02/15/24
8:30 am EST
Most Recent
Press Release
HanesBrands Reports Third-Quarter 2019 Financial Results
HanesBrands Reports Third-Quarter 2019 Financial Results
October 31, 2019 at 7:00 AM EDT
– Inline 3Q results include net sales and EPS at the higher end of guidance
– 3Q net sales of
– 3Q global Champion sales increased 25% as reported, up 29% domestically, excluding the mass channel
– 3Q GAAP EPS of
– 3Q operating cash flow of more than
– Updated 2019 full-year guidance includes increased midpoint for net sales and EPS
For the quarter ended
Third-quarter GAAP operating profit increased 5% to
“We are proud to have met or exceeded our financial guidance for each of the first three quarters of the year, and we have now raised the midpoint of 2019 guidance for net sales and EPS,” said Hanes Chief Executive Officer
Callouts for Financial Results and Outlook
Third-Quarter Results Include Strong Net Sales and EPS Performance. Performance for all measures in the third quarter were in line with company guidance, with net sales and EPS toward the higher end of guidance. Company guidance for the third quarter were net sales of
Global Champion Constant-Currency Sales Increased 26% in the Third Quarter. Champion achieved its ninth consecutive quarter of strong double-digit global sales growth in constant currency, excluding the U.S. mass channel. The growth was broad-based by geography, by product segment and by channel. Domestic Champion sales increased 29%, and international Champion sales increased 24%, with double-digit gains in
In the third quarter, the company also entered an agreement to add a distribution partner for Champion in
Double-Digit Growth for Domestic and International Consumer-Directed Sales. Global consumer-directed sales, consisting of company-owned or brand retail stores and all online channel sales, increased 10% on a reported basis in the third quarter, representing 23% of total sales. On a constant-currency basis, consumer-directed sales increased 13%, up double-digits both domestically and internationally.
Third-Quarter Operating Cash Flow Increases Significantly, Debt Leverage Decreases Significantly. Cash flow from operations of
The company reduced net debt at the end of the third quarter by approximately
Third-Quarter Business Segment Summaries
International Segment Sales Increase 7% Despite Currency Pressure. International segment sales increased a stronger-than-expected 7% as reported and 11% in constant currency as sales for both activewear and innerwear increased. Operating profit increased 8% as reported and 10% in constant currency.
The segment, which is now the company’s largest, had an operating margin of 16.2%, the fifth consecutive quarter of margins above the company average.
In addition to double-digit Champion activewear growth in
Innerwear Segment Innovation Focus Continues, but Sales Affected by Softer-than-Expected Retail Traffic Trends and Prior Retailer Bankruptcies. U.S. Innerwear segment net sales decreased 3.5% in the third quarter, while operating profit decreased 8%.
Segment sales of
Innovation continues to perform well in the segment. In basics, expansion of Comfort Flex Fit and X-Temp products continues. In intimates, shapewear sales increased for the fifth consecutive quarter, and new innovation introduced in bras, including EasyLight lightweight products, are succeeding as expected.
Activewear Segment Profit Increases on Champion Growth, Remixing Efforts. U.S. Activewear segment third-quarter net sales decreased 1% and operating profit increased 4%.
Outside the mass channel, Champion activewear sales increased 18%. At mass, a slight increase in C9 by Champion sales was better than an expected decrease due to continued strong sell-through.
For the non-Champion portion of the segment, the company continues to focus on remixing to branded products to drive improving segment margins. The sales decline in this portion of the segment was a result of the previously disclosed exit of commodity programs in the mass channel and softer industry demand trends across the printwear channel of trade.
The segment’s operating margin increased 90 basis points to 17.8% in the quarter despite higher growth investment. Driving margin growth were improved Champion profitability, benefits of remixing to branded products, and the benefit of pricing.
2019 Financial Guidance
Hanes has updated full-year financial guidance for 2019, including effectively raising the midpoint of the guidance ranges for net sales and EPS and tightening the high end of the range for operating profit.
The company expects 2019 net sales of
Prior guidance for the updated ranges were net sales of
At the midpoint, the updated 2019 guidance versus 2018 results represents net sales growth of more than 2%; GAAP and adjusted operating profit growth of 5% and 2%, respectively; GAAP and adjusted EPS growth of 8% and 4%, respectively; and operating cash flow growth of 17%.
For the fourth quarter, net sales are expected to be in the range of
Guidance Assumptions. Key assumptions in the company’s guidance include: a cautious outlook for the U.S. brick-and-mortar retail market, including the effect of door closures; continued progress in U.S. Innerwear revitalization initiatives; price increases; negative effects of currency exchange rates; and increased marketing investment to support brand plans.
Organic sales in constant currency for 2019 are expected to approach 4% growth at the midpoint of full-year guidance and are expected to be comparable to a year ago in the fourth quarter at the midpoint of guidance. Adverse foreign currency exchange rates are now expected to reduce net sales as reported by approximately
Segment Guidance. At the midpoint of full-year guidance, International segment net sales are expected to increase more than 7%, and constant-currency organic sales growth is expected to approach 12%. Growth drivers are expected to be Champion sales growth in
U.S. Innerwear net sales at the midpoint of guidance for the full year are expected to decrease 2.5% to 3%, while fourth-quarter net sales are expected to decline approximately 2%, trending sequentially better than the third quarter.
