Document

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Report of Foreign Private Issuer

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

the Securities Exchange Act of 1934



For the month of: November 2018		Commission File Number: 1-14830

GILDAN ACTIVEWEAR INC.

(Translation of Registrant’s name into English)

600 de Maisonneuve Boulevard West

(Address of Principal Executive Offices)

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



Form 20-F o		Form 40-F þ

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

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

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



	GILDAN ACTIVEWEAR INC.
Date: November 1, 2018	By:	/s/ Lindsay Matthews
		Name:	Lindsay Matthews
		Title:	Vice-President, General Counsel and Corporate Secretary



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



Exhibit		Description of Exhibit

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



	MANAGEMENT'S DISCUSSION AND ANALYSIS

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

This MD&A comments on our operations, financial performance, and financial condition as at and for the three and nine months ended September 30, 2018. All amounts in this MD&A are in U.S. dollars, unless otherwise noted. For a complete understanding of our business environment, trends, risks and uncertainties, and the effect of accounting estimates on our results of operations and financial condition, this MD&A should be read in conjunction with Gildan’s unaudited condensed interim consolidated financial statements as at and for the three and nine months ended September 30, 2018, and the related notes, and with our MD&A for the year ended December 31, 2017 (2017 Annual MD&A).

In preparing this MD&A, we have taken into account all information available to us up to October 31, 2018, the date of this MD&A. The unaudited condensed interim consolidated financial statements as at and for the three and nine months ended September 30, 2018 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 October 31, 2018.

All financial information contained in this MD&A and in the unaudited condensed interim consolidated financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), except for certain information discussed in the section entitled “Definition and reconciliation of non-GAAP financial measures” in this MD&A.

Additional information about Gildan, including our 2017 Annual Information Form, is available on our website at www.gildancorp.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov.

2.0 CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this MD&A constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations and are subject to important risks, uncertainties, and assumptions. This forward-looking information includes, amongst others, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates, and intentions. In particular, information appearing under the headings “Our business - Our operations”, “Strategy and objectives”, "Operating results", “Liquidity and capital resources - Long-term debt and net indebtedness”, and “Outlook” contain forward looking statements. Forward-looking statements generally can be identified by the use of conditional or forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”, “foresee”, “believe”, or “continue”, or the negatives of these terms or variations of them or similar terminology. We refer you to the Company’s filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the risks described under the “Financial risk management”, “Critical accounting estimates and judgments”, and “Risks and uncertainties” sections of this MD&A and of the 2017 Annual MD&A for a discussion of the various factors that may affect the Company’s future results. Material factors and assumptions that were applied in drawing a conclusion or making a forecast or projection are also set out throughout this document.

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

our ability to implement our growth strategies and plans;

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

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

changes in general economic and financial conditions globally or in one or more of the markets we serve;

our reliance on a small number of significant customers;

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

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

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

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

the impact of climate, political, social, and economic risks in the countries in which we operate or from which we source production;

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

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

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

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

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

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

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

changes in third-party licensing arrangements and licensed brands;

our ability to protect our intellectual property rights;

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

an actual or perceived breach of data security;

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

changes in accounting policies and estimates; and

exposure to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk, and interest rate risk, as well as risks arising from commodity prices.

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.

QUARTERLY REPORT - Q3 2018 P.3



	MANAGEMENT'S DISCUSSION AND ANALYSIS

Gildan is a leading manufacturer of everyday basic apparel which markets its products in North America, Europe, Asia Pacific, and Latin America, under a diversified portfolio of Company-owned brands, including Gildan®, American Apparel®, Comfort Colors®, Gildan® Hammer™, Gold Toe®, Anvil®, Alstyle®, Secret®, Silks®, Kushyfoot®, Secret Silky®, Therapy Plus™, Peds® and MediPeds®, and under the Under Armour® brand through a sock licensing agreement providing exclusive distribution rights in the United States and Canada. Gildan designs, manufactures, and markets activewear, underwear, socks, hosiery, and legwear products. Our products are sold to wholesale distributors, screenprinters or embellishers, as well as to retailers that sell to consumers through their physical stores and/or e-commerce platforms. In addition, we sell directly to consumers through our own direct-to-consumer platforms.

Since its formation, the Company has made significant capital investments in developing its own large-scale, low-cost vertically integrated supply chain, encompassing yarn production, textile manufacturing, and final product assembly. The vast majority of Gildan's manufacturing operations are internally run and are primarily located in Central America, the Caribbean Basin, North America, and Bangladesh. Owning and operating the vast majority of our manufacturing facilities allows us to exercise tighter control over our manufacturing processes and to ensure adherence to high standards for environmental and social responsibility practices throughout our supply chain.

3.2 Operating segment reporting

Effective January 1, 2018, the Company consolidated its organizational structure and implemented executive leadership changes to better leverage its go-to-market strategy across its brand portfolio and to drive greater operational efficiency across the organization. The Company combined its Printwear and Branded Apparel operating businesses into one consolidated divisional operating structure centralizing senior management, as well as marketing, merchandising, sales, distribution, and administrative functions to better position the Company to capitalize on growth opportunities within the evolving industry landscape. The combination of the two operating businesses is intended to drive a leaner and more streamlined organization, which is expected to provide operational efficiencies as the Company leverages a common infrastructure to maximize the growth potential of its brands. Consequently, the Company has transitioned to a single reporting segment.

3.3.1 Brands, products and customers

We manufacture and market a broad range of basic apparel products across a diversified portfolio of brands sold to a customer base which includes wholesale distributors, screenprinters/embellishers, retailers, and individual consumers.

Our primary product categories include activewear, underwear, and hosiery, the vast majority of which we manufacture. Some of our brands also extend to other categories such as intimates, shapewear, denim, and peripheral or fringe products like caps, totes, towels, and other accessories which are primarily sourced through third-party suppliers.

The majority of our activewear products are sold as “blanks” or undecorated, without imprints or embellishment. Our activewear products are primarily sold to wholesale distributors who buy our products and sell the blanks to screenprinters/embellishers who decorate the products with designs and logos, and in turn sell the imprinted activewear into a highly diversified range of end-use markets. These include educational institutions, athletic dealers, event merchandisers, promotional product distributors, charitable organizations, entertainment promoters, travel and tourism venues, and retailers. The activewear products have diverse applications, such as serving as work or school uniforms or athletic team wear or simply conveying individual, group, and team identity. In addition to activewear, as part of our basic family apparel product offering we sell socks and underwear for men, ladies, and kids, as well as other hosiery products such as pantyhose and leggings, through various distribution tiers within the retail channel, including mass retailers and dollar stores, department stores, national chains, sports specialty stores, craft stores, food and drug retailers, and price clubs, all of which sell to consumers. In addition, our products are sold to consumers through the e-commerce platforms of our retail customers' and our own websites. The Company also manufactures products for select leading global athletic and lifestyle consumer brands against which our brands do not compete.

