05/09/24
8:30 am EDT
Most Recent
Press Release
HanesBrands Reports Third-Quarter 2014 Financial Results
HanesBrands Reports Third-Quarter 2014 Financial Results
October 29, 2014 at 4:01 PM EDT
– Third Consecutive Quarter of Double-Digit Sales and Profit Growth
– Excluding Actions, Net Sales up 17%, Operating Profit up 23% and EPS up 41%
– Full-Year Adjusted EPS Guidance Increased to a Range of
For the third quarter ended
Hanes has delivered three consecutive quarters of double-digit growth in net sales, adjusted operating profit and adjusted EPS. Third-quarter results were aided by acquisition-related sales and profit contributions, modest base sales growth led by innovative products, and significant efficiency gains from global supply chain operations.
The company’s updated 2014 full-year financial guidance includes an
increase in expected adjusted EPS to a range of
“Our business continues to perform very well, particularly in an
uncertain consumer environment,” Hanes Chairman and Chief Executive
Officer
Third-Quarter 2014 Financial Highlights and Business Segment Summary
Key accomplishments for the third quarter include:
Sales Growth in Each Business Segment. Net sales increased for
each business segment. Maidenform contributed
Supply Chain and Innovate-to-Elevate Drive Margin Improvement. Strong global supply chain performance and Innovate-to-Elevate drove a 100-basis-point improvement in adjusted operating profit margin year-over-year in the third quarter, excluding DBApparel. Overall, including DBA, adjusted operating margin increased 70 basis points.
Maidenform Integration Successfully Completed. Hanes completed the integration of Maidenform within one year of the acquisition closing. From here on, Maidenform brand results will be part of the company’s core business in its Innerwear, International and Direct to Consumer segments. The company remains on schedule for capturing synergies from the acquisition and integration, including ramp up of internalized production of select Maidenform intimate apparel styles in Hanes’ self-owned supply chain.
DBApparel Acquisition Closed and Integration Planning Underway.
Hanes closed on the acquisition of DBApparel, a leading marketer of
intimate apparel and underwear in
Key business highlights include:
Innerwear Segment. Innerwear net sales increased 16 percent in the third quarter as a result of the Maidenform acquisition, while the company’s base business was up slightly compared with a year ago. Operating profit increased 29 percent on acquisition benefits and increased base-business profitability.
- Retail Environment. Sales in the quarter were affected by a continued uneven and challenging retail environment. Sales growth of at least mid-single digits in socks, boys’ underwear, and panties were offset by softness in other Innerwear categories. Innovation platforms, including ComfortBlend and X-Temp underwear and Flexible Fit bras, continued to outperform their respective categories.
- Profitability Improvement. Innerwear’s operating profit margin increased 200 basis points to 19.8 percent as a result of strong supply chain performance and Innovate-to-Elevate.
Activewear Segment. Activewear sales increased 5 percent, while operating profit declined 1 percent versus a strong year-ago third quarter.
- Continued Strong Profitability. The segment’s operating profit margin was 16.1 percent in the third quarter, and the year-to-date operating margin of 14.1 percent is 95 basis points better than a year ago.
- Mixed Sales Environment. Retail Activewear sales increased by 1 percent, while Gear for Sports sales increased by double digits.
International Segment. The acquisitions of Maidenform and DBApparel contributed to International sales growth of 63 percent and operating profit growth of 74 percent in the third quarter, while foreign exchange rates on currency continued to have a negative impact on both measures. On a constant-currency basis, base International net sales decreased 3 percent in the quarter and operating profit decreased 1 percent.
Direct to Consumer Segment. Net sales for the Direct to Consumer segment increased 13 percent and operating profit increased 6 percent in the third quarter, with the acquisition of Maidenform contributing to both comparisons versus the year-ago quarter.
2014 Guidance
Based on third-quarter results, Hanes has increased its 2014 outlook for
full-year adjusted EPS and other financial measures. The company’s
previous guidance for the 53-week year was updated
All guidance for adjusted performance measures exclude charges related to the acquisitions of DBA and Maidenform and other actions. (See the GAAP reconciliation section below.)
