02/15/24
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HanesBrands Reports Second-Quarter 2014 Financial Results
HanesBrands Reports Second-Quarter 2014 Financial Results
July 23, 2014 at 4:02 PM EDT
– Second Consecutive Quarter of Record Results Driven by Acquisition Benefits, Activewear Performance, and Supply Chain Manufacturing Execution
– Excluding Actions, Net Sales up 12%, Operating Profit up 27% and EPS up 44%
– Full-Year Adjusted EPS Guidance Increased to a Range of
For the second-quarter ended
Primary contributors to the record quarterly results despite a
continuing uncertain economic environment were increased margins and
operating profit as a result of the company’s Innovate-to-Elevate
strategy; strong Activewear segment results; increased supply chain
manufacturing efficiencies; tight control of selling, general and
administrative costs; and successful integration of
As a result of strong second-quarter 2014 results, the company has
raised its 2014 full-year financial guidance. Increased full-year
expectations include adjusted EPS of
“Our record first-half results are a testament to the value we are
creating through our Innovate-to-Elevate, self-owned supply chain, and
acquisition strategies,” Hanes Chief Executive Officer
Second-Quarter 2014 Financial Highlights and Business Segment Summary
Key accomplishments for the second quarter include:
Sales Growth in Each Business Segment. Each business segment
contributed to the total net sales increase of
Innovate-to-Elevate Drives Margin Improvement. Hanes’ Innovate-to-Elevate strategy, which harnesses synergies from combining the company’s brand power, supply chain leverage, and product innovation platforms, drove adjusted gross margin improvement in the second quarter of 160 basis points and adjusted operating margin improvement of 210 basis points. The company’s adjusted operating profit margin of 17.2 percent was a second-quarter record.
Significant SG&A Leverage. Despite adding the acquired
Maidenform operations, Hanes’ adjusted selling, general and
administrative expenses increased by only
Maidenform Integration Milestones Achieved. The integration of Maidenform is progressing on schedule. In July, Hanes began the first production of Maidenform bra styles in its self-owned intimate apparel supply chain plants. In the first quarter, all Maidenform financial reporting, forecasting, ordering, inventory, purchasing and direct-to-consumer operations moved onto Hanes’ financial and operating systems.
Business Momentum Built on Innovate-to-Elevate, Self-Owned Low-Cost Supply Chain, and Acquisitions. Hanes’ record first-half results and guidance for the full year are based on the company’s business model to create value through executing its Innovate-to-Elevate strategy, relying on its self-owned low-cost global supply chain, and making disciplined acquisitions.
“Our innovation strategy is succeeding, our supply chain is a
competitive advantage, and we have developed strong integration
capabilities,” said
Key business highlights include:
Innerwear Segment. Innerwear net sales increased 15 percent in the second quarter, driven by the Maidenform acquisition as well as intimate apparel growth in the base business. Operating profit increased 19 percent with significant contributions from Maidenform and base business intimate apparel and basics.
- Retail Environment. Sales in the quarter were affected by a continued uneven and challenging retail environment, even with the Easter holiday selling period occurring in the second quarter of 2014 versus the first quarter in 2013. Intimate apparel sales performed better than underwear basics. However, innovation platforms, including ComfortBlend and X-Temp underwear and Flexible Fit bras, continued to outperform their respective categories.
- Strong Profit Increase. Despite a difficult selling environment, operating profit increased as a result of Innovate-to-Elevate. The segment’s operating profit margin increased 80 basis points to 23 percent of sales.
Activewear Segment. The Activewear segment continued to deliver strong sales and profit performance in both the first and second quarters. Net sales increased 8 percent in the second quarter and 9 percent for the first half. Sales growth was magnified into operating profit growth of 23 percent in the second quarter and 33 percent for the first half.
- Record Profitability. The segment’s operating profit was a record for both the first and second quarters. The segment’s operating profit margin of 14.4 percent in the quarter increased 180 basis points over the prior-year quarter, and the first-half operating profit margin of 12.7 percent was up 230 basis points.
