02/15/24
8:30 am EST
Most Recent
Press Release
HanesBrands Reports Fourth-Quarter 2016 Financial Results
HanesBrands Reports Fourth-Quarter 2016 Financial Results
February 2, 2017 at 4:06 PM EST
- Record Net Sales, Operating Profit and EPS for Full Year
-
Record Cash Flow from Operations of
$606 Million in 2016 - Company Initiates Full-Year 2017 Guidance, Forecasting All-Time Highs for Net Sales, Operating Profit, EPS, and Cash Flow
In addition to 2016 results, Hanes has announced initial financial guidance for 2017, forecasting high-single-digit growth expectations for net sales, record cash flow from operations, and growth for operating profit and earnings per diluted share.
For the year ended
On a GAAP basis, fourth-quarter EPS of
(All adjusted consolidated measures and comparisons in this news release
reflect continuing operations and exclude pretax charges related to
acquisitions and other actions of approximately
“We had a strong year of sales, profit and cash flow growth with many
accomplishments, including the expansion of our X-Temp product lineup,
the successful launch of our Hanes FreshIQ underwear innovation,
acquisition integration, and new acquisitions in
“Despite the challenging environment, we were able to manage inventory
and generate cash, returning nearly
Key Callouts for Fourth-Quarter and Full-Year 2016 Financial Results
Record Cash Flow Driven by Inventory Management and Growth. Hanes
generated a record
GAAP and adjusted operating profit, and the associated operating profit
margins, increased in the fourth quarter and full year. For the year,
GAAP operating profit increased 30 percent to
Consumer Store Traffic Challenges. Slower-than-expected consumer visits to retail stores in the fourth quarter resulted in retailer inventory control through reduced replenishment orders by U.S. retailers. Innerwear sales decreased 8 percent in the fourth quarter, while Activewear sales increased 3 percent. Hanes is adapting to the growth of online sales and changing consumer buying behavior. In the fourth-quarter, the online channel, including retailer websites, company websites and pure-play ecommerce sites, accounted for approximately 11 percent of U.S. sales, versus approximately 8 percent a year ago.
Acquisitions Drive International Segment Growth. The acquisitions
of Pacific Brands of
Direct to Consumer Segment. The Direct to Consumer segment sales decreased 12 percent in the fourth quarter and 8 percent for the year as part of a transition to exit the company’s legacy catalog business and reduce noncore offerings in outlet stores and online.
2017 Financial Guidance
Hanes has issued initial guidance for 2017 that would represent a fifth consecutive year of record net sales, operating profit and EPS. The guidance reflects acquisition contributions, growth opportunities, the effect of the ongoing consumer shift toward online purchases, and negative currency impacts that are expected to dampen growth of International segment sales and operating profit.
The company expects 2017 net sales of
Compared with 2016 results, the midpoint of 2017 guidance represents net sales growth of 8 percent, GAAP operating profit growth of 12 percent, adjusted operating profit growth of 5 percent, GAAP EPS growth from continuing operations of 26 percent, adjusted EPS growth from continuing operations of 7 percent, and operating cash flow growth of 11 percent.
Factors Affecting Cadence of Guidance. Full-year net sales
guidance includes expected incremental sales from acquisitions of
approximately
At today’s foreign exchange rates, the stronger dollar versus last year
is expected to reduce net sales growth by an estimated
First-Quarter Guidance. The company expects total net sales growth in the first quarter as a result of acquisition-driven International gains as well as Activewear growth. Organic sales are expected to decline in the quarter as a result of lower Innerwear sales affected by the retail climate of store closings and tight inventory as well as the exits from the company’s domestic catalog business and noncore offerings. Innerwear sales trends are expected to normalize starting in the second quarter, with expected full-year net sales comparable to 2016.
First-quarter GAAP EPS for continuing operations is expected to be
Additional Full-Year Guidance. The company expects approximately
In conjunction with acquisition integration in 2017, the company expects
to incur an estimated
Guidance for operating cash flow growth in 2017 includes the expected benefits from net income growth and lower pretax cash charges related to acquisitions.