U.S. Activewear net sales at the midpoint of 2019 guidance are expected to increase approximately 3.5%, including mid-30% growth for Champion sales outside of the mass channel, a decline of approximately 7% for the Champion mass business, and a decline in the remainder of the Activewear segment as the company focuses on higher-margin products and navigates softer second-half industry demand trends in the printwear channel. The company expects margin expansion for the Activewear segment for the year. For the fourth quarter, U.S. Activewear sales are expected to decline approximately 7% with high-teens growth for Champion outside of mass to be more than offset by declines in Champion at mass and the remainder of Activewear.
Additional Guidance. The midpoint of 2019 guidance implies an adjusted operating profit margin consistent year over year.
GAAP operating profit in 2019 is expected to reflect approximately
Hanes expects interest expense and other expenses to be approximately
The company expects capital expenditure investment of approximately
The company’s priority for use of excess operating cash flow is to pay down debt. The company’s debt leverage on a net-debt-to-adjusted-EBITDA basis is expected to be 2.9 times at year end. Through the third quarter, the company generated
The company expects an annual effective tax rate of approximately 14% and slightly less than 366 million shares outstanding for both the fourth quarter and full year.
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 financial guidance prepared in accordance with generally accepted accounting principles, the company provides 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, EBITDA, adjusted EBITDA, and the ratio of net debt to adjusted EBITDA.
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.
Charges for actions taken in 2018 primarily represent acquisition and integration costs related to Hanes Europe Innerwear, Hanes Australasia, Champion Europe, Alternative Apparel and Bras N Things, and other costs related to supply chain network changes. Charges for actions taken and expected to be taken in 2019 primarily represent supply chain network changes and overhead reduction as well as completion of outstanding acquisition integration. Acquisition and integration 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 related to the integration of recently acquired businesses.
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 future periods depending upon acquisition activity.
Hanes has chosen to present these non‐GAAP measures 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 acquisitions 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, the company has chosen to present EBITDA, adjusted EBITDA, the ratio of net debt to adjusted EBITDA and free cash flow to investors because it considers these measures to be an important supplemental means of evaluating operating performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and stock compensation expense. Net debt is defined as total debt less cash and cash equivalents. Free cash flow is defined as net cash from operating activities less capital expenditures. These metrics are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses the ratio of net debt to adjusted EBITDA for planning purposes in connection with setting its capital allocation strategy. These metrics should not, however, be considered as measures of discretionary cash available to invest in the growth of the business.
Hanes is a global company that reports financial information in U.S. dollars in accordance with GAAP. As a supplement to the company’s reported operating results, Hanes also presents constant-currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. The company uses constant-currency information to provide a framework to assess how the business performed compared to prior-year reporting periods excluding the effects of changes in the rates used to calculate foreign currency translation.
To calculate foreign currency translation on a constant currency basis, operating results for the current-year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).
Organic net sales are net sales excluding those derived from businesses acquired within the previous 12 months of a reporting date.
Hanes believes this information is useful to management and investors to facilitate comparison of operating results and better identify trends in the company’s businesses.
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.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the supplemental financial information included with this release.
Webcast Conference Call
Hanes will host an Internet webcast of its third-quarter investor conference call at
An archived replay of the conference call webcast will be available in the investors section of the Hanes corporate website. 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 regarding Champion brand growth, our revitalization strategy for U.S. Innerwear, our outlook for cash flow growth and reduced leverage, and statements following the heading 2019 Financial Guidance, 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; the rapidly changing retail environment; any inadequacy, interruption, integration failure or security failure with respect to our information technology; the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; our ability to properly manage strategic projects in order to achieve the desired results; our ability to attract and retain a senior management team with the core competencies needed to support growth in global markets; significant fluctuations in foreign exchange rates; our reliance on a relatively small number of customers for a significant portion of our sales; legal, regulatory, political and economic risks related to our international operations; our ability to realize all of the anticipated benefits of acquisitions; and other risks identified from time to time in our most recent
