02/15/24
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HanesBrands Reports First-Quarter 2014 Financial Results
HanesBrands Reports First-Quarter 2014 Financial Results
April 24, 2014 at 4:05 PM EDT
– Record First-Quarter Results Driven by Acquisition and Strong Operating Performance
– Excluding Actions, Net Sales up 12%, Operating Profit up 34% and EPS up 49%
–
For the first-quarter 2014, net sales increased 12 percent to
Primary contributors to the record quarterly results in a difficult
economic environment were increased margins driven by the company’s
Innovate-to-Elevate strategy, strong Activewear segment results led by
performance of the Champion brand, increased supply chain
operating efficiencies, tight control of selling, general and
administrative costs, and successful integration of
As a result of strong first-quarter 2014 results, the company has raised
its 2014 full-year financial guidance. Increased expectations include
adjusted operating profit of
“We had very strong first-quarter profitability and have raised our
full-year profit guidance as a result of our continued confidence in our
Innovate-to-Elevate strategy and our progress with the integration of
Maidenform,” Hanes Chairman and Chief Executive Officer
Net sales in the first quarter of
Adjusted EPS for the quarter increased to
Adjusted operating profit for the quarter increased to
First-Quarter 2014 Financial Highlights and Business Segment Summary
Key accomplishments for the first quarter include:
- Innovate-to-Elevate Drives Margin Improvement. Hanes’ Innovate-to-Elevate strategy, which harnesses synergies from combining the company’s brand power, supply chain leverage, and product innovation platforms, drove adjusted gross margin improvement of 50 basis points and adjusted operating margin improvement of 180 basis points in the first quarter. The company’s adjusted operating profit margin of 10.8 percent was a first-quarter record.
-
SG&A Leverage. Despite adding the acquired
Maidenform operations, Hanes’ adjusted selling, general and
administrative expenses increased by only
$15 million in the quarter versus a year ago. As a percentage of sales, Hanes improved its adjusted SG&A leverage by 130 basis points – 24.3 percent in the quarter versus 25.6 percent a year ago. - Maidenform Integration Milestones Achieved. The integration of Maidenform is progressing on schedule. All Maidenform financial reporting, forecasting, ordering, inventory, purchasing and direct-to-consumer operations moved onto Hanes’ financial and operating systems in the first quarter.
-
Momentum Drives Guidance for a Record Year. Hanes has increased
its full-year 2014 adjusted EPS guidance for the second time. “We set
a company record for earnings last year, and our guidance calls for
another record earnings year in 2014,” said
Richard D. Moss , Hanes chief financial officer. “The midpoint of our EPS guidance represents 25 percent growth over 2013 adjusted EPS, which was up 49 percent over 2012.”
Key business highlights include:
Innerwear Segment. Innerwear net sales increased 15 percent in the first quarter, with all of the growth a result of the Maidenform acquisition. Operating profit increased 7 percent. Excluding Maidenform, net sales decreased 6 percent, while operating profit increased 1 percent.
- Retail Environment. Sales in the quarter were affected by a mixed retail environment disrupted frequently by extreme weather, as well as the timing of the Easter holiday selling period, which occurs in the second quarter of 2014 versus the first quarter in 2013. Innerwear basics, including socks and panties, performed better than intimate apparel, which is more sensitive to the timing of Easter.
- Profit Increase. Despite a difficult selling environment, operating profit increased, both including and excluding Maidenform results. Innovate-to-Elevate, including product innovation platforms, is driving success.
Activewear Segment. The Activewear segment continued to deliver strong performance with net sales increasing 10 percent in the first quarter and operating profit increasing 50 percent.
- Strong Profitability. Just two years after recording a loss in the first quarter, the Activewear segment posted record first-quarter profits. The segment’s operating profit margin in the quarter increased 290 basis points to 10.9 percent. The retail Champion business led the way with strong double-digit sales and operating profit growth.
- Strength Across Businesses. In addition to retail Champion, the branded printwear and Gear for Sports businesses also delivered strong quarters of sales and profit growth. Branded printwear, which now focuses on higher-value branded products for the screen-print industry, turned itself around from an operating loss in the year-ago quarter.