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

The following table summarizes our product and brand offerings:



Primary product categories	Product-line details	Brands
Activewear	T-shirts, fleece tops and bottoms, or sport shirts	Gildan®, Gildan Performance®, Gildan Platinum®⁽¹⁾, Gildan® Hammer™, Smart Basics®, Comfort Colors®⁽²⁾, American Apparel®, Anvil®, Alstyle®⁽²⁾, Gold Toe®, Mossy Oak®⁽³⁾
Hosiery	athletic, dress, casual and workwear socks, liner socks, socks for therapeutic purposes^(5),sheer panty hose⁽⁶⁾, tights⁽⁶⁾, or leggings⁽⁶⁾	Gildan®, Gildan Platinum®⁽¹⁾, Smart Basics®, Under Armour®⁽⁴⁾, Gold Toe®, PowerSox®, GT a Gold Toe Brand®, Silver Toe®, Signature Gold by Goldtoe®, Peds®, MediPeds®, Kushyfoot®⁽¹⁾, Therapy Plus®⁽¹⁾, All Pro®, Mossy Oak®^(3),Secret®⁽¹⁾, Silks®⁽¹⁾, Secret Silky®, Peds®, American Apparel®
Underwear	men's and boys' underwear (tops and bottoms) or ladies panties	Gildan®, Gildan Platinum®⁽¹⁾,Smart Basics®, American Apparel®
Intimates	ladies shapewear, intimates, or accessories	Secret®⁽¹⁾, American Apparel®, Secret Silky®
Other	To round out our product offerings for certain brands, we also offer other products, including but not limited to denim, jackets, sweaters, bodysuits, skirts, dresses, accessories, which are mainly sourced through third-party suppliers

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

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

(3) Under license agreement - with worldwide distribution rights and exclusivity for certain product categories.

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

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

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

The vast majority of our products are manufactured in facilities that we own and operate. Our vertically integrated manufacturing operations include capital-intensive yarn-spinning, textile, sock, and sheer hosiery manufacturing facilities, as well as labour-intensive sewing plants. At our yarn-spinning facilities we convert cotton and other fibres into yarn. In our textile plants we convert yarn into fabric, dye and cut the fabric, and subsequently assemble the cut fabric into activewear and underwear garments primarily at sewing facilities which we operate in owned or leased premises. We also use third-party sewing contractors, although to a lesser extent, to satisfy some of our sewing requirements. In our integrated sock manufacturing facilities we convert yarn into finished socks. The majority of our sock production does not require sewing, as the equipment used in our facilities knit the entire sock with a seamless toe-closing operation.

Our yarn-spinning operations encompass seven facilities located in the United States, where we manufacture the majority of the yarn used to produce our products. We also use third-party yarn-spinning suppliers, primarily in the United States, to satisfy the remainder of our yarn requirements. Our largest manufacturing hub is in Central America, in Honduras, strategically located to efficiently service the quick replenishment requirements of our markets. In Honduras we have textile, sock, and sewing operations. We operate four large-scale, vertically integrated textile facilities at our Rio Nance complex and another vertically integrated textile facility in Honduras outside of the Rio Nance complex. The majority of our socks are produced at our Rio Nance complex in two hosiery manufacturing facilities. Sheer hosiery manufacturing is located in a facility in Canada. The majority of the cut goods produced in the textile facilities in Central America are assembled in our sewing facilities located in Honduras and Nicaragua, mainly in leased premises. Also in Central America, we have garment-dyeing operations, as well as screenprinting and decorating capabilities to support our sales to leading global athletic and lifestyle consumer brands. In the Caribbean Basin, we operate a large-scale, vertically integrated textile facility in the Dominican Republic and assemble the cut goods from that facility at our sewing facilities in the Dominican Republic and at dedicated third-party sewing contractors in Haiti. Another manufacturing hub is based in Mexico, where we operate a large integrated textile, sewing, and distribution facility, as well as cut and sew facilities. We are also developing third-party sewing contractor relationships in Mexico. In Bangladesh, we own and operate a smaller vertically integrated manufacturing facility for the production of activewear primarily for international markets. While we internally produce the vast majority of the products we sell, we also use third-party contractors to supplement our requirements.

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

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



	Canada	United States	Central America	Caribbean Basin	Mexico	Asia
Yarn-spinning facilities⁽¹⁾		• Clarkton, NC • Cedartown, GA • Columbus, GA (2 facilities) • Salisbury, NC (2 facilities) • Mocksville, NC
Textile facilities			• Honduras (5 facilities)	• Dominican Republic	• Agua Prieta	• Bangladesh
Garment dyeing facilities			• Honduras
Sewing facilities⁽²⁾			• Honduras (4 facilities) • Nicaragua (3 facilities)	• Dominican Republic (2 facilities)	• Ensenada • Hermosillo • Agua Prieta	• Bangladesh
Hosiery manufacturing facilities	• Montreal, QC		• Honduras (2 facilities)

(1) We also use third-party yarn-spinning suppliers, primarily in the U.S. to satisfy the remainder of our yarn requirements.

(2) We also use the services of third-party sewing contractors, primarily in Haiti, to satisfy the remainder of our sewing requirements.

3.3.3 Sales, marketing and distribution

Our primary sales and marketing office is located in Christ Church, Barbados, out of which we have established customer-related functions, including sales management, marketing, customer service, credit management, sales forecasting, and production planning, as well as inventory control and logistics. We also maintain other sales offices in the U.S. We distribute our products out of our Company-operated large distribution centres in the United States, in Eden, NC, Charleston, SC, Jurupa Valley, CA, Jacksonville, FL and out of smaller facilities in the U.S. and Canada, as well as out of Company-owned distribution facilities in Honduras and Mexico. To supplement some of our distribution needs, we use third-party warehouses in the U.S., Canada, Mexico, Colombia, Europe, and Asia. In order to drive more efficient distribution operations, some distribution facilities ship exclusively full-case and truckload orders, while other distribution facilities are geared to support direct-to-consumer shipping, which is typically smaller orders which require pick-and-pack capabilities.

3.3.4 Employees and corporate office

We currently employ over 51,000 employees worldwide. Our corporate head office is located in Montreal, Canada.