Hanes’ guidance range for net sales remains approximately
Hanes expects interest expense and other expense of approximately
Adjusted EPS guidance for 2014 has been increased to a range of
The new full-year guidance implies fourth-quarter guidance of
approximately
The company expects net cash from operating activities to be in the
range of
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 earnings per share excluding actions
and the tax effect on actions. Adjusted EPS for the third quarter 2014
was
Adjusted operating profit is defined as operating profit excluding
actions. Adjusted operating profit for the third quarter was
Adjusted net income is defined as net income excluding actions and the tax effect on 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 measures with 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 the company’s 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 the Maidenform and DBA
acquisitions 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 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 “2014 Guidance,” statements regarding
the value creation potential of the business, as well as statements
about the benefits anticipated from the Maidenform and DBApparel
acquisitions, 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
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||
September 27, 2014 | September 28, 2013 | % Change | September 27, 2014 | September 28, 2013 | % Change | |||||||||||||||||
Net sales | $ | 1,400,728 | $ | 1,197,346 | 17.0 | % | $ | 3,802,150 | $ | 3,342,012 | 13.8 | % | ||||||||||
Cost of sales | 903,013 | 775,666 | 2,443,304 | 2,157,551 | ||||||||||||||||||
Gross profit | 497,715 | 421,680 | 18.0 | % | 1,358,846 | 1,184,461 | 14.7 | % | ||||||||||||||
As a % of net sales | 35.5 | % | 35.2 | % | 35.7 | % | 35.4 | % | ||||||||||||||
Selling, general and administrative expenses | 343,823 | 244,782 | 926,042 | 740,973 | ||||||||||||||||||
As a % of net sales | 24.5 | % | 20.4 | % | 24.4 | % | 22.2 | % | ||||||||||||||
Operating profit | 153,892 | 176,898 | (13.0 | )% | 432,804 | 443,488 | (2.4 | )% | ||||||||||||||
As a % of net sales | 11.0 | % | 14.8 | % | 11.4 | % | 13.3 | % | ||||||||||||||
Other expenses | 795 | 795 | 1,890 | 2,010 | ||||||||||||||||||
Interest expense, net | 23,528 | 25,002 | 66,465 | 75,846 | ||||||||||||||||||
Income before income tax expense | 129,569 | 151,101 | 364,449 | 365,632 | ||||||||||||||||||
Income tax expense | 10,625 | 25,838 | 49,367 | 67,404 | ||||||||||||||||||
Net income | $ | 118,944 | $ | 125,263 | (5.0 | )% | $ | 315,082 | $ | 298,228 | 5.7 | % | ||||||||||
Earnings per share: | ||||||||||||||||||||||
Basic | $ | 1.18 | $ | 1.25 | (5.6 | )% | $ | 3.14 | $ | 2.99 | 5.0 | % | ||||||||||
Diluted | $ | 1.16 | $ | 1.23 | (5.7 | )% | $ | 3.09 | $ | 2.93 | 5.5 | % | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||
Basic | 100,598 | 100,066 | 100,492 | 99,764 | ||||||||||||||||||
Diluted | 102,131 | 101,987 | 102,014 | 101,923 |
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||
September 27, 2014 | September 28, 2013 | % Change | September 27, 2014 | September 28, 2013 | % Change | |||||||||||||||||
Segment net sales: | ||||||||||||||||||||||
Innerwear | $ | 648,310 | $ | 560,127 | 15.7 | % | $ | 2,007,794 | $ | 1,744,471 | 15.1 | % | ||||||||||
Activewear | 424,745 | 405,091 | 4.9 | % | 1,037,063 | 966,508 | 7.3 | % | ||||||||||||||
Direct to Consumer | 112,663 | 100,003 | 12.7 | % | 300,729 | 272,719 | 10.3 | % | ||||||||||||||
International | 215,010 | 132,125 | 62.7 | % | 456,564 | 358,314 | 27.4 | % | ||||||||||||||
Total net sales | $ | 1,400,728 | $ | 1,197,346 | 17.0 | % | $ | 3,802,150 | $ | 3,342,012 | 13.8 | % | ||||||||||
Segment operating profit: | ||||||||||||||||||||||
Innerwear | $ | 128,343 | $ | 99,887 | 28.5 | % | $ | 405,765 | $ | 342,331 | 18.5 | % | ||||||||||
Activewear | 68,224 | 68,591 | (0.5 | )% | 145,928 | 127,020 | 14.9 | % | ||||||||||||||
Direct to Consumer | 17,254 | 16,245 | 6.2 | % | 28,401 | 25,441 | 11.6 | % | ||||||||||||||
International | 28,950 | 16,648 | 73.9 | % | 53,321 | 31,662 | 68.4 | % | ||||||||||||||
General corporate expenses/other | (25,744 | ) | (24,473 | ) | 5.2 | % | (70,794 | ) | (82,966 | ) | (14.7 | )% | ||||||||||
Acquisition, integration and other action related charges | (63,135 | ) | — | NM | (129,817 | ) | — | NM | ||||||||||||||
Total operating profit | $ | 153,892 | $ | 176,898 | (13.0 | )% | $ | 432,804 | $ | 443,488 | (2.4 | )% | ||||||||||
EBITDA1: | ||||||||||||||||||||||
Net income | $ | 118,944 | $ | 125,263 | $ | 315,082 | $ | 298,228 | ||||||||||||||
Interest expense, net | 23,528 | 25,002 | 66,465 | 75,846 | ||||||||||||||||||
Income tax expense | 10,625 | 25,838 | 49,367 | 67,404 | ||||||||||||||||||
Depreciation and amortization | 23,500 | 21,571 | 69,540 | 67,201 | ||||||||||||||||||
