05/09/24
8:30 am EDT
Most Recent
Press Release
HanesBrands Reports In-Line Results for Second-Quarter 2017
HanesBrands Reports In-Line Results for Second-Quarter 2017
August 1, 2017 at 4:05 PM EDT
-
2Q Net Sales of
$1.65 Billion Increased 12%; GAAP EPS of$0.47 Increased 38%; Adjusted EPS of$0.53 Increased 4% - Working Capital Discipline Delivered Strong Cash Flow
- Company Reaffirms Full-Year 2017 Guidance for Net Sales, Operating Profit, EPS and Cash from Operations
For the second quarter ended
On a GAAP basis, second-quarter operating profit of
Year-to-date net cash from operations was
“We continued our strong start to 2017 in the second quarter, consistent
with our guidance,” said Hanes Chief Executive Officer
“Our team is doing a great job executing our Sell More, Spend Less, Generate Cash strategies and laying the foundation for taking our performance to the next level in the years to come through our Project Booster initiative. We are planning for the future while executing in the present.”
Key Callouts for Second-Quarter 2017 Results
Acquisitions Deliver Growth. Acquisitions completed in 2016,
primarily Champion Europe and Hanes Australasia, contributed
approximately
Continued Growth for Online Sales and Global Champion Activewear. Second-quarter sales in the online channel globally increased approximately 25 percent and represented approximately 9 percent of total sales. Global Champion sales increased 7 percent in the second quarter on a pro forma basis.
Project Booster Progress. Hanes continues to execute its
multiyear Project Booster program to generate investment for sales
growth, reduce costs and increase cash flow. As expected, the company
incurred Project Booster-related expense in the second quarter of
approximately
Business Segment Highlights
Sequential Improvement for Innerwear Sales Trends. Year-over-year segment sales decreased less than 3 percent in the second quarter, compared with lower sales of 6 percent in the first quarter 2017 and 8 percent in the fourth quarter 2016. There was sequential improvement for both the basics and intimates businesses. Operating profit declined 8 percent as a result of lower sales and Project Booster expenses.
Activewear Results Mixed. Activewear sales increased 1 percent. Acquisition benefits and sales growth for Hanes retail and the online channel were partially offset by the later-than-expected licensed sports apparel shipments and the effect of retailer bankruptcies. Operating profit decreased 10 percent, primarily as a result of the impact of retailer bankruptcies and Project Booster expense.
International Segment Growth. Second-quarter segment sales
increased 76 percent as a result of acquisitions and strong results in
2017 Financial Guidance
Hanes has reaffirmed its full-year guidance for 2017 and issued third-quarter guidance for select performance measures.
For 2017, the company expects net sales of
Compared with 2016 results, the midpoint of 2017 guidance represents net sales growth of 8 percent, GAAP operating profit growth of 12 percent, adjusted operating profit growth of 5 percent, GAAP EPS growth from continuing operations of 26 percent, adjusted EPS growth from continuing operations of 7 percent, and operating cash flow growth of 11 percent.
Third-Quarter Guidance. The company expects total net sales of
approximately
Third-quarter GAAP EPS is expected to be
Additional Full-Year Guidance. Incremental sales from
acquisitions for the year are expected to be approximately
Project Booster initiatives are expected to be cost neutral for 2017, with cost savings in the second half split between the third and fourth quarters.
The company expects approximately
In conjunction with continued acquisition integrations in 2017, the
company continues to expect to incur an estimated
Guidance for operating cash flow growth in 2017 includes the expected benefits from net income growth and lower pretax cash charges related to acquisitions.
The company continues to expect capital expenditures of approximately
Hanes continues to expect interest expense and other expenses to be
approximately
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
Note on Adjusted Measures and Reconciliation to GAAP Measures
To supplement our financial guidance prepared in accordance with generally accepted accounting principles, we provide quarterly and full-year results and guidance concerning certain non-GAAP financial measures, including adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin) and EBITDA.
