UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(336 ) 519-8080
Registrant’s telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On November 9, 2022, Hanesbrands Inc. (the “Company” or “Hanesbrands”) issued a press release announcing its financial results for the third quarter ended October 1, 2022. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01. Regulation FD Disclosure
The Company has made available on the investors section of its corporate website, www.Hanes.com/investors, certain supplemental materials regarding Hanesbrands’ financial results and business operations (the “Supplemental Information”). The Supplemental Information is furnished herewith as Exhibit 99.2 and is incorporated by reference. All information in the Supplemental Information is presented as of the particular date or dates referenced therein, and Hanesbrands does not undertake any obligation to, and disclaims any duty to, update any of the information provided.
Exhibits 99.1 and 99.2 to this Current Report on Form 8-K include forward-looking financial information that is expected to be discussed on Hanesbrands’ previously announced conference call with investors and analysts to be held at 8:30 a.m., Eastern time on November 9, 2022. The call may be accessed at www.Hanes.com/investors. Replays of the call will be available at www.Hanes.com/investors and at https://edge.media-server.com/mmc/p/3z4xmc25. The webcast replay will be available from approximately 12:00 p.m., Eastern time, on November 9, 2022, until 12:00 p.m., Eastern time, on November 9, 2023.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit 99.1 | ||||||||
| Exhibit 99.2 | ||||||||
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| November 9, 2022 | HANESBRANDS INC. | |||||||||||||
| By: | /s/ Michael P. Dastugue | |||||||||||||
| Michael P. Dastugue | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
 | ||||||||
News Media contact: Kirk Saville (336) 979-7293
Analysts and Investors contact: T.C. Robillard (336) 519-2115
HanesBrands Announces Third-Quarter 2022 Results
•Net sales decrease 7% on a reported basis to $1.67 billion; net sales decrease 3% versus prior year in constant currency
•GAAP EPS from continuing operations of $0.23; adjusted EPS from continuing operations of $0.29
•Operating profit and EPS from continuing operations in-line with guidance
•Continues progress on Full Potential growth strategy, including launch of new innerwear products aimed at younger consumers and actions to improve flexibility and lower cost within its global supply chain network
•Board declares regular cash dividend of $0.15 per share
•Updates full-year 2022 guidance; provides fourth-quarter 2022 guidance reflecting increased macro-related challenges within the global operating environment
•For reconciliations of select GAAP and Non-GAAP measures, see Table 6 of this release
WINSTON-SALEM, N.C. (November 9, 2022) – HanesBrands Inc. (NYSE: HBI), a global leader in iconic apparel brands, today announced results for the third quarter of 2022.
“Our global team’s agility and focus helped us deliver operating profit and earnings per share in line with expectations, despite the tougher-than-expected sales environment,” said Steve Bratspies, CEO HanesBrands. “Our business fundamentals, brands and categories remain strong, and we are focused on controlling those things that are in our control. We’re making progress in reducing SKUs and inventory, while optimizing our global supply chain. We’re launching products aimed at younger consumers. We’re taking aggressive actions to manage through the near-term challenges as we execute the Full Potential strategy, which will put us in an advantaged position when the macroenvironment stabilizes.”
Third-Quarter Highlights
•Robust pipeline of new products and innovations continues to roll out to younger consumers. In addition to the successful launches of Hanes Total Support Pouch with X-Temp and Hanes Retro Rib, the Company continues its journey to get younger in innerwear with the roll out of new products from its robust innovation and product pipeline. Beginning in the fourth quarter, the Hanes Originals product line will be available in certain retail channels followed by expanded distribution in early 2023. Hanes Originals consists of enhanced core men’s and women’s innerwear products with a fit and style aimed at younger consumers. In its Maidenform brand portfolio, the Company launched a seamless collection of bras and underwear delivering stretch-to-fit comfort as well as a lace-based shapewear short that combines shaping with style. These Maidenform products, aimed at younger consumers, quickly became top sellers on maidenform.com with expanded distribution for bras beginning in 2023.
•Continued progress on executing Full Potential global supply chain initiatives to drive simplification, increase speed and flexibility, expand margins and improve cash flow generation. As part of the Full Potential plan, the Company did an in-depth analysis of its entire global network to best position its global supply chain to match the revenue growth opportunities. The work has begun and is expected to continue over the course of the Full Potential plan across distribution, manufacturing, and sourcing.
As previously disclosed, within its distribution network the Company is consolidating to fewer, bigger distribution centers in the U.S., increasing the use of direct-ship to its large retail partners, using dedicated DTC facilities as well as increased automation. Within its own manufacturing network, the Company holds a clear advantage to sourcing in terms of cost and speed for high-volume, cotton-based products. HanesBrands continues to build on this advantage and increase efficiency, which created the opportunity to exit two facilities, further reducing costs. Within its existing large sourcing operations, the Company is taking actions to further reduce cost and improve speed. At the same time, the Company is building sourcing capabilities in areas such as synthetic fabrics and short-term fashion offerings to capture incremental growth opportunities that align with its Full Potential plan.
Third-Quarter 2022 Results
•Net sales from continuing operations decreased 7% to $1.67 billion, which includes a $59 million unfavorable impact from foreign exchange rates, compared to last year. On a constant currency basis, net sales decreased 3%, or $60 million. The constant currency decline was due to the macro-driven slowdown in consumer spending in the U.S. and certain Asian markets coupled with the impact to orders as U.S. retailers tightly manage their overall inventory levels. These headwinds more than offset innerwear growth in Australia and the Other Americas as well as Champion growth in Europe.
◦Global Champion brand sales decreased 14% on a reported basis as compared to prior year, with similar declines in both the U.S. and internationally. In constant currency, Global brand sales decreased 9%. As compared to prior year, constant currency sales increased in Europe and the U.S. collegiate channels. However, this growth was more than offset by soft consumer demand in the U.S., order cancellations in the U.S. from late shipments as retailers tightly managed inventory and lingering COVID challenges in certain Asian markets.
•Gross Profit of $563 million declined 20% as compared to prior year. Gross margin was 33.7%, down from 39.1% in the prior year. Adjusted Gross Profit, which excludes certain costs related to the Company’s Full Potential plan, was $576 million. Adjusted Gross Margin of 34.5% declined approximately 460 basis points compared to prior year. Near-term headwinds, including commodity and ocean freight inflation as well as manufacturing time-out costs related to its inventory reduction actions represented more than 500 basis points of year-over-year margin headwinds in the quarter. These headwinds were partially offset by pricing actions, decreased use of air freight, and Full Potential cost savings initiatives.
•Selling, General and Administrative (SG&A) expenses declined 9% to $421 million as compared to last year. Adjusted SG&A expenses, which exclude certain costs related to its Full Potential plan, declined 6% from last year to $408 million. As a percent of net sales, adjusted SG&A expense of 24.4% was comparable with prior year as cost controls and expense efficiencies from its Full Potential initiatives offset investments in brand marketing and technology related to Full Potential.
•Operating Profit and Operating Margin in the third quarter of 2022 were $141 million and 8.5%, respectively, which compared to $235 million and 13.1%, respectively, in the prior year. Adjusted Operating Profit of $168 million declined $96 million as compared to third-quarter 2021. Adjusted Operating Margin of 10.0% declined nearly 470 basis points over prior year.