3.4 Competitive environment

The basic apparel market for our products is highly competitive. Over the last few years, changing market dynamics, such as the growth in on-line shopping, weaker store traffic trends, and overall store shelf space reductions driven by retailer store closures have intensified competition but at the same time presented opportunities for potential growth. For instance, the growth of on-line shopping has reduced barriers to entry and provided greater opportunity for new brands to emerge, as traditional brick and mortar space limitation is not a barrier on e-commerce platforms. At the same time, retailers and wholesale distributors have increasingly developed their own private label brands as a means of differentiation from their competitors.

Competition is generally based upon price, brand, quality, consistency of quality features, comfort, fit, style, and service. We believe we differentiate ourselves from our competition with our expertise in designing, constructing, and operating large-scale, vertically integrated, and strategically located manufacturing hubs. Our skill set in this respect and the significant capital investments we have made over the years in our manufacturing infrastructure allows us to operate efficiently, remain cost-competitive, maintain consistent product quality, and provide a reliable supply chain with short production/delivery cycle times. Continued investment and innovations in our manufacturing has also enabled us to deliver enhanced product features, further improving the value proposition of our product offering to our customers. Operating as a socially responsible manufacturer is also an important competitive advantage and is an increasingly important purchase consideration for our customers. Owning and operating the vast majority of our manufacturing

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

facilities allows us to exercise tighter control over our manufacturing processes and to ensure adherence to high standards for environmental and social responsibility practices throughout our supply chain. Distribution reach and capabilities are also key success factors, including the ability to provide quick and efficient fulfillment of large orders as well as small orders which are more typical in direct-to-consumer fulfillment. We have established efficient broad-based distribution operations to service the replenishment needs of all of our customers, be they wholesale distributors or big-box retailers, who purchase in large quantities, or consumers, who purchase in small quantities.

We face competition from large and smaller U.S.-based and foreign manufacturers or suppliers of basic family apparel. Among the larger competing North American-based manufacturers are Fruit of the Loom, Inc., a subsidiary of Berkshire Hathaway Inc., which competes through its own brand offerings and those of its subsidiary, Russell Corporation, as well as Hanesbrands Inc. (Hanesbrands). These companies manufacture out of similar geographies as the Company and compete primarily within the same basic apparel product categories in similar channels of distribution in North America and international markets as the Company. In socks and underwear, our competitors also include Garan Incorporated, Renfro Corporation, Jockey International, Inc., Kayser Roth Corporation, and Spanx, Inc. In addition, we compete with smaller U.S.-based competitors selling to or operating as wholesale distributors of imprintable activewear products, including Delta Apparel Inc., Color Image Apparel, Inc., Next Level Apparel, and Bella + Canvas, as well as Central American and Mexican manufacturers. Competing brands also include various private label brands controlled and sold by many of our customers, including wholesale distributors within the imprintables channel and retailers. More recently we are seeing an increase in private label offerings, particularly within the mass retail channel, replacing branded offerings.

4.0 STRATEGY AND OBJECTIVES

4.1 Driving market leadership in imprintable fashion basics

We intend to continue to pursue growth in imprintable fashion basics. While the majority of the products we manufacture and market are considered basic, non-fashion apparel and are replenishment-driven in nature, some of the brands under which we market our activewear products have more fashion and/or performance-driven elements. Within the imprintables channel, there are three brand positioning categories for activewear, namely “basics”, “fashion basics”, and “performance basics”. In basics, Gildan® is the leading brand. In more recent years, we have seen an acceleration of industry growth in the fashion basics and performance basics categories, due in part to end users shifting preference to lighter weight, softer fabrics (fashion basics), or garments offering attributes featuring moisture wicking and anti-microbial properties for long-lasting comfort and performance (performance basics). Fashion basics products are produced with higher quality cotton ring-spun yarns and/or blended yarn fibres and may feature more fitted silhouettes, side seam stitching, and stretch attributes, among other characteristics. Currently, our market share in the fashion and performance basics categories is not as high as in basics. Over the last few years, we have developed and acquired brands which are well positioned to drive growth in these categories. We have also invested in developing our own yarn-spinning manufacturing facilities, thereby securing our own cost-effective ring-spun yarn supply. In the fashion basics category, we sell our products under the Gildan® and Gildan® Hammer™ brands, as part of our opening-price-point offering, the Anvil® brand, the American Apparel® brand, which is positioned as a premium brand in fashion basics, and the Comfort Colors® brand, also a premium brand, featuring garment-dyed activewear products. In the performance category, we market our products under our Gildan Performance® brand offering. With strong brand positioning in these categories supported by cost-effective manufacturing operations, including yarn capabilities, we believe we are well positioned to drive further market share penetration within imprintable fashion and performance basics.

4.2 Leveraging brand portfolio across channels, geographies, and e-commerce platforms and capitalizing on private label program opportunities that fit within our business model

We are targeting to grow our sales by leveraging our brand portfolio across channels of distribution, geographical regions, and across our e-commerce infrastructure and the on-line platforms of our customers. In addition, we believe we can leverage our extensive distribution network and capabilities to broaden the customer base and reach of our brands. Growth in on-line shopping is changing the overall market landscape. Our channels of distribution are converging, accessibility to consumers and end-users through e-commerce is increasing, and "space" to market products on-line is not a constraining factor for growth as in the traditional brick and mortar retailer channel. Consequently, e-commerce is creating opportunities for our brands and is an area of focus and investment for the Company, including investments in enhancing direct-to-consumer distribution capabilities. At the same time, we are seeing a resurgence of private label brands by traditional retailers or wholesale distributors trying to differentiate their offerings and enhance profitability. While continuing to focus on our own brands, in light of the rising trend of retailers shifting focus to proprietary private label brands, the Company will evaluate opportunities to supply retailers with product for their own private label programs

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

depending on certain criteria, including size of program, financial return targets, duration or term of expiry of the agreement, and working capital investment requirements, among other factors of consideration. We have also developed strong relationships with, and are targeting to grow our sales as a supply chain partner to, a small number of select leading global athletic and lifestyle brands for which we manufacture products, but against which our brands do not compete directly.

4.3 Growing internationally

We are pursuing further growth in international markets where we estimate that the addressable market opportunity is large. Currently our sales outside the United States and Canada represent approximately 10% of our total consolidated net sales. Our market presence internationally is focused in Europe, Asia-Pacific, and Latin America. We intend to continue to pursue further sales growth by leveraging the extensive breadth of our North American product line to further develop and widen our international product offering. Our current sales base has been established primarily through the sale of products marketed under the Gildan® brand. We intend to leverage additional brands in our portfolio, such as the American Apparel® and Comfort Colors® brands, among others, across the international markets in which we compete by selling to wholesale distributors and screenprinters or embellishers, and directly to consumers through our own e-commerce platforms and international online retailers.

