptive reduction, termination, or phase-out of trade preferences or trade incentives for Bangladesh’s exports to Canada, the European Union, the UK, Japan, the United States, Australia, and other countries. Bangladesh’s reduction, termination or phase-out of trade preferences or trade incentives may negatively affect our competitive position in some of the countries in which we sell our products. Many Chinese imports into the United States are subject to additional trade remedy duties under section 301 of the Trade Act of 1974. The items on Lists 3 and, 4A, under this action include textiles and apparel. Currently, goods on List 3 are subject to 25 percent additional duty, and goods on List 4A, are subject to 7.5 percent additional duty. List 4B, which includes the majority of apparel articles, has never been implemented. These changes, or the imposition of any further duties on Chinese goods, could negatively impact our operations. The United States has determined that the mass detention and treatment of Uyghurs and other ethnic minorities in the Xinjiang Uyghur Autonomous Region (XUAR) of China includes and gives rise to forced labour. The Uyghur Forced Labor Prevention Act (UFLPA), which took effect on June 21, 2022, establishes a presumption that any goods produced or manufactured in whole or in part in XUAR were made with forced labour and are inadmissible into the United States unless importers present clear and convincing evidence that the goods were not made with forced labour. The United States has identified cotton products as a high enforcement priority. U.S. Customs and Border Protection (“CBP”) can detain or, exclude shipments under the UFLPA. Canada has introduced the Fighting Against Forced Labour and Child Labour in Supply Chains Act which will require significant reporting obligations on Canadian businesses and importers meeting certain eligibility requirements, including the steps an entity has taken to prevent and reduce the risk that forced or child labour was used at any step for the production of goods that were produced or entered into Canada by that entity and must be submitted before May 31st of each year starting in 2024. Forced Labour legislation is also pending in the UK, and the European Union. While we do not source product from the XUAR and have taken increased actions to ensure our entire supply chain is free of any forced labour, there is nonetheless a risk, given the presence of XUAR origin cotton in global supply chains, that our business could be affected by these restrictions. The U.S. Generalized System of Preferences program expired on December 31, 2020. Although the expired program did not include duty-free preference for textile and apparel products, any renewal of the program incorporating duty-free access of textiles and apparel into the U.S. for beneficiary countries could adversely impact our competitiveness in the United States. GILDAN 2023 REPORT TO SHAREHOLDERS 41 MANAGEMENT'S DISCUSSION AND ANALYSIS The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement among Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. The agreement is currently in force among Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, New Zealand, Singapore, South Korea, Thailand and Vietnam. Once ratified by all signatories, RCEP will be the world’s largest free trade agreement based on member’s gross domestic product. As the RCEP is implemented and utilized, it may negatively affect our competitive position in some of the countries in which we sell our products. Japan's Generalized System of Preferences scheme currently allows duty-free entry of qualifying goods from Bangladesh. Any change to Japan’s GSP preference program could negatively impact our operations. Overall, changes to trade agreements or trade preference programs that we leverage in our key country markets, or new agreements that liberalize access for our competitors, could negatively impact our competitiveness in those markets. The likelihood of such changes, or of modification, suspension, or termination of the agreements and preference programs around which we have built our manufacturing supply chain, and the extent of the impact on our business, cannot be determined with certainty. In addition, the Company could be 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, and compliance with other applicable customs requirements, we cannot predict the outcome of any governmental audit or inquiry. The Company operates two U.S. foreign trade zones (FTZs) at its distribution warehouses in North and South Carolina. While 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. The Company believes it has adequate systems and controls in place to manage the regulatory requirements associated with its FTZs, but we cannot predict the outcome of any governmental audit or examination of our FTZs. Over the past two decades, 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 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, unilateral and multilateral sanctions and trade disincentives on certain countries and persons are unpredictable, and they continue to evolve in response to economic and political events, particularly in the countries in which we operate, and could significantly impact our supply chain, capital investments, along with our ability to service our customers. The impact of the imposition of sanctions and trade disincentives on products we import into the United States or other markets cannot be determined or predicted with certainty. 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. The Company’s income tax filing positions and income tax provisions are based on interpretations of applicable tax laws in the jurisdictions in which it operates, 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. GILDAN 2023 REPORT TO SHAREHOLDERS 42 MANAGEMENT'S DISCUSSION AND ANALYSIS 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 in domestic laws and income tax treaties that may result from the Organization for Economic Co-operation and Development (OECD) initiatives against base erosion and profit shifting (BEPS), including the implementation of a global minimum tax which is discussed in greater detail below; 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 business model; or other factors. In October 2021, 136 jurisdictions, including Canada, agreed to the OECD’s BEPS initiative that aims to provide a two- pillar solution to the tax challenges arising from the digitalization of the economy. The agreement consists of two pillars, known as Pillar One and Pillar Two. Generally, Pillar One makes changes to the profit allocation and nexus rules applicable to business profits and would apply to multinational enterprises with annual global revenues greater than 20 billion euros and profitability above 10%, with the revenue threshold expected to be reduced to 10 billion euros over time. Based on the minimum revenue threshold, the Company is currently expected to be outside the scope of Pillar One. Pillar Two provides for a 15% global minimum tax and would apply to multinational enterprises with annual global revenues greater than 750 million euros. On December 20, 2021, the OECD published detailed model rules to assist jurisdictions in the domestic implementation of Pillar Two in a manner consistent with the agreement reached in October 2021 and released commentary to those rules in March 2022. The European Union member states have unanimously adopted a Council Directive which requires the main component of Pillar Two to be transposed into member states’ domestic laws for the start of 2024. Many jurisdictions in which the Company operates have implemented or are currently proposing to implement the main component of Pillar Two to be effective retroactively as of January 1, 2024. Pillar Two legislation has been enacted in Belgium and the United Kingdom, jurisdictions in which subsidiaries of the Company operate. In those jurisdictions, the Pillar Two legislation includes an income inclusion rule and a domestic minimum top-up tax, which will be effective for fiscal years beginning on or after December 31, 2023. Belgium has also enacted the undertaxed profits rule, which will be effective for fiscal years beginning on or after December 31, 2024. The Company’s subsidiaries in Belgium and the United Kingdom are subject to an effective tax rate of at least 15%. In addition, these subsidiaries do not have an ownership interest in any entities operating in low-taxed jurisdictions. Consequently, we do not expect the income inclusion rule and the domestic minimum top-up tax to have a materially adverse impact on the Company’s overall effective tax rate. However, under Belgium’s undertaxed profit rule, the Company’s profits derived from its operations in low tax jurisdictions, particularly Barbados (where the Company is subject to an effective tax rate lower than 15%), would become subject to a Pillar Two top-up tax in Belgium for its fiscal year starting December 29, 2025 unless other jurisdictions enact Pillar Two legislation. The Company operates in certain jurisdictions that are planning to enact Pillar Two legislation in 2024, which, if enacted, would take priority over Belgium’s undertaxed profit rule to tax the Company’s profits derived from its operations in low tax jurisdictions. Specifically, Canada has released draft Pillar Two legislation that would implement an income inclusion rule and a domestic minimum top-up tax effective for fiscal years that begin on or after December 31, 2023. Canada’s proposed income inclusion rule would apply to the Company’s profits derived in certain low tax jurisdictions, particularly in Barbados, where the majority of the Company’s worldwide profits are earned, and would subject those profits to an effective tax rate of 15% for fiscal years beginning on or after December 31, 2023, after reflecting the impact of substance based carveout included in the rules. Furthermore, Barbados also released draft legislation in response to Pillar Two which would effectively subject the Company’s profits in Barbados to an effective tax rate of approximately 15% for fiscal years beginning on or after January 1, 2024. Should Canada or Barbados enact their proposed legislation, the Company’s profit in Barbados would be subject to an effective tax rate of 15% and would render Belgium’s undertaxed profit rule inapplicable. If Pillar Two is enacted by the various jurisdictions in which the Company operates, including but not limited to Canada and Barbados, it could significantly increase the Company’s low effective income tax rate and would result in a material increase to our tax provisions and annual income tax expense, which would adversely affect our results of operations and cash flows. If Pillar Two legislation would have applied in 2023, the Company’s average effective tax rate would have been approximately 18%. GILDAN 2023 REPORT TO SHAREHOLDERS 43 MANAGEMENT'S DISCUSSION AND ANALYSIS We have unrecognized deferred income tax liabilities for the undistributed profits of our subsidiaries, for which 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, 2023, the estimated income tax liability that would result in the event of a full repatriation of these undistributed profits is approximately $70 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 and health and safety regulations We are subject to various federal, state, and local environmental, social and occupational health and safety laws and regulations in the jurisdictions in which we operate, concerning, among other things, environmental licenses, wastewater discharges, air emissions, storm water flows, waste disposal, and fire permits. Our manufacturing plants generate some quantities of waste, which are recycled, repurposed, or disposed of by licensed waste management companies, in cases of hazardous waste. Through our Global Environment & Energy Policy, Restricted Substances 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 an efficient use of our resources, landfill reduction and the prioritization of reusing and recycling. 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 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, fines/penalties, or result in a disruption to our supply chain, any of which could have an adverse effect on our business. Global climate change could have an adverse impact on our business In recent years we have seen certain effects related to climate change largely driven by extreme weather events (e.g., hurricanes, flooding, fires, severe storms, cyclones, water scarcity etc.), which may have financial implications for the business. Our operations in Central America, the Caribbean, the United States, and Asia have been subjected to an increase in severe weather events. For example, in November 2020, our Central American operations were impacted by back-to-back hurricanes, necessitating a temporary shutdown of these facilities. While the Company is making additional investments to improve the resiliency of its manufacturing facilities to extreme weather events, nonetheless, such future events could slow and/or halt production due to physical damage to our assets; result in increased employee absenteeism and reduced worker productivity in order to address incremental safety measures during extreme weather conditions; and/or result in supply chain disruptions limiting transportation of supplies or delivery of goods. Additionally, longer-term, chronic shifts in weather patterns may result in rising sea levels, or declining freshwater availability and quality, extreme heat as well as increased duration, intensity and frequency of weather events, all of which could restrict the capacity and cost effectiveness of our operations and impact the cost and availability of key raw materials such as cotton. Climate-related transition risks that we could be exposed to and adversely affected by include (but are not limited to) the following: the impact of changes in government policies, laws and regulations; changes in market conditions; consumer preferences and attitudes affecting their spending behavior; increased reputational risk for failing to meet evolving stakeholder and consumer expectations; and impacts related to adopting new technologies. In some of the regions in which we operate, government policies are quickly evolving to support the transitioning to a low carbon economy by implementing climate and sustainability-related legislation and regulations, including carbon pricing proposals, mandates for emission reductions and supply chain mapping disclosures. GILDAN 2023 REPORT TO SHAREHOLDERS 44 MANAGEMENT'S DISCUSSION AND ANALYSIS The emergence of greenwashing and social washing presents significant risks for companies across multiple fronts, including Gildan, given its global sales presence. The Company faces heightened reputational risks globally, with stakeholders such as suppliers, investors, and business partners scrutinizing its sustainability practices, potentially impacting brand value and relationships. Additionally, the lack of consistent legal requirements across jurisdictions and rapidly evolving regulatory landscapes worldwide further complicates matters for Gildan. Legal consequences, supply chain disruptions, and competitive disadvantages underscore the importance of prioritizing due diligence over Company and product-level claims. Scope 1, 2 and 3 emissions reduction targets: Gildan has established an ESG strategy which in part is aimed at meeting stakeholder expectations and mitigating the various climate change risks. This strategy includes setting and pursuing targets as further described in section 4.0 of this MD&A entitled “Strategy". Our ability to lower GHG emissions on both an absolute basis and in respect of our 2030 reduction targets is subject to numerous risks and uncertainties, including our ability to identify, develop and implement new technologies and processes at a reasonable long-term cost that aligns with our low-cost production model; securing key management expertise specific to required technologies; and our ability to continue to finance these investments over the long-term. Additionally, there can be no assurance that we will achieve our targets on a timely basis or at all, or satisfy evolving government legislation. Also, our actions taken to implement these objectives may expose us to certain additional heightened financial and operational risks, including potentially limiting capacity expansion plans, business acquisition opportunities and other growth initiatives. Additionally, costs related to implementing our ESG strategy as it relates to climate change and environmental initiatives may be higher than anticipated, and we may not be able to pass on higher costs to our customers. The rate of progress towards our targets could also expose us to reputational and litigation risks. Increasingly, investors and other stakeholders are monitoring and assessing companies on climate-related performance. Failure to achieve our GHG targets, or a perception among investors that our targets lack ambition and/or are deemed to be insufficient, could adversely affect the Company’s reputation and ability to attract capital. The Company’s ability to access capital may also be negatively affected in the event that financial institutions, investors, rating agencies and/or lenders adopt more restrictive decarbonization policies that the Company may not meet. Overall, the physical and transitional risks relating to the effects of climate change on our business both in the short and long term are complex and highly uncertain. There can be no assurance that we will be successful in mitigating these risks, and if we are not successful in this regard, such outcome could heighten other business risks described in this MD&A and have an adverse effect on our future sales, competitive position and market share, financial position, profitability, cost structure, capital expenditure requirements, capacity, growth plans, distribution network, supply chain, sources of financing, reputation, and our ability to achieve our strategic financial and ESG objectives. Compliance with product safety regulations 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, the Federal Hazardous Substances Act, the Flammable Fabrics Act, the Toxic Substances Control Act, and associated rules and regulations. 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 childcare 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 specific U.S. states in which we sell our products. In Canada, we are subject to similar laws and regulations, including the Hazardous Products Act and the Canada Consumer Product Safety Act. In the European Union, we are also subject to the General Product Safety Directive and the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), which places responsibility on all manufacturers to identify and manage the risks that chemical substances may pose to human health and to the environment. We are also subject to similar laws and regulations in the other jurisdictions in which we sell our products. Compliance with existing and future product safety laws and regulations and enforcement policies may require that we incur 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. Although we believe that we comply 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. GILDAN 2023 REPORT TO SHAREHOLDERS 45 MANAGEMENT'S DISCUSSION AND ANALYSIS We may be negatively impacted by changes in our relationship with our employees or changes to domestic and foreign employment regulations  We employ approximately 43,000 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. Many of our employees are members of labour organizations, and the Company is party to a number of collective bargaining agreements, primarily relating to its sewing operations in Nicaragua and Honduras. Several collective agreements to which the Company is a party are due to expire at various times in the future. An inability to renew these collective agreements on mutually agreeable terms, as they become subject to renegotiation from time to time, could result in work stoppages or other labour disturbances such as strikes, walkouts or lock-outs, and/or increased costs of labour, which could adversely affect our ability to deliver products and services in a timely manner and on budget and could adversely affect our financial condition and results. 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, and our ability to effectively service customers which may result in lost sales. 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 or the social acceptability of our products, which could impact our ability to retain existing customers or attract new ones and result in a loss of sales, which, in turn, could have a material adverse effect on our financial condition, results of operations, business or cash flows. 