- Strength across Businesses. All of the segment’s businesses – retail, branded printwear, and Gear for Sports – delivered sales and profit growth in the second quarter and first half of 2014. The segment has benefitted from increased channel penetration and shelf-space gains, innovation platform success, and supply-chain leverage through increased internalized production.
International Segment. Currency continued to have a significant negative impact on International net sales and profits. On a constant-currency basis, International net sales increased 11 percent in the second quarter and operating profit increased 35 percent. As reported, International net sales increased 5 percent and operating profit increased 26 percent.
Direct to Consumer Segment. Net sales for the Direct to Consumer segment increased 13 percent and operating profit increased 31 percent in the second quarter, with the acquisition of Maidenform contributing to both comparisons versus the year-ago quarter.
Maidenform Acquisition Integration. Maidenform contributed net
sales of approximately
-
Acquisition synergies. Hanes expects to achieve full synergies
from the Maidenform acquisition within three years. After full
synergies, the acquisition is expected to annually contribute more
than
$500 million in net sales and$80 million in operating profit. -
Integration progressing on schedule. Hanes substantially
completed its integration of Maidenform headquarter business functions
in the second quarter 2014. All Maidenform financial reporting and
business operations have moved onto Hanes’ financial and operating
systems. The company anticipates closing the Maidenform
Fayetteville, N.C. , distribution center by the end of 2014. The first internalized production of select Maidenform bra styles in Hanes’ self-owned supply chain began in July as planned.
DBApparel Acquisition Announcement. During the second quarter, Hanes
announced that it intends to acquire DBApparel, a
The acquisition is contingent upon completion of consultations with European and French works councils representing DBA employees as well as customary closing conditions. The works consultations are under way, and Hanes continues to believe that the all-cash acquisition could close as soon as the third quarter of 2014.
2014 Guidance
The company’s guidance for full-year performance measures does not include any potential contribution from the pending acquisition of DBApparel. Any contribution would depend upon the timing of the acquisition and would be communicated after closing.
Based on second-quarter results, Hanes has increased its profit outlook
for 2014 and updated its sales outlook compared with previous guidance
issued when first-quarter results were announced
For 2014, Hanes expects net sales to be approximately
The company expects its acquisition of Maidenform to contribute
approximately
Interest expense and other expense are expected to be approximately
The company expects to make pension contributions of approximately
The company expects slightly more than 103 million weighted average shares outstanding in 2014.
Charges for Actions and Reconciliation to GAAP Measures
Adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), and EBITDA are not generally accepted accounting principle measures. Hanes has chosen to provide these non-GAAP measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating company operations. Non-GAAP measures should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP or other pro forma measures used by other companies.
Hanes incurred pretax charges of
Adjusted EPS is defined as diluted earnings per share excluding actions
and the tax effect on actions. Adjusted EPS for the second quarter 2014
was
Adjusted operating profit is defined as operating profit excluding
actions. Adjusted operating profit for the second quarter was
Adjusted net income is defined as net income excluding actions and the tax effect on actions. Adjusted gross profit is defined as gross profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. The company believes that these measures provide investors with additional means of analyzing the company’s performance absent the effect of acquisition-related expenses and other actions.
See Table 5 attached to this press release to reconcile adjusted measures with their respective GAAP measures.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although the company does not use EBITDA to manage its business, it believes that EBITDA is another way that investors measure financial performance. See Table 2 attached to this press release to reconcile EBITDA with the GAAP measure of net income.
For the company’s 2014 guidance, which does not include any potential
contribution from the pending acquisition of DBApparel, adjusted EPS is
defined as diluted EPS excluding actions and the tax effect on actions,
and adjusted operating profit is defined as operating profit excluding
actions. Hanes’ current estimate for pretax charges in 2014 for the
Maidenform acquisition and other actions is approximately
On a GAAP basis, which also does not include any potential contribution
from the pending acquisition of DBApparel, full-year 2014 diluted EPS
will vary depending on actual performance, charges and tax rate. GAAP
diluted EPS could be in the range of
Webcast Conference Call
Hanes will host an Internet webcast of its quarterly investor conference
call at
An archived replay of the conference call webcast will be available at www.Hanes.com/investors.