•The GAAP and Adjusted Effective Tax Rates for third-quarter 2022 were both 17.0%. For the third quarter of 2021, GAAP and adjusted effective tax rates were 7.9% and 15.0%, respectively.
•Income from continuing operations totaled $80 million, or $0.23 per diluted share. This compares to income from continuing operations of $177 million, or $0.50 per diluted share, last year. Adjusted income from continuing operations totaled $102 million, or $0.29 per diluted share. This compares to adjusted income from continuing operations of $188 million, or $0.53 per diluted share, in third-quarter 2021.
See the Note on Adjusted Measures and Reconciliation to GAAP Measures later in this news release for additional discussion and details of actions, which include Full Potential plan charges.
Third-Quarter 2022 Business Segment Summary
•Innerwear sales decreased 11% compared to last year. The year-over-year sales performance was driven by macroeconomic pressures that weighed on consumer spending as well as the impact from retailer actions to manage inventory. Although the Company’s inventory at retail was below prior year, retailer actions to tightly manage overall inventory levels negatively impacted near-term replenishment orders and delayed the timing of certain events. These pressures more than offset the benefits from the first-quarter price increase and retail space gains.
Operating margin of 16.0% decreased 505 basis points compared to prior year. The impact from input cost inflation, lower sales volume, manufacturing time-out costs and an unfavorable product mix more than offset the benefit from higher prices and SG&A cost controls.
•Activewear sales were comparable to prior year. Relative to last year, the Company experienced continued growth in the collegiate channel as well as solid growth in the printwear channel for both its Champion and Hanes brands. This growth was essentially offset by declines in its other channels due to lower point-of-sale trends and higher Activewear inventory levels at retail that drove order cancellations, particularly within Champion. By brand, Champion sales within the Activewear reporting segment decreased 9% as compared to prior year while sales of other activewear brands within the Activewear reporting segment increased 15%.
Operating margin for the segment of 11.6% decreased approximately 490 basis points compared to prior year as the impact from inflation, manufacturing time-out costs, and an unfavorable product mix more than offset the benefits from price increases and SG&A cost controls.
•International sales decreased 6% on a reported basis, including the $59 million from unfavorable foreign exchange rates. International sales increased 5% on a constant currency basis compared to prior year, driven by Champion growth in Europe as well as innerwear growth in Australia and the Other Americas. This growth more than offset Champion declines in certain Asian markets.
Operating margin for the segment of 13.9% decreased approximately 220 basis points compared to prior year driven primarily by the impact from inflation, which more than offset SG&A cost controls.
Cash Flow, Balance Sheet and Stockholder Capital Returns
•Total liquidity position at the end of third-quarter 2022 was $863 million, consisting of $253 million of cash and equivalents and $610 million of available capacity under its credit facilities.
•Based on the calculation as defined in the Company’s senior secured credit facility, the Consolidated Net Total Leverage Ratio at the end of third-quarter 2022 was 3.9 times on a net debt-to-adjusted EBITDA basis as compared to 2.6 times at the end of third-quarter 2021 (See Table 6-C). In early November, the Company proactively worked with its bank partners to amend its credit agreement, including altering its two financial covenants, to provide increased near-term financial flexibility given its current leverage ratio and the near-term outlook for the global operating environment. For the five quarters from fiscal fourth quarter 2022 through the end of fiscal fourth quarter 2023, the Company’s maximum allowable consolidated net total leverage ratio will range from 5.25 times to 5.75 times net-debt to adjusted-EBITDA and its minimum consolidated net interest coverage ratio will be 2.6 times adjusted EBITDA-to-net interest expense. Beginning in its fiscal first quarter 2024, its leverage ratio will revert to 4.5 times and its interest coverage ratio will move to 2.75 times.
•Inventory at the end of third-quarter 2022 was $2.14 billion, an increase of 31% over prior year. The increase was driven predominantly by the combination of higher units and higher inflation on input and transportation costs.
On a unit basis, inventory increased 16% over prior year but decreased 6% as compared to second-quarter 2022. The Company is progressing on its previously disclosed mitigation initiatives and continues to expect to end 2022 with lower units in inventory as compared to year-end 2021. By comparison, second-quarter inventory, on a year-over-year basis, was up 37% in dollars and 19% in units.
•Cash flow from operations was a use of $51 million in the third-quarter 2022 driven primarily by the working capital impact from higher inventory.
•The Company’s Board of Directors declared a regular cash dividend of $0.15 per share to be paid on December 13, 2022 to stockholders of record on the close of business November 22, 2022. The declared dividend represents the Company’s 39th consecutive quarterly return of cash to stockholders. The Company did not repurchase any shares in the third quarter and has approximately $575 million remaining under its current repurchase authorization.
Fourth-Quarter and Full-Year 2022 Financial Outlook
For fourth-quarter 2022, which ends on December 31, 2022, the Company currently expects:
•Net sales from continuing operations of approximately $1.40 billion to $1.45 billion, which includes a projected headwind of approximately $68 million from changes in foreign currency exchange rates. At the midpoint, this represents an approximate 15% decline as compared to prior year on a constant currency basis and a 19% decline on a reported basis.
•GAAP operating profit from continuing operations to range from approximately $53 million to $83 million.
•Adjusted operating profit from continuing operations to range from approximately $70 million to $100 million and includes a projected headwind of approximately $9 million from changes in foreign currency exchange rates.
•Charges for actions related to the Full Potential plan of approximately $17 million.
•Interest and other expenses of approximately $54 million.
•An effective tax rate of approximately 17% on both a GAAP and adjusted basis.
•GAAP earnings per share from continuing operations to range from approximately $0.00 to $0.07.
•Adjusted earnings per share from continuing operations to range from approximately $0.04 to $0.11.
•Fully diluted shares outstanding of approximately 350 million.
•Earnings per share and fully diluted share count guidance exclude any potential impact from future share repurchases.
For fiscal-year 2022, which ends on December 31, 2022, the Company currently expects:
•Net sales from continuing operations of approximately $6.16 billion to $6.21 billion, which includes a projected headwind of approximately $196 million from changes in foreign currency exchange rates. At the midpoint, this represents an approximate 6% decline as compared to prior year on a constant currency basis and a 9% decline on a reported basis.
•GAAP operating profit from continuing operations to range from approximately $512 million to $542 million.
•Adjusted operating profit from continuing operations to range from approximately $567 million to $597 million, which includes a projected headwind of approximately $26 million from changes in foreign currency exchange rates.
•Charges for actions related to the Full Potential plan Full Potential of approximately $55 million.
•Interest and other expenses of approximately $167 million.
•An effective tax rate of approximately 17% on both a GAAP and adjusted basis.
•GAAP earnings per share from continuing operations to range from approximately $0.82 to $0.89.
•Adjusted earnings per share from continuing operations to range from approximately $0.95 to $1.02.
•Cash flow from operations to be a use of approximately $400 million.
•Capital investments of approximately $140 million, consisting of approximately $90 million of capital expenditures and approximately $50 million of cloud computing assets. Per GAAP, capital expenditures are reflected in cash from investing activities and certain cloud computing assets are reflected in Other Assets within cash flow from operating activities.