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 and expect to continue to take 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. GILDAN 2023 REPORT TO SHAREHOLDERS 46 MANAGEMENT'S DISCUSSION AND ANALYSIS 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, analytics, 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 upgrades 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 of our business. Any material disruption or slowdown of our systems could cause operational delays and other impacts that could negatively affect our business and results of operations. We may be negatively impacted by data security breaches or data privacy violations Our business involves the regular collection, use and sharing 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 and reputational risk. 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, fines, contractual penalties and financial losses. Divergent technology systems inherited through business acquisitions increase complexity and potential exposure. We use a risk-based approach to mitigating information security risk and data privacy risk. We continue to invest in and improve our data privacy practices, data security threat protection, detection and mitigation policies, procedures and controls, and awareness campaigns to enhance data protection. We seek to detect and investigate all incidents and to prevent their occurrence or recurrence. Senior leadership provides updates to the Corporate Governance and Social Responsibility Committee of any major data security or privacy issues on a quarterly basis, provides quarterly information security reports to the Audit and Finance Committee, provides strategic updates to the Board of Directors on an annual basis, and has a process in place to communicate time sensitive issues to the Board on an as-needed basis. We are unaware of any material data security or privacy issues over the past three years, and expenses incurred from data security breaches and privacy violations have been negligible over this period. However, given the highly evolving nature and sophistication of security threats, data privacy laws, and our dependence upon third party data sharing, the impact of any future incident cannot be easily predicted or mitigated, and the costs related to such incidents 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, hire and retain key managers, including manufacturing, sales and other personnel. Experienced and highly skilled employees are in high demand and competition for these employees can be intense, and our ability to attract, hire and retain them depends on our ability to provide competitive compensation. We may not be able to attract, hire or retain these employees, which could negatively affect our business. GILDAN 2023 REPORT TO SHAREHOLDERS 47 MANAGEMENT'S DISCUSSION AND ANALYSIS Rapid developments in artificial intelligence could adversely impact our business AI capabilities are continuing to develop rapidly and are becoming more generally available, increasing the risk that AI could become disruptive to our business. Failure to keep pace with the advancement of new technologies such as AI could impact our competitive advantage and negatively affect our business, financial condition, and results of operations. Implementation and reliance on new technologies, including machine learning and generative AI, within the Company and through third-party providers, increase the risk that flaws in algorithms, processes, or data may result in inaccurate decisions and potentially increase the cost of operational or cybersecurity related interruptions. Leveraging these new and rapidly evolving technologies may also increase other risks such as risks relating to indirect infringement on intellectual property or privacy and could carry social or ethical implications including unintended bias that could increase reputational risk and potentially result in regulatory fines or penalties. Future legislative action limiting or otherwise regulating the use of these technologies could also adversely impact our ability to operate using them, which, in turn, could negatively affect our business, financial condition and results of operations. There is also a risk that AI could be used to infringe upon our intellectual property, impersonate our people, falsely represent our products, or be used in other ways that could result in operational or reputational harm. 16.0 Definition and reconciliation of non-GAAP financial measures and related ratios We use non-GAAP financial measures, as well as non-GAAP ratios to assess our operating performance and financial condition. The terms and definitions of the non-GAAP financial 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 financial measures are presented on a consistent basis for all periods presented in this MD&A. These 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 or as a substitute for measures of performance prepared in accordance with IFRS. Non-GAAP financial measures and related ratios In this MD&A we use non-GAAP financial measures including adjusted net earnings, adjusted operating income, adjusted gross profit, adjusted SG&A, adjusted EBITDA, as well as non-GAAP ratios including adjusted diluted EPS, adjusted operating margin, adjusted gross margin, adjusted SG&A expenses as a percentage of sales, and adjusted RONA. These financial metrics are used 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 performance and financial condition. Excluding these items does not imply they are non-recurring. We also use non-GAAP financial measures including free cash flow, total debt, net debt, net debt leverage ratio and working capital.   Certain adjustments to non-GAAP measures As noted above certain of our non-GAAP financial measures and ratios exclude the variation caused by certain adjustments that affect the comparability of the Company's financial results and could potentially distort the analysis of trends in its business performance. Adjustments which impact more than one non-GAAP financial measure and ratio are explained below: Restructuring and acquisition-related costs Restructuring and acquisition-related costs are comprised of costs directly related to significant exit activities, including the closure of business locations and sale 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 is included as an adjustment in arriving at adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. Restructuring and acquisition- related costs were $46 million for the fiscal year ended December 31, 2023 (2022 - $0.5 million, 2021 - $8 million). Subsection 5.6.5 entitled “Restructuring and acquisition-related costs” in this MD&A contains a detailed discussion of these costs. GILDAN 2023 REPORT TO SHAREHOLDERS 48 MANAGEMENT'S DISCUSSION AND ANALYSIS Impairment (Impairment reversal) of intangible assets, net of write-downs During the fourth quarter of fiscal 2021 we reported a $32 million credit to income, as a result of an impairment reversal of $56 million and a $24 million write-off of certain intangible assets relating to the Company's Hosiery CGU. During the fourth quarter of fiscal 2022 we reported an impairment charge of $62 million relating to the Company's Hosiery CGU. During the fourth quarter of fiscal 2023 we reported an impairment reversal of $41 million relating to the Hosiery CGU. These impairment charges and impairment reversals are included as adjustments in arriving at adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. Net insurance losses (gains) Net insurance gains of $77 million (2022 - $26 million, 2021 - $46 million) for the fiscal year ended January 1, 2023, related to the two hurricanes which impacted the Company’s operations in Central America in November 2020. Net insurance gains relate to the recognition of insurance recoveries for business interruption losses and insurance recoveries for damaged equipment. Insurance gains relating to recoveries for business interruption losses of $74 million (2022 - nil, 2021 - nil), are recorded in insurance gains, and included as an adjustment in arriving at adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. Net insurance gains and losses relating mainly to recoveries for damaged equipment, salary and benefits for idle employees of $3 million (gain), (2022 - $26 million (gain), 2021 - $46 million (gain)), are recorded in cost of sales and included as an adjustment in arriving at adjusted gross profit and adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. Impact of strategic product line initiatives In the fourth quarter of fiscal 2019, the Company launched a strategic initiative to significantly reduce its imprintables product line SKU count. In the fourth quarter of fiscal 2020 the Company expanded this strategic initiative to include a significant reduction in its retail product line SKU count. The objectives of this strategic initiative include exiting all ship to- the-piece activities, discontinuing overlapping and less productive styles and SKUs between brands, simplifying the Company's product portfolio and reducing complexity in its manufacturing and warehouse distribution activities. The impact of this initiative has included inventory write-downs to reduce the carrying value of discontinued SKUs to liquidation values, sales return allowances for product returns related to discontinued SKUs, and in the fourth quarter of fiscal 2021, the write-down of production equipment and other assets relating to discontinued SKUs. The impact of strategic product line initiatives is included as an adjustment in arriving at adjusted gross profit and adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. The charges related to this initiative in fiscal 2021, 2022 and 2023, were as follows: • • Fiscal 2021 includes $9 million of charges included in cost of sales, consisting of $4 million in inventory write- downs related primarily to the Company's plan to discontinue its legwear and intimates product line, and the write-down of production equipment and other assets relating to discontinued SKUs of $5 million in the fourth quarter of 2021. Fiscal 2022 includes $1 million gain related to the reversal of a reserve relating to Company's strategic initiatives to significantly reduce its product line SKU counts. • Fiscal 2023 recoveries were nil. Gain on sale and leaseback During the first quarter of 2023, the Company recognized a gain of $25 million ($15.5 million after reflecting $9.5 million of income tax expense) on the sale and leaseback of one of our distribution centres located in the U.S. The impact of this gain is included as an adjustment in arriving at adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA. CEO separation costs and related advisory fees on shareholder matters Relates to the separation costs with respect to the departure of the Company’s former CEO in December 2023 and related advisory, legal and other fees and expenses related to the ongoing proxy contest and shareholder matters. The Company has recorded a charge of $6.3 million in the fourth quarter of fiscal 2023, consisting of accrued termination benefits as well as advisory and legal fees, partially offset by a reversal for previously recognized stock-based compensation expense. GILDAN 2023 REPORT TO SHAREHOLDERS 49 MANAGEMENT'S DISCUSSION AND ANALYSIS Adjusted net earnings and adjusted diluted EPS Adjusted net earnings are calculated as net earnings before restructuring and acquisition-related costs, Impairment (impairment reversal) of intangible assets, net of write-downs, the impact of the Company's strategic product line initiatives, net insurance gains, gain on sale and leaseback (new in 2023), CEO separation costs and related advisory fees on shareholder matters (new in 2023), and income tax expense or recovery relating to these items. Adjusted net earnings also excludes income taxes related to the re-assessment of the probability of realization of previously recognized or de-recognized deferred income tax assets, and income taxes relating to the revaluation of deferred income tax assets and liabilities as a result of statutory income tax rate changes in the countries in which we operate. 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 net earnings performance from one period to the next, and in making decisions regarding the ongoing operations of its business, without the variation caused by the impacts of the items described above. The Company excludes these items because they affect the comparability of its net earnings and diluted EPS and could potentially distort the analysis of net earnings trends in its business performance. The Company believes adjusted net earnings and adjusted diluted EPS are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain expenses, write-offs, charges, income or recoveries that can vary from period to period. Excluding these items does not imply they are non- recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions, except per share amounts) Net earnings Adjustments for: Restructuring and acquisition-related costs Impairment (Impairment reversal) of intangible assets, net of write-downs Impact of strategic product line initiatives Gain on sale and leaseback Net insurance gains CEO separation costs and related advisory fees on shareholder matters Income tax expense (recovery) relating to the above- noted adjustments Three months ended January 1, December 2023 31, 2023 Twelve months ended January 1, 2023 December 31, 2023 January 2, 2022 153.3 83.9 533.6 541.5 607.2 10.9 (40.8) — — — 6.3 (0.5) 6.3 45.8 0.5 62.3 — — (25.6) — 0.2 (40.8) — (25.0) (77.3) 6.3 10.0 62.3 (1.0) — (25.9) — 7.2 8.2 (31.5) 8.8 — (46.0) — — Income tax recovery related to the revaluation of deferred income tax assets and liabilities(1) (8.6) 538.1 Adjusted net earnings 3.07 Diluted EPS 2.72 Adjusted diluted EPS(2) (1) Includes an income tax recovery of nil (2022 - $9.9 million, 2021 - $8.6 million) pursuant to the recognition of previously de-recognized (in fiscal 2018 and fiscal 2017 pursuant to the organizational realignment plan) deferred income tax assets as a result of a re-assessment of the probability of realization of such deferred income tax assets. (2) This is a non-GAAP ratio. It is calculated as adjusted net earnings (loss) divided by the diluted weighted average number of common shares outstanding. Certain minor rounding variances exist between the consolidated financial statements and this summary. — 129.2 0.89 0.75 — 452.6 3.03 2.57 (9.9) 574.7 2.93 3.11 (9.9) 117.2 0.47 0.65 GILDAN 2023 REPORT TO SHAREHOLDERS 50 MANAGEMENT'S DISCUSSION AND ANALYSIS Adjusted gross profit and adjusted gross margin Adjusted gross profit is calculated as gross profit excluding the impact of the Company's strategic product line initiatives, and net insurance gains. The Company uses adjusted gross profit and adjusted gross margin to measure its performance at the gross margin level 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 non- recurring. The Company believes adjusted gross profit and adjusted gross margin are useful to management and investors because they help identify underlying trends in our business in how efficiently the Company uses labor and materials for manufacturing goods to our customers, that could otherwise be masked by the impact of our strategic product line initiatives and net insurance gains that can vary from period to period. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions, or otherwise indicated) Gross profit Adjustments for: Impact of strategic product line initiatives Net insurance gains Adjusted gross profit Net sales Sales return allowance for anticipated product returns Net sales excluding the allowance for anticipated product returns related to discontinued SKUs Three months ended January 1, December 2023 31, 2023 Twelve months ended January 1, 2023 December 31, 2023 January 2, 2022 236.6 234.8 880.1 992.4 940.2 — — 236.6 782.7 — — (3.1) 877.0 8.8 — (46.0) (25.6) 209.2 903.0 720.0 3,195.9 3,240.5 2,922.6 — (1.0) (25.9) 965.5 — — — 720.0 3,195.9 3,240.5 2,922.6 Gross margin 32.2 % 32.6 % 30.9 % 29.1 % Adjusted gross margin(1) (1) This is a non-GAAP ratio. It is calculated as adjusted gross profit divided by net sales excluding the sales return allowance for anticipated product returns related to discontinued SKUs. Net sales excluding the sales return allowance for anticipated product returns related to discontinued SKUs is a non-GAAP measure used in the denominator of the adjusted margin ratios to reverse the full effect of the SKU rationalization adjustments. Certain minor rounding variances exist between the consolidated financial statements and this summary. 782.7 30.2 % 30.2 % 27.5 % 27.4 % 30.6 % 29.8 % Adjusted SG&A expenses and adjusted SG&A expenses as a percentage of sales Adjusted SG&A expenses is calculated as selling, general and administrative expenses excluding the impact of CEO separation costs and related advisory fees on shareholder matters (new in 2023). The Company uses adjusted SG&A expenses and adjusted SG&A expenses as a percentage of sales to measure its performance from one period to the next, without the variation caused by the impact of the item described above. Excluding this item does not imply it is non- recurring. The Company believes adjusted SG&A expenses and adjusted SG&A expenses as a percentage of sales are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain expenses and write-offs that can vary from period to period. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions) SG&A expenses Adjustment for: Three months ended January 1, December 2023 31, 2023 Twelve months ended January 1, 2023 December 31, 2023 January 2, 2022 88.3 73.6 330.4 326.3 311.6 CEO separation costs and related advisory fees on shareholder matters Adjusted SG&A expenses SG&A expenses as a percentage of sales Adjusted SG&A expenses as a percentage of sales(1) (1) This is a non-GAAP ratio. It is calculated as adjusted SG&A expenses divided by net sales. 82.0 11.3 % 10.5 % 73.6 10.2 % 10.2 % 6.3 — 6.3 — — 324.1 10.3 % 10.1 % 326.3 10.1 % 10.1 % 311.6 10.7 % 10.7 % GILDAN 2023 REPORT TO SHAREHOLDERS 51 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 income also excludes impairment (impairment reversal) of intangible assets, the impact of the Company's strategic product line initiatives, net insurance gains, gain on sale and leaseback (new in 2023) and CEO separation costs and related advisory fees on shareholder matters (new in 2023). Adjusted operating margin is calculated as adjusted operating income divided by net sales, excluding the sales return allowance for anticipated product returns related to discontinued SKUs. Management uses adjusted operating income and adjusted operating margin to measure its performance at the operating income level as we believe it provides a better indication of our operating performance and facilitates the comparison across reporting periods, 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 operating income and operating margin performance. The Company believes adjusted operating income and adjusted operating margin are useful to investors because they help identify underlying trends in our business in how efficiently the Company generates profit from its primary operations that could otherwise be masked by the impact of the items noted above that can vary from period to period. Excluding these items does not imply they are non-recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions, or otherwise indicated) Operating income Adjustments for: Restructuring and acquisition-related costs Impairment (Impairment reversal) of intangible assets, net of write-downs Impact of strategic product line initiatives Gain on sale and leaseback Net insurance gains CEO separation costs and related advisory fees on shareholder matters Three months ended December 31, 2023 January 1, 2023 Twelve months ended January 1, 2023 December 31, 2023 January 2, 2022 178.1 92.6 643.9 603.4 651.9 10.9 6.3 45.8 0.5 8.2 (40.8) 62.3 — — (25.6) (40.8) — (25.0) (77.3) 62.3 (1.0) — (31.5) 8.8 — (25.9) (46.0) — 6.3 — — — — — 6.3 591.4 Adjusted operating income 22.3 % Operating margin 20.2 % Adjusted operating margin(1) (1) This is a non-GAAP ratio. It is calculated as adjusted operating income divided by net sales excluding the sales return allowance for anticipated product returns related to discontinued SKUs. Net sales excluding the sales return allowance for anticipated product returns related to discontinued SKUs is a non-GAAP measure used in the denominator of the adjusted margin ratios to reverse the full effect of the SKU rationalization adjustments. Certain minor rounding variances exist between the consolidated financial statements and this summary. 