A telephone playback will be available from approximately
Cautionary Statement Concerning Forward-Looking Statements
This press release contains certain “forward-looking statements,” as
defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements following the heading “2014 Guidance,” statements regarding
the value creation potential of the business, as well as statements
about the benefits anticipated from the Maidenform and DBApparel
acquisitions, are forward-looking statements. These forward-looking
statements are based on our current intent, beliefs, plans and
expectations. Readers are cautioned not to place any undue reliance on
any forward-looking statements. Forward-looking statements necessarily
involve risks and uncertainties, many of which are outside of our
control, that could cause actual results to differ materially from such
statements and from our historical results and experience. These risks
and uncertainties include such things as: the impact of significant
fluctuations and volatility in various input costs, such as cotton and
oil-related materials, utilities, freight and wages; the failure of
businesses we acquire to perform to expectations; current economic
conditions, including consumer spending levels and the price elasticity
of our products; legal, regulatory, political and economic risks
associated with our operations in international markets, including the
risk of significant fluctuations in foreign exchange rates; the highly
competitive and evolving nature of the industry in which we compete;
unanticipated business disruptions or the loss of one or more suppliers
in our global supply chain; our ability to effectively manage our
inventory and reduce inventory reserves; and other risks identified from
time to time in our most recent
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||
June 28, 2014 | June 29, 2013 | % Change | June 28, 2014 | June 29, 2013 | % Change | |||||||||||||||||
Net sales | $ | 1,342,052 | $ | 1,199,205 | 11.9 | % | $ | 2,401,422 | $ | 2,144,666 | 12.0 | % | ||||||||||
Cost of sales | 837,698 | 763,723 | 1,540,291 | 1,381,885 | ||||||||||||||||||
Gross profit | 504,354 | 435,482 | 15.8 | % | 861,131 | 762,781 | 12.9 | % | ||||||||||||||
As a % of net sales | 37.6 | % | 36.3 | % | 35.9 | % | 35.6 | % | ||||||||||||||
Selling, general and administrative expenses | 297,230 | 254,035 | 582,219 | 496,191 | ||||||||||||||||||
As a % of net sales | 22.1 | % | 21.2 | % | 24.2 | % | 23.1 | % | ||||||||||||||
Operating profit | 207,124 | 181,447 | 14.2 | % | 278,912 | 266,590 | 4.6 | % | ||||||||||||||
As a % of net sales | 15.4 | % | 15.1 | % | 11.6 | % | 12.4 | % | ||||||||||||||
Other expenses | 660 | 751 | 1,095 | 1,215 | ||||||||||||||||||
Interest expense, net | 21,119 | 25,221 | 42,937 | 50,844 | ||||||||||||||||||
Income before income tax expense | 185,345 | 155,475 | 234,880 | 214,531 | ||||||||||||||||||
Income tax expense | 30,767 | 33,889 | 38,742 | 41,566 | ||||||||||||||||||
Net income | $ | 154,578 | $ | 121,586 | 27.1 | % | $ | 196,138 | $ | 172,965 | 13.4 | % | ||||||||||
Earnings per share: | ||||||||||||||||||||||
Basic | $ | 1.54 | $ | 1.22 | 26.2 | % | $ | 1.95 | $ | 1.74 | 12.1 | % | ||||||||||
Diluted | $ | 1.51 | $ | 1.19 | 26.9 | % | $ | 1.92 | $ | 1.70 | 12.9 | % | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||