•Fully diluted shares outstanding of approximately 351 million.
•Earnings per share and fully diluted share count guidance exclude any potential impact from future share repurchases.
HanesBrands 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 results prepared in accordance with generally accepted accounting principles, the Company provides quarterly and full-year results concerning certain non‐GAAP financial measures, including adjusted EPS from continuing operations, adjusted income from continuing operations, adjusted income tax expense, adjusted income from continuing operations before income tax expense, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), EBITDA, adjusted EBITDA and leverage ratio.
Adjusted EPS from continuing operations is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. Adjusted income from continuing operations is defined as income from continuing operations excluding actions and the tax effect on actions. Adjusted income tax expense is defined as income tax expense excluding actions. Adjusted income from continuing operations before income tax is defined as income from continuing operations before income tax excluding actions. Adjusted operating profit is defined as operating profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. Adjusted gross profit is defined as gross profit excluding actions.
Charges for actions taken in 2022 and 2021 include professional fees, supply chain segmentation charges, technology charges, intangible asset impairment charges related to our Full Potential plan, operating model charges, and (gain)/loss on classification of assets held for sale.
While these costs 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 future business plans and circumstances.
HanesBrands 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 the Full Potential plan and other actions. HanesBrands 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 of any of the aforementioned actions taken.
The Company has also chosen to present EBITDA and adjusted EBITDA to investors because it considers these measures to be an important supplemental means of evaluating operating performance. EBITDA is defined as income from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and other losses, charges and expenses as defined in the Consolidated Net Total Leverage Ratio under its Fifth Amended and Restated Credit Agreement, dated November 19, 2021, as amended. HanesBrands believes that EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA and adjusted EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA and adjusted EBITDA should not, however, be considered as measures of discretionary cash available to invest in the growth of the business.
HanesBrands 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, HanesBrands 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 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).
HanesBrands believes constant-currency 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 these non-GAAP measures to the most directly comparable GAAP financial measures are presented in the supplemental financial information included with this news release.
Cautionary Statement Concerning Forward-Looking Statements
This news 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, guidance and predictions regarding expected operating results, including related to our Full Potential plan; statements made in the Fourth-Quarter and Full-year 2022 Financial Outlook section of this news release; and statements regarding the sale of our U.S. Hosiery business, 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: our ability to successfully execute our Full Potential plan to achieve the desired results; the potential effects of the COVID-19 pandemic, including on consumer spending, global supply chains and the financial markets; the highly competitive and evolving nature of the industry in which we compete; the rapidly changing retail environment and the level of consumer demand; our reliance on a relatively small number of customers for a significant portion of our sales; any inadequacy, interruption, integration failure or security failure with respect to our information technology (including the ransomware attack announced May 31, 2022); the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; the availability of global supply chain resources; our ability to attract and retain a senior management team with the core competencies needed to support growth in global markets and ongoing labor shortages generally; significant fluctuations in foreign exchange rates; legal, regulatory, political and economic risks related to our international operations; our ability to effectively manage our complex multinational tax structure; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and HanesBrands undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, other than as required by law.
HanesBrands
HanesBrands (NYSE: HBI) makes everyday apparel that is known and loved by consumers around the world for comfort, quality and value. Among the Company’s iconic brands are Hanes, the leading basic apparel brand in the United States; Champion, an innovator at the intersection of lifestyle and athletic apparel; and Bonds, which is setting new standards for design and sustainability. HBI employs 59,000 associates in 33 countries and has built a strong reputation for workplace quality and ethical business practices. The Company, a longtime leader in sustainability, launched aggressive 2030 goals to improve the lives of people, protect the planet and produce sustainable products. HBI is building on its unmatched strengths to unlock its #FullPotential and deliver long-term growth that benefits all of its stakeholders.
TABLE 1
HANESBRANDS INC.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
| Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | % Change | October 1, 2022 | October 2, 2021 | % Change | ||||||||||||||||||||||||||||||
| Net sales | $ | 1,670,741 | $ | 1,789,551 | (6.6) | % | $ | 4,760,364 | $ | 5,048,891 | (5.7) | % | |||||||||||||||||||||||
| Cost of sales | 1,107,889 | 1,089,890 | 3,041,233 | 3,064,920 | |||||||||||||||||||||||||||||||
| Gross profit | 562,852 | 699,661 | (19.6) | % | 1,719,131 | 1,983,971 | (13.3) | % | |||||||||||||||||||||||||||
| As a % of net sales | 33.7 | % | 39.1 | % | 36.1 | % | 39.3 | % | |||||||||||||||||||||||||||
| Selling, general and administrative expenses | 421,408 | 465,015 | 1,259,921 | 1,341,809 | |||||||||||||||||||||||||||||||
| As a % of net sales | 25.2 | % | 26.0 | % | 26.5 | % | 26.6 | % | |||||||||||||||||||||||||||
| Operating profit | 141,444 | 234,646 | (39.7) | % | 459,210 | 642,162 | (28.5) | % | |||||||||||||||||||||||||||
| As a % of net sales | 8.5 | % | 13.1 | % | 9.6 | % | 12.7 | % | |||||||||||||||||||||||||||
| Other expenses | 3,212 | 1,811 | 6,088 | 6,227 | |||||||||||||||||||||||||||||||
| Interest expense, net | 41,721 | 40,860 | 107,408 | 127,760 | |||||||||||||||||||||||||||||||