639.3 18.6 % 19.7 % 135.6 12.9 % 18.8 % 552.9 20.1 % 17.3 % 154.5 22.8 % 19.7 % GILDAN 2023 REPORT TO SHAREHOLDERS 52 MANAGEMENT'S DISCUSSION AND ANALYSIS Adjusted EBITDA Adjusted EBITDA is calculated as earnings before financial expenses net, income taxes, and depreciation and amortization, and excludes the impact of restructuring and acquisition-related costs. Adjusted EBITDA also excludes impairment (impairment reversal) of intangible assets, net insurance gains, the gain on sale and leaseback (new in 2023), CEO separation costs and related advisory fees on shareholder matters (new in 2023), and the impact of the Company's strategic product line initiative. Management uses adjusted EBITDA, among other measures, to facilitate a comparison of the profitability of its business on a consistent basis from period-to-period and to provide a more complete understanding of factors and trends affecting our business. The Company also believes this measure is commonly used by investors and analysts to assess profitability and the cost structure of companies within the industry, as well as 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 non-recurring. This measure does not have any standardized meanings prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Three months ended January 1, December 2023 31, 2023 Twelve months ended January 1, 2023 December 31, 2023 January 2, 2022 (in $ millions) Net earnings Restructuring and acquisition-related costs Impairment (Impairment reversal) of intangible assets, net of write-downs Impact of strategic product line initiatives Gain on sale and leaseback Net insurance gains CEO separation costs and related advisory fees on shareholder matters 153.3 10.9 (40.8) — — — 83.9 6.3 62.3 — — (25.6) 533.6 45.8 (40.8) — (25.0) (77.3) Depreciation and amortization Financial expenses, net Income tax (recovery) expense Adjusted EBITDA Certain minor rounding variances exist between the consolidated financial statements and this summary. 6.3 30.8 21.2 3.6 185.3 — 28.0 13.3 (4.6) 163.6 6.3 121.6 79.7 30.6 674.5 541.5 0.5 62.3 (1.0) — (25.9) — 124.9 37.0 24.9 764.2 607.2 8.2 (31.5) 8.8 — (46.0) — 135.4 27.3 17.4 726.8 Free cash flow Free cash flow is defined as cash from operating activities, less cash flow used in investing activities excluding cash flows relating to business acquisitions/dispositions. 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 used by management in managing capital as it indicates how much cash is available after capital expenditures to repay debt, to pursue business acquisitions, and/or to redistribute to its shareholders. Management believes that free cash flow also provides investors with an important perspective on the cash available to us to service debt, fund acquisitions, and pay dividends. In addition, free cash flow is commonly used by investors and analysts when valuing a business and its underlying assets. This measure does not have any standardized meanings prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions) 2021 2023 2022 Cash flows from operating activities Cash flows used in investing activities Adjustment for: — Business (dispositions) acquisitions 391.7 Free cash flow Certain minor rounding variances exist between the consolidated financial statements and this summary. 546.6 (154.9) 413.5 (182.4) 617.5 (187.8) (33.5) 197.6 164.0 593.7 GILDAN 2023 REPORT TO SHAREHOLDERS 53 MANAGEMENT'S DISCUSSION AND ANALYSIS Total debt and net debt Total debt is defined as the total bank indebtedness, long-term debt (including any current portion), and lease obligations (including any current portion), and net debt is calculated as total debt net of cash and cash equivalents. The Company considers total debt and net debt to be important indicators for management and investors to assess the financial position and liquidity of the Company, and measure its financial leverage. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. (in $ millions) Long-term debt (including current portion) Bank indebtedness Lease obligations (including current portion) Total debt Cash and cash equivalents Net debt Certain minor rounding variances exist between the consolidated financial statements and this summary. 985.0 — 98.1 1,083.1 (89.6) 993.4 December 31, 2023 January 1, 2023 January 2, 2022 930.0 — 94.0 1,024.0 (150.4) 873.6 600.0 — 109.1 709.1 (179.2) 529.9 Net debt leverage ratio The net debt leverage ratio is defined as the ratio of net debt to pro-forma adjusted EBITDA for the trailing twelve months, all of which are non-GAAP measures. 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 fiscal year-end net debt leverage target ratio of one to two times pro-forma adjusted EBITDA for the trailing twelve months. The net debt leverage ratio serves to evaluate the Company's financial leverage and is used by management in its decisions on the Company's capital structure, including financing strategy. The Company believes that certain investors and analysts use the net debt leverage ratio to measure the financial leverage of the Company, including our ability to pay off our incurred debt. The Company's net debt leverage ratio differs from the net debt to EBITDA ratio that is a covenant in our loan and note agreements due primarily to adjustments in the latter related to lease accounting, and therefore the Company believes it is a useful additional measure. This measure does not have any standardized meanings prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. December 31, 2023 January 1, 2023 January 2, 2022 (in $ millions, or otherwise indicated) Adjusted EBITDA for the trailing twelve months Adjustment for: 22.8 Business acquisitions 749.6 Pro-forma adjusted EBITDA for the trailing twelve months 529.9 Net debt 0.7 Net debt leverage ratio(1) (1) The Company's total net debt to EBITDA ratio for purposes of its loan and note agreements was 1.6 at December 31, 2023. Refer to section 8.2 of this MD&A. Certain minor rounding variances exist between the consolidated financial statements and this summary. — 674.5 993.4 1.5 — 764.2 873.6 1.1 674.5 764.2 726.8 GILDAN 2023 REPORT TO SHAREHOLDERS 54 MANAGEMENT'S DISCUSSION AND ANALYSIS Return on adjusted average net assets Return on adjusted average net assets (Adjusted RONA) is defined as the ratio of return to adjusted average net assets for the last five quarters. Return is defined as adjusted net earnings, excluding net financial expenses and the amortization of intangible assets (excluding software), net of income tax recoveries related thereto. Average is computed as the sum of the five quarters divided by five. Adjusted average net assets are defined as the sum of average total assets, excluding average cash and cash equivalents, average net deferred income taxes, and the average accumulated amortization of intangible assets excluding software, less average total current liabilities excluding the current portion of lease obligations. Adjusted average net assets and return are non-GAAP measures used as components of Adjusted RONA. The Company uses Adjusted RONA as a performance indicator to measure the efficiency of its invested capital. Management believes Adjusted RONA is useful to investors as a measure of performance and the effectiveness of our use of capital. Adjusted RONA is not a measure of financial performance under IFRS and may not be defined and calculated by other companies in the same manner. (in $ millions) Average total assets Average cash and cash equivalents Average net deferred income taxes Average accumulated amortization of intangible assets, excluding software Average total current liabilities, excluding the current portion of lease obligations and debt Adjusted average net assets (in $ millions, or otherwise indicated) Adjusted net earnings Financial expenses, net (nil income taxes in all years) Amortization of intangible assets, excluding software, net (nil income taxes in all three years) December 31, 2023 January 1, 2023 January 2, 2022 3,565.7 (97.0) (11.4) 304.7 3,344.4 (118.8) (12.9) 254.9 3,050.8 (384.1) (15.6) 254.8 (432.7) 3,329.3 (485.3) 2,982.3 (400.1) 2,505.8 2023 Twelve months ended 2021 2022 452.6 79.7 8.3 574.7 37.0 13.8 538.1 27.3 12.8 Return 540.6 16.2 % Return on adjusted average net assets (Adjusted RONA) Certain minor rounding variances exist between the consolidated financial statements and this summary. 625.5 21.0 % 578.2 23.1 % Working capital Working capital is a non-GAAP financial measure and is defined as current assets less current liabilities. Management believes that working capital, in addition to other conventional financial measures prepared in accordance with IFRS, provides information that is helpful to understand the financial condition of the Company. The objective of using working capital is to present readers with a view of the Company from management’s perspective by interpreting the material trends and activities that affect the short-term liquidity and financial position of the Company, including its ability to discharge its short-term liabilities as they come due. This measure is not comparable to similarly titled measures used by other public companies. (in $ millions) December 31, 2023 January 1, 2023 January 2, 2022 Cash and cash equivalents Trade accounts receivable Inventories Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities Income taxes payable Current portion of lease obligations Current portion of long-term debt Working capital Certain minor rounding variances exist between the consolidated financial statements and this summary. 89.6 412.5 1,089.4 96.0 (408.3) (1.6) (14.2) (300.0) 963.4 150.4 248.8 1,225.9 101.8 (471.2) (6.6) (13.8) (150.0) 1,085.3 179.2 330.0 774.4 163.7 (440.4) (7.9) (15.3) — 983.7 GILDAN 2023 REPORT TO SHAREHOLDERS 55 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, 2023. Management is also responsible for the preparation and presentation of other financial information included in the 2023 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 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, 2023. KPMG LLP has direct access to the Audit and Finance Committee of the Board of Directors. (Signed: Vincent Tyra) Vincent Tyra President and Chief Executive Officer February 20, 2024 (Signed: Rhodri J. Harries) Rhodri J. Harries Executive Vice-President, Chief Financial and Administrative Officer GILDAN 2023 REPORT TO SHAREHOLDERS 56 CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Gildan Activewear Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial position of Gildan Activewear Inc. (the "Company") as of December 31, 2023 and January 1, 2023, the related consolidated statements of earnings and comprehensive income, changes in equity, and cash flows for the years ended December 31, 2023 and January 1, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and January 1, 2023, and its financial performance and its cash flows for the years ended December 31, 2023 and January 1, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 20, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 57 CONSOLIDATED FINANCIAL STATEMENTS Page 2 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. involved our especially challenging, subjective, or complex Assessment and allocation of inventories costs As discussed in Note 8 to the consolidated financial statements, the inventories balance as of December 31, 2023 was $1,089.4 million, of which work in process and finished goods represented $923.9 million. As discussed in Note 3(c) to the consolidated financial statements, inventories are stated at the lower of cost, determined on a first-in first-out basis, and net realizable value. As the Company manages its day-to-day production costs and inventories using a standard costing system, variances arise between these standard costs and the actual manufacturing costs. Adjustments are therefore required at period-end to measure inventories at their actual cost. This involves the combination of automated and non-automated systems and processes using data obtained from different geographical locations to accumulate manufacturing variances at each stage of the Company’s vertically integrated manufacturing process and identify costs to be expensed immediately to cost of sales. Such costs include additional costs incurred as a result of operating below normal capacity and abnormal costs. The Company then applies a variance deferral factor, based on the number of days of inventories on hand based on the most recent past production, to determine the variances to be included in ending inventories. The determination of the variance deferral factor involves estimation. GILDAN 2023 REPORT TO SHAREHOLDERS 58 CONSOLIDATED FINANCIAL STATEMENTS Page 3 We identified the assessment of costs directly related to the conversion of raw materials to finished goods and the allocation of manufacturing variances to the carrying value of inventories as a critical audit matter. A higher degree of auditor judgment and audit effort was required in testing the costs included in the carrying value of inventories and evaluating the variance deferral factor used in allocating the manufacturing variances given the complexity of the process. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s inventory costing process, including controls related to: (1) identifying costs to be expensed immediately; and (2) establishing the variance deferral factor. We tested the eligibility of costs for recognition in inventories by: (1) assessing the nature of costs included in inventories by inspecting a sample of transactions recorded as manufacturing costs and tracing them to underlying documentation; (2) analyzing manufacturing variances to identify the existence of costs to be expensed immediately; and (3) assessing changes in production activity to identify costs to be expensed immediately. We assessed the variance deferral factor based on the number of days of inventory on hand determined by reference to the most recent past production, which included testing certain of the inputs to the calculation. Assessment of the carrying value of intangible assets in the Hosiery cash generating unit (“CGU”) As discussed in Note 11 to the consolidated financial statements, the intangible asset balances as of December 31, 2023 in aggregate were $245.3 million, of which $136.8 million related to the Hosiery CGU. As discussed in Notes 3(h) and 3(y) to the consolidated financial statements, the Company performs impairment testing on an annual basis or whenever events or changes in circumstances indicate that the carrying value of a CGU might exceed its recoverable amount, which is determined using the fair value less costs of disposal method. The Company’s assessment of the recoverable amount incorporates assumptions including estimated sales volumes, selling prices, input costs and selling, general and administrative ("SG&A") expenses in determining the risk adjusted forecasted recurring earnings before financial expenses, income taxes, depreciation and amortization, and restructuring and acquisition-related costs ("adjusted EBITDA") and the multiple applied to the adjusted EBITDA ("adjusted EBITDA multiple"). During the year ended December 31, 2023, the Company recorded an impairment reversal of $40.8 million in the Hosiery CGU. We identified the assessment of the carrying value of intangible assets in the Hosiery CGU as a critical audit matter. There was a higher degree of subjective auditor judgment required to evaluate the above noted assumptions used in determining the recoverable amount. Additionally, the audit effort associated with the evaluation of the adjusted EBITDA multiple rate required specialized skills and knowledge. GILDAN 2023 REPORT TO SHAREHOLDERS 59 Page 4 CONSOLIDATED FINANCIAL STATEMENTS The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s impairment assessment process, including controls related to (1) determining the adjusted EBITDA and the assumptions underlying its determination; and (2) identifying comparable peer companies and determining the adjusted EBITDA multiple. We evaluated the adjusted EBITDA for the Hosiery CGU by comparing the Company’s adjusted EBITDA to historical actual results. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the adjusted EBITDA multiple used by the Company by comparing it to publicly available EBITDA multiples for comparable entities. /s/ KPMG LLP We have served as the Company’s auditor since 1996. Montréal, Canada February 20, 2024 GILDAN 2023 REPORT TO SHAREHOLDERS 60 CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and 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, 2023, based on 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2023 and January 1, 2023, the related consolidated statements of earnings and comprehensive income, changes in equity, and cash flows for the years ended December 31, 2023 and January 1, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2024 expressed an 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 the accompanying "Management’s annual report on internal control over financial reporting" included in Management’s Discussion and Analysis for the year ended December 31, 2023. 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. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 61 CONSOLIDATED FINANCIAL STATEMENTS Page 2 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. 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. /s/ KPMG LLP Montréal, Canada February 20, 2024 GILDAN 2023 REPORT TO SHAREHOLDERS 62 GILDAN ACTIVEWEAR INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands of U.S. dollars) CONSOLIDATED FINANCIAL STATEMENTS Current assets: Cash and cash equivalents (note 6) Trade accounts receivable (note 7) Inventories (note 8) Prepaid expenses, deposits and other current assets Total current assets Non-current assets: Property, plant and equipment (note 9) Right-of-use assets (note 10(a)) Intangible assets (note 11) Goodwill (note 11) Deferred income taxes (note 19) Other non-current assets Total non-current assets Total assets Current liabilities: Accounts payable and accrued liabilities Income taxes payable Current portion of lease obligations (note 10(b)) Current portion of long-term debt (note 12) Total current liabilities Non-current liabilities: Long-term debt (note 12) Lease obligations (note 10(b)) Deferred income taxes (note 19) Other non-current liabilities (note 13) Total non-current liabilities Total liabilities Commitments, guarantees and contingent liabilities (note 24) Equity (note 14): Share capital Contributed surplus Retained earnings Accumulated other comprehensive income (note 15) 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, 2023 January 1, 2023 $ 89,642 412,498 1,089,441 95,955 1,687,536 1,174,515 81,447 261,419 271,677 23,971 14,308 1,827,337 $ 150,417 248,785 1,225,940 101,810 1,726,952 1,115,169 77,958 229,951 271,677 16,000 2,507 1,713,262 $ 3,514,873 $ 3,440,214 $ 408,294 1,635 14,161 300,000 724,090 685,000 83,900 18,118 46,308 833,326 $ 471,208 6,637 13,828 150,000 641,673 780,000 80,162 — 56,217 916,379 1,557,416 1,558,052 271,213 61,363 1,611,231 13,650 1,957,457 202,329 79,489 1,590,499 9,845 1,882,162 $ 3,514,873 $ 3,440,214 (Signed: Vincent Tyra) Vincent Tyra Director (Signed: Luc Jobin) Luc Jobin Director GILDAN 2023 REPORT TO SHAREHOLDERS 63 GILDAN ACTIVEWEAR INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME Fiscal years ended December 31, 2023 and January 1, 2023 (in thousands of U.S. dollars, except per share data) CONSOLIDATED FINANCIAL STATEMENTS Net sales (note 27) Cost of sales (note 17(c)) Gross profit Selling, general and administrative expenses (note 17(a)) Gain on sale and leaseback (note 17(e)) Net insurance gains (note 17(f)) Restructuring and acquisition-related costs (note 18) Impairment (Impairment reversal) of intangible assets (note 11) Operating income Financial expenses, net (note 15(c)) Earnings before income taxes Income tax expense (note 19) Net earnings Other comprehensive (loss) income, net of related income taxes: Cash flow hedges (note 15(d)) Actuarial gain on employee benefit obligations (note 13(a)) Comprehensive income Earnings per share (note 20): Basic Diluted See accompanying notes to consolidated financial statements. 