4.4 Further leveraging manufacturing infrastructure and enhancing distribution capabilities

We plan to continue to increase capacity to support our sales growth and to optimize our cost structure by investing in projects for cost reduction and further vertical integration. This will also support additional product quality enhancements. Specifically, we are currently investing in textile capacity and technology to enhance our capabilities in the production of fashion and performance garments, which we believe are products that present a greater opportunity for growth. We are also evaluating opportunities to optimize production in existing facilities, which may contribute to increased capacity or cost reduction opportunities. The Company's current plans in expanding its manufacturing capacity include the ramp up of its newest facility in Honduras, Rio Nance 6, and the further ramp-up of production at its Mexican facility in Agua Prieta which was acquired as part of the Alstyle acquisition, as well as additional expansion of certain existing facilities within our manufacturing operations.

We have established extensive distribution operations worldwide through internally managed and operated distribution centres and through third-party logistics providers. In the context of a market landscape where e-commerce is growing quickly and as the Company pursues this growth opportunity domestically and internationally, we are investing in enhancing our direct-to-consumer fulfillment capabilities and speed to market. At the same time, we are evaluating our current infrastructure for potential opportunities for consolidation to drive operational efficiencies and/or to extend our reach by establishing capabilities in various geographies.

4.5 Pursuing acquisitions to complement organic growth

We have established a capital allocation framework intended to enhance sales and earnings growth as well as shareholder returns. Beyond our dividend, our first priority for the use of free cash flow and debt financing capacity is completing complementary strategic acquisitions which meet our criteria. We have developed criteria for evaluating acquisition opportunities around three main considerations: (1) strategic fit; (2) ease of integration; and (3) financial targets, including return on investment thresholds, based on our risk-adjusted cost of capital. Beyond dividends and acquisitions, when appropriate, we intend to use excess cash to repurchase shares under normal course issuer bid programs. The Company has set a net debt leverage target ratio of one to two times pro-forma adjusted EBITDA for the trailing twelve months, which it believes will provide an efficient capital structure and a framework within which it can execute on its capital allocation priorities.

We are subject to a variety of business risks that may affect our ability to maintain our current market share and profitability, as well as our ability to achieve our short and long-term strategic objectives. These risks are described under the “Financial risk management” and “Risks and uncertainties” sections of our 2017 Annual MD&A.

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

5.0 OPERATING RESULTS

5.1 Non-GAAP financial measures

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

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

5.2 Summary of quarterly results

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



For the three months ended (in $ millions, except share and per share amounts or otherwise indicated)	September 30, 2018	July 1, 2018	April 1, 2018	December 31, 2017	October 1, 2017	July 2, 2017	April 2, 2017	⁽¹⁾	January 1, 2017


Net sales	754.4	764.2	647.3	653.7	716.4	715.4	665.4		587.9
Net earnings	114.3	109.0	67.9	54.9	116.1	107.7	83.5		74.3
Net earnings per share:
Basic⁽²⁾	0.55	0.51	0.31	0.25	0.52	0.48	0.36		0.32
Diluted⁽²⁾	0.55	0.51	0.31	0.25	0.52	0.48	0.36		0.32
Weighted average number of shares outstanding (in ‘000s):
Basic	207,926	212,477	218,541	219,387	223,017	224,859	229,474		231,364
Diluted	208,161	212,722	218,850	219,758	223,481	225,389	229,943		231,855

(1) Reflects the acquisition of American Apparel from February 8, 2017.

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

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

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

Our results of operations for interim and annual periods are impacted by the variability of certain factors, including, but not limited to, changes in end-use demand and customer demand, our customers’ decision to increase or decrease their inventory levels, changes in our sales mix, and fluctuations in selling prices and raw material costs. While our products are sold on a year-round basis, our business experiences seasonal changes in demand which result in quarterly fluctuations in operating results. Historically, demand for T-shirts is lowest in the fourth quarter and highest in the second quarter of the year, when distributors purchase inventory for the peak summer selling season. Demand for fleece is typically highest in advance of the fall and winter seasons, in the second and third quarters of the year. Sales of hosiery and underwear are higher during the second half of the year, during the back-to-school period and the Christmas holiday selling season. These seasonal sales trends of our business also result in fluctuations in our inventory levels throughout the year.

Our results are also impacted by fluctuations in the price of raw materials and other input costs. Cotton and polyester fibres are the primary raw materials used in the manufacture of our products, and we also use chemicals, dyestuffs, and trims, which we purchase from a variety of suppliers. Cotton prices are affected by consumer demand, global supply,

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	MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Business acquisitions may affect the comparability of results. As noted in the table under “Summary of quarterly results”, the quarterly financial data reflect results of companies acquired from their effective date of acquisition. In addition, management decisions to consolidate or reorganize operations, including the closure of facilities, may result in significant restructuring costs in an interim or annual period. The effect of asset write-downs, including provisions for bad debts and slow moving inventories, can also affect the variability of our results. Subsection 5.4.4 entitled “Restructuring and acquisition-related costs” in this MD&A contains a discussion of costs related to the Company’s restructuring activities and business acquisitions.

Our reported amounts for net sales, cost of sales, SG&A expenses, and financial expenses/income are impacted by fluctuations in certain foreign currencies versus the U.S. dollar as described in the “Financial risk management” section of the 2017 Annual MD&A. The Company periodically uses derivative financial instruments to manage risks related to fluctuations in foreign exchange rates.

5.3 Selected financial information



(in $ millions, except per share amounts or otherwise indicated)	Three months ended								Nine months ended
	Sep 30, 2018		Oct 1, 2017		Variation				Sep 30, 2018		Oct 1, 2017		Variation
	Sep 30, 2018		Oct 1, 2017		$		%		Sep 30, 2018		Oct 1, 2017		$		%

Net sales	754.4		716.4		38.0		5.3	%	2,165.8		2,097.1		68.7		3.3	%
Gross profit	218.8		222.2		(3.4	)	(1.5	)%	610.6		624.2		(13.6	)	(2.2	)%
SG&A expenses	88.1		94.8		(6.7	)	(7.1	)%	273.1		273.4		(0.3	)	(0.1	)%
Restructuring and acquisition-related costs	3.1		2.5		0.6		24.0	%	12.5		11.9		0.6		5.0	%
Operating income	127.6		124.9		2.7		2.2	%	325.0		339.0		(14.0	)	(4.1	)%
Adjusted operating income⁽¹⁾	130.7		127.4		3.3		2.6	%	337.5		350.9		(13.4	)	(3.8	)%
Adjusted EBITDA⁽¹⁾	167.4		167.7		(0.3	)	(0.2	)%	457.6		472.1		(14.5	)	(3.1	)%
Financial expenses	9.1		6.0		3.1		51.7	%	22.4		18.3		4.1		22.4	%
Income tax expense	4.2		2.7		1.5		55.6	%	11.4		13.3		(1.9	)	(14.3	)%
Net earnings	114.3		116.1		(1.8	)	(1.6	)%	291.2		307.4		(16.2	)	(5.3	)%
Adjusted net earnings⁽¹⁾	118.1		118.6		(0.5	)	(0.4	)%	304.2		319.3		(15.1	)	(4.7	)%