TABLE 1 |
||||||||||||||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Income and Supplemental Financial Information (in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||||||||
|
Quarter Ended |
|
|
|
Nine Months Ended |
|
|
|||||||||||||||
|
September 28, |
|
September 29, |
|
% Change |
|
September 28, |
|
September 29, |
|
% Change |
|||||||||||
Net sales |
$ |
1,866,967 |
|
|
$ |
1,848,707 |
|
|
1.0 |
% |
|
$ |
5,215,918 |
|
|
$ |
5,035,654 |
|
|
3.6 |
% |
|
Cost of sales |
1,154,629 |
|
|
1,136,040 |
|
|
|
|
3,208,025 |
|
|
3,084,110 |
|
|
|
|||||||
Gross profit |
712,338 |
|
|
712,667 |
|
|
0.0 |
% |
|
2,007,893 |
|
|
1,951,544 |
|
|
2.9 |
% |
|||||
As a % of net sales |
38.2 |
% |
|
38.5 |
% |
|
|
|
38.5 |
% |
|
38.8 |
% |
|
|
|||||||
Selling, general and administrative expenses |
442,582 |
|
|
455,778 |
|
|
|
|
1,356,082 |
|
|
1,328,534 |
|
|
|
|||||||
As a % of net sales |
23.7 |
% |
|
24.7 |
% |
|
|
|
26.0 |
% |
|
26.4 |
% |
|
|
|||||||
Operating profit |
269,756 |
|
|
256,889 |
|
|
5.0 |
% |
|
651,811 |
|
|
623,010 |
|
|
4.6 |
% |
|||||
As a % of net sales |
14.4 |
% |
|
13.9 |
% |
|
|
|
12.5 |
% |
|
12.4 |
% |
|
|
|||||||
Other expenses |
8,066 |
|
|
7,285 |
|
|
|
|
23,766 |
|
|
19,616 |
|
|
|
|||||||
Interest expense, net |
43,091 |
|
|
52,795 |
|
|
|
|
137,672 |
|
|
146,988 |
|
|
|
|||||||
Income before income tax expense |
218,599 |
|
|
196,809 |
|
|
|
|
490,373 |
|
|
456,406 |
|
|
|
|||||||
Income tax expense |
30,823 |
|
|
25,388 |
|
|
|
|
69,143 |
|
|
64,943 |
|
|
|
|||||||
Net income |
$ |
187,776 |
|
|
$ |
171,421 |
|
|
9.5 |
% |
|
$ |
421,230 |
|
|
$ |
391,463 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic |
$ |
0.51 |
|
|
$ |
0.47 |
|
|
|
|
$ |
1.16 |
|
|
$ |
1.08 |
|
|
|
|||
Diluted |
$ |
0.51 |
|
|
$ |
0.47 |
|
|
|
|
$ |
1.15 |
|
|
$ |
1.07 |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic |
364,743 |
|
|
363,510 |
|
|
|
|
364,650 |
|
|
363,338 |
|
|
|
|||||||
Diluted |
365,597 |
|
|
364,638 |
|
|
|
|
365,478 |
|
|
364,527 |
|
|
|
The following tables present a reconciliation of reported results on a constant currency basis for the quarter and nine months ended September 28, 2019 and a comparison to prior year: |
Quarter Ended September 28, 2019 |
|
|
|
|
|
|
||||||||||||||||
|
As Reported |
|
Impact from |
|
Constant |
|
Quarter |
|
% Change, |
|
% Change, |
|||||||||||
As reported under GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net sales |
$ |
1,866,967 |
|
|
$ |
(23,430 |
) |
|
$ |
1,890,397 |
|
|
$ |
1,848,707 |
|
|
1.0 |
% |
|
2.3 |
% |
|
Gross profit |
712,338 |
|
|
(12,474 |
) |
|
724,812 |
|
|
712,667 |
|
|
0.0 |
% |
|
1.7 |
% |
|||||
Operating profit |
269,756 |
|
|
(2,705 |
) |
|
272,461 |
|
|
256,889 |
|
|
5.0 |
% |
|
6.1 |
% |
|||||
Diluted earnings per share |
$ |
0.51 |
|
|
$ |
(0.01 |
) |
|
$ |
0.52 |
|
|
$ |
0.47 |
|
|
8.5 |
% |
|
10.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
As adjusted:2 |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net sales |
$ |
1,866,967 |
|
|
$ |
(23,430 |
) |
|
$ |
1,890,397 |
|
|
$ |
1,848,707 |
|
|
1.0 |
% |
|
2.3 |
% |
|
Gross profit |
721,762 |
|
|
(12,474 |
) |
|
734,236 |
|
|
724,427 |
|
|
(0.4 |
)% |
|
1.4 |
% |
|||||
Operating profit |
279,693 |
|
|
(2,705 |
) |
|
282,398 |
|
|
277,621 |
|
|
0.7 |
% |
|
1.7 |
% |
|||||
Diluted earnings per share |
$ |
0.54 |
|
|
(0.01 |
) |
|
$ |
0.55 |
|
|
$ |
0.52 |
|
|
3.8 |
% |
|
5.8 |
% |
|
Nine Months Ended September 28, 2019 |
|
|
|
|
|
|
|||||||||||||||
|
As Reported |
|
Impact from |
|
Constant |
|
Nine Months |
|
% Change, |
|
% Change, |
|||||||||||
As reported under GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net sales |
$ |
5,215,918 |
|
|
$ |
(103,087 |
) |
|
$ |
5,319,005 |
|
|
$ |
5,035,654 |
|
|
3.6 |
% |
|
5.6 |
% |
|
Gross profit |
2,007,893 |
|
|
(54,149 |
) |
|
2,062,042 |
|
|
1,951,544 |
|
|
2.9 |
% |
|
5.7 |
% |
|||||
Operating profit |
651,811 |
|
|
(13,030 |
) |
|
664,841 |
|
|
623,010 |
|
|
4.6 |
% |
|
6.7 |
% |
|||||
Diluted earnings per share |
$ |
1.15 |
|
|
$ |
(0.03 |
) |
|
$ |
1.18 |
|
|
$ |
1.07 |
|
|
7.5 |
% |
|
10.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
As adjusted:2 |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net sales |
$ |
5,215,918 |
|
|
$ |
(103,087 |
) |
|
$ |
5,319,005 |
|
|
$ |
5,035,654 |
|
|
3.6 |
% |
|
5.6 |
% |
|
Gross profit |
2,047,607 |
|
|
(54,149 |
) |
|
2,101,756 |
|
|
1,985,140 |
|
|
3.1 |
% |
|
5.9 |
% |
|||||
Operating profit |
695,730 |
|
|
(13,030 |
) |
|
708,760 |
|
|
688,524 |
|
|
1.0 |
% |
|
2.9 |
% |
|||||
Diluted earnings per share |
$ |
1.26 |
|
|
$ |
(0.03 |
) |
|
$ |
1.29 |
|
|
$ |
1.23 |
|
|
2.4 |
% |
|
4.9 |
% |
1 |
Effect of the change in foreign currency exchange rates year-over-year. Calculated by applying prior period exchange rates to the current year financial results. This calculation excludes entities acquired within the past twelve months.