2023 2022 $ 3,195,911 $ 3,240,482 2,315,857 2,248,070 880,054 330,391 (25,010) (74,172) 45,762 (40,770) 643,853 79,670 564,183 30,603 533,580 3,805 1,717 5,522 992,412 326,258 — — 479 62,290 603,385 36,957 566,428 24,888 541,540 (54,964) 8,094 (46,870) $ 539,102 $ 494,670 $ $ 3.03 3.03 $ $ 2.94 2.93 GILDAN 2023 REPORT TO SHAREHOLDERS 64 GILDAN ACTIVEWEAR INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Fiscal years ended December 31, 2023 and January 1, 2023 (in thousands or thousands of U.S. dollars) CONSOLIDATED FINANCIAL STATEMENTS Share capital Number Amount Contributed surplus Accumulated other comprehensive income (loss) Retained earnings Total Equity 192,267 $ 191,732 $ 58,128 $ 64,809 $ 1,604,736 $ 1,919,405 Shares repurchased for cancellation (note 14(d)) (13,097) (13,335) Balance, January 2, 2022 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 Share repurchases for settlement of non- Treasury RSUs (note 14(e)) Deferred compensation to be settled in non- Treasury RSUs Dividends declared Transactions with shareholders of the Company recognized directly in equity Cash flow hedges (note 15(d)) Actuarial gain (loss) on employee benefit obligations (note 13(a)) Net earnings Comprehensive income Balance, January 1, 2023 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 and SARs Shares repurchased for cancellation (note 14(d)) Share repurchases for settlement of non- Treasury RSUs (note 14(e)) Deferred compensation to be settled in non- Treasury RSUs Dividends declared Transactions with shareholders of the Company recognized directly in equity Cash flow hedges (note 15(d)) Actuarial gain (loss) on employee benefit obligations (note 13(a)) Net earnings Comprehensive income — 48 — 32,248 1,568 — 490 16,985 (3,440) 229 5,556 (11,054) (228) (177) — — — — — — 2,110 1,497 — — — — — — — — — — — — — 32,248 1,568 13,545 (5,498) (430,524) (443,859) (8,081) (8,258) — 2,110 (125,266) (123,769) (563,871) (531,913) (12,558) 10,597 21,361 — — — — — — — — — — — — (54,964) — (54,964) — — (54,964) 8,094 541,540 549,634 8,094 541,540 494,670 179,709 $ 202,329 $ 79,489 $ 9,845 $ 1,590,499 $ 1,882,162 — 54 — 26,804 1,622 — 2,054 65,226 (11,609) 856 17,638 (37,108) (11,831) (14,786) (856) (816) — — — — — — 2,075 1,712 (9,723) 68,884 (18,126) — — — — — — — — — — — — — — — — — — — — — 3,805 — — 3,805 — — — — 26,804 1,622 53,617 (19,470) (355,644) (370,430) (25,412) (26,228) — 2,075 (133,509) (131,797) (514,565) (463,807) — 3,805 1,717 533,580 535,297 1,717 533,580 539,102 Balance, December 31, 2023 169,986 $ 271,213 $ 61,363 $ 13,650 $ 1,611,231 $ 1,957,457 See accompanying notes to consolidated financial statements. GILDAN 2023 REPORT TO SHAREHOLDERS 65 GILDAN ACTIVEWEAR INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal years ended December 31, 2023 and January 1, 2023 (in thousands of U.S. dollars) CONSOLIDATED FINANCIAL STATEMENTS Cash flows from (used in) operating activities: Net earnings Adjustments for: Depreciation and amortization (note 21) Non-cash restructuring charges related to property, plant and equipment, right-of-use assets, and computer software (note 18) Impairment (Impairment reversal) of intangible assets (note 11) (Gain) Loss on disposal of property, plant and equipment (PP&E), including insurance recoveries relating to PP&E Share-based compensation Deferred income taxes Other (note 22 (a)) Changes in working capital balances (note 22 (c)) Cash flows from (used in) operating activities Cash flows from (used in) investing activities: Purchase of property, plant and equipment Purchase of intangible assets Business dispositions (acquisitions) (note 5) Proceeds from sale and leaseback, insurance related to property, plant and equipment (PP&E) and other disposals of PP&E Cash flows from (used in) investing activities Cash flows from (used in) financing activities: (Decrease) Increase in amounts drawn under revolving long-term bank credit facility Payment of notes Proceeds from delayed draw term loan Payment of lease obligations (note 10(b)) Dividends paid Proceeds from the issuance of shares Repurchase and cancellation of shares (note 14(d)) Share repurchases for settlement of non-Treasury RSUs (note 14(e)) Withholding taxes paid pursuant to the settlement of non-Treasury RSUs Cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies Net (decrease) increase 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 22) See accompanying notes to consolidated financial statements. 2023 2022 $ 533,580 $ 541,540 121,644 124,926 18,142 (3,259) (40,770) 62,290 (24,584) 26,957 10,147 (14,042) (84,468) 546,606 (34,195) 32,393 (151) (2,962) (307,094) 413,488 (203,289) (4,720) — (239,128) (5,426) 33,543 53,151 (154,858) 28,607 (182,404) (95,000) (150,000) 300,000 (24,894) (131,797) 55,086 (360,479) 330,000 — — (16,559) (123,769) 14,968 (449,158) (26,228) (19,470) (452,782) (8,258) (5,498) (258,274) (1,639) 259 (28,829) (60,775) 150,417 179,246 $ 89,642 $ 150,417 $ 66,398 $ 29,979 26,527 24,340 GILDAN 2023 REPORT TO SHAREHOLDERS 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal years ended December 31, 2023 and January 1, 2023 (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, hosiery 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, 2023 (fiscal 2023) and January 1, 2023 (fiscal 2022) 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, 2023 were authorized for issuance by the Board of Directors of the Company on February 20, 2024. (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; Liabilities for cash-settled share-based payment arrangements which are measured at fair value, and equity- classified share-based payment arrangements which are measured at fair value at grant date pursuant to IFRS 2, Share-based payment; Discontinued, damaged, and excess finished inventories which are carried at the net realizable value; 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 2023 REPORT TO SHAREHOLDERS 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. BASIS OF PREPARATION (continued): (c) Initial application of new or amended accounting standards: During the year ended December 31, 2023, the Company adopted the following new or amended accounting standards: IAS 12 Amendment International Tax Reform - Pillar Two Model Rules In May 2023, the International Accounting Standards Board issued the IAS 12 Amendment International Tax Reform - Pillar Two Model Rules on mandatory relief for accounting for deferred taxes from the global minimum taxation. The amendments provide a temporary exception from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments also introduce targeted disclosure requirements in the notes for affected entities to enable users of financial statements to understand the extent to which an entity will be affected by the minimum tax, particularly before the legislation comes into force. The amendments to IAS 12 are effective for annual periods beginning on or after January 1, 2023. The Company has updated its disclosures in these annual consolidated financial statements for the year ended December 31, 2023. Pillar Two legislation has been enacted in Belgium and the United Kingdom, jurisdictions in which subsidiaries of the Company operate. The Company has applied the mandatory exemption and did not recognize deferred income tax assets and liabilities for it. Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policy Information In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by: – Replacing the requirement to disclose “significant” accounting policies under IAS 1 with a requirement to disclose “material” accounting policies. Under this, an accounting policy would be material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that primary users of general purpose financial statements make on the basis of those financial statements. Providing guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures. – The amendments shall be applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. Once an entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2. The Company has updated its accounting policy information disclosures in these annual consolidated financial statements for the year ended December 31, 2023. Amendments to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction On May 7, 2021, the IASB amended IAS 12 Income Taxes, to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments are effective for annual periods beginning on or after January 1, 2023. The Company has updated its disclosures in these annual consolidated financial statements for the year ended December 31, 2023. The adoption of these amendments resulted in a $11.1 million gross-up presentation of the lease liability deferred tax asset and right-of-use deferred tax liability as at January 1, 2023, for note disclosure purposes, with no impact on the net amount of deferred tax asset recognized. GILDAN 2023 REPORT TO SHAREHOLDERS 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION: 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) 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 Yarns, LLC Gildan USA LLC Gildan Honduras Properties, S. de R.L. Frontier Yarns, Inc. Gildan Activewear EU SRL Gildan Textiles de Sula, S. de R.L. G.A.B. Limited SDS International Limited Gildan Activewear (Eden) Inc. Gildan Hosiery Rio Nance, S. de R.L. Gildan Mayan Textiles, S. de R.L. Gildan Activewear Dominican Republic Textile Company Inc. Gildan Choloma Textiles, S. de R. L. Jurisdiction of incorporation Ownership percentage Barbados Delaware Delaware Honduras North Carolina Belgium Honduras Bangladesh Bangladesh North Carolina Honduras Honduras Barbados Honduras 100 % 100 % 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, 2023. GILDAN 2023 REPORT TO SHAREHOLDERS 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (b) Trade accounts receivable: Trade accounts receivable consist of amounts due from our normal business activities. An allowance for expected credit losses is maintained to reflect an impairment risk for trade accounts receivable based on an expected credit loss model which factors in changes in credit quality since the initial recognition of trade accounts receivable based on customer risk categories. Expected credit losses are also provided for based on collection history and specific risks identified on a customer-by-customer basis. Trade accounts receivable are presented net of allowances for expected credit losses, sales discounts, and sales returns when the Company has a right to offset the amounts. 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. (c) 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, and reflect the various stages of production that inventories have reached at period-end. 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. Additional costs incurred as a result of operating below the normal capacity of the production facilities are excluded from the carrying value of inventories and charged directly to cost of sales. Normal capacity is the average production expected to be achieved during the fiscal year, under normal circumstances. The Company manages its day-to-day production costs and inventories using a standard inventory costing system whereby the cost of a product is determined using pre-established rates for materials, labour and production overhead expenses based on the manufacturing specifications of the product. At period end, the Company assesses whether the variances between the standard costs and the actual costs incurred relate to the conversion of materials to finished goods, or if they represent abnormal costs that should be charged directly to cost of sales. The carrying value of inventories is then adjusted to record the manufacturing variances related to inventories still on hand and manufacturing variances related to inventories that have been sold are charged to cost of sales, through an allocation method which uses an estimated variance deferral factor based on the number of days of inventory on hand based on the most recent past production. The Company's inventory costing process involves a combination of automated and non-automated systems and processes using data obtained from different geographical locations to accumulate manufacturing variances at each stage of the Company's vertically integrated manufacturing process and identify costs to be expensed immediately. Net realizable value is the estimated selling price of finished goods in normal sales channels, or where applicable, liquidation channels, 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. GILDAN 2023 REPORT TO SHAREHOLDERS 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (d) 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. (e) 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, borrowing costs, as well as 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, which 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(1) Manufacturing equipment(2) Other equipment Useful life 5 to 40 years 2 to 20 years 3 to 10 years (1) The majority of the Company's buildings are depreciated over a 30 to 40 year period. (2) The majority of the Company's manufacturing equipment is depreciated over a 15 to 20 year period. 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. (f) 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 and consist of customer contracts and customer relationships, license agreements, trademarks, and non-compete agreements. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (f) Intangible assets (continued): 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 3 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. 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: it is technically feasible to complete the software product so that it will be available for use; • • management intends to complete the software product and use it; • • • there is an ability to use the software product; it can be demonstrated how the software product will generate probable future economic benefits; adequate technical, financial, and other resources to complete the development and to use the software product are available; and the expenditures attributable to the software product during its development can be reliably measured. • Other development expenditures that do not meet these criteria are recognized as an expense in the consolidated statement of earnings and comprehensive income as incurred. (g) 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. (h) 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"). Reversal of impairment losses A goodwill impairment loss is not reversed. Impairment losses on non-financial assets other than goodwill recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. GILDAN 2023 REPORT TO SHAREHOLDERS 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (i) Financial instruments: The Company initially recognizes financial instruments on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Financial instruments are initially measured at fair value. If the financial instrument 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 instrument’s acquisition or origination. On initial recognition, the Company classifies its financial assets or financial liabilities as subsequently measured at either amortized cost or fair value, depending on its business model for managing the financial instruments and the contractual cash flow characteristics of the financial instruments. Financial assets Financial assets are classified into the following categories and depend on the purpose for which the financial assets were acquired. 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. 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 other than derivative financial instruments. Financial liabilities Financial liabilities are classified into the following categories. 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. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 73 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (i) Financial instruments (continued): NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair value of financial instruments Financial instruments measured at fair value use the following fair value hierarchy to prioritize the inputs used in measuring fair value: • • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data. • Impairment of financial assets The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. The Company recognizes a loss allowance at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. Otherwise, the loss allowance for that financial instrument corresponds to an amount equal to twelve-month expected credit losses. The Company uses the simplified method to measure the loss allowance for trade receivables at lifetime expected losses. The Company uses historical trends of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. Losses are recognized in the consolidated statement of income and reflected in an allowance account against trade and other receivables. (j) 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 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 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. When a hedged forecasted transaction subsequently results in the recognition of a non-financial asset or liability, the cash flow hedge reserve is removed from accumulated other comprehensive income and included in the initial cost or carrying amount of the asset or liability. 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. If the forecasted transaction is no longer expected to occur, then the balance in accumulated other comprehensive income is recognized immediately in net earnings. GILDAN 2023 REPORT TO SHAREHOLDERS 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (k) Employee benefits: 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 primarily located in the Caribbean 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. (l) Provisions: 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. (m) 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. (n) Revenue recognition: The Company derives revenue from the sale of finished goods, which include activewear, hosiery, and underwear. The Company recognizes revenue at a point in time when it transfers control of the finished goods to a customer, which generally occurs upon shipment of the finished goods from the Company’s facilities. In certain arrangements, control is transferred and revenue is recognized upon delivery of the finished goods to the customer’s premises. Some arrangements for the sale of finished goods provide for customer price discounts, rights of return and/or volume rebates based on aggregate sales over a specified period, which gives rise to variable consideration. At the time of sale, estimates are made for items giving rise to variable consideration based on the terms of the sales program or arrangement. The variable consideration is estimated at contract inception using the most likely amount method and revenue is only recognized to the extent that a significant reversal of revenue is not expected to occur. The estimate is based on historical experience, current trends, and other known factors. New sales incentive programs which relate to sales made in a prior period are recognized at the time the new program is introduced. Sales are recorded net of customer discounts, rebates, and estimated sales returns, and exclude sales taxes. A provision is recognized for expected returns in relation to sales made before the end of the reporting period. GILDAN 2023 REPORT TO SHAREHOLDERS 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (n) Revenue recognition (continued): Consideration payable to a customer that is not considered a distinct good or service from the customer, such as one- time fees paid to customers for product placement or product introduction, is accounted for as a reduction of the transaction price, and the Company recognizes the reduction of revenue at the later of when Company recognizes revenue for the transfer of the related goods to the customer or when the Company pays or promises to pay the consideration. (o) 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. (p) 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 amortization of intangible assets. (q) 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 significant exit activities, including 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; write-downs of property, plant and equipment, right-of-use assets, and software related to exit activities; facility exit and closure costs, including the costs of physically transferring inventory and fixed assets to other facilities; costs of integrating the IT systems of an acquired business to Gildan’s existing IT systems; 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. (r) Cotton and cotton-based yarn procurement: 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. GILDAN 2023 REPORT TO SHAREHOLDERS 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (s) 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. (t) 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; interest on lease obligations; 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. (u) 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 a 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. 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. (v) Earnings per share: Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding for the year. Diluted earnings per share are computed using the weighted average number of common shares outstanding for the period adjusted to include the dilutive impact of stock options and restricted share units. The number of additional shares is calculated by assuming that all common shares held in trust for the purpose of settling non-Treasury restricted share units have been delivered, all dilutive outstanding options are exercised and all dilutive outstanding Treasury restricted share units have vested, and that the proceeds from such exercises, as well as the amount of unrecognized share-based compensation which is considered to be assumed proceeds, are used to repurchase common shares at the average share price for the period. For Treasury restricted share units, only the unrecognized share-based compensation is considered assumed proceeds since there is no exercise price paid by the holder. GILDAN 2023 REPORT TO SHAREHOLDERS 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (w) Share-based payments: Stock options, Stock appreciation rights, Treasury and non-Treasury restricted share units Stock options, Stock appreciation rights ("SARs"), 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 and SARs, 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 or SARs, 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 non-market performance conditions as at the reporting date are considered in the calculation of diluted earnings per share, as per note 3(aa) to these consolidated financial statements. Estimates for forfeitures and performance conditions The measurement of compensation expense for stock options, SARs, 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. 