International Segment. Currency had a significant impact on International net sales and profits. On a constant-currency basis, International net sales increased 19 percent in the first quarter and operating profit increased 300 percent. Maidenform contributed to both sales and operating profit. As reported, International net sales increased 9 percent and operating profit more than tripled.
Direct to Consumer Segment. Net sales for the Direct to Consumer segment increased 4.5 percent, driven by the addition of Maidenform, and recorded a slight operating loss.
Maidenform Acquisition. Maidenform contributed net sales of
approximately
-
Acquisition synergies. Hanes expects to achieve full synergies
from the Maidenform acquisition within three years. After full
synergies, the acquisition is expected to annually contribute more
than
$500 million in net sales and$80 million in operating profit.
Synergies are expected from selling, general and administrative savings as a result of the elimination of duplicative corporate and operational costs; cost-of-goods-sold savings as a result of the integration of Maidenform’s 100 percent sourced production model into Hanes’ predominately self-owned manufacturing operations; and complementary revenue, driven by the application of Hanes’ Innovate-to-Elevate strategy to Maidenform’s products.
The majority of the corporate SG&A savings are anticipated to begin by mid-2014. Benefits of supply chain actions to cost of goods sold are expected to start in 2015 and be fully realized in 2016. Complementary revenue opportunities are expected to deliver benefits in late 2015, with the majority of the benefits coming in 2016. -
Integration progressing on schedule. Hanes expects to
substantially complete its integration of Maidenform headquarter
business functions by the end of the second quarter 2014. All
Maidenform financial reporting and business operations have moved onto
Hanes’ financial and operating systems. The company anticipates
closing the Maidenform
Fayetteville, N.C. , distribution center by the end of 2014.
2014 Guidance
Based on first-quarter results, Hanes has significantly increased its profit outlook for 2014 and has increased its guidance for adjusted operating profit, adjusted EPS and net cash from operating activities.
For 2014, Hanes expects net sales of slightly less than
The company expects its acquisition of Maidenform to contribute
approximately
Interest expense and other expense are expected to be approximately
The company expects to make pension contributions of approximately
The company expects slightly more than 103 million weighted average shares outstanding in 2014.
Charges for Actions and Reconciliation to GAAP Measures
Adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), and EBITDA are not generally accepted accounting principle measures. Hanes has chosen to provide these non-GAAP measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating company operations. Non-GAAP measures should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP or other pro forma measures used by other companies.
Hanes incurred pretax charges of
Adjusted EPS is defined as diluted EPS excluding actions and the tax effect on actions. Adjusted net income is defined as net income excluding actions and the tax effect on actions. Adjusted operating profit is defined as operating profit excluding actions. Adjusted gross profit is defined as gross profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. The company believes that these measures provide investors with additional means of analyzing the company’s performance absent the effect of acquisition-related expenses and other actions. See Table 5 attached to this press release to reconcile adjusted EPS, adjusted net income, adjusted operating profit, adjusted gross profit and adjusted SG&A to their respective GAAP measures.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although the company does not use EBITDA to manage its business, it believes that EBITDA is another way that investors measure financial performance. See Table 2 attached to this press release to reconcile EBITDA with the GAAP measure of net income.
For 2014 guidance, adjusted EPS is defined as diluted EPS excluding
actions and the tax effect on actions, and adjusted operating profit is
defined as operating profit excluding actions. Hanes’ current estimate
for pretax charges in 2014 for acquisition and other actions is
approximately
On a GAAP basis, full-year 2014 diluted EPS will vary depending on
actual performance, charges and tax rate. GAAP diluted EPS could be in
the range of
Webcast Conference Call
Hanes will host an Internet webcast of its quarterly investor conference
call at
An archived replay of the conference call webcast will be available at www.Hanes.com/investors.