Basic EPS	0.55		0.52		0.03		5.8	%	1.37		1.36		0.01		0.7	%
Diluted EPS	0.55		0.52		0.03		5.8	%	1.37		1.36		0.01		0.7	%
Adjusted diluted EPS⁽¹⁾	0.57		0.53		0.04		7.5	%	1.43		1.41		0.02		1.4	%

Gross margin	29.0	%	31.0	%	n/a		(2.0) pp		28.2	%	29.8	%	n/a		(1.6) pp
SG&A expenses as a percentage of sales	11.7	%	13.2	%	n/a		(1.5) pp		12.6	%	13.0	%	n/a		(0.4) pp
Operating margin	16.9	%	17.4	%	n/a		(0.5) pp		15.0	%	16.2	%	n/a		(1.2) pp
Adjusted operating margin⁽¹⁾	17.3	%	17.8	%	n/a		(0.5) pp		15.6	%	16.7	%	n/a		(1.1) pp

QUARTERLY REPORT - Q3 2018 P.10



	MANAGEMENT'S DISCUSSION AND ANALYSIS



	Sep 30, 2018	Dec 31, 2017	Variation
	Sep 30, 2018	Dec 31, 2017	$	%

Total assets	3,175.0	2,980.7	194.3	6.5	%
Total non-current financial liabilities	871.0	630.0	241.0	38.3	%
Quarterly cash dividend declared per common share	0.1120	0.0935	0.0185	19.8	%
Net debt leverage ratio⁽¹⁾	1.4	1.0	n/a	n/a

n/a = not applicable

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

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

5.4 Operating review



	Three months ended						Nine months ended
(in $ millions, or otherwise indicated)	Sep 30, 2018	Oct 1, 2017	Variation				Sep 30, 2018	Oct 1, 2017	Variation
(in $ millions, or otherwise indicated)	Sep 30, 2018	Oct 1, 2017	$		%		Sep 30, 2018	Oct 1, 2017	$		%

Activewear	612.4	546.2	66.2		12.1	%	1,752.1	1,577.8	174.3		11.0	%
Hosiery and underwear ⁽¹⁾	142.0	170.2	(28.2	)	(16.6	)%	413.7	519.4	(105.7	)	(20.4	)%
Total net sales	754.4	716.4	38.0		5.3	%	2,165.8	2,097.2	68.6		3.3	%

(1) Also includes intimates and other fringe products.

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

During the third quarter, sales growth was constrained due to the impact of Hurricane Florence in the month of September, which disrupted the Company's distribution operations in the Carolinas, impacting overall sales by approximately $30 million in total. Despite this impact, the Company was still able to generate sales growth in the quarter. The increase in net sales for the three and nine months ended September 30, 2018 compared to the prior year reflected higher activewear sales partly offset by a decline in the hosiery and underwear category. The increase in activewear sales in the quarter and for the first nine months of 2018 was driven by higher unit sales volume and net selling prices compared to the same periods last year. On a year-to-date basis, activewear sales growth also reflected the benefit of favourable mix and foreign exchange impacts compared to the same period last year. Activewear unit volume growth for the quarter and on a year-to-date basis was mainly due to higher shipments of imprintable products in the U.S., including fashion basics, combined with higher unit sales of global lifestyle brand products and double digit growth in international shipments. The decline in the hosiery and underwear category for the third quarter and first nine months of 2018 was mainly due to lower sock volumes in the mass market channel and lower licensed and Gold Toe brand sales. Distribution disruptions in the third quarter due to the impact of Hurricane Florence resulted in an estimated $15 million loss of sales in this category, as the Company was unable to fulfill certain replenishment orders in September. In addition, on a year-to-date basis, the decline in hosiery and underwear sales reflected the impact of the non-recurrence of the initial roll-out of certain program gains which occurred during the first half of the prior year.



	Three months ended						Nine months ended
(in $ millions, or otherwise indicated)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Gross profit	218.8		222.2		(3.4	)	610.6		624.2		(13.6	)
Gross margin	29.0	%	31.0	%	(2.0) pp		28.2	%	29.8	%	(1.6) pp

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

The decline in gross margin for the third quarter and first nine months of 2018 was mainly due to higher raw material and other input costs partly offset by higher net selling prices compared to the same periods last year. Gross margin for the quarter and on a year-to-date basis was also impacted by activewear growth ramp up costs and costs related to

QUARTERLY REPORT - Q3 2018 P.11



	MANAGEMENT'S DISCUSSION AND ANALYSIS

disruptions in our supply chain in Central America, which occurred earlier in the year. The gross margin decline on a year-to-date basis was also partly offset by the benefit of a richer product-mix compared to the same prior year period.

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



	Three months ended						Nine months ended
(in $ millions, or otherwise indicated)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

SG&A expenses	88.1		94.8		(6.7	)	273.1		273.4		(0.3	)
SG&A expenses as a percentage of sales	11.7	%	13.2	%	(1.5) pp		12.6	%	13.0	%	(0.4) pp

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

As a percentage of sales, the improvement in SG&A expenses for the third quarter and the first nine months of 2018 compared to the same periods last year was mainly due to the benefit of cost reductions resulting from the Company's recent organizational consolidation, which more than offset increased investments related to the enhancement of the Company's e-commerce and distribution capabilities primarily in the first half of the year.

5.4.4 Restructuring and acquisition-related costs

Restructuring and acquisition-related costs for the three and nine months ended September 30, 2018 were $3.1 million and $12.5 million, respectively, compared to $2.5 million and $11.9 million for the same periods last year.

Restructuring and acquisition-related costs for the nine months ended September 30, 2018 related primarily to the Company's internal organizational realignment, including severance costs, legal fees, and other professional fees, the consolidation of the Company's U.S. distribution centres pursuant to the acquisitions of American Apparel, Alstyle, and Peds, and the completion of the integration of prior years' business acquisitions, primarily for consolidation of garment dyeing operations acquired in the Comfort Colors acquisition.

Restructuring and acquisition-related costs for the nine months ended October 1, 2017 related primarily to transaction and integration costs incurred in connection with the American Apparel business acquisition, as well as costs for the completion of the integration of businesses acquired in previous years, involving consolidation of customer service, distribution, and administrative functions.