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. (x) Leases: At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use ("ROU") asset and a lease liability at the lease commencement date. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The ROU asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the ROU asset or the lease term. The lease term includes consideration of an option to renew or to terminate if the Company is reasonably certain to exercise that option. Lease terms range from 1 to 16 years for manufacturing, sales, distribution, and administrative facilities.. In addition, the ROU asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. GILDAN 2023 REPORT TO SHAREHOLDERS 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (x) Leases (continued): The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. Lease payments mainly include fixed, or in substance fixed, payments and variable lease payments that depend on an index or a rate. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment of whether it will exercise a purchase, extension, or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in profit or loss if the carrying amount of the ROU asset has been reduced to zero. The Company has elected to apply the practical expedient not to recognize ROU assets and lease liabilities for short- term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term. (y) 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 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. The Company has identified its CGUs for purposes of testing the recoverability and impairment of non-financial assets to be Textile & Sewing and Hosiery as they represent the lowest level at which the goodwill and indefinite life intangible assets are monitored for internal management purposes. Income taxes The Company’s income tax provisions and income tax assets and liabilities are based on interpretations of applicable tax laws, including income tax treaties between various countries in which the Company operates, as well as underlying rules and regulations with respect to transfer pricing. These interpretations involve judgments and estimates and may be challenged through government taxation audits that the Company is regularly subject to. New information may become available that causes the Company to change its judgment regarding the adequacy of existing income tax assets and liabilities; such changes will impact net earnings in the period that such a determination is made. GILDAN 2023 REPORT TO SHAREHOLDERS 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. MATERIAL ACCOUNTING POLICY INFORMATION (continued): (y) Use of estimates and judgments (continued): Key sources of estimation uncertainty: Key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year are as follows: 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 estimated sales volumes, selling prices, input costs, 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 or accelerated depreciation and amortization charges related to its non-financial assets. Please refer to note 11 for additional details on the recoverability of the Company’s cash-generating units. Other sources of estimation uncertainty The cost of inventories may no longer be recoverable if inventories are discontinued, damaged, in excess quantities, or if their selling prices or estimated forecast of product demand decline. Discontinued, damaged, and excess inventories are carried at the net realizable value, as those inventories are sold below cost in liquidation channels. In determining the net realizable value of finished goods, the Company considers recent recovery rates and current market conditions in these channels. The Company regularly reviews inventory quantities on hand, current production plans, and forecasted future sales, and inventories are written down to net realizable value when it is determined that they are no longer fully recoverable. There is estimation uncertainty in relation to the identification of excess inventories used in establishing the net realizable value. As at December 31, 2023, a 10% decrease or increase in the expected selling prices used to establish the net realizable value of discontinued, damaged, and excess inventories would not result in either a material decrease or an increase in inventories. 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 write-downs may be required. 4. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET APPLIED: Amendments to IAS 1, Presentation of Financial Statements On January 23, 2020, the IASB issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, to clarify how to classify debt and other liabilities as current or non-current. The amendments (which affect only the presentation of liabilities in the statement of financial position) clarify that the classification of liabilities as current or non- current should be based on rights that are in existence at the end of the reporting period to defer settlement by at least twelve months and make explicit that only rights in place at the end of the reporting period should affect the classification of a liability; clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets, or services. On October 31, 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1). These further amendments clarify how to address the effects on classification and disclosure of covenants which an entity is required to comply with on or before the reporting date and covenants which an entity must comply with only after the reporting date. The 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective for annual periods beginning on or after January 1, 2024, and are not expected to have an impact on the Company's consolidated financial statements. Early adoption is permitted. GILDAN 2023 REPORT TO SHAREHOLDERS 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. BUSINESS DISPOSITIONS: Frontier Yarns - Plant 3 On August 1, 2022 the Company sold a yarn spinning facility located in the U.S., which was the smallest of the four facilities that the Company acquired on December 10, 2021 as part of the Frontier Yarns acquisition. The sale included the disposition of inventory, equipment, goodwill and the transfer of a leasehold interest and related lease liability. The proceeds of disposition of $29.4 million, of which $1.5 million was held in escrow subject to certain post-closing matters, exceeded the carrying value of net assets sold of $23.4 million (including $13.9 million of allocated goodwill), resulting in a pre-tax gain on disposal of $6.0 million ($1.0 million after tax). The pre-tax gain of $6.0 million was included as a recovery in restructuring and acquisition-related costs. Other During the fourth quarter of fiscal 2022, the Company sold its sheer inventory and trademarks for total proceeds of $6.4 million, of which $0.7 million was held in escrow subject to certain post-closing matters. The gain on disposal of these assets was insignificant. 6. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consisted entirely of bank balances as at December 31, 2023 and January 1, 2023. 7. TRADE ACCOUNTS RECEIVABLE: Trade accounts receivable Allowance for expected credit losses December 31, 2023 January 1, 2023 $ 423,663 $ 264,179 (15,394) $ 412,498 $ 248,785 (11,165) As at December 31, 2023, trade accounts receivables being serviced under a receivables purchase agreement amounted to $270.9 million (January 1, 2023 - $228.9 million). The difference between the carrying amount of the receivables sold under the agreement and the cash received at the time of transfer was $17.5 million for fiscal 2023 (2022 - $5.1 million) and was recorded in bank and other financial charges. Refer to note 26 for additional information related to the receivables purchase agreement. The movement in the allowance for expected credit losses in respect of trade receivables was as follows: Balance, beginning of fiscal year Reversal of impairment (Impairment) of trade accounts receivable Write-off (Recoveries) of trade accounts receivable Balance, end of fiscal year 2023 2022 $ $ (15,394) $ 3,859 370 (11,165) $ (13,704) (2,150) 460 (15,394) The reversal of impairment of trade accounts receivable for fiscal 2023, is mainly related to a decrease in the expected credit loss rates for specific customers, partially offset by the impact of increases in overall trade accounts receivables. The impairment of trade accounts receivable for fiscal 2022 was mainly related to specific provisions on higher risk customers, partially offset by lower provisions on lower risk customers due to a decrease in trade accounts receivable. Beginning in fiscal 2023, impairment of trade accounts receivable has been included in selling, general and administrative expenses (was previously presented separately on the statement of earnings), and comparative periods have been recasted to conform to this presentation. GILDAN 2023 REPORT TO SHAREHOLDERS 81 8. INVENTORIES: Raw materials and spare parts inventories Work in progress Finished goods MANAGEMENT'S DISCUSSION AND ANALYSIS December 31, 2023 January 1, 2023 $ 165,527 $ 251,700 77,726 896,514 $ 1,089,441 $ 1,225,940 57,938 865,976 The amount of inventories recognized as an expense and included in cost of sales was $2,241.2 million for fiscal 2023 (2022 - $2,164.0 million). For fiscal 2023, cost of sales included an expense of $12.3 million (2022 - $19.7 million) related the write-down of inventory to net realizable value. The Company has a multi-year agreement for the purchase of yarn terminating in 2028, with minimum purchase requirements starting in the second quarter of fiscal 2024. As at December 31, 2023, the Company had a commitment of $186.5 million (2022 - $238.5 million) under this agreement. GILDAN 2023 REPORT TO SHAREHOLDERS 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. PROPERTY, PLANT AND EQUIPMENT: 2023 Cost Land Buildings and improvements Manufacturing equipment Other equipment Assets not yet utilized in operations Total Balance, January 1, 2023 $ 130,940 $ 591,302 $ 1,205,601 $ 175,366 $ 172,754 $ 2,275,963 Additions Transfers Disposals(1) 2,910 — 28,661 11,024 31,337 97,684 6,659 4,921 126,126 195,693 (113,629) — (4,281) (29,501) (20,662) (14,718) — (69,162) Balance, December 31, 2023 $ 129,569 $ 601,486 $ 1,313,960 $ 172,228 $ 185,251 $ 2,402,494 Accumulated depreciation Balance, January 1, 2023 Depreciation (note 21) Disposals(1) Balance, December 31, 2023 $ $ — — — — Carrying amount, December 31, 2023 $ 129,569 $ 263,383 $ 756,317 $ 141,094 $ 23,493 (3,551) 66,694 10,974 (16,925) (13,500) 806,086 $ 138,568 $ $ $ 283,325 318,161 $ $ — — — — $ 1,160,794 101,161 (33,976) $ 1,227,979 507,874 $ 33,660 $ 185,251 $ 1,174,515 2022 Cost Land Buildings and improvements Manufacturing equipment Other equipment Assets not yet utilized in operations Total Balance, January 2, 2022 $ 127,068 $ 582,643 $ 1,109,128 $ 171,147 $ 76,660 $ 2,066,646 4,321 — (449) 22,578 (8,128) (5,791) 48,665 67,782 8,375 2,847 158,595 (62,501) 242,534 — (19,974) (7,003) — (33,217) $ 130,940 $ 591,302 $ 1,205,601 $ 175,366 $ 172,754 $ 2,275,963 $ $ — — — — $ 244,971 $ 699,988 $ 136,614 $ 23,872 (5,460) 67,185 (10,856) 11,257 (6,777) 756,317 $ 141,094 $ — — — — $ 1,081,573 102,314 (23,093) $ 1,160,794 $ $ 263,383 327,919 $ $ Carrying amount, January 1, 2023 $ 130,940 449,284 $ 34,272 $ 172,754 $ 1,115,169 (1) Disposals include the write-off of certain equipment relating to facility closures. See note 18 "Restructuring and acquisition-related costs" for additional information. During fiscal 2022, disposals also included manufacturing equipment with a cost of $7.8 million and accumulated depreciation of $2.0 million related to the sale of Frontier Yarns - Plant 3. See note 5 for additional information. Effective January 3, 2022, the Company revised the estimated useful lives of certain textile manufacturing equipment based on a re-assessment of their expected use to the Company and recent experience of their economic lives. These assets, which were previously being depreciated on a straight-line basis over 10 years, were revised to be depreciated on a straight-line basis over 15 years. For the year ended January 1, 2023, the change in estimate which was made on a prospective basis resulted in a reduction of depreciation of approximately $5.0 million. 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. As at December 31, 2023, there were contractual purchase obligations outstanding of approximately $104.7 million (January 1, 2023 - $168.5 million) for the purchase of property, plant and equipment. GILDAN 2023 REPORT TO SHAREHOLDERS 83 Additions Transfers Disposals(1) Balance, January 1, 2023 Accumulated depreciation Balance, January 2, 2022 Depreciation (note 21) Disposals(1) Balance, January 1, 2023 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS: (a) Right-of-use assets: The following table presents the right-of-use assets for the Company: Balance, beginning of fiscal year Additions Business dispositions Write-downs, impairments, and accelerated depreciation Depreciation (note 21) Balance, end of fiscal year 2023 2022 $ $ 77,958 $ 18,502 — (1,657) (13,356) 81,447 $ 92,447 11,688 (8,426) (2,974) (14,777) 77,958 (b) Lease obligations: The Company’s leases are primarily for manufacturing, sales, distribution, and administrative facilities. The following table presents lease obligations recorded in the statement of financial position: Current Non-current December 31, 2023 January 1, 2023 $ $ 14,161 $ 83,900 98,061 $ 13,828 80,162 93,990 Leases of certain facilities contain extension or termination options exercisable by the Company before the end of the non-cancellable contract period. The Company has applied judgment to determine the lease term for the contracts with renewal and termination options and has included renewal and termination options in the measurement of lease obligations when it is reasonably certain to exercise the options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or a significant change in circumstances within its control which impacts the original assessments made. As at December 31, 2023, potential undiscounted future lease payments related to renewal options not included in the measurement of lease obligations were $80.2 million (January 1, 2023 - $58.8 million). The following table presents the undiscounted future minimum lease payments under non-cancellable leases (including short term leases) as at December 31, 2023: Less than one year One to five years More than five years December 31, 2023 $ 20,775 66,052 49,413 $ 136,240 For the year ended December 31, 2023, expenses relating to short-term leases and leases of low-value assets were $3.2 million (2022 - $3.8 million). For the year ended December 31, 2023, the total cash outflow for recognized lease obligations (including interest) was $28.3 million (2022 - $19.7 million), of which $24.9 million (2022 - $16.6 million) was included as part of cash outflows from financing activities. GILDAN 2023 REPORT TO SHAREHOLDERS 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INTANGIBLE ASSETS AND GOODWILL: Intangible assets: 2023 Cost Customer contracts and customer relationships Trademarks License agreements Computer software Non-compete agreements Total Balance, January 1, 2023 $ 224,489 $ 226,172 $ 70,450 $ 70,574 $ 1,790 $ 593,475 Additions Disposals — — — — — — 4,592 (1,266) — (1,790) 4,592 (3,056) Balance, December 31, 2023 $ 224,489 $ 226,172 $ 70,450 $ 73,900 $ — $ 595,011 Accumulated amortization Balance, January 1, 2023 Amortization (note 21) Disposals Impairment reversal Balance, December 31, 2023 Carrying amount, December 31, 2023 2022 Cost $ 184,421 $ 55,447 $ 68,398 $ 53,468 $ 1,790 $ 363,524 6,633 — — — (7,803) (32,967) 1,642 — — 5,568 (1,215) — 183,251 $ 22,480 $ 70,040 $ 57,821 $ — (1,790) — — 13,843 (3,005) (40,770) $ 333,592 41,238 $ 203,692 $ 410 $ 16,079 $ — $ 261,419 $ $ Customer contracts and customer relationships Trademarks License agreements Computer software Non-compete agreements Total Balance, January 2, 2022 $ 224,489 $ 226,172 $ 72,796 $ 67,157 $ 1,790 $ 592,404 Additions Disposals — — — — — (2,346) 5,205 (1,788) — — 5,205 (4,134) Balance, January 1, 2023 $ 224,489 $ 226,172 $ 70,450 $ 70,574 $ 1,790 $ 593,475 Accumulated amortization Balance, January 2, 2022 Amortization (note 21) Disposals Write-downs and impairments Balance, January 1, 2023 Carrying amount, January 1, 2023 $ 148,132 $ 19,127 $ 66,929 $ 49,796 $ 1,790 $ 285,774 11,194 — — — 25,095 36,320 184,421 $ 55,447 40,068 $ 170,725 2,561 (1,967) 875 68,398 2,052 $ $ 5,397 (1,725) — 53,468 17,106 $ $ $ $ — — — $ $ 1,790 — $ $ 19,152 (3,692) 62,290 363,524 229,951 During fiscal 2023, the Company recorded an impairment reversal of $40.8 million (2022 - impairment charge of $62.3 million) relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions. The carrying amount of internally-generated assets within computer software was $11.7 million as at December 31, 2023 (January 1, 2023 - $13.6 million). Included in computer software as at December 31, 2023 was $1.2 million (January 1, 2023 - $4.4 million) of assets not yet utilized in operations. GILDAN 2023 REPORT TO SHAREHOLDERS 85 11. INTANGIBLE ASSETS AND GOODWILL (continued): Goodwill: Balance, beginning of fiscal year Goodwill acquired (disposed) Purchase price allocation adjustment Balance, end of fiscal year Recoverability of cash-generating units: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2023 2022 $ 271,677 — — $ 271,677 $ 283,815 (13,892) 1,754 $ 271,677 Goodwill acquired through business acquisitions and intangibles have been allocated to the Company's CGUs as follows: Textile & Sewing: Goodwill Definite life intangible assets (excluding computer software) Indefinite life intangible assets Hosiery: Definite life intangible assets (excluding computer software) Indefinite life intangible assets December 31, 2023 January 1, 2023 $ 271,677 15,134 93,400 $ 380,211 $ 271,677 19,282 93,400 $ 384,359 $ 26,514 110,292 $ 136,806 $ 22,838 77,325 $ 100,163 In assessing whether goodwill and indefinite life intangible assets are impaired, the carrying amounts of the CGUs (including goodwill and indefinite life intangible assets) are compared to their recoverable amounts. 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 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 Company performed its annual impairment review for goodwill and indefinite life intangible assets as at December 31, 2023 and January 1, 2023. The estimated recoverable amount for the Textile & Sewing CGU exceeded its carrying value and as a result, there was no impairment identified. The estimated recoverable amount for the Hosiery CGU was in excess of its carrying value and as a result the Company recorded an impairment reversal of $40.8 million for the year ended December 31, 2023 relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions. For the year ended January 1, 2023, the carrying value for the Hosiery CGU was in excess of its estimated recoverable amount resulting in an impairment charge of $62.3 million, relating to intangible assets (both definite and indefinite life) acquired in previous business acquisitions. Recoverable amount for Textile & Sewing and Hosiery CGUs The Company determined the recoverable amounts of the Textile & Sewing and Hosiery CGUs based on the fair value less costs of disposal method. The fair value measurement was categorized as a level 3 fair value. The fair values of the Textile & Sewing and Hosiery CGUs were based on a multiple applied to risk adjusted EBITDA (adjusted EBITDA as defined in note 25) for the next year, which takes into account financial forecasts approved by senior management. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INTANGIBLE ASSETS AND GOODWILL (continued): Recoverability of cash-generating units (continued): Textile & Sewing CGU For the Textile & Sewing CGU, 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. Hosiery CGU Based on the results of the impairment test performed on December 31, 2023, the recoverable amount of the CGU of $365.3 million (2022 - $265.5 million) is higher than the carrying value and as a result there was $40.8 million impairment reversal identified. The fair value of the Hosiery CGU was based on a multiple applied to the risk-adjusted forecasted adjusted EBITDA (see definition of adjusted EBITDA in note 25). The key assumptions used in the estimation of the recoverable amount for the Hosiery CGU are the risk-adjusted forecasted adjusted EBITDA for the next year and the adjusted EBITDA multiple of 7.5 for the December 31, 2023 and January 1, 2023 tests. A decrease in the risk adjusted forecasted adjusted EBITDA of 10% in the Hosiery CGU combined with a decrease in the adjusted EBITDA multiple by a factor of 1 would yield an impairment reversal of the same amount. GILDAN 2023 REPORT TO SHAREHOLDERS 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. LONG-TERM DEBT: Non-current portion of long-term debt Revolving long-term bank credit facility, interest at variable U.S. interest rate(2)(3) Term loan, interest at variable U.S. interest rate, payable monthly(2)(4) Notes payable, interest at fixed rate of 2.91%, payable semi- annually(5) Notes payable, interest at Adjusted SOFR plus a spread of 1.57%, payable quarterly(5)(6) Effective interest rate (1) Principal amount December 31, 2023 January 1, 2023 Maturity date 6.4% $ 235,000 $ 330,000 March 2027 4.6% 300,000 300,000 June 2026 2.9% 100,000 100,000 August 2026 2.9% 50,000 50,000 August 2026 $ 685,000 $ 780,000 Current portion of long-term debt Notes payable, interest at fixed rate of 2.70%, payable semi- annually(5) 2.7% — 100,000 Notes payable, interest at Adjusted LIBOR plus a spread of 1.53%, payable quarterly(5)(7) 2.7% — 50,000 Matured and repaid in August 2023 Matured and repaid in August 2023 Delayed draw term loan (DDTL), interest at variable U.S. interest rate, payable monthly(2)(4) 7.0% 300,000 — May 2024 Long-term debt $ $ 300,000 $ 985,000 $ 150,000 930,000 (1) Represents the annualized effective interest rate for the year ended December 31, 2023, including the cash impact of interest rate swaps, where applicable. (2) Secured Overnight Financing Rate (SOFR) advances at adjusted Term SOFR (includes a 0% to 0.25% reference rate adjustment) plus a spread ranging from 1% to 3%. (3) 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 adjusted Term SOFR is a function of the total net debt to EBITDA ratio (as defined in the credit facility agreement and its amendments). In addition, an amount of $36.0 million (January 1, 2023 - $43.9 million) has been committed against this facility to cover various letters of credit. (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 adjusted Term SOFR is a function of the total net debt to EBITDA ratio (as defined in the term loan agreements and its amendments). (5) The unsecured notes issued 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. (6) Adjusted SOFR rate is determined on the basis of floating rate notes that bear interest at a floating rate plus a spread of 1.57%. (7) Adjusted LIBOR rate is determined on the basis of floating rate notes that bear interest at a floating rate plus a spread of 1.53%. On March 25, 2022, the Company amended and extended its unsecured revolving long-term bank credit facility of $1 billion to March 2027. As part of the amendment, LIBOR references were replaced with Term Secured Overnight Financing Rate (‘‘Term SOFR’’) and the revolving facility includes a sustainability-linked loan ("SLL") structure, whereby its applicable margins are adjusted upon achievement of certain sustainability targets, which commenced in 2023. On March 25, 2022, the Company amended its $300 million term loan to replace LIBOR references by Term SOFR references. On June 30, 2022, the Company amended its notes purchase agreement to include LIBOR fallback provisions to replace LIBOR with adjusted term SOFR, adjusted daily simple SOFR or any relevant alternate rate selected by the note holders and the Company upon a benchmark transition event or early opt-in election. During fiscal 2022, the Company applied the IFRS 9 interest rate benchmark reform practical expedient for amendments required by the interest rate reform to the revolving-long term bank credit facility, term loan and related interest rate swap agreements. GILDAN 2023 REPORT TO SHAREHOLDERS 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. LONG-TERM DEBT (continued): On May 26, 2023, the Company amended its $300 million term loan to include an additional $300 million delayed draw term loan ("DDTL") with a one year maturity from the effective date. All other terms of the agreement remained unchanged. The Company repaid the current portion of notes payable, which matured in August 2023. Under the terms of the revolving facility, 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, 2023. 13. OTHER NON-CURRENT LIABILITIES: Employee benefit obligation - Statutory severance and pre-notice (a) Employee benefit obligation - Defined contribution plan (b) Provisions (c) (a) Statutory severance and pre-notice obligations: Obligation, beginning of fiscal year Service cost Interest cost Actuarial gain(1) Foreign exchange gain Benefits paid Obligation, end of fiscal year December 31, 2023 January 1, 2023 $ 31,003 $ 4,225 11,080 46,308 $ $ 42,127 3,383 10,707 56,217 2023 2022 $ $ 42,127 $ 16,700 8,767 (1,717) (501) (34,373) 31,003 $ 42,931 18,166 8,543 (8,094) (626) (18,793) 42,127 (1) The actuarial gain in fiscal 2023 and fiscal 2022 is mainly 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 ranging between 10.0% and 11.4% (2022 - between 8.5% and 11.0%) and rates of compensation increases between 8.0% and 9.5% (2022 - 8.0% and 10.5%). A 1% increase in the discount rates would result in a corresponding decrease in the statutory severance obligations of $4.7 million, and a 1% decrease in the discount rates would result in a corresponding increase in the statutory severance obligations of $5.7 million. A 1% increase in the rates of compensation increases used would result in a corresponding increase in the statutory severance obligations of $6.0 million, and a 1% decrease in the rates of compensation increases used would result in a corresponding decrease in the statutory severance obligations of $5.1 million. The cumulative amount of actuarial losses recognized in other comprehensive income as at December 31, 2023 was $24.8 million (January 1, 2023 - $26.5 million) which have been reclassified to retained earnings in the period in which they were recognized. (b) Defined contribution plan: During fiscal 2023, defined contribution expenses were $5.4 million (2022 - $4.7 million). GILDAN 2023 REPORT TO SHAREHOLDERS 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. OTHER NON-CURRENT LIABILITIES (continued): (c) Provisions: The following table presents the provisions for decommissioning and site restoration costs of the Company: Balance, beginning of fiscal year Changes in estimates made during the fiscal year Accretion of interest Balance, end of fiscal year 2023 10,707 $ (41) 414 11,080 $ 2022 13,189 (2,689) 207 10,707 $ $ Provisions as at December 31, 2023 include estimated future costs of decommissioning and site restoration for certain assets located at the Company’s textile and sock facilities for which the timing of settlement is uncertain, but has been estimated to be in excess of ten years. 14. 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, for which the hedged transaction has not yet occurred at the end of the fiscal year. (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, 2023 and January 1, 2023, none of the first and second preferred shares were issued. Issued: As at December 31, 2023, there were 169,986,477 common shares (January 1, 2023 - 179,709,339) issued and outstanding, which are net of 8,245 common shares (January 1, 2023 - 8,129) that have been purchased and are held in trust as described in note 14(e). GILDAN 2023 REPORT TO SHAREHOLDERS 90 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. EQUITY (continued): (d) Normal course issuer bid ("NCIB"): On February 22, 2022, the Company received approval from the Toronto Stock Exchange (TSX) to amend its current NCIB, which commenced on August 9, 2021, in order to increase the maximum number of common shares that may be repurchased from 9,926,177, or 5% of the Company’s issued and outstanding common shares as at July 31, 2021 (the reference date for the NCIB), to 19,477,744 common shares, representing 10% of the public float as at July 31, 2021. In August 2022, the Company received approval from the TSX to renew its normal course issuer bid (NCIB) program commencing on August 9, 2022, to purchase for cancellation a maximum of 9,132,337 common shares, representing 5% of the Company's issued and outstanding common shares, as at July 31, 2022 (the reference date for the NCIB). Under the NCIB, the Company was authorized to make purchases under the normal course issuer bid during the period from August 9, 2022 to August 8, 2023 in accordance with the requirements of the TSX. In August 2023, the Company received approval from the TSX to renew its NCIB program commencing on August 9, 2023, to purchase for cancellation a maximum of 8,778,638 common shares, representing approximately 5% of the Company's issued and outstanding common shares, as at July 31, 2023 (the reference date for the renewed NCIB). The Company is authorized to make purchases under the renewed NCIB until August 8, 2024 in accordance with the requirements of the TSX. Purchases can be made by means of open market transactions on both the TSX and the New York Stock Exchange (NYSE), or alternative Canadian trading systems, if eligible, or by such other means as may be permitted by securities regulatory authorities, including pre-arranged crosses, exempt offers, private agreements under an issuer bid exemption order issued by securities regulatory authorities and block purchases of common shares. The average daily trading volume of common shares on the TSX (ADTV) for the six- month period ended July 31, 2023 was 370,447. Consequently, and in accordance with the requirements of the TSX, the Company may purchase, in addition to purchases made on other exchanges including the NYSE, up to a maximum of 92,611 common shares daily through the facilities of the TSX, which represents 25% of the ADTV for the six-month period noted above. During the year ended December 31, 2023, the Company repurchased for cancellation a total of 11,830,618 common shares purchased for cancellation, for a total cost of $370.4 million, of which $14.8 million was charged to share capital and $355.6 million was charged to retained earnings. (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, 2023, a total of 8,245 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, 2023 - 8,129 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 or SARs, the corresponding amounts previously credited to contributed surplus are transferred to share capital, except for the portion of the share-based payment that the Company settles on a net basis when the Company has an obligation under tax laws to withhold an amount for an employee’s tax obligation, in which case the corresponding amounts previously credited to contributed surplus are transferred to accounts payable and accrued liabilities. GILDAN 2023 REPORT TO SHAREHOLDERS 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS: (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 Fair value through other comprehensive income: December 31, 2023 January 1, 2023 $ 89,642 $ 150,417 248,785 412,498 45,136 12,863 48,274 118 Derivative financial assets included in prepaid expenses, deposits and other current assets 15,797 23,765 Financial liabilities Amortized cost: Accounts payable and accrued liabilities(1) Long-term debt - bearing interest at variable rates Long-term debt - bearing interest at fixed rates(2) Fair value through other comprehensive income: Derivative financial liabilities included in accounts payable and accrued liabilities $ 403,534 $ 462,496 730,000 200,000 885,000 100,000 4,760 8,712 1) Accounts payable and accrued liabilities include $12.5 million (January 1, 2023 - $26.9 million) under supply-chain financing arrangements (reverse factoring) with a financial institution, whereby receivables due from the Company to certain suppliers can be collected by the suppliers from a financial institution before their original due date. These balances are classified as accounts payable and accrued liabilities and the related payments as cash flows from operating activities, given the principal business purpose of the arrangement is to provide funding to the supplier and not the Company, the arrangement does not significantly extend the payment terms beyond the normal terms agreed with other suppliers, and no additional deferral or special guarantees to secure the payments are included in the arrangement. Accounts payable and accrued liabilities also include balances payable of $49.0 million (January 1, 2023 - $35.7 million) resulting mainly from a one-week timing difference between the collection of sold receivables and the weekly remittance to our bank counterparty under our receivables purchase agreement that is disclosed in note 7 to these consolidated financial statements. 2) The fair value of the long-term debt bearing interest at fixed rates was $98.6 million as at December 31, 2023 (January 1, 2023 - $197.1 million). GILDAN 2023 REPORT TO SHAREHOLDERS 92 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS (continued): (a) Financial instruments - carrying amounts and fair values (continued): 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. 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 Derivative financial instruments are designated as effective hedging instruments and 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. During fiscal 2022 and most of fiscal 2023 the Company also had 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 was 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, 2023, the notional amount of TRS outstanding was nil shares (January 1, 2023 - 362,608 shares) and the carrying amount and fair value included in accounts payable and accrued liabilities was nil (January 1, 2023 - $4.7 million included in prepaid expenses, deposits and other current assets). 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. GILDAN 2023 REPORT TO SHAREHOLDERS 93 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS (continued): (b) Derivative financial instruments - hedge accounting: During fiscal 2023 and 2022, 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, 2023 and January 1, 2023 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, 2023 and January 1, 2023 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, 2023 and January 1, 2023 served to fix the variable interest rates on the designated interest payments of a portion of the Company's long-term debt. The following table summarizes the Company’s commitments to buy and sell foreign currencies (cash flow hedges) as at December 31, 2023: Notional foreign currency amount equivalent Average exchange rate Notional Prepaid expenses, U.S. $ deposits and other current assets equivalent Accounts payable and accrued liabilities 0 to 12 months Carrying and fair value Maturity Forward foreign exchange contracts: Sell GBP/Buy USD Sell EUR/Buy USD Sell CAD/Buy USD Buy CAD/Sell USD Sell AUD/Buy USD Sell MXN/Buy USD 25,399 1.2506 $ 31,765 $ 40,866 1.0987 52,285 0.7506 41,199 0.7384 15,011 325,633 0.6681 0.0543 44,901 39,243 30,422 10,029 17,687 25 63 33 735 21 — $ (585) $ (640) (362) — (261) (980) (560) (577) (329) 735 (240) (980) $ 174,047 $ 877 $ (2,828) $ (1,951) The following table summarizes the Company’s commitments to buy and sell foreign currencies (cash flow hedges) as at January 1, 2023: Notional foreign currency amount equivalent Average exchange rate Notional Prepaid expenses, deposits and other current assets U.S. $ equivalent Accounts payable and accrued liabilities 0 to 12 months Carrying and fair value Maturity Forward foreign exchange contracts: Sell GBP/Buy USD Sell EUR/Buy USD Sell CAD/Buy USD Buy CAD/Sell USD Sell AUD/Buy USD Sell MXN/Buy USD Buy EUR/Sell USD 39,600 1.2000 $ 47,520 $ 42,544 1.0513 47,531 0.7534 30,497 0.7662 12,258 0.6836 63,776 0.0469 3,137 1.0592 44,726 35,812 23,367 8,379 2,989 3,323 686 328 707 17 153 — 56 $ (1,023) $ (337) (1,355) (1,027) (56) (815) (122) (242) (14) 651 (798) 31 (242) 42 $ 166,116 $ 1,947 $ (3,627) $ (1,680) GILDAN 2023 REPORT TO SHAREHOLDERS 94 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS (continued): (b) Derivative financial instruments - hedge accounting (continued): The following table summarizes the Company's commodity contracts outstanding (cash flow hedges) as at December 31, 2023: Type of commodity Notional amount(1) Forward contracts Cotton 144.6 million pounds Swap & option contracts Energy 2.9 million gallons (1) Notional amounts are not in thousands. Carrying and fair value Maturity Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities 0 to 12 months $ $ 4,583 153 4,736 $ $ (1,745) $ 2,838 (187) (34) (1,932) $ 2,804 The following table summarizes the Company's commodity contracts outstanding (cash flow hedges) as at January 1, 2023: Type of commodity Notional amount(1) Forward contracts Cotton 118.9 million pounds Swap & option contracts Energy 1.7 million gallons (1) Notional amounts are not in thousands. Carrying and fair value Maturity Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities 0 to 12 months $ $ 5,105 253 5,358 $ $ — $ 5,105 (358) (105) (358) $ 5,000 GILDAN 2023 REPORT TO SHAREHOLDERS 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. 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 (cash flow hedges) as at December 31, 2023: Notional amount of borrowings Maturity date Pay / Receive Fixed rate Floating rate Carrying and fair value Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities Term Loan(1) $ 50,000 April 30, 2024 Pay fixed rate / receive floating rate 1.44 % SOFR $ 646 $ 25,000 50,000 25,000 25,000 25,000 April 30, 2025 Pay fixed rate / receive floating rate 1.06 % SOFR April 30, 2025 Pay fixed rate / receive floating rate June 30, 2026 Pay fixed rate / receive floating rate June 30, 2026 Pay fixed rate / receive floating rate June 30, 2026 Pay fixed rate / receive floating rate 0.70 % SOFR 1.52 % SOFR 1.17 % SOFR 3.20 % SOFR 1,130 2,414 439 1,593 373 Unsecured Notes 50,000 August 25, 2026 Pay fixed rate / receive floating rate 1.12 % SOFR 3,589 $ 10,184 $ — — — — — — — — (1) The notional amounts for the interest rate swap contracts maturing in 2025 and 2026 are extensions to the $125 million interest rate swap contracts originally entered into for the $300 million term loan. GILDAN 2023 REPORT TO SHAREHOLDERS 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. 