|
|
2 |
See “Reconciliation of Select GAAP Measures to Non-GAAP Measures” in Table 5.
|
TABLE 2 |
||||||||||||||||||||||
HANESBRANDS INC. Supplemental Financial Information (in thousands) (Unaudited) |
||||||||||||||||||||||
|
Quarter Ended |
|
|
|
Nine Months Ended |
|
|
|||||||||||||||
|
September 28, |
|
September 29, |
|
% Change |
|
September 28, |
|
September 29, |
|
% Change |
|||||||||||
Segment net sales: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Innerwear |
$ |
578,453 |
|
|
$ |
599,726 |
|
|
(3.5 |
)% |
|
$ |
1,733,002 |
|
|
$ |
1,785,498 |
|
|
(2.9 |
)% |
|
Activewear |
548,117 |
|
|
554,953 |
|
|
(1.2 |
) |
|
1,401,734 |
|
|
1,306,863 |
|
|
7.3 |
|
|||||
International |
663,525 |
|
|
619,435 |
|
|
7.1 |
|
|
1,878,568 |
|
|
1,735,184 |
|
|
8.3 |
|
|||||
Other |
76,872 |
|
|
74,593 |
|
|
3.1 |
|
|
202,614 |
|
|
208,109 |
|
|
(2.6 |
) |
|||||
Total net sales |
$ |
1,866,967 |
|
|
$ |
1,848,707 |
|
|
1.0 |
% |
|
$ |
5,215,918 |
|
|
$ |
5,035,654 |
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Innerwear |
$ |
121,467 |
|
|
$ |
132,244 |
|
|
(8.1 |
)% |
|
$ |
375,623 |
|
|
$ |
392,792 |
|
|
(4.4 |
)% |
|
Activewear |
97,314 |
|
|
93,605 |
|
|
4.0 |
|
|
209,686 |
|
|
189,400 |
|
|
10.7 |
|
|||||
International |
107,168 |
|
|
99,624 |
|
|
7.6 |
|
|
280,944 |
|
|
253,243 |
|
|
10.9 |
|
|||||
Other |
9,643 |
|
|
8,400 |
|
|
14.8 |
|
|
16,429 |
|
|
18,187 |
|
|
(9.7 |
) |
|||||
General corporate expenses/other |
(55,899 |
) |
|
(56,252 |
) |
|
(0.6 |
) |
|
(186,952 |
) |
|
(165,098 |
) |
|
13.2 |
|
|||||
Acquisition, integration and other action-related charges |
(9,937 |
) |
|
(20,732 |
) |
|
(52.1 |
) |
|
(43,919 |
) |
|
(65,514 |
) |
|
(33.0 |
) |
|||||
Total operating profit |
$ |
269,756 |
|
|
$ |
256,889 |
|
|
5.0 |
% |
|
$ |
651,811 |
|
|
$ |
623,010 |
|
|
4.6 |
% |
The following tables present a reconciliation of total reported net sales to organic constant currency net sales for the quarter and nine months ended September 28, 2019 and a comparison to prior year: |
|
Quarter Ended September 28, 2019 |
|
|
||||||||||||||||
|
Reported |
|
Acquisitions1 |
|
Impact from |
|
Organic |
|
% Change |
||||||||||
Segment net sales: |
|
|
|
|
|
|
|
|
|
||||||||||
Innerwear |
$ |
578,453 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
578,453 |
|
|
(3.5 |
)% |
|
Activewear |
548,117 |
|
|
— |
|
|
— |
|
|
548,117 |
|
|
(1.2 |
) |
|||||
International |
663,525 |
|
|
— |
|
|
(23,430 |
) |
|
686,955 |
|
|
10.9 |
|
|||||
Other |
76,872 |
|
|
— |
|
|
— |
|
|
76,872 |
|
|
3.1 |
|
|||||
Total |
$ |
1,866,967 |
|
|
$ |
— |
|
|
$ |
(23,430 |
) |
|
$ |
1,890,397 |
|
|
2.3 |
% |
|
Nine Months Ended September 28, 2019 |
|
|
||||||||||||||||
|
Reported |
|
Acquisitions1 |
|
Impact from |
|
Organic |
|
% Change |
||||||||||
Segment net sales: |
|
|
|
|
|
|
|
|
|
||||||||||
Innerwear |
$ |
1,733,002 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,733,002 |
|
|
(2.9 |
)% |
|
Activewear |
1,401,734 |
|
|
— |
|
|
— |
|
|
1,401,734 |
|
|
7.3 |
|
|||||
International |
1,878,568 |
|
|
17,515 |
|
|
(103,087 |
) |
|
1,964,140 |
|
|
13.2 |
|
|||||
Other |
202,614 |
|
|
— |
|
|
— |
|
|
202,614 |
|
|
(2.6 |
) |
|||||
Total |
$ |
5,215,918 |
|
|
$ |
17,515 |
|
|
$ |
(103,087 |
) |
|
$ |
5,301,490 |
|
|
5.3 |
% |
1 |
Net sales derived from businesses acquired within the past twelve months. |
|
2 |
Effect of the change in foreign currency exchange rates year-over-year. Calculated by applying prior period exchange rates to the current year net sales. This calculation excludes entities acquired within the past twelve months. |