| Income from continuing operations before income tax expense | 96,511 | 191,975 | 345,714 | 508,175 | |||||||||||||||||||||||||||||||
| Income tax expense | 16,410 | 15,228 | 58,775 | 55,161 | |||||||||||||||||||||||||||||||
| Income from continuing operations | 80,101 | 176,747 | (54.7) | % | 286,939 | 453,014 | (36.7) | % | |||||||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | — | (24,970) | 3,965 | (435,823) | |||||||||||||||||||||||||||||||
| Net income | $ | 80,101 | $ | 151,777 | $ | 290,904 | $ | 17,191 | |||||||||||||||||||||||||||
| Earnings (loss) per share - basic: | |||||||||||||||||||||||||||||||||||
| Continuing operations | $ | 0.23 | $ | 0.50 | $ | 0.82 | $ | 1.29 | |||||||||||||||||||||||||||
| Discontinued operations | 0.00 | (0.07) | 0.01 | (1.24) | |||||||||||||||||||||||||||||||
| Net income | $ | 0.23 | $ | 0.43 | $ | 0.83 | $ | 0.05 | |||||||||||||||||||||||||||
| Earnings (loss) per share - diluted: | |||||||||||||||||||||||||||||||||||
| Continuing operations | $ | 0.23 | $ | 0.50 | $ | 0.82 | $ | 1.29 | |||||||||||||||||||||||||||
| Discontinued operations | 0.00 | (0.07) | 0.01 | (1.24) | |||||||||||||||||||||||||||||||
| Net income | $ | 0.23 | $ | 0.43 | $ | 0.83 | $ | 0.05 | |||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||
| Basic | 349,884 | 351,071 | 349,969 | 351,020 | |||||||||||||||||||||||||||||||
| Diluted | 350,316 | 352,251 | 350,691 | 351,996 | |||||||||||||||||||||||||||||||
TABLE 2
The following tables present a reconciliation of reported results on a constant currency basis for the quarter and nine months ended October 1, 2022 and a comparison to prior year: | ||
| Quarter Ended October 1, 2022 | |||||||||||||||||||||||||||||||||||
| As Reported | Impact from Foreign Currency1 | Constant Currency | Quarter Ended October 2, 2021 | % Change, As Reported | % Change, Constant Currency | ||||||||||||||||||||||||||||||
| As reported under GAAP: | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,670,741 | $ | (58,626) | $ | 1,729,367 | $ | 1,789,551 | (6.6) | % | (3.4) | % | |||||||||||||||||||||||
| Gross profit | 562,852 | (25,875) | 588,727 | 699,661 | (19.6) | (15.9) | |||||||||||||||||||||||||||||
| Operating profit | 141,444 | (8,340) | 149,784 | 234,646 | (39.7) | (36.2) | |||||||||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.23 | $ | (0.02) | $ | 0.25 | $ | 0.50 | (54.0) | % | (50.0) | % | |||||||||||||||||||||||
As adjusted:2 | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,670,741 | $ | (58,626) | $ | 1,729,367 | $ | 1,789,551 | (6.6) | % | (3.4) | % | |||||||||||||||||||||||
| Gross profit | 575,954 | (25,875) | 601,829 | 699,553 | (17.7) | (14.0) | |||||||||||||||||||||||||||||
| Operating profit | 167,895 | (8,340) | 176,235 | 263,742 | (36.3) | (33.2) | |||||||||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.29 | $ | (0.02) | $ | 0.31 | $ | 0.53 | (45.3) | % | (41.5) | % | |||||||||||||||||||||||
| Nine Months Ended October 1, 2022 | |||||||||||||||||||||||||||||||||||
| As Reported | Impact from Foreign Currency1 | Constant Currency | Nine Months Ended October 2, 2021 | % Change, As Reported | % Change, Constant Currency | ||||||||||||||||||||||||||||||
| As reported under GAAP: | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 4,760,364 | $ | (127,076) | $ | 4,887,440 | $ | 5,048,891 | (5.7) | % | (3.2) | % | |||||||||||||||||||||||
| Gross profit | 1,719,131 | (60,211) | 1,779,342 | 1,983,971 | (13.3) | (10.3) | |||||||||||||||||||||||||||||
| Operating profit | 459,210 | (16,890) | 476,100 | 642,162 | (28.5) | (25.9) | |||||||||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.82 | $ | (0.04) | $ | 0.86 | $ | 1.29 | (36.4) | % | (33.3) | % | |||||||||||||||||||||||
As adjusted:2 | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 4,760,364 | $ | (127,076) | $ | 4,887,440 | $ | 5,048,891 | (5.7) | % | (3.2) | % | |||||||||||||||||||||||
| Gross profit | 1,733,264 | (60,211) | 1,793,475 | 1,988,570 | (12.8) | (9.8) | |||||||||||||||||||||||||||||
| Operating profit | 496,843 | (16,890) | 513,733 | 709,315 | (30.0) | (27.6) | |||||||||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.91 | $ | (0.04) | $ | 0.95 | $ | 1.39 | (34.5) | % | (31.7) | % | |||||||||||||||||||||||
| 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. | ||||
| 2 | Results for the quarters and nine months ended October 1, 2022 and October 2, 2021 reflect adjustments for restructuring and other action-related charges. See "Reconciliation of Select GAAP Measures to Non-GAAP Measures" in Table 6. | ||||
TABLE 3
HANESBRANDS INC.
Supplemental Financial Information
By Business Segment
(in thousands)
(Unaudited)
| Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | % Change | October 1, 2022 | October 2, 2021 | % Change | ||||||||||||||||||||||||||||||
| Segment net sales: | |||||||||||||||||||||||||||||||||||
| Innerwear | $ | 625,082 | $ | 702,617 | (11.0) | % | $ | 1,889,807 | $ | 2,053,702 | (8.0) | % | |||||||||||||||||||||||
Activewear | 461,043 | 462,499 | (0.3) | 1,178,380 | 1,230,691 | (4.3) | |||||||||||||||||||||||||||||
| International | 502,066 | 536,483 | (6.4) | 1,436,384 | 1,521,667 | (5.6) | |||||||||||||||||||||||||||||
Other | 82,550 | 87,952 | (6.1) | 255,793 | 242,831 | 5.3 | |||||||||||||||||||||||||||||
| Total net sales | $ | 1,670,741 | $ | 1,789,551 | (6.6) | % | $ | 4,760,364 | $ | 5,048,891 | (5.7) | % | |||||||||||||||||||||||
| Segment operating profit: | |||||||||||||||||||||||||||||||||||
| Innerwear | $ | 99,797 | $ | 147,651 | (32.4) | % | $ | 343,602 | $ | 461,237 | (25.5) | % | |||||||||||||||||||||||
Activewear | 53,491 | 76,172 | (29.8) | 125,332 | 177,813 | (29.5) | |||||||||||||||||||||||||||||
| International | 69,890 | 86,371 | (19.1) | 215,281 | 235,451 | (8.6) | |||||||||||||||||||||||||||||
Other | 4,839 | 11,288 | (57.1) | 9,501 | 22,394 | (57.6) | |||||||||||||||||||||||||||||
| General corporate expenses/other | (60,122) | (57,740) | 4.1 | (196,873) | (187,580) | 5.0 | |||||||||||||||||||||||||||||
Total operating profit before restructuring and other action-related charges | 167,895 | 263,742 | (36.3) | 496,843 | 709,315 | (30.0) | |||||||||||||||||||||||||||||
| Restructuring and other action-related charges | (26,451) | (29,096) | (9.1) | (37,633) | (67,153) | (44.0) | |||||||||||||||||||||||||||||
| Total operating profit | $ | 141,444 | $ | 234,646 | (39.7) | % | $ | 459,210 | $ | 642,162 | (28.5) | % | |||||||||||||||||||||||
| Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | Basis Points Change | October 1, 2022 | October 2, 2021 | Basis Points Change | ||||||||||||||||||||||||||||||
| Segment operating margin: | |||||||||||||||||||||||||||||||||||
| Innerwear | 16.0 | % | 21.0 | % | (505) | 18.2 | % | 22.5 | % | (428) | |||||||||||||||||||||||||
Activewear | 11.6 | 16.5 | (487) | 10.6 | 14.4 | (381) | |||||||||||||||||||||||||||||
International | 13.9 | 16.1 | (218) | 15.0 | 15.5 | (49) | |||||||||||||||||||||||||||||
Other | 5.9 | 12.8 | (697) | 3.7 | 9.2 | (551) | |||||||||||||||||||||||||||||