Adjusted EPS is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. Adjusted net income is defined as net income from continuing operations 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. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
Actions during the periods presented include adjustments for acquisition-related and integration costs. These costs include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items, facility closures, inventory write-offs, information technology integration costs, and similar charges. While these costs are not operational in nature and are not expected to continue for any singular transaction on an ongoing basis, similar types of costs, expenses and charges have occurred in prior periods and may recur in the future as the company continues to integrate prior acquisitions and pursues any future acquisitions.
Hanes has chosen to present non-GAAP measures excluding the effects of these actions to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating operations absent the effect of acquisition-related and integration expenses and other actions. Hanes believes these non-GAAP measures provide management and investors with valuable supplemental information for analyzing the operating performance of the company’s ongoing business during each period presented without giving effect to costs associated with the execution and integration of any of the aforementioned actions taken.
In addition to these non-GAAP measures, the company has chosen to present EBITDA to investors because it considers that measure to be an important supplemental means of evaluating operating performance. Hanes believes that EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA should not, however, be considered as a measure of discretionary cash available to invest in the growth of the business.
Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as an alternative to, or substitute for, financial results prepared in accordance with GAAP. Further, the non-GAAP measures presented may be different from non-GAAP measures with similar or identical names presented by other companies.
In the first and second quarters of 2017, Hanes incurred approximately
In the first and second quarters of 2016, Hanes incurred approximately
Hanes expects to incur approximately
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 “2017 Financial Guidance,” as well as statements about the
benefits anticipated from Project Booster, the acquisitions of Hanes
Europe Innerwear, Hanes Australasia, Knights Apparel and Champion
Europe, and assumptions regarding the timing of back-to-school
shipments, organic sales growth, and U.S. tax law and policy 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 highly competitive and evolving nature of
the industry in which we compete; any inadequacy, interruption,
integration failure or security failure with respect to our information
technology; significant fluctuations in foreign exchange rates; the
rapidly changing retail environment; our complex multinational tax
structure; our ability to properly manage strategic projects; our
ability to attract and retain a senior management team with the core
competencies needed to support our growth in global markets; risks
related to our international operations, including the impact to our
business as a result of the United Kingdom’s recent referendum to leave
the
TABLE 1 |
||||||||||||||||||||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
July 1, 2017 | July 2, 2016 | % Change | July 1, 2017 | July 2, 2016 | % Change | |||||||||||||||||||||||
Net sales | $ | 1,646,610 | $ | 1,472,731 | 11.8 | % | $ | 3,026,965 | $ | 2,691,871 | 12.4 | % | ||||||||||||||||