On a constant currency basis, global Champion sales outside the mass channel increased 26% in the third quarter of 2019 compared to the third quarter of 2018. Including the unfavorable foreign currency impact of $3.6 million, global Champion revenue outside the mass channel increased 25% in the quarter. |
On a constant currency basis, consumer-directed sales increased 13% in the third quarter of 2019 compared to the third quarter of 2018. Including the unfavorable foreign currency impact of $11 million, consumer-directed sales increased 10% in the quarter. |
TABLE 3 |
||||||||
HANESBRANDS INC. Condensed Consolidated Balance Sheets (in thousands) (Unaudited) |
||||||||
|
September 28, |
|
December 29, |
|||||
Assets |
|
|
|
|||||
Cash and cash equivalents |
$ |
317,024 |
|
|
$ |
433,022 |
|
|
Trade accounts receivable, net |
1,033,938 |
|
|
870,878 |
|
|||
Inventories |
2,108,281 |
|
|
2,054,458 |
|
|||
Other current assets |
166,727 |
|
|
159,231 |
|
|||
Total current assets |
3,625,970 |
|
|
3,517,589 |
|
|||
|
|
|
|
|||||
Property, net |
581,971 |
|
|
607,688 |
|
|||
Right-of-use assets |
475,037 |
|
|
— |
|
|||
Trademarks and other identifiable intangibles, net |
1,493,969 |
|
|
1,555,381 |
|
|||
Goodwill |
1,223,216 |
|
|
1,241,727 |
|
|||
Deferred tax assets |
257,314 |
|
|
249,693 |
|
|||
Other noncurrent assets |
115,821 |
|
|
83,880 |
|
|||
Total assets |
$ |
7,773,298 |
|
|
$ |
7,255,958 |
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|||||
Accounts payable |
$ |
997,069 |
|
|
$ |
1,029,933 |
|
|
Accrued liabilities |
589,992 |
|
|
553,901 |
|
|||
Lease liabilities |
145,055 |
|
|
— |
|
|||
Notes payable |
4,275 |
|
|
5,824 |
|
|||
Accounts Receivable Securitization Facility |
208,604 |
|
|
161,608 |
|
|||
Current portion of long-term debt |
151,909 |
|
|
278,976 |
|
|||
Total current liabilities |
2,096,904 |
|
|
2,030,242 |
|
|||
|
|
|
|
|||||
Long-term debt |
3,467,591 |
|
|
3,534,183 |
|
|||
Lease liabilities - noncurrent |
364,083 |
|
|
— |
|
|||
Pension and postretirement benefits |
348,674 |
|
|
378,972 |
|
|||
Other noncurrent liabilities |
265,804 |
|
|
342,278 |
|
|||
Total liabilities |
6,543,056 |
|
|
6,285,675 |
|
|||
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|||||
Preferred stock |
— |
|
|
— |
|
|||
Common stock |
3,616 |
|
|
3,613 |
|
|||
Additional paid-in capital |
310,327 |
|
|
284,877 |
|
|||
Retained earnings |
1,528,258 |
|
|
1,184,735 |
|
|||
Accumulated other comprehensive loss |
(611,959 |
) |
|
(502,942 |
) |
|||
Total stockholders’ equity |
1,230,242 |
|
|
970,283 |
|
|||
Total liabilities and stockholders’ equity |
$ |
7,773,298 |
|
|
$ |
7,255,958 |
|
TABLE 4 |
||||||||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) |
||||||||||||||||
|
Quarter Ended |
|
Nine Months Ended |
|||||||||||||
|
September 28, |
|
September 29, |
|
September 28, |
|
September 29, |
|||||||||
Operating Activities: |
|
|
|
|
|
|
|
|||||||||
Net income |
$ |
187,776 |
|
|
$ |
171,421 |
|
|
$ |
421,230 |
|
|
$ |
391,463 |
|
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
|||||||||
Depreciation |
24,723 |
|
|
23,730 |
|
|
71,612 |
|
|
70,910 |
|
|||||
Amortization of acquisition intangibles |
6,172 |
|
|
7,348 |
|
|
18,709 |
|
|
20,544 |
|
|||||
Other amortization |
2,458 |
|
|
2,743 |
|
|
7,521 |
|
|
7,860 |
|
|||||
Amortization of debt issuance costs |
2,263 |
|
|
2,324 |
|
|
7,021 |
|
|
6,951 |
|
|||||
Stock compensation expense |
1,547 |
|
|
1,588 |
|
|
8,794 |
|
|
4,621 |
|
|||||
Deferred taxes |
(1,079 |
) |
|
(4,166 |
) |
|
(3,661 |
) |
|
(3,451 |
) |
|||||
Other |
(3,813 |
) |
|
6,705 |
|
|
8,737 |