| General corporate expenses/other | (3.6) | (3.2) | (37) | (4.1) | (3.7) | (42) | |||||||||||||||||||||||||||||
| Total operating margin before restructuring and other action-related charges | 10.0 | 14.7 | (469) | 10.4 | 14.0 | (361) | |||||||||||||||||||||||||||||
| Restructuring and other action-related charges | (1.6) | (1.6) | 4 | (0.8) | (1.3) | 54 | |||||||||||||||||||||||||||||
| Total operating margin | 8.5 | % | 13.1 | % | (465) | 9.6 | % | 12.7 | % | (307) | |||||||||||||||||||||||||
TABLE 4
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| October 1, 2022 | January 1, 2022 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 253,131 | $ | 536,277 | |||||||
| Trade accounts receivable, net | 926,666 | 894,151 | |||||||||
| Inventories | 2,136,314 | 1,584,015 | |||||||||
| Other current assets | 223,741 | 186,503 | |||||||||
| Current assets held for sale | 14,906 | 327,157 | |||||||||
| Total current assets | 3,554,758 | 3,528,103 | |||||||||
| Property, net | 443,166 | 441,401 | |||||||||
| Right-of-use assets | 335,473 | 363,854 | |||||||||
| Trademarks and other identifiable intangibles, net | 1,210,581 | 1,220,170 | |||||||||
| Goodwill | 1,084,581 | 1,133,095 | |||||||||
| Deferred tax assets | 328,778 | 327,804 | |||||||||
| Other noncurrent assets | 141,944 | 57,009 | |||||||||
| Total assets | $ | 7,099,281 | $ | 7,071,436 | |||||||
| Liabilities | |||||||||||
| Accounts payable | $ | 1,130,649 | $ | 1,214,847 | |||||||
| Accrued liabilities | 594,333 | 660,778 | |||||||||
| Lease liabilities | 99,405 | 109,526 | |||||||||
| Accounts Receivable Securitization Facility | 211,500 | — | |||||||||
| Current portion of long-term debt | 31,250 | 25,000 | |||||||||
| Current liabilities held for sale | 14,906 | 316,902 | |||||||||
| Total current liabilities | 2,082,043 | 2,327,053 | |||||||||
| Long-term debt | 3,655,889 | 3,326,091 | |||||||||
| Lease liabilities - noncurrent | 260,349 | 281,852 | |||||||||
| Pension and postretirement benefits | 230,087 | 248,518 | |||||||||
| Other noncurrent liabilities | 196,029 | 185,429 | |||||||||
| Total liabilities | 6,424,397 | 6,368,943 | |||||||||
| Stockholders’ equity | |||||||||||
| Preferred stock | — | — | |||||||||
| Common stock | 3,489 | 3,499 | |||||||||
| Additional paid-in capital | 328,072 | 315,337 | |||||||||
| Retained earnings | 1,043,246 | 935,260 | |||||||||
| Accumulated other comprehensive loss | (699,923) | (551,603) | |||||||||
| Total stockholders’ equity | 674,884 | 702,493 | |||||||||
| Total liabilities and stockholders’ equity | $ | 7,099,281 | $ | 7,071,436 | |||||||
TABLE 5
HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows1
(in thousands)
(Unaudited)
| Quarters Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
| Operating Activities: | |||||||||||||||||||||||
| Net income | $ | 80,101 | $ | 151,777 | $ | 290,904 | $ | 17,191 | |||||||||||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||||||||||
| Depreciation | 19,585 | 19,618 | 56,140 | 63,183 | |||||||||||||||||||
| Amortization of acquisition intangibles | 4,558 | 4,718 | 14,045 | 15,696 | |||||||||||||||||||
| Other amortization | 2,925 | 2,796 | 8,121 | 8,610 | |||||||||||||||||||
| Impairment of intangible assets and goodwill | — | — | — | 163,047 | |||||||||||||||||||
| (Gain) loss on sale of business and classification of assets held for sale | 4,310 | 30,562 | (6,185) | 266,742 | |||||||||||||||||||
| Amortization of debt issuance costs | 1,727 | 2,581 | 5,483 | 10,250 | |||||||||||||||||||
| Other | 5,276 | 12,336 | 11,717 | (1,888) | |||||||||||||||||||
| Changes in assets and liabilities: | |||||||||||||||||||||||
| Accounts receivable | (23,919) | (1,819) | (63,003) | (201,925) | |||||||||||||||||||
| Inventories | (72,529) | (117,316) | (612,544) | (292,465) | |||||||||||||||||||
| Other assets | (22,080) | 2,591 | (71,613) | 7,042 | |||||||||||||||||||
| Accounts payable | (74,052) | 90,716 | (22,289) | 391,034 | |||||||||||||||||||
| Accrued pension and postretirement benefits | (571) | (1,292) | (1,066) | (40,468) | |||||||||||||||||||
| Accrued liabilities and other | 24,061 | 117,852 | (101,392) | 121,327 | |||||||||||||||||||
| Net cash from operating activities | (50,608) | 315,120 | (491,682) | 527,376 | |||||||||||||||||||
| Investing Activities: | |||||||||||||||||||||||
| Capital expenditures | (33,009) | (29,989) | (70,955) | (55,320) | |||||||||||||||||||
| Purchase of trademarks | — | — | (103,000) | — | |||||||||||||||||||
| Proceeds from sales of assets | 37 | 24 | 259 | 2,479 | |||||||||||||||||||
| Other | — | 1,500 | (5,640) | 8,437 | |||||||||||||||||||
| Net cash from investing activities | (32,972) | (28,465) | (179,336) | (44,404) | |||||||||||||||||||
| Financing Activities: | |||||||||||||||||||||||
| Repayments on Term Loan Facilities | (6,250) | (9,375) | (18,750) | (315,625) | |||||||||||||||||||
| Borrowings on Accounts Receivable Securitization Facility | 565,800 | — | 1,303,589 | — | |||||||||||||||||||
| Repayments on Accounts Receivable Securitization Facility | (459,000) | — | (1,092,089) | — | |||||||||||||||||||
| Borrowings on Revolving Loan Facilities | 610,000 | — | 1,337,500 | — | |||||||||||||||||||
| Repayments on Revolving Loan Facilities | (539,000) | — | (908,500) | — | |||||||||||||||||||
| Borrowings on notes payable | — | 66,759 | 21,454 | 109,397 | |||||||||||||||||||
| Repayments on notes payable | — | (66,531) | (21,713) | (109,597) | |||||||||||||||||||
| Share repurchases | — | — | (25,018) | — | |||||||||||||||||||
| Cash dividends paid | (52,341) | (52,380) | (156,962) | (157,099) | |||||||||||||||||||
| Other | (267) | (476) | (4,263) | (3,000) | |||||||||||||||||||
| Net cash from financing activities | 118,942 | (62,003) | 435,248 | (475,924) | |||||||||||||||||||
| Effect of changes in foreign exchange rates on cash | (30,153) | (10,427) | (71,728) | (27,207) | |||||||||||||||||||
| Change in cash and cash equivalents | 5,209 | 214,225 | (307,498) | (20,159) | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 247,922 | 676,219 | 560,629 | 910,603 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 253,131 | $ | 890,444 | $ | 253,131 | $ | 890,444 | |||||||||||||||
| Balances included in the Condensed Consolidated Balance Sheets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 253,131 | $ | 873,628 | $ | 253,131 | $ | 873,628 | |||||||||||||||
| Cash and cash equivalents included in current assets held for sale | — | 16,816 | — | 16,816 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 253,131 | $ | 890,444 | $ | 253,131 | $ | 890,444 | |||||||||||||||
| 1 | The cash flows related to discontinued operations have not been segregated and remain included in the major classes of assets and liabilities in the periods prior the sale of the European Innerwear business on March 5, 2022. Accordingly, the Condensed Consolidated Statements of Cash Flows include the results of continuing and discontinued operations. | ||||
TABLE 6-A
HANESBRANDS INC.
