02/15/24
8:30 am EST
Most Recent
Press Release
HanesBrands Reports Second-Quarter 2015 Financial Results
HanesBrands Reports Second-Quarter 2015 Financial Results
July 30, 2015 at 4:06 PM EDT
– Sixth Consecutive Quarter of Record Results Highlight Benefits of Acquisition and Innovate-to-Elevate Strategies
– Net Sales of
– Growth Driven by Acquisition Benefits and Margin Expansion in Innerwear and Activewear
– Company Reaffirms 2015 Guidance for Adjusted EPS Growth of 13% to 17%
Results were driven by continued acquisition benefits, global supply
chain performance and margin expansion. Net sales increased 13 percent
to
On a GAAP basis, operating profit decreased 33 percent to
Net sales in the quarter excluding foreign currency fluctuations and the acquisitions of DBApparel and Knights Apparel, increased 1 percent. The company drove significant margin expansion in its Innerwear and Activewear segments.
“We continue to deliver double-digit growth in adjusted operating profit
and EPS as expected, and we are tracking to our full-year profit
expectations,” Hanes Chairman and Chief Executive Officer
For 2015, Hanes has updated its full-year guidance for net sales. The
company now expects full-year net sales of slightly less than
The company’s 2015 guidance represents growth over 2014 results of nearly 11 percent for net sales, 12 percent to 15 percent for adjusted operating profit, and 13 percent to 17 percent for adjusted EPS. (Additional guidance commentary is contained in the guidance section later in this news release.)
Second-Quarter 2015 Financial Highlights and Business Segment Summary
Key accomplishments for the second quarter of 2015 include:
-
Sales Growth Driven by Activewear and Acquisitions of DBApparel and
Knights Apparel. Activewear net sales increased 19 percent in the
second quarter, driven by high-single-digit growth of Champion
as well as
$37 million in net sales from Knights Apparel, a licensed apparel leader that was acquiredApril 6, 2015 . In the International segment, DBApparel, a leading marketer of intimate apparel and underwear inEurope that was acquiredAug. 29, 2014 , contributed net sales of$149 million (€134 million) in the second quarter. - Significant Adjusted Operating Profit and Margin Growth. The company’s adjusted operating profit margin increased 20 basis points in the second quarter to 17.4 percent. Innerwear and Activewear operating profit margins increased by 190 basis points and 130 basis points, respectively. Contributors included strong supply chain performance, Innovate-to-Elevate benefits, and performance associated with the previous acquisitions of Gear for Sports and Maidenform.
- Acquisition Integrations Proceeding on Plan. The DBApparel integration planning continues to progress on schedule with implementation to begin in the fourth quarter, subject to pending consultations with appropriate works councils and unions. Four of the five works council consultations have been completed. The integration plan for Knights Apparel has been designed and communicated to employees, with implementation beginning late in the fourth quarter of 2015.
Key segment highlights include:
Innerwear net sales decreased 1 percent in the second quarter, while operating profit increased 7 percent. Sales of basics, including underwear and socks, increased while intimate apparel sales decreased. The consumer sales environment remains uneven.
Activewear net sales increased 19 percent and operating profit increased 30 percent, each led by Champion, Gear for Sports and the acquisition of Knights Apparel. The company has announced that it will integrate its Gear for Sports and Knights Apparel businesses into a combined Licensed Sports Apparel commercial business in the Activewear segment to take advantage of complementary expertise in brand building, marketing, graphic design, licensing relationships, supply chain and retailer relationships across channels.
International sales and operating profit increased significantly
as a result of the acquisition of DBApparel in
2015 Financial Guidance
For 2015, Hanes has updated its full-year guidance for net sales and
adjusted operating profit. The company now expects full-year net sales
for 2015 of slightly less than
The company expects adjusted operating profit of
The guidance reflects expectations for Knights Apparel and increased
profit expectations for DBApparel. Knights Apparel is expected to
contribute net sales of approximately
The company expects net cash from operating activities to total
approximately
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 half 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 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.