5.4.5 Operating income and adjusted operating income



	Three months ended					Nine months ended
(in $ millions, or otherwise indicated)	Sep 30, 2018		Oct 1, 2017		Variation	Sep 30, 2018		Oct 1, 2017		Variation

Operating income	127.6		124.9		2.7	325.0		339.0		(14.0	)
Adjustment for:
Restructuring and acquisition-related costs	3.1		2.5		0.6	12.5		11.9		0.6
Adjusted operating income⁽¹⁾	130.7		127.4		3.3	337.5		350.9		(13.4	)

Operating margin	16.9	%	17.4	%	(0.5) pp	15.0	%	16.2	%	(1.2) pp
Adjusted operating margin⁽¹⁾	17.3	%	17.8	%	(0.5) pp	15.6	%	16.7	%	(1.1) pp

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

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

The year-over-year increase in operating income and adjusted operating income for the third quarter was mainly due to higher sales and lower SG&A expenses, partly offset by lower gross margin. For the first nine months of 2018, the operating income and adjusted operating income decline was primarily due to the decline in gross profit over the same periods last year.

QUARTERLY REPORT - Q3 2018 P.12



	MANAGEMENT'S DISCUSSION AND ANALYSIS

5.4.6 Financial expenses, net



	Three months ended					Nine months ended
(in $ millions)	Sep 30, 2018	Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Interest expense on financial liabilities recorded at amortized cost	7.2	4.3		2.9		17.7		12.6		5.1
Bank and other financial charges	1.8	2.0		(0.2	)	5.4		5.9		(0.5	)
Interest accretion on discounted provisions	0.1	0.1		—		0.2		0.2		—
Foreign exchange gain	—	(0.3	)	0.3		(1.0	)	(0.4	)	(0.6	)
Financial expenses, net	9.1	6.1		3.0		22.3		18.3		4.0

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

For the three and nine months ended September 30, 2018, the increase in financial expenses compared to the corresponding periods last year was mainly due to higher effective interest rates on our long-term debt bearing interest at variable rates as a result of higher U.S. short-term interest rates, and higher average borrowing levels. Foreign exchange gains for the nine months ended September 30, 2018 relate primarily to the revaluation of net monetary assets denominated in foreign currencies.

The Company’s average effective income tax rate is calculated as follows:



	Three months ended						Nine months ended
(in $ millions, or otherwise indicated)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Earnings before income taxes	118.5		118.9		(0.4	)	302.6		320.7		(18.1	)
Income tax expense	4.2		2.7		1.5		11.4		13.3		(1.9	)
Average effective income tax rate	3.5	%	2.3	%	1.2 pp		3.8	%	4.1	%	(0.3) pp

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

For the nine months ended September 30, 2018, the average effective income tax rate was in line with the Company’s expected effective income tax rate of approximately 4% for fiscal 2018.

QUARTERLY REPORT - Q3 2018 P.13



	MANAGEMENT'S DISCUSSION AND ANALYSIS

5.4.8 Net earnings, adjusted net earnings, and earnings per share measures



	Three months ended				Nine months ended
(in $ millions, except per share amounts)	Sep 30, 2018	Oct 1, 2017	Variation		Sep 30, 2018	Oct 1, 2017	Variation

Net earnings	114.3	116.1	(1.8	)	291.2	307.4	(16.2	)
Adjustments for:
Restructuring and acquisition-related costs	3.1	2.5	0.6		12.5	11.9	0.6
Income tax expense relating to restructuring and acquisition-related costs and U.S. Tax Reform ⁽¹⁾	0.7	—	0.7		0.5	—	0.5
Adjusted net earnings⁽²⁾	118.1	118.6	(0.5	)	304.2	319.3	(15.1	)

Basic EPS	0.55	0.52	0.03		1.37	1.36	0.01
Diluted EPS	0.55	0.52	0.03		1.37	1.36	0.01
Adjusted diluted EPS⁽²⁾	0.57	0.53	0.04		1.43	1.41	0.02

(1) For the nine months ended September 30, 2018, reflects an income tax expense of $1.0 million relating to the impact of U.S. tax reform, and an income tax recovery of $0.5 million relating to restructuring and acquisition-related activities.

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

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

Net earnings and adjusted net earnings for the three months ended September 30, 2018, were essentially flat compared to the prior year as the impact of higher sales and lower SG&A expenses were offset by the decline in gross margin for the quarter and higher financial expenses compared to the prior year quarter. On a year-to-date basis, the net earnings and adjusted net earnings decline was mainly due to lower operating margin and higher financial expenses, partly offset by the contribution of higher sales. On a diluted per share basis, net earnings and adjusted net earnings for the third quarter and first nine months of 2018 were up over the same periods last year reflecting the benefit of a lower share count.

QUARTERLY REPORT - Q3 2018 P.14



	MANAGEMENT'S DISCUSSION AND ANALYSIS

6.0 FINANCIAL CONDITION

6.1 Current assets and current liabilities



(in $ millions)	Sep 30, 2018		Dec 31, 2017		Variation

Cash and cash equivalents	52.0		52.8		(0.8	)
Trade accounts receivable	401.6		243.4		158.2
Income taxes receivable	2.4		3.9		(1.5	)
Inventories	973.9		945.7		28.2
Prepaid expenses, deposits and other current assets	96.5		62.1		34.4
Accounts payable and accrued liabilities	(309.1	)	(258.5	)	(50.6	)
Total working capital	1,217.3		1,049.4		167.9

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

The increase in trade accounts receivable (which are net of accrued sales discounts) was mainly due to the impact of seasonally higher sales in the third quarter of fiscal 2018 compared to the fourth quarter of fiscal 2017, the impact of seasonally higher days sales outstanding (DSO), and a seasonally lower offset for accruals for sales discounts in trade accounts receivable compared to the end of fiscal 2017 (due to the payout of annual rebate programs for distributors subsequent to the end of fiscal 2017). The seasonal increase in the DSO was mainly due to the impact of fleece sales, which carry extended payment terms in accordance with industry practice.

The increase in inventories was mainly due to higher average unit costs resulting from a combination of higher raw material costs and other input costs, as well as higher raw materials and work in progress inventories, partially offset by lower activewear and sock units in inventories.

The increase in prepaid expenses, deposits and other current assets was mainly due to the higher fair value of derivative financial instruments outstanding.

The increase in accounts payable and accrued liabilities is mainly the result of a seasonal increase due to the impact of the holiday period manufacturing downtime at the end of the fourth quarter of fiscal 2017, higher raw material costs, and a higher derivative financial instrument liability.

Working capital was $1,217.3 million as at September 30, 2018, compared to $1,049.4 million as at December 31, 2017. The current ratio at the end of the third quarter of fiscal 2018 was 4.9, compared to 5.1 at the end of fiscal 2017.