Supplemental Financial Information
Reconciliation of Select GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
| Quarter Ended October 1, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling, General and Administrative Expenses | Operating Profit | Income From Continuing Operations Before Income Tax Expense | Income Tax Expense | Income From Continuing Operations | Diluted Earnings Per Share From Continuing Operations1 | |||||||||||||||||||||||||||||||||||
| As reported | $ | 562,852 | $ | (421,408) | $ | 141,444 | $ | 96,511 | $ | (16,410) | $ | 80,101 | $ | 0.23 | |||||||||||||||||||||||||||
| As a percentage of net sales | 33.7 | % | 25.2 | % | 8.5 | % | |||||||||||||||||||||||||||||||||||
| Restructuring and other action-related charges: | |||||||||||||||||||||||||||||||||||||||||
| Full Potential Plan: | |||||||||||||||||||||||||||||||||||||||||
| Professional services | — | 6,020 | 6,020 | 6,020 | — | 6,020 | 0.02 | ||||||||||||||||||||||||||||||||||
| Supply chain segmentation | 13,298 | — | 13,298 | 13,298 | — | 13,298 | 0.04 | ||||||||||||||||||||||||||||||||||
| Technology | — | 2,622 | 2,622 | 2,622 | — | 2,622 | 0.01 | ||||||||||||||||||||||||||||||||||
| Operating model | (196) | 178 | (18) | (18) | — | (18) | 0.00 | ||||||||||||||||||||||||||||||||||
| Loss on classification of assets held for sale | — | 4,310 | 4,310 | 4,310 | — | 4,310 | 0.01 | ||||||||||||||||||||||||||||||||||
| Other | — | 219 | 219 | 219 | — | 219 | 0.00 | ||||||||||||||||||||||||||||||||||
| Tax effect on actions | — | — | — | — | (4,493) | (4,493) | (0.01) | ||||||||||||||||||||||||||||||||||
| Total restructuring and other action-related charges | 13,102 | 13,349 | 26,451 | 26,451 | (4,493) | 21,958 | 0.06 | ||||||||||||||||||||||||||||||||||
| As adjusted | $ | 575,954 | $ | (408,059) | $ | 167,895 | $ | 122,962 | $ | (20,903) | $ | 102,059 | $ | 0.29 | |||||||||||||||||||||||||||
| As a percentage of net sales | 34.5 | % | 24.4 | % | 10.0 | % | |||||||||||||||||||||||||||||||||||
| Nine Months Ended October 1, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling, General and Administrative Expenses | Operating Profit | Income From Continuing Operations Before Income Tax Expense | Income Tax Expense | Income From Continuing Operations | Diluted Earnings Per Share From Continuing Operations1 | |||||||||||||||||||||||||||||||||||
| As reported | $ | 1,719,131 | $ | (1,259,921) | $ | 459,210 | $ | 345,714 | $ | (58,775) | $ | 286,939 | $ | 0.82 | |||||||||||||||||||||||||||
| As a percentage of net sales | 36.1 | % | 26.5 | % | 9.6 | % | |||||||||||||||||||||||||||||||||||
| Restructuring and other action-related charges: | |||||||||||||||||||||||||||||||||||||||||
| Full Potential Plan: | |||||||||||||||||||||||||||||||||||||||||
| Professional services | — | 21,014 | 21,014 | 21,014 | — | 21,014 | 0.06 | ||||||||||||||||||||||||||||||||||
| Supply chain segmentation | 14,587 | — | 14,587 | 14,587 | — | 14,587 | 0.04 | ||||||||||||||||||||||||||||||||||
| Technology | — | 9,052 | 9,052 | 9,052 | — | 9,052 | 0.03 | ||||||||||||||||||||||||||||||||||
| Operating model | (196) | (916) | (1,112) | (1,112) | — | (1,112) | 0.00 | ||||||||||||||||||||||||||||||||||
| Gain on classification of assets held for sale | — | (6,558) | (6,558) | (6,558) | — | (6,558) | (0.02) | ||||||||||||||||||||||||||||||||||
| Other | (258) | 908 | 650 | 650 | — | 650 | 0.00 | ||||||||||||||||||||||||||||||||||
| Tax effect on actions | — | — | — | — | (6,394) | (6,394) | (0.02) | ||||||||||||||||||||||||||||||||||
| Total restructuring and other action-related charges | 14,133 | 23,500 | 37,633 | 37,633 | (6,394) | 31,239 | 0.09 | ||||||||||||||||||||||||||||||||||
| As adjusted | $ | 1,733,264 | $ | (1,236,421) | $ | 496,843 | $ | 383,347 | $ | (65,169) | $ | 318,178 | $ | 0.91 | |||||||||||||||||||||||||||
| As a percentage of net sales | 36.4 | % | 26.0 | % | 10.4 | % | |||||||||||||||||||||||||||||||||||
| 1 | Amounts may not be additive due to rounding. | ||||
| Including the unfavorable foreign currency impact of $35 million, global Champion sales excluding C9 Champion decreased approximately 14% in the third quarter of 2022 compared to the third quarter of 2021. On a constant currency basis, global Champion sales excluding C9 Champion decreased approximately 9% in the third quarter of 2022 compared to the third quarter of 2021. | ||
TABLE 6-B
| Quarter Ended October 2, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling, General and Administrative Expenses | Operating Profit | Income From Continuing Operations Before Income Tax Expense | Income Tax Expense | Income From Continuing Operations | Diluted Earnings Per Share From Continuing Operations1 | |||||||||||||||||||||||||||||||||||
| As reported | $ | 699,661 | $ | (465,015) | $ | 234,646 | $ | 191,975 | $ | (15,228) | $ | 176,747 | $ | 0.50 | |||||||||||||||||||||||||||
| As a percentage of net sales | 39.1 | % | 26.0 | % | 13.1 | % | |||||||||||||||||||||||||||||||||||
| Restructuring and other action-related charges: | |||||||||||||||||||||||||||||||||||||||||
| Full Potential Plan: | |||||||||||||||||||||||||||||||||||||||||
| Professional services | — | 11,283 | 11,283 | 11,283 | — | 11,283 | 0.03 | ||||||||||||||||||||||||||||||||||
| Operating model | — | 16,000 | 16,000 | 16,000 | — | 16,000 | 0.05 | ||||||||||||||||||||||||||||||||||
| Other | (108) | 1,921 | 1,813 | 1,813 | — | 1,813 | 0.01 | ||||||||||||||||||||||||||||||||||
| Discrete tax benefits | — | — | — | — | (11,802) | (11,802) | (0.03) | ||||||||||||||||||||||||||||||||||
| Tax effect on actions | — | — | — | — | (6,131) | (6,131) | (0.02) | ||||||||||||||||||||||||||||||||||
| Total restructuring and other action-related charges | (108) | 29,204 | 29,096 | 29,096 | (17,933) | 11,163 | 0.03 | ||||||||||||||||||||||||||||||||||
| As adjusted | $ | 699,553 | $ | (435,811) | $ | 263,742 | $ | 221,071 | $ | (33,161) | $ | 187,910 | $ | 0.53 | |||||||||||||||||||||||||||