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 (cash flow hedges) as at January 1, 2023: Notional amount of borrowings Maturity date Pay / Receive Fixed rate Floating rate Carrying and fair value Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities Term Loan(1) $ 75,000 April 30, 2023 Pay fixed rate / receive floating rate 2.85 % US LIBOR $ 435 $ 50,000 25,000 50,000 25,000 25,000 April 30, 2024 April 30, 2025 Pay fixed rate / receive floating rate Pay fixed rate / receive floating rate 1.51 % US LIBOR 1.06 % US LIBOR April 30, 2025 Pay fixed rate / receive floating rate 0.78 % US LIBOR June 30, 2026 June 30, 2026 Pay fixed rate / receive floating rate Pay fixed rate / receive floating rate 1.59 % US LIBOR 1.23 % US LIBOR Unsecured Notes 50,000 50,000 August 25, 2023 August 25, 2026 Pay fixed rate / receive floating rate Pay fixed rate / receive floating rate 1.18 % US LIBOR 1.34 % US LIBOR 2,124 1,839 3,346 443 1,999 1,394 4,880 $ 16,460 $ — — — — — — — — — (1) The notional amounts for the interest rate swap contracts maturing in 2025 and 2026 were extensions to the $100 million interest rate swap contracts originally entered into for the $300 million term loan. The following table summarizes the Company’s hedged items as at December 31, 2023: 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) $ — $ — — — $ — $ — — — — — $ (1,945) $ 736 1,945 (736) 4,733 (4,733) 10,126 (10,126) $ 13,650 $ (13,650) 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 2023 REPORT TO SHAREHOLDERS 97 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS (continued): (b) Derivative financial instruments - hedge accounting (continued): The following table summarizes the Company’s hedged items as at January 1, 2023: Cash flow hedges: Foreign currency risk: Forecast sales Forecast expenses Commodity risk: Forecast purchases Interest rate risk: Forecast interest payments Change in Carrying amount of value used for Cash flow the hedged item calculating hedge hedge reserve Assets Liabilities ineffectiveness (AOCI) $ — $ — — — $ — $ — — — — — $ (1,359) $ (750) 1,359 750 (4,112) 4,112 16,066 (16,066) $ 9,845 $ (9,845) 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. (c) Financial expenses, net: Interest expense on financial liabilities recorded at amortized cost (1) Bank and other financial charges Interest accretion on discounted lease obligations Interest accretion on discounted provisions Foreign exchange loss (gain) 2023 53,360 $ 22,314 3,429 414 153 79,670 $ 2022 25,619 10,524 3,097 47 (2,330) 36,957 $ $ (1) Net of capitalized borrowing costs of $6.8 million (2022 - $2.3 million) using an average capitalization rate of 5.39% (2022 - 3.22%). GILDAN 2023 REPORT TO SHAREHOLDERS 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FINANCIAL INSTRUMENTS (continued): (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 2023 2022 $ (3,334) $ 15,758 2,682 10,965 46,056 18,628 33 (110) (6,913) (114,989) Amounts reclassified from OCI to net earnings, related to foreign currency risk, commodity risk, and interest rate risk, and included in: Net sales Cost of sales Selling, general and administrative expenses Financial expenses, net Income taxes Other comprehensive income (loss) $ 1,802 58 1,198 (7,437) (42) 3,805 $ (11,904) 22 316 (4,100) 152 (54,964) 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 years ended December 31, 2023 and January 1, 2023. The change in the forward element of derivatives designated as cash flow hedges to reduce foreign currency risk was not significant for the years ended December 31, 2023 and January 1, 2023. Approximately $10.1 million of net gains presented in accumulated other comprehensive income as at December 31, 2023 are expected to be reclassified to inventory or net earnings within the next twelve months. GILDAN 2023 REPORT TO SHAREHOLDERS 99 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE-BASED COMPENSATION: The Company’s Long-Term Incentive Plan (the "LTIP") includes stock options, stock appreciation rights ('SARs'), and restricted share units. The LTIP allows the Board of Directors to grant stock options, SARs, 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 13,797,851. As at December 31, 2023, 2,105,337 common shares remained authorized for future issuance under this plan. The exercise price payable for each common share covered by a stock option or SARs 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. Most stock options vest equally beginning on the second, third, fourth, and fifth anniversary of the grant date. Stock options granted in fiscal 2020 all vested on the third anniversary of the grant date, subject to performance vesting conditions in some cases. SARs granted in fiscal 2020 vested on the third anniversary of the grant date, and were subject to performance vesting conditions, with the result that 75% of the SARs vested and 25% were forfeited. No stock options or SARs have been granted since fiscal 2020. Holders of Treasury RSUs and non-Treasury RSUs 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. (a) Stock options: Outstanding stock options were as follows: Stock options issued in Canadian dollars and to be exercised on the TSX: Stock options outstanding, January 2, 2022 Changes in outstanding stock options: Exercised Stock options outstanding, January 1, 2023 Changes in outstanding stock options: Exercised Stock options outstanding, December 31, 2023 Stock options issued in U.S. dollars and to be exercised on the NYSE: Stock options outstanding, January 2, 2022 Changes in outstanding stock options: Granted Stock options outstanding, January 1, 2023 Changes in outstanding stock options: Forfeited Exercised Stock options outstanding, December 31, 2023 Number Weighted exercise price (CA$) 1,236 $ 36.85 (490) 746 (463) 283 $ 37.35 36.52 33.01 42.27 Number Weighted exercise price (US$) 1,988 $ 27.21 — 1,988 (213) (1,591) 184 $ — 27.21 30.00 26.62 29.01 GILDAN 2023 REPORT TO SHAREHOLDERS 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE-BASED COMPENSATION (continued): (a) Stock options (continued): As at December 31, 2023, 282,737 outstanding options issued in Canadian dollars to be exercised on the TSX were exercisable at the weighted average exercise price of CA$42.27 (January 1, 2023 - 745,902 options at CA$36.52), and 184,664 outstanding options issued in U.S. dollars and to be exercised on the NYSE, were exercisable at the weighted average exercise price of US$29.01 (January 1, 2023 - 601,186 options at US$29.01). For stock options exercised during fiscal 2023, the weighted average share price at the date of exercise on the TSX was CA$40.72 (2022 - CA$39.02), and the weighted average share price at the date of exercise on the NYSE was US$33.06 (2022 - nil). The following table summarizes information about stock options issued and outstanding and exercisable at December 31, 2023: Exercise prices CA$42.27 US$29.01 Options issued and outstanding Remaining contractual life (yrs) Number 283 184 467 2 1 Options exercisable Number 283 184 467 The compensation expense related to stock options included in operating income for fiscal 2023 was $2.1 million (2022 - $2.5 million), and the counterpart has been recorded as contributed surplus. When the underlying shares are issued to the employees, the amounts previously credited to contributed surplus are transferred to share capital. (b) Stock appreciation rights ("SARs"): As at December 31, 2023, nil SARs remained outstanding (2022 - 824,406). During fiscal 2023, 618,304 SARs vested and settled through the delivery of shares and 206,102 SARs were forfeited. The compensation expense related to SARs included in operating income for fiscal 2023 was $1.4 million (2022 - $1.5 million), and the counterpart has been recorded as contributed surplus. GILDAN 2023 REPORT TO SHAREHOLDERS 101 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE-BASED COMPENSATION (continued): (c) Restricted share units: 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 four to five-year period. Outstanding Treasury RSUs were as follows: Treasury RSUs outstanding, January 2, 2022 Changes in outstanding Treasury RSUs: Granted Granted for dividends declared Treasury RSUs outstanding, January 1, 2023 Changes in outstanding Treasury RSUs: Granted Granted for dividends declared Forfeited Treasury RSUs outstanding, December 31, 2023 Number Weighted average fair value per unit 23 48 2 73 3 2 (17) 61 $ 32.55 34.67 30.48 33.91 29.12 30.98 29.95 34.69 $ As at December 31, 2023 and January 1, 2023, none of the outstanding Treasury RSUs vested. The compensation expense related to Treasury RSUs included in operating income for fiscal 2023 was an expense of $0.4 million (2022 - $0.4 million), and the counterpart has been recorded as contributed surplus. When the underlying shares are issued to the employees, the amounts previously credited to contributed surplus are transferred to share capital. GILDAN 2023 REPORT TO SHAREHOLDERS 102 16. SHARE-BASED COMPENSATION (continued): (c) Restricted share units (continued): Outstanding non-Treasury RSUs were as follows: Non-Treasury RSUs outstanding, January 2, 2022 Changes in outstanding non-Treasury RSUs: Granted Granted for dividends declared Settled - common shares Settled - payment of withholding taxes Forfeited Non-Treasury RSUs outstanding, January 1, 2023 Changes in outstanding non-Treasury RSUs: Granted Additional units for vested performance conditions Granted for dividends declared Settled - common shares Settled - payment of withholding taxes Forfeited Non-Treasury RSUs outstanding, December 31, 2023 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Number Weighted average fair value per unit 1,946 $ 29.50 672 47 (229) (146) (201) 2,089 845 493 53 (810) (524) (630) 1,516 $ 38.28 30.79 30.69 31.30 34.40 31.63 32.12 27.36 31.09 27.08 27.65 34.12 33.26 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. The outstanding non-Treasury RSUs awarded to executive officers prior to fiscal 2022 have vesting conditions that are dependent upon the attainment of strategic performance objectives which are set based on the Company’s long- term strategic plan. The outstanding non-Treasury RSUs awarded to executive officers in fiscal 2022 have vesting conditions that are dependent upon the financial performance and share price of the Company relative to a benchmark group of North American publicly listed companies. In addition, up to two times the actual number of non- Treasury RSUs awarded can vest if exceptional financial performance is achieved. As at December 31, 2023 and January 1, 2023, none of the outstanding non-Treasury RSUs were vested. The compensation cost related to non-Treasury RSUs included in operating income for fiscal 2023 was an expense of $22.9 million (2022 - $27.8 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. GILDAN 2023 REPORT TO SHAREHOLDERS 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. SHARE-BASED COMPENSATION (continued): (d) 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. Holders of deferred share units are entitled to dividends declared by the Company which are recognized in the form of additional awards equivalent in value to the dividends paid on common shares. 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, 2023, there were 410,646 (January 1, 2023 - 385,403) DSUs outstanding at a value of $13.6 million (January 1, 2023 - $10.6 million). This amount is included in accounts payable and accrued liabilities based on a fair value per deferred share unit of $33.06 (January 1, 2023 - $27.40). 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 2023 was $2.0 million (2022 - $2.5 million). Changes in outstanding DSUs were as follows: DSUs outstanding, beginning of fiscal year Granted Granted for dividends declared Redeemed DSUs outstanding, end of fiscal year (e) Employee share purchase plans: 2023 385 80 10 (64) 411 2022 313 82 7 (17) 385 The Company has employee share purchase plans which allow eligible employees to authorize payroll deductions of up to 10% of their salary to purchase common shares of the Company at a price of 90% of the then current share price as defined in the plans from Treasury. 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, 2023, 4,377,663 common shares remained authorized for future issuance under the plans. Included as compensation costs in selling, general and administrative expenses is $0.2 million (2022 - $0.1 million) relating to the employee share purchase plans. 17. 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 2023 68,460 $ 151,905 110,026 330,391 $ $ $ 2023 $ 583,860 $ 27,118 52,114 $ 663,092 $ 2022 78,520 147,075 100,663 326,258 2022 631,619 32,401 33,608 697,628 GILDAN 2023 REPORT TO SHAREHOLDERS 104 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. SUPPLEMENTARY INFORMATION RELATING TO THE NATURE OF EXPENSES (continued): (c) Cost of sales: Included in cost of sales for the year ended December 31, 2023 are the following items: • • An expense of $12.3 million related to the write-down of inventory to net realizable value. Net insurance gain of $3.1 million primarily related to accrued insurance recoveries at replacement cost value for damaged equipment in excess of the write-off of the net book value of property plant and equipment. Included in cost of sales for the year ended January 1, 2023 are the following items: • • An expense of $19.7 million related to the write-down of inventory to net realizable value. Net insurance gains of $25.9 million, related to the two hurricanes which occurred in Central America in November 2020. The net insurance gain reflected costs of $7.0 million, (mainly attributable to equipment repairs, and other costs and charges), which were more than offset by related accrued insurance recoveries of $32.9 million. The insurance gains primarily relate to accrued insurance recoveries at replacement cost value for damaged equipment in excess of the write-off of the net book value of property plant and equipment. (d) Government assistance: During the year ended December 31, 2023 an amount of $19.6 million (2022 - $18.1 million) was recognized in cost of sales in the consolidated statement of earnings and comprehensive income relating to government assistance for production costs. (e) Sale and leaseback During the first quarter of fiscal 2023, the Company entered into an agreement to sell and leaseback one of its distribution centres located in the U.S. The proceeds of disposition of $51.0 million, which represents the fair value of the distribution centre, were recognized in the consolidated statement of cash flows as proceeds from sale and leaseback and other disposals of property, plant and equipment within investing activities. The Company recognized a right-of-use asset of $3.9 million and a lease obligation of $15.5 million at inception. In addition, a pre-tax gain on sale of $25.0 million ($15.5 million after tax) was recognized in the consolidated statements of earnings and comprehensive income in Gain on sale and leaseback. (f) Net insurance gains During the second quarter of fiscal 2023, the Company finalized an agreement with the insurer to close its insurance claims related to the two hurricanes which occurred in Central America in November 2020, and received a final insurance claims payment of $74.0 million, relating to the business interruption portion of its claims. This payment resulted in the recognition of a corresponding gain in the Company’s consolidated statement of earnings and comprehensive income in Net insurance gains. GILDAN 2023 REPORT TO SHAREHOLDERS 105 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. RESTRUCTURING AND ACQUISITION-RELATED COSTS: Restructuring and acquisition-related costs are presented in the following table, and are comprised of costs directly related to significant exit activities, including 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 Net loss (gain) on disposal, write-downs and accelerated depreciation of property, plant and equipment, right-of-use assets and computer software related to exit activities Acquisition-related transaction costs 2023 2022 $ 16,638 $ 10,936 971 2,179 18,142 46 $ 45,762 $ (3,259) 588 479 Restructuring and acquisition-related costs in fiscal 2023 related to the following: $27.5 million primarily for the consolidation and closure of manufacturing facilities in Central America in the second quarter of 2023, $11.4 million related to the closure of a yarn-spinning facility in the U.S. in the fourth quarter of fiscal 2023, $3.7 million related to the December 2022 closure of a yarn-spinning plant in the U.S. and the exit cost from terminating a lease on a previously closed yarn facility, and $3.2 million in other costs, including costs incurred to complete restructuring activities that were initiated in fiscal 2022. Restructuring and acquisition-related costs in fiscal 2022 related to the following: $4.8 million for the closure of a yarn- spinning plant in the U.S, $2.6 million in accelerated depreciation of right-of-use assets relating to facilities no longer in use, $0.6 million in employee termination and benefit costs related to the closure of a distribution center in the U.S., as well $1.9 million related to the completion of previously initiated restructuring activities, partly offset by a gain of $6.0 million on business dispositions (refer to note 5 of the consolidated financial statements), and a gain of $3.4 million on the sale of a former manufacturing facility in Mexico. GILDAN 2023 REPORT TO SHAREHOLDERS 106 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. 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 statutory tax rate Income taxes at applicable statutory rate Increase (decrease) in income taxes resulting from: Effect of different tax rates and additional income taxes in other jurisdictions Income tax and other adjustments related to prior taxation years Recognition of previously de-recognized tax benefits related to tax losses and temporary differences 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 2023 2022 $ 564,183 $ 566,428 26.5 % 26.5 % 149,508 150,103 (141,387) (2,824) (132,436) 321 — 24,798 508 30,603 $ (9,938) 13,151 3,687 24,888 5.4 % 4.4 % $ The Company’s applicable statutory tax rate is the Canadian combined rate applicable in the jurisdictions in which the Company operates. The details of income tax expense are as follows: Current income taxes, includes a recovery of $2,848 (2022 - $1,283) relating to prior taxation years Deferred income taxes: Origination and reversal of temporary differences Recognition of previously de-recognized tax benefits related to tax losses and temporary differences Non-recognition of tax benefits related to tax losses and temporary differences Adjustments relating to prior taxation years 2023 2022 $ 20,456 $ 25,039 (14,645) (4,968) — 24,768 24 10,147 (9,938) 13,151 1,604 (151) 24,888 Total income tax expense $ 30,603 $ In fiscal 2023, the Company re-recognized nil (2022 - $9.9 million) of previously de-recognized (in fiscal 2017 pursuant to the organizational realignment plan) deferred income tax assets in the U.S. relating to deferred income tax assets that are now more likely than not to be recovered. GILDAN 2023 REPORT TO SHAREHOLDERS 107 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. 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: December 31, 2023 January 1, 2023 Deferred income tax assets: Non-capital losses Non-deductible reserves and accruals Property, plant and equipment Lease liability Intangible assets Other items Unrecognized deferred income tax assets Deferred income tax assets Deferred income tax liabilities: Right-of-use assets Property, plant and equipment Deferred income 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 Right of use assets and lease liability Intangible assets Other Unrecognized deferred income tax assets Business acquisitions Other Balance, end of fiscal year, net $ 119,187 $ 111,792 14,837 16,063 14,800 3,427 10,189 171,108 (105,658) 65,450 15,233 17,470 16,448 6,737 10,202 185,277 (130,425) 54,852 $ $ $ $ $ (12,312) $ (36,687) (48,999) $ (11,102) (38,348) (49,450) 5,853 $ 16,000 2023 2022 $ 16,000 $ 17,726 7,394 396 3,069 438 3,310 14 (24,768) (10,147) 10,133 (11,218) 773 24 888 2,459 (2,908) 151 — — 5,853 $ (1,754) (123) 16,000 $ Deferred income tax assets and liabilities are presented in the statement of financial position as follows: Deferred income tax assets Deferred income tax liabilities Deferred income taxes December 31, 2023 January 1, 2023 $ $ 23,971 $ 18,118 5,853 $ 16,000 — 16,000 GILDAN 2023 REPORT TO SHAREHOLDERS 108 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. INCOME TAXES (continued): As at December 31, 2023, 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 $130.4 million, for which no deferred tax asset has been recognized (January 1, 2023 - $105.7 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 2027 and 2043. The recognized deferred tax asset related to loss carryforwards is supported by projections of future profitability of the Company. The Company has unrecognized deferred income tax liabilities for the undistributed profits of subsidiaries operating in foreign jurisdictions, for which it 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, 2023, a deferred income tax liability of approximately $70 million would result from the recognition of the taxable temporary differences of approximately $650 million. Pillar Two legislation has been enacted in Belgium and the United Kingdom, jurisdictions in which subsidiaries of the Company operate. In those jurisdictions, the Pillar Two legislation includes an income inclusion rule and a domestic minimum top-up tax, which will be effective for fiscal years beginning on or after December 31, 2023. Belgium has also enacted the undertaxed profits rule, which will be effective for fiscal years beginning on or after December 31, 2024. The Company’s subsidiaries in Belgium and the United Kingdom are subject to an effective tax rate of at least 15%. In addition, these subsidiaries do not have an ownership interest in any entities operating in low-taxed jurisdictions. Consequently, we do not expect the income inclusion rule and the domestic minimum top-up tax to have a materially adverse impact on the Company’s overall effective tax rate. However, under Belgium’s undertaxed profit rule, the Company’s profits derived from its operations in low tax jurisdictions, particularly Barbados (where the Company is subject to an effective tax rate lower than 15%), would become subject to a Pillar Two top-up tax in Belgium for its fiscal year starting December 29, 2025 unless other jurisdictions enact Pillar Two legislation. The Company operates in certain jurisdictions that are planning to enact Pillar Two legislation in 2024, which, if enacted, would take priority over Belgium’s undertaxed profit rule to tax the Company’s profits derived from its operations in low tax jurisdictions. Specifically, Canada has released draft Pillar Two legislation that would implement an income inclusion rule and a domestic minimum top-up tax effective for fiscal years that begin on or after December 31, 2023. Canada’s proposed income inclusion rule would apply to the Company’s profits derived from its operations in low tax jurisdictions, particularly in Barbados, where the majority of the Company’s worldwide profits are earned, and would subject those profits to an effective tax rate of 15% for fiscal years beginning on or after December 31, 2023. Furthermore, Barbados also released draft legislation in response to Pillar Two which would effectively subject the Company’s profits in Barbados to an effective tax rate of approximately 15% for fiscal years beginning on or after January 1, 2024. Should Canada or Barbados enact their proposed legislation, the Company’s profit in Barbados would be subject to an effective tax rate of 15% and would render Belgium’s undertaxed profit rule inapplicable. In any case, if Pillar Two legislation would have applied in 2023, the Company’s average effective tax rate would have been approximately 18%. The Company is closely monitoring the developments in the various jurisdictions in which it operates, including specific implementation details related to Pillar Two and other unrelated legislation or programs in order to continue to assess the overall impact of such legislation on the Company’s effective tax rate and operating results. GILDAN 2023 REPORT TO SHAREHOLDERS 109 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. 