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
TABLE 1 | |||||||||||||||||||||
HANESBRANDS INC. | |||||||||||||||||||||
Condensed Consolidated Statements of Income | |||||||||||||||||||||
(Amounts in thousands, except per-share amounts) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||||||||
July 4, 2015 | June 28, 2014 | % Change | July 4, 2015 | June 28, 2014 | % Change | ||||||||||||||||
Net sales | $ | 1,522,033 | $ | 1,342,052 | 13.4 | % | $ | 2,730,954 | $ | 2,401,422 | 13.7 | % | |||||||||
Cost of sales | 953,808 | 837,698 | 1,716,498 | 1,540,291 | |||||||||||||||||
Gross profit | 568,225 | 504,354 | 12.7 | % | 1,014,456 | 861,131 | 17.8 | % | |||||||||||||
As a % of net sales | 37.3 | % | 37.6 | % | 37.1 | % | 35.9 | % | |||||||||||||
Selling, general and administrative expenses | 429,292 | 297,230 | 785,592 | 582,219 | |||||||||||||||||
As a % of net sales | 28.2 | % | 22.1 | % | 28.8 | % | 24.2 | % | |||||||||||||
Operating profit | 138,933 | 207,124 | (32.9 | )% | 228,864 | 278,912 | (17.9 | )% | |||||||||||||
As a % of net sales | 9.1 | % | 15.4 | % | 8.4 | % | 11.6 | % | |||||||||||||
Other expenses | 830 | 660 | 1,212 | 1,095 | |||||||||||||||||
Interest expense, net | 29,020 | 21,119 | 55,907 | 42,937 | |||||||||||||||||
Income before income tax expense | 109,083 | 185,345 | 171,745 | 234,880 | |||||||||||||||||
Income tax expense | 14,181 | 30,767 | 24,207 | 38,742 | |||||||||||||||||
Net income | $ | 94,902 | $ | 154,578 | (38.6 | )% | $ | 147,538 | $ | 196,138 | (24.8 | )% | |||||||||
Earnings per share: | |||||||||||||||||||||
Basic | $ | 0.23 | $ | 0.38 | (39.5 | )% | $ | 0.37 | $ | 0.49 | (24.5 | )% | |||||||||
Diluted | $ | 0.23 | $ | 0.38 | (39.5 | )% | $ | 0.36 | $ | 0.48 | (25.0 | )% | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 403,949 | 401,920 | 403,819 | 401,728 | |||||||||||||||||
Diluted | 407,510 | 408,228 | 407,384 | 408,144 |
TABLE 2 | |||||||||||||||||||||
HANESBRANDS INC. | |||||||||||||||||||||
Supplemental Financial Information | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
|
|||||||||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||||||||
July 4, 2015 | June 28, 2014 | % Change | July 4, 2015 | June 28, 2014 | % Change | ||||||||||||||||
Segment net sales: | |||||||||||||||||||||
Innerwear | $ | 777,614 | $ | 788,330 | (1.4 | )% | $ | 1,323,787 | $ | 1,359,484 | (2.6 | )% | |||||||||
Activewear | 378,157 | 317,814 | 19.0 | % | 676,253 | 612,318 | 10.4 | % | |||||||||||||
Direct to Consumer | 101,531 | 104,352 | (2.7 | )% | 183,032 | 188,066 | (2.7 | )% | |||||||||||||
International | 264,731 | 131,556 | 101.2 | % | 547,882 | 241,554 | 126.8 | % | |||||||||||||
Total net sales | $ | 1,522,033 | $ | 1,342,052 | 13.4 | % | $ | 2,730,954 | $ | 2,401,422 | 13.7 | % | |||||||||
Segment operating profit: | |||||||||||||||||||||
Innerwear | $ | 196,035 | $ | 183,917 | 6.6 | % | $ | 306,812 | $ | 281,922 | 8.8 | % | |||||||||
Activewear | 61,485 | 47,459 | 29.6 | % | 94,236 | 81,204 | 16.0 | % | |||||||||||||
Direct to Consumer | 11,954 | 11,223 | (6.5 | )% | 9,676 | 9,897 | (2.2 | )% | |||||||||||||
International | 21,004 | 15,935 | 31.8 | % | 43,120 | 24,121 | 78.8 | % | |||||||||||||
General corporate expenses/other | (25,579 | ) | (27,365 | ) | (6.5 | )% | (55,786 | ) | (51,550 | ) | 8.2 | % | |||||||||