The company expects capital expenditures of approximately
Hanes expects interest expense and other expenses to be approximately
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
Note on Adjusted Measures and Reconciliation to GAAP Measures
To supplement our financial guidance prepared in accordance with generally accepted accounting principles, we provide quarterly and full-year results and guidance concerning certain non‐GAAP financial measures, including adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin) and EBITDA.
Adjusted EPS is defined as diluted EPS 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. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
Actions during the periods presented include adjustments for acquisition
and integration costs, foundational costs and other costs. Acquisition
and integration costs include adjustments directly related to completed
acquisitions and their integration. These costs include legal fees,
consulting fees, bank fees, severance costs, certain purchase accounting
items, facility closures, inventory write-offs, information technology
integration costs, and similar charges. These costs also include
adjustments for acquisition-related currency transactions during the
period to remove the effect of foreign exchange gains from financing
activities related to these acquisitions. Foundational costs are
expenses associated with building and realigning enterprise-wide
infrastructure to support global growth and future acquisitions,
primarily consisting of information technology spending. All
foundational costs were completed in 2015. Other costs relate to other
items not included in the aforementioned categories, primarily
consisting of noncash items related to the exit of the commercial sales
organization in the
In addition to these non-GAAP measures, the company has chosen to present EBITDA to investors because it considers it to be an important supplemental means of evaluating operating performance. Hanes believes that EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA should not, however, be considered as a measure of discretionary cash available to invest in the growth of the business.
Non‐GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as an alternative to, or substitute for, financial results prepared in accordance with GAAP. Further, the non-GAAP measures presented may be different from non-GAAP measures with similar or identical names presented by other companies.
In 2016, Hanes incurred approximately
In 2015, the company incurred approximately
Hanes expects to incur approximately
Webcast Conference Call
Hanes will host an internet webcast of its quarterly investor conference
call at
An archived replay of the conference call webcast will be available at www.Hanes.com/investors.
A telephone playback will be available from approximately
Cautionary Statement Concerning Forward-Looking Statements
This press release contains certain “forward-looking statements,” as
defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements following the heading “2017 Financial Guidance,” as well as
statements about the benefits anticipated from the Hanes Europe
Innerwear, Hanes Australasia and Champion Europe acquisitions, and
assumptions regarding consumer behavior, foreign exchange rates and U.S.
tax law and policy are forward-looking statements. These forward-looking
statements are based on our current intent, beliefs, plans and
expectations. Readers are cautioned not to place any undue reliance on
any forward-looking statements. Forward-looking statements necessarily
involve risks and uncertainties, many of which are outside of our
control, that could cause actual results to differ materially from such
statements and from our historical results and experience. These risks
and uncertainties include such things as: the highly competitive and
evolving nature of the industry in which we compete; any inadequacy,
interruption, integration failure or security failure with respect to
our information technology; significant fluctuations in foreign exchange
