02/15/24
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HanesBrands Reports First-Quarter 2015 Financial Results
HanesBrands Reports First-Quarter 2015 Financial Results
April 23, 2015 at 4:05 PM EDT
– Record First-Quarter Results Driven by Acquisition Benefits and Strong Execution
– Net Sales of
– Company Increases 2015 Guidance to Reflect Recent Acquisition of Knights Apparel
Net sales increased 14 percent to
On a GAAP basis, operating profit increased 25 percent to
“We are off to a great start in 2015, once again delivering a
double-digit increase in EPS, while tracking to our full-year growth
plans,” Hanes Chairman and Chief Executive Officer
Since the end of the first quarter, Hanes closed on the acquisition of Knights Apparel, a leading seller of licensed collegiate logo apparel in the mass retail channel. Hanes has increased its full-year 2015 guidance to reflect the expected contributions from Knights Apparel and has updated its expectations for currency exchange rates for the rest of the year.
For 2015, Hanes now expects net sales of approximately
First-Quarter 2015 Financial Highlights and Business Segment Summary
Key accomplishments for the first quarter of 2015 include:
-
Sales Growth Driven by DBApparel Acquisition. DBApparel, a
leading marketer of intimate apparel and underwear in
Europe that was acquiredAug. 29, 2014 , contributed net sales of$184 million (€164 million) in the first quarter. - Significant Operating Profit and Margin Growth. The company’s adjusted operating profit margin increased 20 basis points in the first quarter. Core adjusted operating margin increased 90 basis points but was partially diluted as expected by the acquisition of DBApparel. The company continues to derive significant benefits from the previous acquisitions of Gear for Sports and Maidenform.
Key segment highlights include:
Innerwear net sales decreased 4 percent in the first quarter, while adjusted operating profit increased 13 percent primarily as a result of strong Maidenform cost synergies. The result was a 310-basis-point improvement in segment operating margin compared with the year-ago quarter. The decline in net sales was due to a retailer’s inventory reduction of approximately two weeks of supply, which has already begun to reverse in early April.
Activewear net sales increased 1 percent in the first quarter, while adjusted operating profit decreased 3 percent. Results were affected by the timing of Champion retail space gains for 2015, many of which will occur in the second quarter.
Despite currency headwinds and Target’s exit from
The DBApparel integration planning has progressed on schedule.
Presentations to the appropriate works councils and unions in
2015 Financial Guidance
Overall, first-quarter results were consistent with the company’s expectations. Hanes has increased its full-year 2015 growth expectations and financial guidance to reflect the expected contributions of the Knights Apparel acquisition and reflect updated assumptions for currency exchange rates for the remainder of the year. The updated assumptions for currency will adversely affect expected net sales but will not have a material effect on operating profit.
For 2015, Hanes expects net sales of approximately
Adjusted operating profit is expected to be
Guidance for adjusted EPS excluding actions has increased to a range of
The company continues to expect net cash from operating activities to
total
The company has made a 2015 pension contribution of
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
Charges for Actions and Reconciliation to GAAP Measures
In the first quarter of 2015, Hanes incurred approximately
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. 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. 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.
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. See Table 2 and Table 5 attached to this press release to reconcile these non-GAAP financial measures to the most directly comparable GAAP measure.