Cost of sales | 1,000,708 | 915,440 | 1,841,532 | 1,677,324 | ||||||||||||||||||||||||
Gross profit | 645,902 | 557,291 | 15.9 | % | 1,185,433 | 1,014,547 | 16.8 | % | ||||||||||||||||||||
As a % of net sales | 39.2 | % | 37.8 | % | 39.2 | % | 37.7 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 417,225 | 336,081 | 835,488 | 670,932 | ||||||||||||||||||||||||
As a % of net sales | 25.3 | % | 22.8 | % | 27.6 | % | 24.9 | % | ||||||||||||||||||||
Operating profit | 228,677 | 221,210 | 3.4 | % | 349,945 | 343,615 | 1.8 | % | ||||||||||||||||||||
As a % of net sales | 13.9 | % | 15.0 | % | 11.6 | % | 12.8 | % | ||||||||||||||||||||
Other expenses | 1,394 | 48,325 | 2,778 | 48,974 | ||||||||||||||||||||||||
Interest expense, net | 44,130 | 36,540 | 86,267 | 68,106 | ||||||||||||||||||||||||
Income from continuing operations before income tax expense | 183,153 | 136,345 | 260,900 | 226,535 | ||||||||||||||||||||||||
Income tax expense | 10,989 | 8,202 | 15,654 | 18,123 | ||||||||||||||||||||||||
Income from continuing operations | 172,164 | 128,143 | 34.4 | % | 245,246 | 208,412 | 17.7 | % | ||||||||||||||||||||
Loss from discontinued operations, net of tax | 368 | — | (2,097 | ) | — | |||||||||||||||||||||||
Net income | $ | 172,532 | $ | 128,143 | 34.6 | % | $ | 243,149 | $ | 208,412 | 16.7 | % | ||||||||||||||||
Earnings per share - basic: | ||||||||||||||||||||||||||||
Continuing operations | $ | 0.47 | $ | 0.34 | $ | 0.66 | $ | 0.54 | ||||||||||||||||||||
Discontinued operations | — | — | (0.01 | ) | — | |||||||||||||||||||||||
Net income | $ | 0.47 | $ | 0.34 | 38.2 | % | $ | 0.66 | $ | 0.54 | 22.2 | % | ||||||||||||||||
Earnings per share - diluted: | ||||||||||||||||||||||||||||
Continuing operations | $ | 0.47 | $ | 0.34 | $ | 0.66 | $ | 0.54 | ||||||||||||||||||||
Discontinued operations | — | — | (0.01 | ) | — | |||||||||||||||||||||||
Net income | $ | 0.47 | $ | 0.34 | 38.2 | % | $ | 0.65 | $ | 0.54 | 20.4 | % | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 365,911 | 379,233 | 370,075 | 383,448 | ||||||||||||||||||||||||
Diluted | 367,992 | 382,511 | 372,147 | 386,756 | ||||||||||||||||||||||||
TABLE 2 |
||||||||||||||||||||||||||||
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
July 1, 2017 | July 2, 2016 | % Change | July 1, 2017 | July 2, 2016 | % Change | |||||||||||||||||||||||
Segment net sales1: | ||||||||||||||||||||||||||||
Innerwear | $ | 719,006 | $ | 737,690 | (2.5 | )% | $ | 1,224,196 | $ | 1,274,711 | (4.0 | )% | ||||||||||||||||
Activewear | 379,756 | 374,511 | 1.4 | % | 707,099 | 691,054 | 2.3 | % | ||||||||||||||||||||
International | 475,242 | 269,662 | 76.2 | % | 952,640 | 548,749 | 73.6 | % | ||||||||||||||||||||
Other | 72,606 | 90,868 | (20.1 | )% | 143,030 | 177,357 | (19.4 | )% | ||||||||||||||||||||
Total net sales | $ | 1,646,610 | $ | 1,472,731 | 11.8 | % | $ | 3,026,965 | $ | 2,691,871 | 12.4 | % | ||||||||||||||||
Segment operating profit1: | ||||||||||||||||||||||||||||
Innerwear | $ | 164,279 | $ | 178,023 | (7.7 | )% | $ | 266,980 | $ | 287,758 | (7.2 | )% | ||||||||||||||||
Activewear | 49,630 | 55,009 | (9.8 | )% | 83,038 | 87,114 | (4.7 | )% | ||||||||||||||||||||
International | 58,307 | 23,153 | 151.8 | % | 108,802 | 47,872 | 127.3 | % | ||||||||||||||||||||
Other | 5,643 | 12,530 | (55.0 | )% | 6,088 | 18,209 | (66.6 | )% | ||||||||||||||||||||
General corporate expenses/other | (23,120 | ) | (23,110 | ) | — | % | (50,534 | ) |
(48,274 |
) |
4.7 | % | ||||||||||||||||
Acquisition-related and integration charges | (26,062 | ) | (24,395 | ) | 6.8 | % | (64,429 | ) | (49,064 | ) | 31.3 | % | ||||||||||||||||