| As a percentage of net sales | 39.1 | % | 24.4 | % | 14.7 | % | |||||||||||||||||||||||||||||||||||
| Nine Months Ended October 2, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling, General and Administrative Expenses | Operating Profit | Income From Continuing Operations Before Income Tax Expense | Income Tax Expense | Income From Continuing Operations | Diluted Earnings Per Share From Continuing Operations1 | |||||||||||||||||||||||||||||||||||
| As reported | $ | 1,983,971 | $ | (1,341,809) | $ | 642,162 | $ | 508,175 | $ | (55,161) | $ | 453,014 | $ | 1.29 | |||||||||||||||||||||||||||
| As a percentage of net sales | 39.3 | % | 26.6 | % | 12.7 | % | |||||||||||||||||||||||||||||||||||
| Restructuring and other action-related charges: | |||||||||||||||||||||||||||||||||||||||||
| Full Potential Plan: | |||||||||||||||||||||||||||||||||||||||||
| Professional services | — | 36,793 | 36,793 | 36,793 | — | 36,793 | 0.10 | ||||||||||||||||||||||||||||||||||
| Operating model | — | 17,600 | 17,600 | 17,600 | — | 17,600 | 0.05 | ||||||||||||||||||||||||||||||||||
| Impairment of intangible assets | — | 7,302 | 7,302 | 7,302 | — | 7,302 | 0.02 | ||||||||||||||||||||||||||||||||||
| Other | 4,599 | 859 | 5,458 | 5,458 | — | 5,458 | 0.02 | ||||||||||||||||||||||||||||||||||
| Discrete tax benefits | — | — | — | — | (19,097) | (19,097) | (0.05) | ||||||||||||||||||||||||||||||||||
| Tax effect on actions | — | — | — | — | (12,041) | (12,041) | (0.03) | ||||||||||||||||||||||||||||||||||
| Total restructuring and other action-related charges | 4,599 | 62,554 | 67,153 | 67,153 | (31,138) | 36,015 | 0.10 | ||||||||||||||||||||||||||||||||||
| As adjusted | $ | 1,988,570 | $ | (1,279,255) | $ | 709,315 | $ | 575,328 | $ | (86,299) | $ | 489,029 | $ | 1.39 | |||||||||||||||||||||||||||
| As a percentage of net sales | 39.4 | % | 25.3 | % | 14.0 | % | |||||||||||||||||||||||||||||||||||
| 1 | Amounts may not be additive due to rounding. | ||||
TABLE 6-C
HANESBRANDS INC.
Supplemental Financial Information
Reconciliation of Select GAAP Measures to Non-GAAP Measures
(in thousands, except per share data)
(Unaudited)
| Last Twelve Months | |||||||||||
| October 1, 2022 | October 2, 2021 | ||||||||||
Leverage Ratio1: | |||||||||||
EBITDA2: | |||||||||||
| Income from continuing operations | $ | 354,893 | $ | 160,816 | |||||||
Interest expense, net | 142,715 | 171,396 | |||||||||
| Income tax expense (benefit) | 63,721 | (97,787) | |||||||||
Depreciation and amortization | 105,015 | 116,145 | |||||||||
Total EBITDA | 666,344 | 350,570 | |||||||||
Total restructuring and other action-related charges (excluding tax effect on actions) | 147,889 | 692,489 | |||||||||
Other losses, charges and expenses3 | 117,923 | 54,822 | |||||||||
Total EBITDA, as adjusted | $ | 932,156 | $ | 1,097,881 | |||||||
| Net debt: | |||||||||||
| Debt (current and long-term debt and Accounts Receivable Securitization Facility excluding long term debt issuance costs of $13,211 and $24,971, respectively) | $ | 3,911,850 | $ | 3,689,018 | |||||||
Other debt and cash adjustments4 | 10,973 | 34,555 | |||||||||
(Less) Cash and cash equivalents | (253,131) | (873,628) | |||||||||
| Net debt | $ | 3,669,692 | $ | 2,849,945 | |||||||
| Net debt/EBITDA, as adjusted | 3.9 | 2.6 | |||||||||
| 1 | Represents the Company’s leverage ratio defined as Consolidated Net Total Leverage Ratio under its Fifth Amended and Restated Credit Agreement, dated November 19, 2021, as amended, which excludes other losses, charges and expenses in addition to restructuring and other action-related charges. | ||||
| 2 | Earnings from continuing operations before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. | ||||
| 3 | Primarily includes bad debt expense, excess and obsolete inventory write-offs, pension expense, other compensation related items and charges related to the Company’s ransomware attack. | ||||
| 4 | Includes drawn letters of credit and cash balances in certain geographies. | ||||
| Quarters Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
Free cash flow1: | |||||||||||||||||||||||
| Net cash from operating activities | $ | (50,608) | $ | 315,120 | $ | (491,682) | $ | 527,376 | |||||||||||||||
| Capital expenditures | (33,009) | (29,989) | (70,955) | (55,320) | |||||||||||||||||||
| Free cash flow | $ | (83,617) | $ | 285,131 | $ | (562,637) | $ | 472,056 | |||||||||||||||
| 1 | Free cash flow includes the results from continuing and discontinued operations in the periods prior the sale of the European Innerwear business on March 5, 2022. | ||||
TABLE 7
HANESBRANDS INC.
Supplemental Financial Information
Reconciliation of GAAP Outlook to Adjusted Outlook
(in thousands, except per share data)
(Unaudited)
| Quarter Ended | Year Ended | ||||||||||
| December 31, 2022 | December 31, 2022 | ||||||||||
| Operating profit outlook, as calculated under GAAP | $53,000 to $83,000 | $512,000 to $542,000 | |||||||||
| Restructuring and other action-related charges | $17,000 | $55,000 | |||||||||
| Operating profit outlook, as adjusted | $70,000 to $100,000 | $567,000 to $597,000 | |||||||||
Diluted earnings per share from continuing operations, as calculated under GAAP1 | $0.00 to $0.07 | $0.82 to $0.89 | |||||||||
| Restructuring and other action-related charges | $0.04 | $0.13 | |||||||||
| Diluted earnings per share from continuing operations, as adjusted | $0.04 to $0.11 | $0.95 to $1.02 | |||||||||
| 1 | The company expects approximately 350 million diluted weighted average shares outstanding for the quarter ended December 31, 2022 and approximately 351 million diluted weighted average shares outstanding for the year ended December 31, 2022. | ||||
Hanesbrands FAQs
Updated November 9, 2022 – New or updated information is in red
General and Current Period FAQs (Guidance comments as of November 9, 2022)
Unless otherwise indicated, all guidance and related commentary as well as comparisons to prior periods reflect continuing operations.
(1) Q: What are the main components of your full-year 2022 guidance?