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: 2023 2022 $ 533,580 $ 541,540 175,938 $ 3.03 $ 184,128 2.94 Basic weighted average number of common shares outstanding 175,938 184,128 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 286 176,224 $ 3.03 $ 404 184,532 2.93 Excluded from the above calculation for the year ended December 31, 2023 are 282,737 stock options (2022 - 282,737) and nil Treasury RSUs (2022 - 25,614) which were deemed to be anti-dilutive. 21. DEPRECIATION AND AMORTIZATION: Depreciation of property, plant and equipment (note 9) Depreciation of right-of-use assets (note 10) Adjustment for the variation of depreciation included in inventories at the beginning and end of the year Amortization of intangible assets, excluding software (note 11) Amortization of software (note 11) Depreciation and amortization included in net earnings 2023 $ 101,161 $ 13,356 (6,716) 8,275 5,568 121,644 $ $ 2022 102,314 14,777 (11,317) 13,755 5,397 124,926 GILDAN 2023 REPORT TO SHAREHOLDERS 110 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22. SUPPLEMENTAL CASH FLOW DISCLOSURE: (a) Adjustments to reconcile net earnings to cash flows from operating activities - other items: Unrealized net (gain) loss on foreign exchange and financial derivatives $ (484) $ Timing differences between settlement of financial derivatives and transfer of deferred gains and losses in accumulated OCI to inventory and net earnings Other non-current assets Other non-current liabilities 6,250 (11,787) (8,021) (14,042) $ $ 2023 2022 (352) (11,253) 1,654 6,989 (2,962) (b) Variations in non-cash transactions: 2023 2022 Net additions to property, plant and equipment and intangible assets included in accounts payable and accrued liabilities $ (7,775) $ 1,522 Proceeds on disposal of property, plant and equipment and computer software included in other current assets Additions to right-of-use assets included in lease obligations Shares repurchases for cancellation included in accounts payable and accrued liabilities 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 Deferred compensation credited to contributed surplus Non-cash ascribed value credited to contributed surplus for dividends attributed to restricted share units (446) 16,717 157 2,960 9,951 (5,299) 29,247 (2,075) 8,996 (2,110) 1,712 1,497 (c) Changes in working capital balances: Trade accounts receivable Income taxes Inventories Prepaid expenses, deposits and other current assets Accounts payable and accrued liabilities 2023 2022 $ (161,893) $ 77,940 (4,841) (1,571) 143,215 (448,838) (1,956) (58,993) 29,915 35,460 $ (84,468) $ (307,094) GILDAN 2023 REPORT TO SHAREHOLDERS 111 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23. 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 Termination benefits(1) Share-based payments 2023 5,950 $ 199 4,431 18,376 28,956 $ 2022 7,894 181 — 24,826 32,901 $ $ (1) As a result of the termination of the employment of Mr. Glenn J. Chamandy as President and Chief Executive Officer (CEO) and Director of the Company, the Company recognized a net charge of $4.4 million during the fourth quarter of fiscal 2023. The amounts included in accounts payable and accrued liabilities for share-based compensation awards to key management personnel were as follows: DSUs Other: December 31, 2023 January 1, 2023 $ 13,576 $ 10,560 During fiscal 2023, the Company incurred expenses for aircraft and other services of $1.6 million (2022 - $1.9 million), with companies controlled by the former President and Chief Executive Officer of the Company. The payments made are in accordance with the terms of the agreement established and agreed to by the related parties. As at December 31, 2023, the amount in accounts payable and accrued liabilities related to the airplane usage and other services was $0.3 million (January 1, 2023 - $0.1 million). 24. COMMITMENTS, GUARANTEES AND CONTINGENT LIABILITIES: (a) Claims and litigation: The Company is a party to claims and litigation arising in the normal course of operations. The Company does not expect the resolution of these matters to have a material adverse effect on the financial position or results of operations of the Company. (b) Guarantees: The Company, and some of its subsidiaries, have granted financial guarantees, irrevocable standby letters of credit, and surety bonds to third parties to indemnify them in the event the Company and some of its subsidiaries do not perform their contractual obligations. As at December 31, 2023, the maximum potential liability under these guarantees was $131.5 million (January 1, 2023 - $153.0 million), of which $15.2 million was for surety bonds and $116.3 million was for financial guarantees and standby letters of credit (January 1, 2023 - $17.3 million and $135.7 million, respectively). As at December 31, 2023, 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 2023 REPORT TO SHAREHOLDERS 112 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25. 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 a capital structure that reflects a target ratio of financial leverage as noted below. 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 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. 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. Adjusted EBITDA also excludes impairment of goodwill and intangible assets and reversal of impairments on intangible assets, net insurance gains related to the two hurricanes which impacted the Company’s operations in Central America, and other adjustments which are considered to be of a non-recurring nature. The Company has set a fiscal year-end net debt leverage target ratio of one to two times adjusted EBITDA. As at December 31, 2023, the Company’s net debt leverage ratio was 1.5 times (January 1, 2023 - 1.1 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 or approve share repurchase programs, 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. On February 21, 2023, the Board of Directors approved a 10% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.186 per share. The Company paid dividends of $131.8 million during the year ended December 31, 2023, representing dividends declared per common share of $0.744. On February 20, 2024, the Board of Directors approved a 10% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.205 per share, on all of the issued and outstanding common shares of the Company, rateably and proportionately, to the holders of record on March 13, 2024. The Company repurchased for cancellation a total of 11,830,618 common shares under its NCIB programs for a total cost of $370.4 million during the year ended December 31, 2023. The Company is not subject to any capital requirements imposed by a regulator. GILDAN 2023 REPORT TO SHAREHOLDERS 113 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT: Due to the nature of the activities that the Company carries out and as a result of holding financial instruments, 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 its common shares under the Company's share-based compensation plans. The Company may periodically use derivative financial instruments to manage risks related to fluctuations in foreign exchange rates, commodity prices, interest rates, and the market price of its own common shares. The use of derivative financial instruments is governed by the Company’s Financial Risk Management Policy approved by the Board of Directors and is administered by the Financial Risk Management Committee. The Financial Risk Management Policy of the Company stipulates that derivative financial instruments should only be used to hedge or mitigate an existing financial exposure that constitutes a commercial risk to the Company, and if the derivatives are determined to be the most efficient and cost effective means of mitigating the Company’s exposure to liquidity risk, foreign currency risk, and interest rate risk, as well as risks arising from commodity prices. Hedging limits, as well as counterparty credit rating and exposure limitations are defined in the Company’s Financial Risk Management Policy, depending on the type of risk that is being mitigated. Derivative financial instruments are not used for speculative purposes. At the inception of each designated hedging derivative contract, the Company formally designates and documents the hedging relationship and its 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 the Company will assess whether the hedging relationship meets the hedge effectiveness requirements, including its analysis of the sources of hedge ineffectiveness and how they determine the hedge ratio. 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. The Company's credit risk may also be exacerbated during periods of weak general economic and financial conditions. The Company's trade accounts receivable and credit exposure fluctuate throughout the year based on the seasonality of its 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. 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. The receivables purchase agreement, which allows for the sale of a maximum of $400 million of accounts receivables at any one time, expires on June 18, 2024, subject to annual extensions. The Company’s credit risk for trade accounts receivables is concentrated as the majority of its sales are to a relatively small group of wholesale distributors and mass-market and other retailers. As at December 31, 2023, the Company’s ten largest trade debtors accounted for 81% of trade accounts receivable (2022 - 72%). The Company’s main trade debtors 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 Canada, Europe, Asia-Pacific, and Latin America. The Company makes an assessment of whether accounts receivable are collectable, based on an expected credit loss model which factors in changes in credit quality since the initial recognition of trade accounts receivable based on customer risk categories. Credit quality is assessed by taking into account the financial condition and payment history of the Company's customers, and other factors. GILDAN 2023 REPORT TO SHAREHOLDERS 114 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (continued): Credit risk (continued) In determining its allowance for expected credit losses, the Company applies the simplified approach per IFRS 9, Financial Instruments, and calculates expected credit losses based on lifetime expected credit losses. The Company uses a provision matrix, which segregates its customers by their economic characteristics and allocates expected credit loss rates based on days past due of its trade receivables. Expected credit loss rates are based on the Company’s historical credit loss experience, adjusted for forward-looking factors of the economic environment. Most of the Company’s customers have been transacting with the Company or its subsidiaries for several years. Certain wholesale distributors 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 mass-market and other retailer customers vary significantly. 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 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 historical credit loss experience will continue. The Company’s exposure to credit risk for trade accounts receivable by geographic area was as follows as at: Trade accounts receivable by geographic area: United States Canada Europe and other Total trade accounts receivable The aging of trade accounts receivable balances was as follows as at: 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 expected credit losses Total trade accounts receivable December 31, 2023 January 1, 2023 $ $ 355,521 $ 19,672 37,305 412,498 $ 198,949 13,279 36,557 248,785 December 31, 2023 January 1, 2023 $ $ 399,317 $ 12,321 6,150 2,147 3,728 423,663 (11,165) 412,498 $ 239,218 10,842 3,907 6,837 3,375 264,179 (15,394) 248,785 GILDAN 2023 REPORT TO SHAREHOLDERS 115 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (continued): Liquidity risk Liquidity risk is defined as the potential risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages its liquidity risk through the management of its capital structure and financial leverage, as outlined in note 25 to these consolidated financial statements. In addition, the Company manages this risk by continuously monitoring actual and projected cash flows, taking into account the seasonality of its sales and cash receipts and the expected timing of capital expenditures. In managing its liquidity risk, the Company relies on cash resources, debt, and cash flows generated from operations to satisfy its financing requirements. The Company may also require access to capital markets to support its operations as well as to achieve its strategic plans. Any impediments to the Company's ability to continue to meet the covenants and conditions contained in its long-term debt agreements as well as the Company's ability to access capital markets, the failure of a financial institution participating in its revolving long-term bank credit facilities, or an adverse perception in capital markets of the Company's financial condition or prospects could have a material impact on its future financing capability. In addition, the Company's access to capital markets and to financing at reasonable terms and interest rates could be influenced by the economic and credit market environment, including a potential prolonged economic downturn and recessions. The following tables present a maturity analysis based on contractual maturity date of the Company's financial liabilities. All commitments have been reflected in the consolidated statements of financial position except for purchase obligations, as well as minimum royalty payments, which are included in the table of contractual obligations below. The amounts are the contractual undiscounted cash flows. (in $ millions) amount cash flows 1 year and 3 years and 5 years 5 years Carrying Contractual Less than Between 1 Between 4 More than Accounts payable and accrued liabilities $ 408.3 $ Long-term debt Purchase and other obligations Lease obligations Total contractual obligations 985.0 — 98.1 408.3 $ 985.0 502.3 136.2 408.3 $ 300.0 327.8 20.8 $ 1,491.4 $ 2,031.8 $ 1,056.9 $ — $ 450.0 99.7 39.7 589.4 $ — $ 235.0 74.8 26.3 336.1 $ — — — 49.4 49.4 As disclosed in note 24, the Company has 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, 2023, the maximum potential liability under these guarantees was $131.5 million, of which $15.2 million was for surety bonds and $116.3 million was for financial guarantees and standby letters of credit. 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. GILDAN 2023 REPORT TO SHAREHOLDERS 116 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (continued): Foreign currency risk (continued) The Company also incurs a portion of its manufacturing costs in foreign currencies, primarily payroll costs paid in Honduran Lempiras, Dominican Pesos, Nicaraguan Cordobas, as well as in Bangladeshi Taka. Significant changes in these currencies relative to the U.S. dollar exchange rate in the future, could have a significant impact on the Company's 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, 2023, consisting primarily of contracts to sell and buy Canadian dollars, sell Euros, sell Pounds sterling, sell Australian dollars, and sell Mexican pesos in exchange for U.S. dollars. The outstanding contracts and other foreign exchange contracts that were settled during fiscal 2023 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, the Company has established a ratio of 1:1 for all foreign exchange hedges. 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, 2023 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, 2023 CAD GBP EUR AUD MXN CNY BDT $ — $ 2.6 $ 5.9 $ 2.7 $ 2.7 $ 2.7 $ 6.9 18.7 1.0 21.3 3.5 6.2 0.6 — 0.4 — 1.1 — 0.1 0.1 8.4 (1.6) (13.0) (6.6) (3.2) (6.6) (0.6) (0.7) 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 (decreased) increased earnings and other comprehensive income as follows, assuming that all other variables remained constant: (in U.S. $ millions) For the year ended December 31, 2023 CAD GBP EUR AUD MXN CNY BDT Impact on earnings before income taxes $ (0.6) $ (0.1) $ (1.1) $ (0.3) $ (0.3) $ (0.1) $ (0.1) Impact on other comprehensive (loss) income before income taxes 0.4 1.5 2.0 0.5 0.8 — — An assumed 5 percent weakening of the U.S. dollar during the year ended December 31, 2023 would have had an equal but opposite effect on the above currencies to the amounts shown above, assuming that all other variables remain constant. GILDAN 2023 REPORT TO SHAREHOLDERS 117 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (continued): 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 would affect the Company’s annual raw material costs by approximately $6.0 million, based on current production levels. In addition, fluctuations in crude oil or petroleum prices also affect the Company's energy consumption costs and can influence transportation costs and the cost of related items used in its business, including other raw materials the Company uses to manufacture its products such as chemicals, dyestuffs, and trims. The Company generally purchases these raw materials at market prices. The Company also 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 these consolidated financial statements in accordance with the accounting standards applicable to financial instruments. During fiscal 2023, the Company entered into commodity derivative contracts as described in note 15. The underlying risk of the commodity derivative contracts is identical to the hedged risk and accordingly, the Company has established a ratio of 1:1 for all commodity derivative hedges. Due to a strong correlation between commodity future contract prices and its purchased costs, the Company did not experience any significant ineffectiveness on its hedges, other than as disclosed in note 15(d). Interest rate risk The Company is subject to interest rate risk arising from its $300 million term loan, $300 million delayed draw term loan, amounts drawn on its $1 billion revolving long-term bank credit facilities, and its $50 million unsecured notes payable, all of which bear interest at adjusted term SOFR plus a spread. The Company generally fixes the rates for adjusted Term SOFR 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 floating-to-fixed interest rate swaps outstanding to hedge up to $225 million of 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 and qualify for hedge accounting. Refer to note 15(b) for additional information. As discussed in note 12 of these consolidated financial statements, the Company amended its revolving facility and term loan facility to replace LIBOR references with Term Secured Overnight Financing Rate (‘‘Term SOFR’’). In addition, the notes purchase agreement previously amended to include LIBOR fallback provisions to replace LIBOR was amended during the third quarter of fiscal 2023 to Term SOFR. In addition, the Company and its counterparties under interest rate swap agreements negotiated the substitution of reference rates in such agreements. GILDAN 2023 REPORT TO SHAREHOLDERS 118 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26. FINANCIAL RISK MANAGEMENT (continued): Interest rate risk (continued): Based on the value of interest-bearing financial instruments during the year ended December 31, 2023, an assumed 0.5 percentage point increase in interest rates during such period would have decreased earnings before income taxes by $3.4 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. 27. DISAGGREGATION OF REVENUE: Net sales by major product group were as follows: Activewear Hosiery and underwear Net sales were derived from customers located in the following geographic areas: United States Canada International 2023 2022 2,667,958 $ 527,953 3,195,911 $ 2,762,533 477,949 3,240,482 2023 2022 2,858,120 $ 112,426 225,365 3,195,911 $ 2,846,810 122,518 271,154 3,240,482 $ $ $ $ GILDAN 2023 REPORT TO SHAREHOLDERS 119 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 28. ENTITY-WIDE DISCLOSURES: Property, plant and equipment, right-of-use-assets, intangible assets, and goodwill, are allocated to geographic areas as follows: United States Canada Honduras Caribbean Asia-Pacific Other December 31, 2023 January 1, 2023 $ 542,005 $ 60,519 350,003 484,373 320,142 32,016 1,789,058 $ $ 560,854 59,604 380,825 440,511 223,307 29,654 1,694,755 Customers accounting for at least 10% of total net sales for the fiscal years ended December 31, 2023 and January 1, 2023 were as follows: Customer A Customer B Customer C 2023 22.4 % 16.3 % 7.6 % 2022 18.1 % 18.6 % 10.7 % The Company manages its business on the basis of one reportable operating segment. GILDAN 2023 REPORT TO SHAREHOLDERS 120 s r e d l o h e r a h S o t t r o p e R 3 2 0 2 2 0 2 3 REPORT TO SHAREHOLDERS 

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