rates; the rapidly changing retail environment; our complex
multinational tax structure; our ability to properly manage strategic
projects; our ability to attract and retain a senior management team
with the core competencies needed to support our growth in global
markets; risks related to our international operations, including the
impact to our business as a result of the United Kingdom’s recent
referendum to leave the
TABLE 1 |
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HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
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|
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Quarter Ended | Year Ended | |||||||||||||||||||||||||||
December 31, 2016 |
January 2, 2016 |
% Change |
December 31, 2016 |
January 2, 2016 |
% Change | |||||||||||||||||||||||
Net sales | $ | 1,575,309 | $ | 1,409,557 | 11.8 | % | $ | 6,028,199 | $ | 5,731,549 | 5.2 | % | ||||||||||||||||
Cost of sales | 963,174 | 868,431 | 3,752,151 | 3,595,217 | ||||||||||||||||||||||||
Gross profit | 612,135 | 541,126 | 13.1 | % | 2,276,048 | 2,136,332 | 6.5 | % | ||||||||||||||||||||
As a % of net sales | 38.9 | % | 38.4 | % | 37.8 | % | 37.3 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 408,453 | 383,200 | 1,500,399 | 1,541,214 | ||||||||||||||||||||||||
As a % of net sales | 25.9 | % | 27.2 | % | 24.9 | % | 26.9 | % | ||||||||||||||||||||
Operating profit | 203,682 | 157,926 | 29.0 | % | 775,649 | 595,118 | 30.3 | % | ||||||||||||||||||||
As a % of net sales | 12.9 | % | 11.2 | % | 12.9 | % | 10.4 | % | ||||||||||||||||||||
Other expenses | 1,225 | 1,280 | 51,758 | 3,210 | ||||||||||||||||||||||||
Interest expense, net | 41,153 | 30,772 | 152,692 | 118,035 | ||||||||||||||||||||||||
Income from continuing operations before income tax expense | 161,304 | 125,874 | 571,199 | 473,873 | ||||||||||||||||||||||||
Income tax expense | 5,579 | 6,711 | 34,272 | 45,018 | ||||||||||||||||||||||||
Income from continuing operations | 155,725 | 119,163 | 536,927 | 428,855 | ||||||||||||||||||||||||
Income from discontinued operations, net of tax | 1,387 | — | 2,455 | — | ||||||||||||||||||||||||
Net income | $ | 157,112 | $ | 119,163 | 31.8 | % | $ | 539,382 | $ | 428,855 | 25.8 | % | ||||||||||||||||
Earnings per share - basic: | ||||||||||||||||||||||||||||
Continuing operations | $ | 0.41 | $ | 0.30 | 36.7 | % | $ | 1.41 | $ | 1.07 | 31.8 | % | ||||||||||||||||
Discontinued operations | — | — | NM | 0.01 | — | NM | ||||||||||||||||||||||
Net income | $ | 0.41 | $ | 0.30 | 36.7 | % | $ | 1.41 | $ | 1.07 | 31.8 | % | ||||||||||||||||
Earnings per share - diluted: | ||||||||||||||||||||||||||||
Continuing operations | $ | 0.41 | $ | 0.30 | 36.7 | % | $ | 1.40 | $ | 1.06 | 32.1 | % | ||||||||||||||||
Discontinued operations | — | — | NM | 0.01 | — | NM | ||||||||||||||||||||||
Net income | $ | 0.41 | $ | 0.30 | 36.7 | % | $ | 1.40 | $ | 1.06 | 32.1 | % | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 379,484 | 393,187 | 381,782 | 399,891 | ||||||||||||||||||||||||
Diluted | 382,074 | 396,082 | 384,566 | 403,659 |
TABLE 2 |
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HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
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Quarter Ended | Year Ended | |||||||||||||||||||||||||||
December 31, 2016 |
January 2, 2016 |
% Change |
December 31, 2016 |
January 2, 2016 |
% Change | |||||||||||||||||||||||
Segment net sales1: | ||||||||||||||||||||||||||||
Innerwear | $ | 611,461 | $ | 666,123 | (8.2 | )% | $ | 2,609,754 | $ | 2,680,981 | (2.7 | )% | ||||||||||||||||
Activewear | 383,465 | 373,166 | 2.8 | % | 1,570,972 | 1,576,724 | (0.4 | )% | ||||||||||||||||||||
Direct to Consumer | 75,341 | 85,913 | (12.3 | )% | 315,560 | 341,207 | (7.5 | )% | ||||||||||||||||||||
International | 505,042 | 284,355 | 77.6 | % | 1,531,913 | 1,132,637 | 35.3 | % | ||||||||||||||||||||
Total net sales | $ | 1,575,309 | $ | 1,409,557 | 11.8 | % | $ | 6,028,199 | $ | 5,731,549 | 5.2 | % | ||||||||||||||||