A: Net Sales: We expect total net sales from continuing operations of $6.16 billion to $6.21 billion. This includes an approximate $196 million headwind from the effects of foreign exchange rates as compared to last year. The foreign exchange impact is reflected within the International segment. At the midpoint, our guidance represents net sales decline as compared to prior year of approximately 6% on a constant currency basis and approximately 9% on a reported basis.
Operating Profit (GAAP and Adjusted): Our guidance for GAAP Operating Profit from continuing operations is $512 million to $542 million. Our guidance for Adjusted Operating Profit from continuing operations, which excludes pretax Full Potential plan-related charges (see pretax expenses below), is $567 million to $597 million. Our operating profit guidance includes an approximate $26 million headwind from the effects of foreign exchange rates as compared to last year.
Interest/Other Expenses and Tax Rate: Our guidance assumes Interest and Other expenses of approximately $167 million. Our guidance assumes an effective tax rate of approximately 17% on both a GAAP and adjusted basis.
EPS (GAAP and Adjusted): Our guidance for GAAP EPS from continuing operations is $0.82 to $0.89. Our guidance for Adjusted EPS from continuing operations is $0.95 to $1.02. Adjusted EPS from continuing operations excludes pretax Full Potential plan-related expenses (see pretax expenses below). Both ranges are based on diluted shares outstanding of approximately 351 million for the year and exclude any potential impact from future share repurchases.
Cash flow from operations: Our full-year guidance is for cash flow from operations to be a use of $400 million. Our full-year capital investment guidance is approximately $140 million, consisting of approximately $90 million of capital expenditures and approximately $50 million of cloud computing assets. Per GAAP, capital expenditures are reflected in cash from investing activities and certain cloud computing assets are reflected in Other Assets within cash flow from operating activities.
Pretax expenses: Our guidance reflects approximately $55 million of pretax Full Potential plan-related charges.
(2) Q: What are the main components of your fourth-quarter 2022 guidance?
A: Net Sales: We expect total net sales from continuing operations of $1.40 billion to $1.45 billion. This includes an approximate $68 million headwind from the effects of foreign exchange rates as compared to last year. The foreign exchange impact is reflected within the International segment. At the midpoint, our guidance represents net sales decline as compared to prior year of approximately 15% on a constant currency basis and down approximately 19% on a reported basis.
Operating Profit (GAAP and Adjusted): Our guidance for GAAP Operating Profit from continuing operations is $53 million to $83 million. Our guidance for Adjusted Operating Profit from continuing operations, which excludes pretax Full Potential plan-related charges (see pretax expenses below), is $70 million to $100 million. Our operating profit guidance includes an approximate $9 million headwind from the effects of foreign exchange rates as compared to last year.
Interest/Other Expenses and Tax Rate: Our guidance assumes Interest and Other expenses of approximately $54 million. Our guidance assumes an effective tax rate of approximately 17% on both a GAAP and adjusted basis.
EPS (GAAP and Adjusted): Our guidance for GAAP EPS from continuing operations is $0.00 to $0.07. Our guidance for Adjusted EPS from continuing operations is $0.04 to $0.11. Adjusted EPS from continuing operations excludes pretax Full Potential plan-related expenses (see pretax expenses below). Both ranges are based on diluted shares outstanding of approximately 350 million for the quarter and exclude any potential impact from share repurchases.
Pretax expenses: Our guidance reflects approximately $17 million of pretax Full Potential plan-related charges.
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(3) Q: Can you provide any information on the announcement to sell the U.S. Sheer Hosiery business?
A: We reached another milestone in our Full Potential initiative to focus our portfolio in areas with the greatest potential for growth and returns. As part of this initiative, on February 3, 2022, we announced our intention to sell our U.S. Sheer Hosiery business. The assets and liabilities of the U.S. Sheer Hosiery business are reflected in ‘held for sale’ on the balance sheet. We expect this business to generate approximately $60 million of sales and essentially zero operating profit, which is reflected in our current 2022 guidance estimates.
***For prior FAQs please see our prior Securities and Exchange Commission reports, including our Current Reports on Form 8-K.***
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Charges for Actions and Reconciliation to GAAP Measures
To supplement financial results prepared in accordance with generally accepted accounting principles, the Company provides quarterly and full-year results concerning certain non‐GAAP financial measures, including adjusted EPS from continuing operations, adjusted income from continuing operations, adjusted income tax expense, adjusted income from continuing operations before income tax expense, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), EBITDA, adjusted EBITDA and leverage ratio.
Adjusted EPS from continuing operations is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. Adjusted income from continuing operations is defined as income from continuing operations excluding actions and the tax effect on actions. Adjusted income tax expense is defined as income tax expense excluding actions. Adjusted income from continuing operations before income tax is defined as income from continuing operations before income tax excluding actions. Adjusted operating profit is defined as operating profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. Adjusted gross profit is defined as gross profit excluding actions.
Charges for actions taken in 2022 and 2021 include professional fees, supply chain segmentation charges, technology charges, intangible asset impairment charges related to our Full Potential plan, operating model charges, and (gain)/loss on classification of assets held for sale. While these costs 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 future business plans and circumstances.
HanesBrands 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 the Full Potential plan and other actions. HanesBrands 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 of any of the aforementioned actions taken. The Company has also chosen to present EBITDA and adjusted EBITDA to investors because it considers these measures to be an important supplemental means of evaluating operating performance. EBITDA is defined as income from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and other losses, charges and expenses as defined in the Consolidated Net Total Leverage Ratio under its Fifth Amended and Restated Credit Agreement, dated November 19, 2021, as amended. HanesBrands believes that EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA and adjusted EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA and adjusted EBITDA should not, however, be considered as measures of discretionary cash available to invest in the growth of the business.
HanesBrands 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, HanesBrands 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 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). HanesBrands believes constant-currency information is useful to management and investors to facilitate comparison of operating results and better identify trends in the Company’s businesses.
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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. See the Company’s press release dated November 9, 2022, to reconcile quarterly non-GAAP performance measures to the most directly comparable GAAP measure. A copy of the press release is available at www.Hanes.com/Investors.
Cautionary Statement Concerning Forward-Looking Statements
These FAQs 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, guidance and predictions regarding expected operating results, including related to our Full Potential plan; statements made in the Fourth-Quarter and Full-year 2022 Financial Outlook section of this news release; and statements regarding the sale of our U.S. Hosiery business, 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: our ability to successfully execute our Full Potential plan to achieve the desired results; the potential effects of the COVID-19 pandemic, including on consumer spending, global supply chains and the financial markets; the highly competitive and evolving nature of the industry in which we compete; the rapidly changing retail environment and the level of consumer demand; our reliance on a relatively small number of customers for a significant portion of our sales; any inadequacy, interruption, integration failure or security failure with respect to our information technology (including the ransomware attack announced May 31, 2022); the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; the availability of global supply chain resources; our ability to attract and retain a senior management team with the core competencies needed to support growth in global markets and ongoing labor shortages generally; significant fluctuations in foreign exchange rates; legal, regulatory, political and economic risks related to our international operations; our ability to effectively manage our complex multinational tax structure; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and HanesBrands undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, other than as required by law.
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