For 2015 guidance, adjusted EPS is defined as diluted EPS excluding
actions and the tax effect on actions, and adjusted operating profit is
defined as operating profit excluding actions. Hanes’ current estimate
for pretax charges in 2015 for acquisition, integration and other
actions is approximately
On a GAAP basis, full-year 2015 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 “2015 Financial Guidance,” as well as
statements about the benefits anticipated from the DBApparel and Knights
Apparel 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 highly
competitive and evolving nature of the industry in which we compete; the
failure of businesses we acquire to perform to expectations; legal,
regulatory, political and economic risks associated with our operations
in international markets, including the risk of significant fluctuations
in foreign exchange rates; the loss or interruption of services of a
member of our senior management team; the accuracy of the estimates and
assumptions on which our financial statement projections are based; any
inadequacy, interruption, integration failure or security failure with
respect to our information technology; the impact of significant
fluctuations and volatility in various input costs, such as cotton and
oil-related materials, utilities, freight and wages; current economic
conditions, including consumer spending levels and the price elasticity
of our products; unanticipated business disruptions or the loss of one
or more suppliers in our global supply chain; and other risks identified
from time to time in our most recent
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
TABLE 1 |
|||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
|||||||||||
Quarters Ended | |||||||||||
April 4, |
March 29, 2014 |
% Change | |||||||||
Net sales | $ | 1,208,921 | $ | 1,059,370 | 14.1 | % | |||||
Cost of sales | 762,690 | 702,593 | |||||||||
Gross profit | 446,231 | 356,777 | 25.1 | % | |||||||
As a % of net sales | 36.9 | % | 33.7 | % | |||||||
Selling, general and administrative expenses | 356,300 | 284,989 | |||||||||
As a % of net sales | 29.5 | % | 26.9 | % | |||||||
Operating profit | 89,931 | 71,788 | 25.3 | % | |||||||
As a % of net sales | 7.4 | % | 6.8 | % | |||||||
Other expenses | 382 | 435 | |||||||||
Interest expense, net | 26,887 | 21,818 | |||||||||
Income before income tax expense | 62,662 | 49,535 | |||||||||
Income tax expense | 10,026 | 7,975 | |||||||||
Net income | $ | 52,636 | $ | 41,560 | 26.7 | % | |||||
Earnings per share: | |||||||||||
Basic | $ | 0.13 | $ | 0.10 | 30.0 | % | |||||
Diluted | $ | 0.13 | $ | 0.10 | 30.0 | % | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 403,579 | 401,564 | |||||||||
Diluted | 408,260 | 407,876 |
TABLE 2 |
|||||||||||
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
|||||||||||
Quarters Ended | |||||||||||
April 4, 2015 |
March 29, 2014 |
% Change | |||||||||
Segment net sales: | |||||||||||
Innerwear | $ | 546,174 | $ | 571,154 | (4.4 | )% | |||||
Activewear | 298,096 | 294,504 | 1.2 | % | |||||||
Direct to Consumer | 81,501 | 83,714 | (2.6 | )% | |||||||
International | 283,150 | 109,998 | 157.4 | % | |||||||
Total net sales | $ | 1,208,921 | $ | 1,059,370 | 14.1 | % | |||||
Segment operating profit: | |||||||||||
Innerwear | $ | 110,777 | $ | 98,005 | 13.0 | % | |||||
Activewear | 32,751 | 33,745 | (2.9 | )% | |||||||
Direct to Consumer | (2,278 | ) | (1,326 | ) | 71.8 | % | |||||
International | 22,116 | 8,186 | 170.2 | % | |||||||
General corporate expenses/other | (30,207 | ) | (24,185 | ) | 24.9 | % | |||||
Acquisition, integration and other action related charges | (43,228 | ) | (42,637 | ) | 1.4 | % | |||||
Total operating profit | $ | 89,931 | $ | 71,788 | 25.3 | % | |||||
EBITDA1: | |||||||||||
Net income | $ | 52,636 | $ | 41,560 | |||||||
Interest expense, net | 26,887 | 21,818 | |||||||||
Income tax expense | 10,026 | 7,975 | |||||||||
Depreciation and amortization | 24,573 | 23,059 | |||||||||
Total EBITDA | $ | 114,122 | $ | 94,412 | 20.9 | % |
¹ | Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
TABLE 3 |
|||||||
HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
|||||||
April 4, 2015 | January 3, 2015 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 277,067 | $ | 239,855 | |||
Trade accounts receivable, net | 713,113 | 672,048 | |||||
Inventories | 1,692,712 | 1,537,200 | |||||
Other current assets | 337,796 | 316,129 | |||||
Total current assets | 3,020,688 | 2,765,232 | |||||
Property, net | 662,809 | 674,379 | |||||