Segment operating profit1: | ||||||||||||||||||||||||||||
Innerwear | $ | 137,699 | $ | 163,117 | (15.6 | )% | $ | 588,265 | $ | 623,412 | (5.6 | )% | ||||||||||||||||
Activewear | 64,575 | 59,325 | 8.8 | % | 227,535 | 246,508 | (7.7 | )% | ||||||||||||||||||||
Direct to Consumer | (4,054 | ) | 2,481 | NM | 5,564 | 15,859 | (64.9 | )% | ||||||||||||||||||||
International | 70,733 | 29,436 | 140.3 | % | 179,917 | 105,515 | 70.5 | % | ||||||||||||||||||||
General corporate expenses/other | (18,403 | ) | (42,354 | ) | (56.5 | )% | (87,113 | ) | (130,116 | ) | (33.0 | )% | ||||||||||||||||
Acquisition, integration and other action related charges | (46,868 | ) | (54,079 | ) | (13.3 | )% | (138,519 | ) | (266,060 | ) | (47.9 | )% | ||||||||||||||||
Total operating profit | $ | 203,682 | $ | 157,926 | 29.0 | % | $ | 775,649 | $ | 595,118 | 30.3 | % | ||||||||||||||||
EBITDA2: | ||||||||||||||||||||||||||||
Net income from continuing operations | $ | 155,725 | $ | 119,163 | 30.7 | % | $ | 536,927 | $ | 428,855 | 25.2 | % | ||||||||||||||||
Interest expense, net | 41,153 | 30,772 | 33.7 | % | 152,692 | 118,035 | 29.4 | % | ||||||||||||||||||||
Income tax expense | 5,579 | 6,711 | (16.9 | )% | 34,272 | 45,018 | (23.9 | )% | ||||||||||||||||||||
Depreciation and amortization | 29,460 | 28,153 | 4.6 | % | 103,175 | 103,903 | (0.7 | )% | ||||||||||||||||||||
Total EBITDA | $ | 231,917 | $ | 184,799 | 25.5 | % | $ | 827,066 | $ | 695,811 | 18.9 | % | ||||||||||||||||
1 As a result of a shift in management responsibilities, the Company decided in the first quarter of 2016 to move its wholesale e-commerce business, that sells products directly to retailers, from the Direct to Consumer segment to the Innerwear and Activewear segments. In addition, revisions were made to the manner in which certain selling, general and administrative expenses are allocated. Prior-year segment sales and operating profit results have been revised to conform to the current year presentation. |
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2 Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
TABLE 3 |
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HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
|||||||||
December 31, 2016 | January 2, 2016 | ||||||||
Assets | |||||||||
Cash and cash equivalents | $ | 460,245 | $ | 319,169 | |||||
Trade accounts receivable, net | 814,178 | 680,417 | |||||||
Inventories | 1,840,565 | 1,814,602 | |||||||
Other current assets | 137,535 | 103,679 | |||||||
Current assets of discontinued operations | 45,897 | — | |||||||
Total current assets | 3,298,420 | 2,917,867 | |||||||
Property, net | 692,464 | 650,462 | |||||||
Trademarks and other identifiable intangibles, net | 1,285,458 | 700,515 | |||||||
Goodwill | 1,098,540 | 834,315 | |||||||
Deferred tax assets | 464,872 | 445,179 | |||||||
Other noncurrent assets | 67,980 | 49,252 | |||||||
Total assets | $ | 6,907,734 | $ | 5,597,590 | |||||
Liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 1,358,696 | $ | 1,133,305 | |||||
Notes payable | 56,396 | 117,785 | |||||||
Accounts Receivable Securitization Facility | 44,521 | 195,163 | |||||||
Current portion of long-term debt | 133,843 | 57,656 | |||||||
Current liabilities of discontinued operations | 9,466 | — | |||||||
Total current liabilities | 1,602,922 | 1,503,909 | |||||||
Long-term debt | 3,507,685 | 2,232,712 | |||||||
Pension and postretirement benefits | 371,612 | 362,266 | |||||||
Other noncurrent liabilities | 201,601 | 222,812 | |||||||
Total liabilities | 5,683,820 | 4,321,699 | |||||||
Equity | 1,223,914 | 1,275,891 | |||||||
Total liabilities and equity | $ | 6,907,734 | $ | 5,597,590 |
TABLE 4 |
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HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
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Year Ended | ||||||||||
December 31, 2016 | January 2, 2016 | |||||||||
Operating Activities: | ||||||||||
Net income | $ | 539,382 | $ | 428,855 | ||||||
Depreciation and amortization | 103,175 | 103,903 | ||||||||