A telephone playback will be available from approximately
Cautionary Statement Concerning Forward-Looking Statements
This press release contains certain “forward-looking statements,” as
defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements following the heading “2014 Guidance,” as well as statements
about the benefits anticipated from the Maidenform acquisition, are
forward-looking statements. These forward-looking statements are based
on our current intent, beliefs, plans and expectations. Readers are
cautioned not to place any undue reliance on any forward-looking
statements. Forward-looking statements necessarily involve risks and
uncertainties, many of which are outside of our control, that could
cause actual results to differ materially from such statements and from
our historical results and experience. These risks and uncertainties
include such things as: the impact of significant fluctuations and
volatility in various input costs, such as cotton and oil-related
materials, utilities, freight and wages; the failure of businesses we
acquire to perform to expectations; current economic conditions,
including consumer spending levels and the price elasticity of our
products; legal, regulatory, political and economic risks associated
with our operations in international markets, including the risk of
significant fluctuations in foreign exchange rates; the highly
competitive and evolving nature of the industry in which we compete;
unanticipated business disruptions or the loss of one or more suppliers
in our global supply chain; our ability to effectively manage our
inventory and reduce inventory reserves; and other risks identified from
time to time in our most recent
TABLE 1
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
|||||||||||
Quarter Ended | |||||||||||
March 29, 2014 | March 30, 2013 | % Change | |||||||||
Net sales | $ | 1,059,370 | $ | 945,461 | 12.0 | % | |||||
Cost of sales | 702,593 | 618,162 | |||||||||
Gross profit | 356,777 | 327,299 | 9.0 | % | |||||||
As a % of net sales | 33.7 | % | 34.6 | % | |||||||
Selling, general and administrative expenses | 284,989 | 242,156 | |||||||||
As a % of net sales | 26.9 | % | 25.6 | % | |||||||
Operating profit | 71,788 | 85,143 | (15.7 | )% | |||||||
As a % of net sales | 6.8 | % | 9.0 | % | |||||||
Other expenses | 435 | 464 | |||||||||
Interest expense, net | 21,818 | 25,623 | |||||||||
Income before income tax expense | 49,535 | 59,056 | |||||||||
Income tax expense | 7,975 | 7,677 | |||||||||
Net income | $ | 41,560 | $ | 51,379 | (19.1 | )% | |||||
Earnings per share: | |||||||||||
Basic | $ | 0.41 | $ | 0.52 | (21.2 | )% | |||||
Diluted | $ | 0.41 | $ | 0.51 | (19.6 | )% | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 100,391 | 99,369 | |||||||||
Diluted | 101,969 | 101,460 |
TABLE 2
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
||||||||||
Quarter Ended | ||||||||||
March 29, 2014 | March 30, 2013 | % Change | ||||||||
Segment net sales: | ||||||||||
Innerwear | $ | 571,154 | $ | 497,025 | 14.9 | % | ||||
Activewear | 294,504 | 267,186 | 10.2 | % | ||||||
Direct to Consumer | 83,714 | 80,083 | 4.5 | % | ||||||
International | 109,998 | 101,167 | 8.7 | % | ||||||
Total net sales | $ | 1,059,370 | $ | 945,461 | 12.0 | % | ||||
Segment operating profit (loss)¹: | ||||||||||
Innerwear | $ | 95,755 | $ | 89,742 | 6.7 | % | ||||
Activewear | 31,995 | 21,309 | 50.1 | % | ||||||
Direct to Consumer | (701 | ) | 132 | NM | ||||||
International | 8,311 | 2,282 | 264.2 | % | ||||||
General corporate expenses/other | (20,935 | ) | (28,322 | ) | (26.1 | )% | ||||
Acquisition, integration and other action related charges | (42,637 | ) | — | NM | ||||||
Total operating profit | $ | 71,788 | $ | 85,143 | (15.7 | )% | ||||
EBITDA1: | ||||||||||
Net income | $ | 41,560 | $ | 51,379 | ||||||
Interest expense, net | 21,818 | 25,623 | ||||||||
Income tax expense | 7,975 | 7,677 | ||||||||
Depreciation and amortization | 23,059 | 23,221 | ||||||||
Total EBITDA | $ | 94,412 | $ | 107,900 | (12.5 | )% |
¹ | Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