Basic | 100,480 | 99,855 | 100,432 | 99,624 | ||||||||||||||||||
Diluted | 102,057 | 102,013 | 102,036 | 101,729 |
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||
June 28, 2014 | June 29, 2013 | % Change | June 28, 2014 | June 29, 2013 | % Change | |||||||||||||||||
Segment net sales: | ||||||||||||||||||||||
Innerwear | $ | 788,330 | $ | 687,319 | 14.7 | % | $ | 1,359,484 | $ | 1,184,344 | 14.8 | % | ||||||||||
Activewear | 317,814 | 294,231 | 8.0 | % | 612,318 | 561,417 | 9.1 | % | ||||||||||||||
Direct to Consumer | 104,352 | 92,633 | 12.7 | % | 188,066 | 172,716 | 8.9 | % | ||||||||||||||
International | 131,556 | 125,022 | 5.2 | % | 241,554 | 226,189 | 6.8 | % | ||||||||||||||
Total net sales | $ | 1,342,052 | $ | 1,199,205 | 11.9 | % | $ | 2,401,422 | $ | 2,144,666 | 12.0 | % | ||||||||||
Segment operating profit: | ||||||||||||||||||||||
Innerwear | $ | 181,667 | $ | 152,702 | 19.0 | % | $ | 277,422 | $ | 242,444 | 14.4 | % | ||||||||||
Activewear | 45,709 | 37,120 | 23.1 | % | 77,704 | 58,429 | 33.0 | % | ||||||||||||||
Direct to Consumer | 11,848 | 9,064 | 30.7 | % | 11,147 | 9,196 | 21.2 | % | ||||||||||||||
International | 16,060 | 12,732 | 26.1 | % | 24,371 | 15,014 | 62.3 | % | ||||||||||||||
General corporate expenses/other | (24,115 | ) | (30,171 | ) | (20.1 | )% | (45,050 | ) | (58,493 | ) | (23.0 | )% | ||||||||||
Acquisition, integration and other action related charges | (24,045 | ) | — | NM | (66,682 | ) | — | NM | ||||||||||||||
Total operating profit | $ | 207,124 | $ | 181,447 | 14.2 | % | $ | 278,912 | $ | 266,590 | 4.6 | % | ||||||||||
EBITDA1: | ||||||||||||||||||||||
Net income | $ | 154,578 | $ | 121,586 | $ | 196,138 | $ | 172,965 | ||||||||||||||
Interest expense, net | 21,119 | 25,221 | 42,937 | 50,844 | ||||||||||||||||||
Income tax expense | 30,767 | 33,889 | 38,742 | 41,566 | ||||||||||||||||||
Depreciation and amortization | 22,981 | 22,409 | 46,040 | 45,630 | ||||||||||||||||||
Total EBITDA | $ | 229,445 | $ | 203,105 | 13.0 | % | $ | 323,857 | $ | 311,005 | 4.1 | % | ||||||||||
¹ Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
|||||||
June 28, 2014 | December 28, 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 143,617 | $ | 115,863 | |||
Trade accounts receivable, net | 779,520 | 578,558 | |||||
Inventories | 1,401,615 | 1,283,331 | |||||
Other current assets | 262,984 | 265,914 | |||||
Total current assets | 2,587,736 | 2,243,666 | |||||
Property, net | 571,744 | 579,883 | |||||
Intangible assets and goodwill | 994,388 | 1,004,143 | |||||
Other noncurrent assets | 261,150 | 262,356 | |||||
Total assets | $ | 4,415,018 | $ | 4,090,048 | |||
Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 889,536 | $ | 781,296 | |||
Notes payable | 40,802 | 36,192 | |||||
Accounts Receivable Securitization Facility | 225,000 | 181,790 | |||||
Total current liabilities | 1,155,338 | 999,278 | |||||
Long-term debt | 1,523,000 | 1,467,000 | |||||
Other noncurrent liabilities | 358,252 | 393,147 | |||||
Total liabilities | 3,036,590 | 2,859,425 | |||||
Equity | 1,378,428 | 1,230,623 | |||||
Total liabilities and equity | $ | 4,415,018 | $ | 4,090,048 |
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
||||||||
Six Months Ended | ||||||||
June 28, 2014 | June 29, 2013 | |||||||