Other noncash items | 66,682 | 38,849 | ||||||||
Changes in assets and liabilities, net | (103,632 | ) | (344,600 | ) | ||||||
Net cash from operating activities | 605,607 | 227,007 | ||||||||
Investing Activities: | ||||||||||
Purchases/sales of property and equipment, net, and other | (2,566 | ) | (83,971 | ) | ||||||
Acquisition of businesses | (964,075 | ) | (192,829 | ) | ||||||
Net cash from investing activities | (966,641 | ) | (276,800 | ) | ||||||
Financing Activities: | ||||||||||
Cash dividends paid | (167,375 | ) | (161,316 | ) | ||||||
Share repurchases | (379,901 | ) | (351,495 | ) | ||||||
Net borrowings on notes payable, debt and other | 1,058,330 | 645,793 | ||||||||
Net cash from financing activities | 511,054 | 132,982 | ||||||||
Effect of changes in foreign currency exchange rates on cash | (8,944 | ) | (3,875 | ) | ||||||
Change in cash and cash equivalents | 141,076 | 79,314 | ||||||||
Cash and cash equivalents at beginning of year | 319,169 | 239,855 | ||||||||
Cash and cash equivalents at end of year | $ | 460,245 | $ | 319,169 |
TABLE 5 |
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HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per-share amounts) (Unaudited) |
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Quarter Ended | Year Ended | ||||||||||||||||
December 31, 2016 |
January 2, 2016 |
December 31, 2016 |
January 2, 2016 |
||||||||||||||
Gross profit, as reported under GAAP | $ | 612,135 | $ | 541,126 | $ | 2,276,048 | $ | 2,136,332 | |||||||||
Acquisition, integration and other action related charges | 11,647 | 14,920 | 39,379 | 62,859 | |||||||||||||
Gross profit, as adjusted | $ | 623,782 | $ | 556,046 | $ | 2,315,427 | $ | 2,199,191 | |||||||||
As a % of net sales | 39.6 | % | 39.4 | % | 38.4 | % | 38.4 | % | |||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 408,453 | $ | 383,200 | $ | 1,500,399 | $ | 1,541,214 | |||||||||
Acquisition, integration and other action related charges | (35,221 | ) | (39,159 | ) | (99,140 | ) | (203,201 | ) | |||||||||
Selling, general and administrative expenses, as adjusted | $ | 373,232 | $ | 344,041 | $ | 1,401,259 | $ | 1,338,013 | |||||||||
As a % of net sales | 23.7 | % | 24.4 | % | 23.2 | % | 23.3 | % | |||||||||
Operating profit, as reported under GAAP | $ | 203,682 | $ | 157,926 | $ | 775,649 | $ | 595,118 | |||||||||
Acquisition, integration and other action related charges included in gross profit | 11,647 | 14,920 | 39,379 | 62,859 | |||||||||||||
Acquisition, integration and other action related charges included in SG&A | 35,221 | 39,159 | 99,140 | 203,201 | |||||||||||||
Operating profit, as adjusted | $ | 250,550 | $ | 212,005 | $ | 914,168 | $ | 861,178 | |||||||||
As a % of net sales | 15.9 | % | 15.0 | % | 15.2 | % | 15.0 | % | |||||||||
Net income from continuing operations, as reported under GAAP | $ | 155,725 | $ | 119,163 | $ | 536,927 | $ | 428,855 | |||||||||
Acquisition, integration and other action related charges included in gross profit | 11,647 | 14,920 | 39,379 | 62,859 | |||||||||||||
Acquisition, integration and other action related charges included in SG&A | 35,221 | 39,159 | 99,140 | 203,201 | |||||||||||||
Debt refinance charges included in other expenses | — | — | 47,291 | — | |||||||||||||
Tax effect on actions | (1,422 | ) | 1,439 | (11,148 | ) | (25,276 | ) | ||||||||||
Net income from continuing operations, as adjusted | $ | 201,171 | $ | 174,681 | $ | 711,589 | $ | 669,639 | |||||||||
Diluted earnings per share from continuing operations, as reported under GAAP | $ | 0.41 | $ | 0.30 | $ | 1.40 | $ | 1.06 | |||||||||
Acquisition, integration and other action related charges | 0.12 | 0.14 | 0.45 | 0.60 | |||||||||||||
Diluted earnings per share from continuing operations, as adjusted | $ | 0.53 | $ | 0.44 | $ | 1.85 | $ | 1.66 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170202006279/en/
Source:
HanesBrands
News Media:
Matt Hall, 336-519-3386
or
Analysts
and Investors:
T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.