Total EBITDA | $ | 176,597 | $ | 197,674 | (10.7 | )% | $ | 500,454 | $ | 508,679 | (1.6 | )% |
¹ |
Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
|||||||
September 27, 2014 | December 28, 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 215,832 | $ | 115,863 | |||
Trade accounts receivable, net | 874,922 | 578,558 | |||||
Inventories | 1,666,008 | 1,283,331 | |||||
Other current assets | 397,658 | 265,914 | |||||
Total current assets | 3,154,420 | 2,243,666 | |||||
Property, net | 673,295 | 579,883 | |||||
Intangible assets and goodwill | 1,436,984 | 1,004,143 | |||||
Other noncurrent assets | 278,795 | 262,356 | |||||
Total assets | $ | 5,543,494 | $ | 4,090,048 | |||
Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 1,293,186 | $ | 781,296 | |||
Notes payable | 137,948 | 36,192 | |||||
Accounts Receivable Securitization Facility | 225,000 | 181,790 | |||||
Current portion of long-term debt | 19,821 | — | |||||
Total current liabilities | 1,675,955 | 999,278 | |||||
Long-term debt | 1,908,733 | 1,467,000 | |||||
Other noncurrent liabilities | 494,136 | 393,147 | |||||
Total liabilities | 4,078,824 | 2,859,425 | |||||
Equity | 1,464,670 | 1,230,623 | |||||
Total liabilities and equity | $ | 5,543,494 | $ | 4,090,048 |
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
||||||||
Nine Months Ended | ||||||||
September 27, 2014 | September 28, 2013 | |||||||
Operating Activities: | ||||||||
Net income | $ | 315,082 | $ | 298,228 | ||||
Depreciation and amortization | 69,540 | 67,201 | ||||||
Other noncash items | 13,771 | 13,443 | ||||||
Changes in assets and liabilities, net | (183,072 | ) | (121,887 | ) | ||||
Net cash from operating activities | 215,321 | 256,985 | ||||||
Investing Activities: | ||||||||
Purchases/sales of property and equipment, net, and other | (50,326 | ) | (24,825 | ) | ||||
Acquisition of business, net of cash acquired | (352,986 | ) | — | |||||
Net cash from investing activities | (403,312 | ) | (24,825 | ) | ||||
Financing Activities: | ||||||||
Cash dividends paid | (89,638 | ) | (39,615 | ) | ||||
Net borrowings on notes payable, debt and other | 382,339 | (101,804 | ) | |||||
Net cash from financing activities | 292,701 | (141,419 | ) | |||||
Effect of changes in foreign currency exchange rates on cash | (4,741 | ) | (1,217 | ) | ||||
Change in cash and cash equivalents | 99,969 | 89,524 | ||||||
Cash and cash equivalents at beginning of year | 115,863 | 42,796 | ||||||
Cash and cash equivalents at end of period | $ | 215,832 | $ | 132,320 |
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | |||||||||||||
Gross profit, as reported under GAAP | $ | 497,715 | $ | 421,680 | $ | 1,358,846 | $ | 1,184,461 | ||||||||
Acquisition, integration and other action related charges | 22,565 | — | 41,227 | — | ||||||||||||
Gross profit, as adjusted | $ | 520,280 | $ | 421,680 | $ | 1,400,073 | $ | 1,184,461 | ||||||||
As a % of net sales | 37.1 | % | 35.2 | % | 36.8 | % | 35.4 | % | ||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 343,823 | $ | 244,782 | $ | 926,042 | $ | 740,973 | ||||||||
Acquisition, integration and other action related charges | (40,570 | ) | — | (88,590 | ) | — | ||||||||||
Selling, general and administrative expenses, as adjusted | $ | 303,253 | $ | 244,782 | $ | 837,452 | $ | 740,973 | ||||||||
As a % of net sales | 21.6 | % | 20.4 | % | 22.0 | % | 22.2 | % | ||||||||
Operating profit, as reported under GAAP | $ | 153,892 | $ | 176,898 | $ | 432,804 | $ | 443,488 | ||||||||
Acquisition, integration and other action related charges included in gross profit | 22,565 | — | 41,227 | — | ||||||||||||
Acquisition, integration and other action related charges included in SG&A | 40,570 | — | 88,590 | — | ||||||||||||
Operating profit, as adjusted | $ | 217,027 | $ | 176,898 | $ | 562,621 | $ | 443,488 | ||||||||
As a % of net sales | 15.5 | % | 14.8 | % | 14.8 | % | 13.3 | % | ||||||||
Net income, as reported under GAAP | $ | 118,944 | $ | 125,263 | $ | 315,082 | $ | 298,228 | ||||||||
Acquisition, integration and other action related charges included in gross profit | 22,565 | — | 41,227 | — | ||||||||||||
Acquisition, integration and other action related charges included in SG&A | 40,570 | — | 88,590 | — | ||||||||||||
Tax effect on actions | (5,176 | ) | — | (16,033 | ) | — | ||||||||||
Net income, as adjusted | $ | 176,903 | $ | 125,263 | $ | 428,866 | $ | 298,228 | ||||||||
Diluted earnings per share, as reported under GAAP | $ | 1.16 | $ | 1.23 | $ | 3.09 | $ | 2.93 | ||||||||
Acquisition, integration and other action related charges | 0.57 | — | 1.12 | — | ||||||||||||
Diluted earnings per share, as adjusted | $ | 1.73 | $ | 1.23 | $ | 4.20 | $ | 2.93 |
Source:
HanesBrands
News Media:
Matt Hall, 336-519-3386
or
Analysts
and Investors:
T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.