TABLE 3
HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
|||||||
March 29, 2014 | December 28, 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 151,136 | $ | 115,863 | |||
Trade accounts receivable, net | 611,600 | 578,558 | |||||
Inventories | 1,402,122 | 1,283,331 | |||||
Other current assets | 276,093 | 265,914 | |||||
Total current assets | 2,440,951 | 2,243,666 | |||||
Property, net | 572,575 | 579,883 | |||||
Intangible assets and goodwill | 999,195 | 1,004,143 | |||||
Other noncurrent assets | 261,198 | 262,356 | |||||
Total assets | $ | 4,273,919 | $ | 4,090,048 | |||
Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 825,996 | $ | 781,296 | |||
Notes payable | 38,488 | 36,192 | |||||
Accounts Receivable Securitization Facility | 164,879 | 181,790 | |||||
Total current liabilities | 1,029,363 | 999,278 | |||||
Long-term debt | 1,620,000 | 1,467,000 | |||||
Other noncurrent liabilities | 378,079 | 393,147 | |||||
Total liabilities | 3,027,442 | 2,859,425 | |||||
Equity | 1,246,477 | 1,230,623 | |||||
Total liabilities and equity | $ | 4,273,919 | $ | 4,090,048 |
TABLE 4
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
||||||||
Quarter Ended | ||||||||
March 29, 2014 | March 30, 2013 | |||||||
Operating Activities: | ||||||||
Net income | $ | 41,560 | $ | 51,379 | ||||
Depreciation and amortization | 23,059 | 23,221 | ||||||
Other noncash items | 2,614 | 2,638 | ||||||
Changes in assets and liabilities, net | (129,469 | ) | (155,146 | ) | ||||
Net cash from operating activities | (62,236 | ) | (77,908 | ) | ||||
Investing Activities: | ||||||||
Purchases/sales of property and equipment, net, and other | (12,169 | ) | (6,530 | ) | ||||
Financing Activities: | ||||||||
Cash dividends paid | (29,850 | ) | — | |||||
Net borrowings on notes payable, debt and other | 140,041 | 110,640 | ||||||
Net cash from financing activities | 110,191 | 110,640 | ||||||
Effect of changes in foreign currency exchange rates on cash | (513 | ) | (453 | ) | ||||
Change in cash and cash equivalents | 35,273 | 25,749 | ||||||
Cash and cash equivalents at beginning of year | 115,863 | 42,796 | ||||||
Cash and cash equivalents at end of period | $ | 151,136 | $ | 68,545 |
TABLE 5
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||
Quarter Ended | ||||||||
March 29, 2014 | March 30, 2013 | |||||||
Gross profit, as reported under GAAP | $ | 356,777 | $ | 327,299 | ||||
Acquisition, integration and other action related charges | 14,827 | — | ||||||
Gross profit, as adjusted | $ | 371,604 | $ | 327,299 | ||||
As a % of net sales | 35.1 | % | 34.6 | % | ||||
Selling, general and administrative expenses, as reported under GAAP | $ | 284,989 | $ | 242,156 | ||||
Acquisition, integration and other action related charges | (27,810 | ) | — | |||||
Selling, general and administrative expenses, as adjusted | $ | 257,179 | $ | 242,156 | ||||
As a % of net sales | 24.3 | % | 25.6 | % | ||||
Operating profit, as reported under GAAP | $ | 71,788 | $ | 85,143 | ||||
Acquisition, integration and other action related charges included in gross profit | 14,827 | — | ||||||
Acquisition, integration and other action related charges included in SG&A | 27,810 | — | ||||||
Operating profit, as adjusted | $ | 114,425 | $ | 85,143 | ||||
As a % of net sales | 10.8 | % | 9.0 | % | ||||
Net income, as reported under GAAP | $ | 41,560 | $ | 51,379 | ||||
Acquisition, integration and other action related charges included in gross profit | 14,827 | — | ||||||
Acquisition, integration and other action related charges included in SG&A | 27,810 | — | ||||||
Tax effect on actions | (6,865 | ) | — | |||||
Net income, as adjusted | $ | 77,332 | $ | 51,379 | ||||
Diluted earnings per share, as reported under GAAP | $ | 0.41 | $ | 0.51 | ||||
Acquisition, integration and other action related charges | 0.35 | — | ||||||
Diluted earnings per share, as adjusted | $ | 0.76 | $ | 0.51 |
Source:
HanesBrands
News Media, Matt Hall, 336-519-3386
Analysts and
Investors, T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.