|
|
(719 |
) |
|||||
Changes in assets and liabilities, net of acquisition of business: |
|
|
|
|
|
|
|
|||||||||
Accounts receivable |
(32,903 |
) |
|
(74,997 |
) |
|
(170,348 |
) |
|
(156,509 |
) |
|||||
Inventories |
106,357 |
|
|
(34,219 |
) |
|
(72,096 |
) |
|
(278,962 |
) |
|||||
Other assets |
(13,378 |
) |
|
48,315 |
|
|
(40,732 |
) |
|
42,122 |
|
|||||
Accounts payable |
(19,668 |
) |
|
47,412 |
|
|
(11,969 |
) |
|
116,189 |
|
|||||
Accrued pension and postretirement benefits |
3,960 |
|
|
2,598 |
|
|
(14,361 |
) |
|
(4,840 |
) |
|||||
Accrued liabilities and other |
37,648 |
|
|
4,885 |
|
|
14,243 |
|
|
(74,890 |
) |
|||||
Net cash from operating activities |
302,063 |
|
|
205,687 |
|
|
244,700 |
|
|
141,289 |
|
|||||
|
|
|
|
|
|
|
|
|||||||||
Investing Activities: |
|
|
|
|
|
|
|
|||||||||
Capital expenditures |
(21,665 |
) |
|
(22,832 |
) |
|
(79,950 |
) |
|
(63,472 |
) |
|||||
Proceeds from sales of assets |
3,012 |
|
|
(61 |
) |
|
3,530 |
|
|
1,779 |
|
|||||
Acquisition of business, net of cash acquired1 |
(21,360 |
) |
|
— |
|
|
(21,360 |
) |
|
(334,916 |
) |
|||||
Net cash from investing activities |
(40,013 |
) |
|
(22,893 |
) |
|
(97,780 |
) |
|
(396,609 |
) |
|||||
|
|
|
|
|
|
|
|
|||||||||
Financing Activities: |
|
|
|
|
|
|
|
|||||||||
Borrowings on notes payable |
88,120 |
|
|
63,808 |
|
|
250,712 |
|
|
217,709 |
|
|||||
Repayments on notes payable |
(88,381 |
) |
|
(64,215 |
) |
|
(252,084 |
) |
|
(217,987 |
) |
|||||
Borrowings on Accounts Receivable Securitization Facility |
83,293 |
|
|
77,419 |
|
|
207,105 |
|
|
191,896 |
|
|||||
Repayments on Accounts Receivable Securitization Facility |
(65,000 |
) |
|
(8,826 |
) |
|
(160,110 |
) |
|
(95,126 |
) |
|||||
Borrowings on Revolving Loan Facilities |
981,777 |
|
|
816,000 |
|
|
2,584,277 |
|
|
2,841,860 |
|
|||||
Repayments on Revolving Loan Facilities |
(1,163,092 |
) |
|
(990,500 |
) |
|
(2,585,592 |
) |
|
(2,488,500 |
) |
|||||
Repayments on Term Loan Facilities |
(10,625 |
) |
|
(1,250 |
) |
|
(152,248 |
) |
|
(22,500 |
) |
|||||
Borrowings on International Debt |
20,539 |
|
|
— |
|
|
27,680 |
|
|
— |
|
|||||
Repayments on International Debt |
(13,483 |
) |
|
— |
|
|
(41,424 |
) |
|
(1,105 |
) |
|||||
Cash dividends paid |
(54,240 |
) |
|
(54,085 |
) |
|
(162,689 |
) |
|
(162,200 |
) |
|||||
Payments to amend and refinance credit facilities |
(330 |
) |
|
(218 |
) |
|
(1,098 |
) |
|
(633 |
) |
|||||
Payment of contingent consideration |
— |
|
|
— |
|
|
— |
|
|
(3,540 |
) |
|||||
Taxes paid related to net shares settlement of equity awards |
(366 |
) |
|
(1,593 |
) |
|
(1,523 |
) |
|
(5,778 |
) |
|||||
Other |
393 |
|
|
159 |
|
|
1,378 |
|
|
486 |
|
|||||
Net cash from financing activities |
(221,395 |
) |
|
(163,301 |
) |
|
(285,616 |
) |
|
254,582 |
|
|||||
Effect of changes in foreign exchange rates on cash |
(3,274 |
) |
|
(19,297 |
) |
|
1,008 |
|
|
879 |
|
|||||
Change in cash, cash equivalents and restricted cash |
37,381 |
|
|
196 |
|
|
(137,688 |
) |
|
141 |
|
|||||
Cash, cash equivalents and restricted cash at beginning of period |
280,663 |
|
|
421,511 |
|
|
455,732 |
|
|
421,566 |
|
|||||
Cash, cash equivalents and restricted cash at end of period |
318,044 |
|
|
421,707 |
|
|
318,044 |
|
|
421,707 |
|
|||||
Less restricted cash at end of period1 |
1,020 |
|
|
23,208 |
|
|
1,020 |
|
|
23,208 |
|
|||||
Cash and cash equivalents per balance sheet at end of period |
$ |
317,024 |
|
|
$ |
398,499 |
|
|
$ |
317,024 |
|
|
$ |
398,499 |
|
1 |