6.2 Property, plant and equipment, intangible assets and goodwill



(in $ millions)	Property, plant and equipment		Intangible assets		Goodwill

Balance, December 31, 2017	1,035.8		401.6		226.6
Net capital additions	75.3		16.0		—
Additions through business acquisitions	—		—		0.1
Depreciation and amortization	(94.7	)	(20.4	)	—
Balance, September 30, 2018	1,016.4		397.2		226.7

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

Additions to property, plant and equipment were primarily for investments in textile and sewing capacity expansion, distribution, partially offset by the sale of the Company's corporate aircraft.

QUARTERLY REPORT - Q3 2018 P.15



	MANAGEMENT'S DISCUSSION AND ANALYSIS

Intangible assets are comprised of customer contracts and relationships, trademarks, license agreements, non-compete agreements, and computer software. The slight decrease in intangible assets reflects amortization of $20.4 million, offset by additions of $16.0 million including the renewal of a brand license agreement.

6.3 Other non-current assets and non-current liabilities



	Contents
	MD&A
	1.0 Preface	2
	2.0 Caution regarding forward-looking statements	2
	3.0 Our business	4
	4.0 Strategy and objectives	7
	5.0 Operating results	9
	6.0 Financial condition	15
	7.0 Cash flows	16
	8.0 Liquidity and capital resources	19
	9.0 Legal proceedings	22
	10.0 Outlook	22
	11.0 Financial risk management	22
	12.0 Critical accounting estimates and judgments	22
	13.0 Accounting policies and new accounting standards not yet applied	23
	14.0 Internal control over financial reporting	24
	15.0 Risks and uncertainties	24
	16.0 Definition and reconciliation of non-GAAP financial measures	25

	Condensed interim consolidated financial statements	28

	Notes to the condensed interim consolidated financial statements	32



	Three months ended						Nine months ended
(in $ millions)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Purchase of property, plant and equipment	(31.4	)	(17.9	)	(13.5	)	(83.8	)	(59.1	)	(24.7	)
Purchase of intangible assets	(2.2	)	(0.8	)	(1.4	)	(15.1	)	(2.1	)	(13.0	)
Business acquisitions	—		(13.4	)	13.4		(0.1	)	(115.6	)	115.5
Proceeds on disposal of property, plant and equipment	0.3		0.1		0.2		11.1		0.3		10.8
Cash flows used in investing activities	(33.3	)	(32.0	)	(1.3	)	(87.9	)	(176.5	)	88.6



	Three months ended						Nine months ended
(in $ millions)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Cash flows from operating activities	151.7		168.5		(16.8	)	264.4		414.2		(149.8	)
Cash flows used in investing activities	(33.3	)	(32.0	)	(1.3	)	(88.0	)	(176.5	)	88.5
Adjustment for:
Business acquisitions	—		13.4		(13.4	)	0.1		115.6		(115.5	)
Free cash flow⁽¹⁾	118.4		149.9		(31.5	)	176.5		353.3		(176.8	)



	Three months ended						Nine months ended
(in $ millions)	Sep 30, 2018		Oct 1, 2017		Variation		Sep 30, 2018		Oct 1, 2017		Variation

Increase (decrease) in amounts drawn under long-term bank credit facilities	(29.0	)	—		(29.0	)	241.0		105.0		136.0
Dividends paid	(23.4	)	(21.5	)	(1.9	)	(71.4	)	(64.4	)	(7.0	)
Proceeds from the issuance of shares	0.9		0.4		0.5		2.2		2.0		0.2
Repurchase and cancellation of shares	(56.2	)	(115.2	)	59.0		(347.9	)	(272.4	)	(75.5	)
Share repurchases for settlement of non-Treasury RSUs	(0.2	)	—		(0.2	)	(0.8	)	—		(0.8	)
Cash flows used in financing activities	(107.9	)	(136.3	)	28.4		(176.9	)	(229.8	)	52.9



	Effective interest rate ⁽¹⁾	Principal amount		Maturity date
(in $ millions, or otherwise indicated)	Effective interest rate ⁽¹⁾	Sep 30, 2018	Dec 31, 2017	Maturity date

Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%⁽²⁾	3.2%	271.0	30.0	April 2023
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%, payable monthly⁽³⁾	2.7%	300.0	300.0	April 2023
Notes payable, interest at fixed rate of 2.70%, payable semi-annually⁽⁴⁾	2.7%	100.0	100.0	August 2023
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53%, payable quarterly⁽⁴⁾	2.7%	50.0	50.0	August 2023
Notes payable, interest at fixed rate of 2.91%, payable semi-annually⁽⁴⁾	2.9%	100.0	100.0	August 2026
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57%, payable quarterly⁽⁴⁾	2.9%	50.0	50.0	August 2026
		871.0	630.0


•	See section 8.0 of this MD&A entitled “Liquidity and capital resources” for the discussion on long-term debt.


•	Other non-current liabilities include provisions and employee benefit obligations.


•	Cash flows from operating activities were $264.4 million for the nine months ended September 30, 2018, compared to $414.2 million in the corresponding period last year. The decrease was mainly due to the impact of a higher increase in non-cash working capital, as explained below.


•	Cash used in investing activities during the nine months ended September 30, 2018 was lower than the same period last year primarily due to cash used in fiscal 2017 for business acquisitions including American Apparel, partially offset by higher capital spending in fiscal 2018.


•	Capital expenditures for the nine months ended September 30, 2018 are described in section 6.2 of this MD&A, and our projected capital expenditures for the twelve months ending December 30, 2018 are discussed under “Liquidity and capital resources” in section 8.0 of this MD&A.


•	The year-over-year decrease in free cash flow of $176.8 million for the nine months ended September 30, 2018 was mainly due to the decrease in operating cash flows and increased capital spending, as noted above.


(1)	Represents the annualized effective interest rate for the nine months ended September 30, 2018, including the cash impact of interest rate swaps, where applicable.


(3)	The unsecured term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreement).


(4)	The unsecured notes issued for a total aggregate principal amount of $300 million to accredited investors in the U.S. private placement market can be prepaid in whole or in part at any time, subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement.