Total operating profit | $ | 228,677 | $ | 221,210 | 3.4 | % | $ | 349,945 | $ | 343,615 | 1.8 | % | ||||||||||||||||
EBITDA2: | ||||||||||||||||||||||||||||
Net income from continuing operations | $ | 172,164 | $ | 128,143 | 34.4 | % | $ | 245,246 | $ | 208,412 | 17.7 | % | ||||||||||||||||
Interest expense, net | 44,130 | 36,540 | 20.8 | % | 86,267 | 68,106 | 26.7 | % | ||||||||||||||||||||
Income tax expense | 10,989 | 8,202 | 34.0 | % | 15,654 | 18,123 | (13.6 | )% | ||||||||||||||||||||
Depreciation and amortization | 29,330 | 24,007 | 22.2 | % | 58,095 | 46,827 | 24.1 | % | ||||||||||||||||||||
Total EBITDA | $ | 256,613 | $ | 196,892 | 30.3 | % | $ | 405,262 | $ | 341,468 | 18.7 | % | ||||||||||||||||
1 |
In the first quarter of 2017, the Company realigned its reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker. The former Direct to Consumer segment, which consisted of the Company’s U.S. value-based (“outlet”) stores, legacy catalog business and U.S. retail Internet operations, was eliminated. The Company’s U.S. retail Internet operations, which sells products directly to consumers, is now reported in the respective Innerwear and Activewear segments. The Other category consists of the Company’s U.S. value-based (“outlet”) stores, U.S. hosiery business (previously reported in the Innerwear segment) and legacy catalog operations. Prior year segment sales and operating profit results have been revised to conform to the current year presentation. | ||
2 |
Earnings from continuing operations 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) |
|||||||||
July 1, 2017 | December 31, 2016 | ||||||||
Assets | |||||||||
Cash and cash equivalents | $ | 449,415 | $ | 460,245 | |||||
Trade accounts receivable, net | 935,548 | 836,924 | |||||||
Inventories | 2,000,436 | 1,840,565 | |||||||
Other current assets | 192,603 | 137,535 | |||||||
Current assets of discontinued operations | — | 45,897 | |||||||
Total current assets | 3,578,002 | 3,321,166 | |||||||
Property, net | 619,883 | 692,464 | |||||||
Trademarks and other identifiable intangibles, net | 1,346,369 | 1,285,458 | |||||||
Goodwill | 1,132,981 | 1,098,540 | |||||||
Deferred tax assets | 480,001 | 464,872 | |||||||
Other noncurrent assets | 79,735 | 67,980 | |||||||
Total assets | $ | 7,236,971 | $ | 6,930,480 | |||||
Liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 1,350,103 | $ | 1,381,442 | |||||
Notes payable | 72,157 | 56,396 | |||||||
Accounts Receivable Securitization Facility | 203,609 | 44,521 | |||||||
Current portion of long-term debt | 152,719 | 133,843 | |||||||
Current liabilities of discontinued operations | — | 9,466 | |||||||
Total current liabilities | 1,778,588 | 1,625,668 | |||||||
Long-term debt | 3,797,245 | 3,507,685 | |||||||
Pension and postretirement benefits | 377,715 | 371,612 | |||||||
Other noncurrent liabilities | 205,097 | 201,601 | |||||||
Total liabilities | 6,158,645 | 5,706,566 | |||||||
Equity | 1,078,326 | 1,223,914 | |||||||
Total liabilities and equity | $ | 7,236,971 | $ | 6,930,480 | |||||
TABLE 4 |
||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
||||||||||
Six Months Ended | ||||||||||
July 1, 2017 | July 2, 2016 | |||||||||
Operating Activities: | ||||||||||
Net income | $ | 243,149 | $ | 208,412 | ||||||
Depreciation and amortization | 58,095 | 46,827 | ||||||||
Loss on disposition of businesses | 1,100 | — | ||||||||
Other noncash items | 16,827 | 54,288 | ||||||||
Changes in assets and liabilities, net | (284,921 | ) | (438,605 | ) | ||||||
Net cash from operating activities | 34,250 | (129,078 | ) | |||||||
Investing Activities: | ||||||||||