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018, the Company acquired Bras N Things for a total purchase price of A$495 million (U.S.$389 million) which included an indemnification escrow of A$32 million (U.S.$25 million). During the third quarter of 2019, the Company paid A$31 million (U.S.$21 million) of the indemnification escrow related to the Bras N Things acquisition to the sellers. The remaining indemnification escrow is classified as restricted cash and is included in the “Other current assets” line of the Condensed Consolidated Balance Sheet at September 28, 2019. |
TABLE 5 |
||||||||||||||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||
|
Quarter Ended |
|
Nine Months Ended |
|||||||||||||
|
September 28, |
|
September 29, |
|
September 28, |
|
September 29, |
|||||||||
Gross profit, as reported under GAAP |
$ |
712,338 |
|
|
$ |
712,667 |
|
|
$ |
2,007,893 |
|
|
$ |
1,951,544 |
|
|
Acquisition, integration and other action-related charges |
9,424 |
|
|
11,760 |
|
|
39,714 |
|
|
33,596 |
|
|||||
Gross profit, as adjusted |
$ |
721,762 |
|
|
$ |
724,427 |
|
|
$ |
2,047,607 |
|
|
$ |
1,985,140 |
|
|
As a % of net sales |
38.7 |
% |
|
39.2 |
% |
|
39.3 |
% |
|
39.4 |
% |
|||||
|
|
|
|
|
|
|
|
|||||||||
Selling, general and administrative expenses, as reported under GAAP |
$ |
442,582 |
|
|
$ |
455,778 |
|
|
$ |
1,356,082 |
|
|
$ |
1,328,534 |
|
|
Acquisition, integration and other action-related charges |
(513 |
) |
|
(8,972 |
) |
|
(4,205 |
) |
|
(31,918 |
) |
|||||
Selling, general and administrative expenses, as adjusted |
$ |
442,069 |
|
|
$ |
446,806 |
|
|
$ |
1,351,877 |
|
|
$ |
1,296,616 |
|
|
As a % of net sales |
23.7 |
% |
|
24.2 |
% |
|
25.9 |
% |
|
25.7 |
% |
|||||
|
|
|
|
|
|
|
|
|||||||||
Operating profit, as reported under GAAP |
$ |
269,756 |
|
|
$ |
256,889 |
|
|
$ |
651,811 |
|
|
$ |
623,010 |
|
|
Acquisition, integration and other action-related charges included in gross profit |
9,424 |
|
|
11,760 |
|
|
39,714 |
|
|
33,596 |
|
|||||
Acquisition, integration and other action-related charges included in SG&A |
513 |
|
|
8,972 |
|
|
4,205 |
|
|
31,918 |
|
|||||
Operating profit, as adjusted |
$ |
279,693 |
|
|
$ |
277,621 |
|
|
$ |
695,730 |
|
|
$ |
688,524 |
|
|
As a % of net sales |
15.0 |
% |
|
15.0 |
% |
|
13.3 |
% |
|
13.7 |
% |
|||||
|
|
|
|
|
|
|
|
|||||||||
Net income, as reported under GAAP |
$ |
187,776 |
|
|
$ |
171,421 |
|
|
$ |
421,230 |
|
|
$ |
391,463 |
|
|
Action and other related charges: |
|
|
|
|
|
|
|
|||||||||
Acquisition, integration and other action-related charges included in gross profit |
9,424 |
|
|
11,760 |
|
|
39,714 |
|
|
33,596 |
|
|||||
Acquisition, integration and other action-related charges included in SG&A |
513 |
|
|
8,972 |
|
|
4,205 |
|
|
31,918 |
|
|||||
Debt refinance charges included in other expenses |
— |
|
|
— |
|
|
— |
|
|
(36 |
) |
|||||
Tax effect on actions |
(1,402 |
) |
|
(3,089 |
) |
|
(6,193 |
) |
|
(9,946 |
) |
|||||
Net income, as adjusted |
$ |
196,311 |
|
|
$ |
189,064 |
|
|
$ |
458,956 |
|
|
$ |
446,995 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per share, as reported under GAAP1 |
$ |
0.51 |
|
|
$ |
0.47 |
|
|
$ |
1.15 |
|
|
$ |
1.07 |
|
|
Action and other related charges |
0.02 |
|
|
0.05 |
|
|
0.10 |
|
|
0.15 |
|
|||||
Diluted earnings per share, as adjusted |
$ |
0.54 |
|
|
$ |
0.52 |
|
|
$ |
1.26 |
|
|
$ |
1.23 |
|
1 |
Results may not be additive due to rounding. |
|
Quarter Ended |
|
Nine Months Ended |
|||||||||||||
|
September 28, |
|
September 29, |
|
September 28, |
|
September 29, |
|||||||||
Action and other related charges by category: |
|
|
|
|
|
|
|
|||||||||
Supply chain actions |
$ |
9,424 |
|
|
$ |
— |
|
|
$ |
39,714 |
|