Operating Activities: | ||||||||
Net income | $ | 196,138 | $ | 172,965 | ||||
Depreciation and amortization | 46,040 | 45,630 | ||||||
Other noncash items | 6,796 | 10,805 | ||||||
Changes in assets and liabilities, net | (244,036 | ) | (211,074 | ) | ||||
Net cash from operating activities | 4,938 | 18,326 | ||||||
Investing Activities: | ||||||||
Purchases/sales of property and equipment, net, and other | (19,667 | ) | (16,173 | ) | ||||
Financing Activities: | ||||||||
Cash dividends paid | (59,731 | ) | (19,797 | ) | ||||
Net borrowings on notes payable, debt and other | 102,349 | 58,352 | ||||||
Net cash from financing activities | 42,618 | 38,555 | ||||||
Effect of changes in foreign currency exchange rates on cash | (135 | ) | (1,199 | ) | ||||
Change in cash and cash equivalents | 27,754 | 39,509 | ||||||
Cash and cash equivalents at beginning of year | 115,863 | 42,796 | ||||||
Cash and cash equivalents at end of period | $ | 143,617 | $ | 82,305 |
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 | Six Months Ended | |||||||||||||||
June 28, 2014 | June 29, 2013 | June 28, 2014 | June 29, 2013 | |||||||||||||
Gross profit, as reported under GAAP | $ | 504,354 | $ | 435,482 | $ | 861,131 | $ | 762,781 | ||||||||
Acquisition, integration and other action related charges | 3,835 | — | 18,662 | — | ||||||||||||
Gross profit, as adjusted | $ | 508,189 | $ | 435,482 | $ | 879,793 | $ | 762,781 | ||||||||
As a % of net sales | 37.9 | % | 36.3 | % | 36.6 | % | 35.6 | % | ||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 297,230 | $ | 254,035 | $ | 582,219 | $ | 496,191 | ||||||||
Acquisition, integration and other action related charges | (20,210 | ) | — | (48,020 | ) | — | ||||||||||
Selling, general and administrative expenses, as adjusted | $ | 277,020 | $ | 254,035 | $ | 534,199 | $ | 496,191 | ||||||||
As a % of net sales | 20.6 | % | 21.2 | % | 22.2 | % | 23.1 | % | ||||||||
Operating profit, as reported under GAAP | $ | 207,124 | $ | 181,447 | $ | 278,912 | $ | 266,590 | ||||||||
Acquisition, integration and other action related charges included in gross profit | 3,835 | — | 18,662 | — | ||||||||||||
Acquisition, integration and other action related charges included in SG&A | 20,210 | — | 48,020 | — | ||||||||||||
Operating profit, as adjusted | $ | 231,169 | $ | 181,447 | $ | 345,594 | $ | 266,590 | ||||||||
As a % of net sales | 17.2 | % | 15.1 | % | 14.4 | % | 12.4 | % | ||||||||
Net income, as reported under GAAP | $ | 154,578 | $ | 121,586 | $ | 196,138 | $ | 172,965 | ||||||||
Acquisition, integration and other action related charges included in gross profit | 3,835 | — | 18,662 | — | ||||||||||||
Acquisition, integration and other action related charges included in SG&A | 20,210 | — | 48,020 | — | ||||||||||||
Tax effect on actions | (3,992 | ) | — | (10,857 | ) | — | ||||||||||
Net income, as adjusted | $ | 174,631 | $ | 121,586 | $ | 251,963 | $ | 172,965 | ||||||||
Diluted earnings per share, as reported under GAAP | $ | 1.51 | $ | 1.19 | $ | 1.92 | $ | 1.70 | ||||||||
Acquisition, integration and other action related charges | 0.20 | — | 0.55 | — | ||||||||||||
Diluted earnings per share, as adjusted | $ | 1.71 | $ | 1.19 | $ | 2.47 | $ | 1.70 |
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.