Acquisition, integration and other action related charges | (125,966 | ) | (24,045 | ) | 423.9 | % | (169,194 | ) | (66,682 | ) | 153.7 | % | |||||||||
Total operating profit | $ | 138,933 | $ | 207,124 | (32.9 | )% | $ | 228,864 | $ | 278,912 | (17.9 | )% | |||||||||
EBITDA1: | |||||||||||||||||||||
Net income | $ | 94,902 | $ | 154,578 | $ | 147,538 | $ | 196,138 | |||||||||||||
Interest expense, net | 29,020 | 21,119 | 55,907 | 42,937 | |||||||||||||||||
Income tax expense | 14,181 | 30,767 | 24,207 | 38,742 | |||||||||||||||||
Depreciation and amortization | 26,234 | 22,981 | 50,807 | 46,040 | |||||||||||||||||
Total EBITDA | $ | 164,337 | $ | 229,445 | (28.4 | )% | $ | 278,459 | $ | 323,857 | (14.0 | )% | |||||||||
¹Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
TABLE 3 |
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|
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HANESBRANDS INC. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Dollars in thousands) | ||||||
(Unaudited) | ||||||
July 4, 2015 | January 3, 2015 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 315,354 | $ | 239,855 | ||
Trade accounts receivable, net | 835,299 | 672,048 | ||||
Inventories | 1,766,761 | 1,537,200 | ||||
Other current assets | 378,908 | 316,129 | ||||
Total current assets | 3,296,322 | 2,765,232 | ||||
Property, net | 658,789 | 674,379 | ||||
Intangible assets and goodwill | 1,548,810 | 1,414,321 | ||||
Other noncurrent assets | 368,460 | 367,849 | ||||
Total assets | $ | 5,872,381 | $ | 5,221,781 | ||
Liabilities | ||||||
Accounts payable and accrued liabilities | $ | 1,134,307 | $ | 1,116,847 | ||
Notes payable | 112,818 | 144,438 | ||||
Accounts Receivable Securitization Facility | 232,134 | 210,963 | ||||
Current portion of long-term debt | 34,431 | 14,354 | ||||
Total current liabilities | 1,513,690 | 1,486,602 | ||||
Long-term debt | 2,217,760 | 1,613,997 | ||||
Other noncurrent liabilities | 689,159 | 734,410 | ||||
Total liabilities | 4,420,609 | 3,835,009 | ||||
Equity | 1,451,772 | 1,386,772 | ||||
Total liabilities and equity | $ | 5,872,381 | $ | 5,221,781 |
TABLE 4 |
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HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
|||||||
Six Months Ended | |||||||
July 4, 2015 | June 28, 2014 | ||||||
Operating Activities: | |||||||
Net income | $ | 147,538 | $ | 196,138 | |||
Depreciation and amortization | 50,807 | 46,040 | |||||
Other noncash items | 3,851 | 6,796 | |||||
Changes in assets and liabilities, net | (435,264 | ) | (244,036 | ) | |||
Net cash from operating activities | (233,068 | ) | 4,938 | ||||
Investing Activities: | |||||||
Purchases/sales of property and equipment, net, and other | (51,093 | ) | (19,667 | ) | |||
Acquisition of business, net of cash acquired | (193,461 | ) | — | ||||
Net cash from investing activities | (244,554 | ) | (19,667 | ) | |||
Financing Activities: | |||||||
Cash dividends paid | (81,470 | ) | (59,731 | ) | |||
Net borrowings on notes payable, debt and other | 638,171 | 102,349 | |||||
Net cash from financing activities | 556,701 | 42,618 | |||||
Effect of changes in foreign currency exchange rates on cash | (3,580 | ) | (135 | ) | |||
Change in cash and cash equivalents | 75,499 | 27,754 | |||||
Cash and cash equivalents at beginning of year | 239,855 | 115,863 | |||||
Cash and cash equivalents at end of period | $ | 315,354 | $ | 143,617 |