|
$ |
— |
|
|
Hanes Europe Innerwear |
— |
|
|
7,076 |
|
|
— |
|
|
24,107 |
|
|||||
Hanes Australasia |
— |
|
|
1,444 |
|
|
— |
|
|
14,183 |
|
|||||
Other acquisitions and other action-related costs |
513 |
|
|
12,212 |
|
|
4,205 |
|
|
27,224 |
|
|||||
Debt refinance charges |
— |
|
|
— |
|
|
— |
|
|
(36 |
) |
|||||
Tax effect on actions |
(1,402 |
) |
|
(3,089 |
) |
|
(6,193 |
) |
|
(9,946 |
) |
|||||
Total action and other related charges |
$ |
8,535 |
|
|
$ |
17,643 |
|
|
$ |
37,726 |
|
|
$ |
55,532 |
|
|
Last Twelve Months |
|||||||
|
September 28, |
|
September 29, |
|||||
EBITDA1: |
|
|
|
|||||
Net income |
$ |
582,851 |
|
|
$ |
6,852 |
|
|
Interest expense, net |
185,359 |
|
|
191,239 |
|
|||
Income tax expense |
97,997 |
|
|
518,418 |
|
|||
Depreciation and amortization |
130,324 |
|
|
132,039 |
|
|||
Total EBITDA |
996,531 |
|
|
848,548 |
|
|||
Total action and other related charges (excluding tax effect on actions) |
58,603 |
|
|
182,079 |
|
|||
Stock compensation expense |
25,589 |
|
|
21,852 |
|
|||
Total EBITDA, as adjusted |
$ |
1,080,723 |
|
|
$ |
1,052,479 |
|
|
|
|
|
|
|||||
Net debt: |
|
|
|
|||||
Debt (current and long-term debt and Accounts Receivable Securitization Facility) |
$ |
3,828,104 |
|
|
$ |
4,369,779 |
|
|
Notes payable |
4,275 |
|
|
14,051 |
|
|||
(Less) Cash and cash equivalents |
(317,024 |
) |
|
(398,499 |
) |
|||
Net debt |
$ |
3,515,355 |
|
|
$ |
3,985,331 |
|
|
|
|
|
|
|||||
Net debt/EBITDA, as adjusted |
3.3 |
|
|
3.8 |
|
1 |
Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
|
Quarter Ended |
|
Nine Months Ended |
|||||||||||||
|
September 28, |
|
September 29, |
|
September 28, |
|
September 29, |
|||||||||
Free Cash Flow: |
|
|
|
|
|
|
|
|||||||||
Net cash from operating activities |
$ |
302,063 |
|
|
$ |
205,687 |
|
|
$ |
244,700 |
|
|
$ |
141,289 |
|
|
Capital expenditures |
(21,665 |
) |
|
(22,832 |
) |
|
(79,950 |
) |
|
(63,472 |
) |
|||||
Free Cash Flow |
$ |
280,398 |
|
|
$ |
182,855 |
|
|
$ |
164,750 |
|
|
$ |
77,817 |
|
TABLE 6 |
||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of GAAP Outlook to Adjusted Outlook1 (in thousands, except per-share amounts) (Unaudited) |
||||
|
Quarter Ended |
|
Year Ended |
|
|
December 28, |
|
December 28, |
|
Operating profit outlook, as calculated under GAAP |
$248,000 to $273,000 |
|
$900,000 to $925,000 |
|
Acquisition, integration and other action-related charges |
$11,000 |
|
$55,000 |
|
Operating profit outlook, as adjusted |
$259,000 to $284,000 |
|
$955,000 to $980,000 |
|
|
|
|
|
|
Diluted earnings per share, as calculated under GAAP2 |
$0.46 to $0.52 |
|
$1.61 to $1.67 |
|
Acquisition, integration and other action-related charges |
$0.02 |
|
$0.13 |
|
Diluted earnings per share, as adjusted |
$0.48 to $0.54 |
|
$1.74 to $1.80 |
1 |
Hanesbrands is unable to reconcile projections for net debt to EBITDA, as adjusted, as of the end of the 2019 fiscal year without unreasonable efforts, because the company cannot predict, without unreasonable effort and otherwise to a reasonable degree of certainty, the exact amount of certain items that would impact this ratio, such as debt balances, revenue, tax rates, interest expense and stock compensation expense. |
|
2 |
The company expects slightly less than 366 million diluted weighted average shares outstanding for the quarter and the year ended December 28, 2019. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20191031005448/en/
Source:
News Media, contact:
Matt Hall, (336) 519-3386
Analysts and Investors, contact:
T.C. Robillard, (336) 519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.