Intangible assets and goodwill | 1,363,024 | 1,414,321 | |||||
Other noncurrent assets | 361,405 | 367,849 | |||||
Total assets | $ | 5,407,926 | $ | 5,221,781 | |||
Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 1,072,931 | $ | 1,116,847 | |||
Notes payable | 116,742 | 144,438 | |||||
Accounts Receivable Securitization Facility | 199,609 | 210,963 | |||||
Current portion of long-term debt | 11,464 | 14,354 | |||||
Total current liabilities | 1,400,746 | 1,486,602 | |||||
Long-term debt | 1,973,876 | 1,613,997 | |||||
Other noncurrent liabilities | 630,075 | 734,410 | |||||
Total liabilities | 4,004,697 | 3,835,009 | |||||
Equity | 1,403,229 | 1,386,772 | |||||
Total liabilities and equity | $ | 5,407,926 | $ | 5,221,781 |
TABLE 4 |
|||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
|||||||||
Quarters Ended | |||||||||
April 4, 2015 | March 29, 2014 | ||||||||
Operating Activities: | |||||||||
Net income | $ | 52,636 | $ | 41,560 | |||||
Depreciation and amortization | 24,573 | 23,059 | |||||||
Other noncash items | 7,288 | 2,614 | |||||||
Changes in assets and liabilities, net | (343,842 | ) | (129,469 | ) | |||||
Net cash from operating activities | (259,345 | ) | (62,236 | ) | |||||
Investing Activities: | |||||||||
Purchases/sales of property and equipment, net, and other | (31,633 | ) | (12,169 | ) | |||||
Acquisition of business, net of cash acquired |
— |
— |
|||||||
Net cash from investing activities | (31,633 | ) | (12,169 | ) | |||||
Financing Activities: | |||||||||
Cash dividends paid | (40,083 | ) | (29,850 | ) | |||||
Net borrowings on notes payable, debt and other | 373,837 | 140,041 | |||||||
Net cash from financing activities | 333,754 | 110,191 | |||||||
Effect of changes in foreign currency exchange rates on cash | (5,564 | ) | (513 | ) | |||||
Change in cash and cash equivalents | 37,212 | 35,273 | |||||||
Cash and cash equivalents at beginning of year | 239,855 | 115,863 | |||||||
Cash and cash equivalents at end of period | $ | 277,067 | $ | 151,136 |
TABLE 5 |
||||||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||
Quarters Ended | ||||||||
April 4, 2015 |
March 29, 2014 |
|||||||
Gross profit, as reported under GAAP | $ | 446,231 | $ | 356,777 | ||||
Acquisition, integration and other action related charges (1) | 14,068 | 14,827 | ||||||
Gross profit, as adjusted | $ | 460,299 | $ | 371,604 | ||||
As a % of net sales | 38.1 | % | 35.1 | % | ||||
Selling, general and administrative expenses, as reported under GAAP | $ | 356,300 | $ | 284,989 | ||||
Acquisition, integration and other action related charges (2) | (29,160 | ) | (27,810 | ) | ||||
Selling, general and administrative expenses, as adjusted | $ | 327,140 | $ | 257,179 | ||||
As a % of net sales | 27.1 | % | 24.3 | % | ||||
Operating profit, as reported under GAAP | $ | 89,931 | $ | 71,788 | ||||
Acquisition, integration and other action related charges included in gross profit | 14,068 | 14,827 | ||||||
Acquisition, integration and other action related charges included in SG&A | 29,160 | 27,810 | ||||||
Operating profit, as adjusted | $ | 133,159 | $ | 114,425 | ||||
As a % of net sales | 11.0 | % | 10.8 | % | ||||
Net income, as reported under GAAP | $ | 52,636 | $ | 41,560 | ||||
Acquisition, integration and other action related charges included in gross profit | 14,068 | 14,827 | ||||||
Acquisition, integration and other action related charges included in SG&A | 29,160 | 27,810 | ||||||
Tax effect on actions | (6,916 | ) | (6,865 | ) | ||||
Net income, as adjusted | $ | 88,948 | $ | 77,332 | ||||
Diluted earnings per share, as reported under GAAP | $ | 0.13 | $ | 0.10 | ||||
Acquisition, integration and other action related charges | 0.09 | 0.09 | ||||||
Diluted earnings per share, as adjusted | $ | 0.22 | $ | 0.19 | ||||
(1) Acquisition, integration and other action related charges included in gross profit include: | ||||||||
Acquisition and integration costs | $ | 9,946 | $ | 9,150 | ||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 117 | 2,200 | ||||||
Other actions | 4,005 | 3,477 | ||||||
$ | 14,068 | $ | 14,827 | |||||
(2) Acquisition, integration and other action related charges included in SG&A include: | ||||||||
Acquisition and integration costs | $ | 18,428 | $ | 14,959 | ||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 6,610 | 2,800 | ||||||
Other actions | 4,122 | 10,051 | ||||||
$ | 29,160 | $ | 27,810 |
Source:
HanesBrands
News Media, Matt Hall, 336-519-3386
Analysts and
Investors, T.C. Robillard, 336-519-2115
Data Provided by Refinitiv. Minimum 15 minutes delayed.