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) |
|||||||||||||||
Quarters Ended | Six Months Ended | ||||||||||||||
July 4, 2015 | June 28, 2014 | July 4, 2015 | June 28, 2014 | ||||||||||||
Gross profit, as reported under GAAP | $ | 568,225 | $ | 504,354 | $ | 1,014,456 | $ | 861,131 | |||||||
Acquisition, integration and other action related charges (1) | 26,151 | 3,835 | 40,219 | 18,662 | |||||||||||
Gross profit, as adjusted | $ | 594,376 | $ | 508,189 | $ | 1,054,675 | $ | 879,793 | |||||||
As a % of net sales | 39.1 | % | 37.9 | % | 38.6 | % | 36.6 | % | |||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 429,292 | $ | 297,230 | $ | 785,592 | $ | 582,219 | |||||||
Acquisition, integration and other action related charges (2) | (99,815 | ) | (20,210 | ) | (128,975 | ) | (48,020 | ) | |||||||
Selling, general and administrative expenses, as adjusted | $ | 329,477 | $ | 277,020 | $ | 656,617 | $ | 534,199 | |||||||
As a % of net sales | 21.6 | % | 20.6 | % | 24.0 | % | 22.2 | % | |||||||
Operating profit, as reported under GAAP | $ | 138,933 | $ | 207,124 | $ | 228,864 | $ | 278,912 | |||||||
Acquisition, integration and other action related charges included in gross profit | 26,151 | 3,835 | 40,219 | 18,662 | |||||||||||
Acquisition, integration and other action related charges included in SG&A | 99,815 | 20,210 | 128,975 | 48,020 | |||||||||||
Operating profit, as adjusted | $ | 264,899 | $ | 231,169 | $ | 398,058 | $ | 345,594 | |||||||
As a % of net sales | 17.4 | % | 17.2 | % | 14.6 | % | 14.4 | % | |||||||
Net income, as reported under GAAP | $ | 94,902 | $ | 154,578 | $ | 147,538 | $ | 196,138 | |||||||
Acquisition, integration and other action related charges included in gross profit | 26,151 | 3,835 | 40,219 | 18,662 | |||||||||||
Acquisition, integration and other action related charges included in SG&A | 99,815 | 20,210 | 128,975 | 48,020 | |||||||||||
Tax effect on actions | (16,376 | ) | (3,992 | ) | (23,292 | ) | (10,857 | ) | |||||||
Net income, as adjusted | $ | 204,492 | $ | 174,631 | $ | 293,440 | $ | 251,963 | |||||||
Diluted earnings per share, as reported under GAAP | $ | 0.23 | $ | 0.38 | $ | 0.36 | $ | 0.48 | |||||||
Acquisition, integration and other action related charges | 0.27 | 0.05 | 0.36 | 0.14 | |||||||||||
Diluted earnings per share, as adjusted | $ | 0.50 | $ | 0.43 | $ | 0.72 | $ | 0.62 | |||||||
(1) Acquisition, integration and other action related charges included in gross profit include: | |||||||||||||||
Acquisition and integration costs | $ | 15,215 | $ | 2,839 | $ | 25,168 | $ | 11,989 | |||||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 940 | (1,504 | ) | $ | 2,139 | $ | 4,173 | ||||||||
Other costs | 9,996 | 2,500 | 12,912 | $ | 2,500 | ||||||||||
$ | 26,151 | $ | 3,835 | $ | 40,219 | $ | 18,662 | ||||||||
(2) Acquisition, integration and other action related charges included in SG&A include: | |||||||||||||||
Acquisition and integration costs | $ | 76,853 | $ | 19,451 | $ | 95,291 | $ | 34,410 | |||||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 9,421 | 823 | 17,497 | (1,563 | ) | ||||||||||
Other costs | 13,541 | (64 | ) | 16,187 | 15,173 | ||||||||||
$ | 99,815 | $ | 20,210 | $ | 128,975 | $ | 48,020 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20150730006642/en/
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.