Purchases/sales of property and equipment, net, and other | (26,460 | ) | (27,037 | ) | ||||||
Acquisition of businesses, net of cash acquired | (524 | ) | (193,396 | ) | ||||||
Disposition of businesses | 40,285 | — | ||||||||
Net cash from investing activities | 13,301 | (220,433 | ) | |||||||
Financing Activities: | ||||||||||
Cash dividends paid | (110,529 | ) | (84,234 | ) | ||||||
Share repurchases | (299,919 | ) | (379,901 | ) | ||||||
Net borrowings on notes payable, debt and other | 355,237 | 1,154,816 | ||||||||
Net cash from financing activities | (55,211 | ) | 690,681 | |||||||
Effect of changes in foreign currency exchange rates on cash | (3,170 | ) | 658 | |||||||
Change in cash and cash equivalents | (10,830 | ) | 341,828 | |||||||
Cash and cash equivalents at beginning of year | 460,245 | 319,169 | ||||||||
Cash and cash equivalents at end of period | $ | 449,415 | $ | 660,997 | ||||||
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 | Six Months Ended | |||||||||||||||||||
July 1, 2017 | July 2, 2016 | July 1, 2017 | July 2, 2016 | |||||||||||||||||
Gross profit, as reported under GAAP | $ | 645,902 | $ | 557,291 | $ | 1,185,433 | $ | 1,014,547 | ||||||||||||
Acquisition-related and integration charges | 4,284 | 9,300 | 19,759 | 14,169 | ||||||||||||||||
Gross profit, as adjusted | $ | 650,186 | $ | 566,591 | $ | 1,205,192 | $ | 1,028,716 | ||||||||||||
As a % of net sales | 39.5 | % | 38.5 | % | 39.8 | % | 38.2 | % | ||||||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 417,225 | $ | 336,081 | $ | 835,488 | $ | 670,932 | ||||||||||||
Acquisition-related and integration charges | (21,778 | ) | (15,095 | ) | (44,670 | ) | (34,895 | ) | ||||||||||||
Selling, general and administrative expenses, as adjusted | $ | 395,447 | $ | 320,986 | $ | 790,818 | $ | 636,037 | ||||||||||||
As a % of net sales | 24.0 | % | 21.8 | % | 26.1 | % | 23.6 | % | ||||||||||||
Operating profit, as reported under GAAP | $ | 228,677 | $ | 221,210 | $ | 349,945 | $ | 343,615 | ||||||||||||
Acquisition-related and integration charges included in gross profit | 4,284 | 9,300 | 19,759 | 14,169 | ||||||||||||||||
Acquisition-related and integration charges included in SG&A | 21,778 | 15,095 | 44,670 | 34,895 | ||||||||||||||||
Operating profit, as adjusted | $ | 254,739 | $ | 245,605 | $ | 414,374 | $ | 392,679 | ||||||||||||
As a % of net sales | 15.5 | % | 16.7 | % | 13.7 | % | 14.6 | % | ||||||||||||
Net income from continuing operations, as reported under GAAP | $ | 172,164 | $ | 128,143 | $ | 245,246 | $ | 208,412 | ||||||||||||
Acquisition-related and integration charges included in gross profit | 4,284 | 9,300 | 19,759 | 14,169 | ||||||||||||||||
Acquisition-related and integration charges included in SG&A | 21,778 | 15,095 | 44,670 | 34,895 | ||||||||||||||||
Debt refinance charges included in other expenses | — | 47,291 | — | 47,291 | ||||||||||||||||
Tax effect on actions | (1,564 | ) | (4,996 | ) | (3,866 | ) | (7,709 | ) | ||||||||||||
Net income from continuing operations, as adjusted | $ | 196,662 | $ | 194,833 | $ | 305,809 | $ | 297,058 | ||||||||||||
Diluted earnings per share from continuing operations, as reported under GAAP | $ | 0.47 | $ | 0.34 | $ | 0.66 | $ | 0.54 | ||||||||||||
Acquisition-related and integration charges | 0.07 | 0.17 | 0.16 | 0.23 | ||||||||||||||||
Diluted earnings per share from continuing operations, as adjusted | $ | 0.53 | $ | 0.51 | $ | 0.82 | $ | 0.77 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170801006534/en/
Source:
HanesBrands
News Media, contact:
Matt Hall, 336-519-3386
or
Analysts
and Investors, contact:
T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.