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

Accounts payable and accrued liabilities	309.1	309.1	309.1	—	—	—
Long-term debt⁽¹⁾	871.0	871.0	—	—	721.0	150.0
Purchase obligations	—	126.9	126.5	0.4	—	—
Operating leases and other obligations	—	343.0	62.0	116.9	106.0	58.1
Total contractual obligations	1,180.1	1,650.0	497.6	117.3	827.0	208.1


•	Valuation of statutory severance obligations and the related costs


•	Measurement of the estimate of expected costs for decommissioning and site restoration costs


•	We may be negatively impacted by changes in general economic and financial conditions


•	Our customers do not commit to purchase minimum quantities


•	We may be negatively impacted by fluctuations and volatility in the price of raw materials used to manufacture our products


•	We may be negatively impacted by climate, political, social, and economic risks in the countries in which we operate or from which we source production


•	Compliance with laws and regulations in the various countries in which we operate and the potential negative effects of litigation and/or regulatory actions


•	We rely on certain international trade (including multilateral and bilateral) agreements and preference programs and are subject to evolving international trade regulations


•	Compliance with environmental, health, and safety regulations


•	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 rely significantly on our information systems for our business operations


•	We may be negatively impacted by data security and privacy breaches


•	We depend on key management and our ability to attract and/or retain key personnel



	September 30, 2018		December 31, 2017
Current assets:
Cash and cash equivalents	$	51,978	$	52,795
Trade accounts receivable	401,575		243,365
Income taxes receivable	2,421		3,891
Inventories (note 4)	973,906		945,738
Prepaid expenses, deposits and other current assets	96,541		62,092
Total current assets	1,526,421		1,307,881
Non-current assets:
Property, plant and equipment	1,016,437		1,035,818
Intangible assets	397,160		401,605
Goodwill	226,670		226,571
Other non-current assets	8,320		8,830
Total non-current assets	1,648,587		1,672,824
Total assets	$	3,175,008	$	2,980,705
Current liabilities:
Accounts payable and accrued liabilities	$	309,086	$	258,476
Total current liabilities	309,086		258,476
Non-current liabilities:
Long-term debt (note 5)	871,000		630,000
Deferred income taxes	6,743		3,713
Other non-current liabilities	41,082		37,141
Total non-current liabilities	918,825		670,854
Total liabilities	1,227,911		929,330
Equity:
Share capital	153,107		159,170
Contributed surplus	38,555		25,208
Retained earnings	1,731,907		1,853,457
Accumulated other comprehensive income	23,528		13,540
Total equity attributable to shareholders of the Company	1,947,097		2,051,375
Total liabilities and equity	$	3,175,008	$	2,980,705



	Share capital					Contributed surplus			Accumulated other comprehensive income (loss)				Retained earnings			Total equity
	Number		Amount			Contributed surplus			Accumulated other comprehensive income (loss)				Retained earnings			Total equity
Balance, December 31, 2017	219,199		$	159,170		$	25,208			$	13,540		$	1,853,457		$	2,051,375
Adjustments relating to adoption of new accounting standards (note 2(d))	—		—			—				—			(1,515		)	(1,515		)
Adjusted balance, January 1, 2018	219,199		159,170			25,208				13,540			1,851,942			2,049,860
Share-based compensation	—		—			13,122				—			—			13,122
Shares issued under employee share purchase plan	44		1,285			—				—			—			1,285
Shares issued pursuant to exercise of stock options	46		1,389			(367		)		—			—			1,022
Shares repurchased for cancellation	(11,970	)	(8,737		)	—				—			(339,217		)	(347,954		)
Dividends declared	—		—			592				—			(72,040		)	(71,448		)
Transactions with shareholders of the Company recognized directly in equity	(11,880	)	(6,063		)	13,347				—			(411,257		)	(403,973		)
Cash flow hedges (note 9)	—		—			—				9,988			—			9,988
Net earnings	—		—			—				—			291,222			291,222
Comprehensive income	—		—			—				9,988			291,222			301,210
Balance, September 30, 2018	207,319		$	153,107		$	38,555			$	23,528		$	1,731,907		$	1,947,097
Balance, January 1, 2017	230,218		$	152,313		$	23,198			$	40,611		$	1,903,525		$	2,119,647
Share-based compensation	—		—			11,806				—			—			11,806
Shares issued under employee share purchase plan	45		1,234			—				—			—			1,234
Shares issued pursuant to exercise of stock options	63		1,336			(467		)		—			—			869
Shares issued or distributed pursuant to vesting of restricted share units	136		1,887			(1,887		)		—			—			—
Shares repurchased for cancellation	(9,830	)	(6,544		)	—				—			(270,012		)	(276,556		)
Dividends declared	—		—			332				—			(64,697		)	(64,365		)
Transactions with shareholders of the Company recognized directly in equity	(9,586	)	(2,087		)	9,784				—			(334,709		)	(327,012		)
Cash flow hedges (note 9)	—		—			—				(30,818		)	—			(30,818		)
Net earnings	—		—			—				—			307,385			307,385
Comprehensive income (loss)	—		—			—				(30,818		)	307,385			276,567
Balance, October 1, 2017	220,632		$	150,226		$	32,982			$	9,793		$	1,876,201		$	2,069,202



	NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



	September 30, 2018		December 31, 2017
Raw materials and spare parts inventories	$	149,960	$	128,414
Work in progress	67,180		60,743
Finished goods	756,766		756,581
	$	973,906	$	945,738



	Effective interest rate⁽¹⁾	Principal amount				Maturity date
	Effective interest rate⁽¹⁾	September 30, 2018		December 31, 2017		Maturity date
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%⁽²⁾	3.2%	$	271,000	$	30,000	April 2023
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%, payable monthly⁽³⁾	2.7%	300,000		300,000		April 2023
Notes payable, interest at fixed rate of 2.70%, payable semi-annually⁽⁴⁾	2.7%	100,000		100,000		August 2023
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53%, payable quarterly⁽⁴⁾	2.7%	50,000		50,000		August 2023
Notes payable, interest at fixed rate of 2.91%, payable semi-annually⁽⁴⁾	2.9%	100,000		100,000		August 2026
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57%, payable quarterly⁽⁴⁾	2.9%	50,000		50,000		August 2026
		$	871,000	$	630,000



	September 30, 2018		December 31, 2017
Financial assets
Amortized cost:
Cash and cash equivalents	$	51,978	$	52,795
Trade accounts receivable	401,575		243,365
Financial assets included in prepaid expenses, deposits and other current assets	38,815		28,711
Long-term non-trade receivables included in other non-current assets	2,931		2,781
Derivative financial assets included in prepaid expenses, deposits and other current assets	35,794		16,920

Financial liabilities
Amortized cost:
Accounts payable and accrued liabilities	300,927		255,832
Long-term debt - bearing interest at variable rates	671,000		430,000
Long-term debt - bearing interest at fixed rates⁽¹⁾	200,000		200,000
Derivative financial liabilities included in accounts payable and accrued liabilities	8,159		2,644


(1)	The fair value of the long-term debt bearing interest at fixed rates was $187.9 million as at September 30, 2018 (December 31, 2017 - $197.6 million).