02/15/24
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HanesBrands Reports Second-Quarter Financial Results
HanesBrands Reports Second-Quarter Financial Results
August 2, 2016 at 4:06 PM EDT
Company Reaffirms Full-Year 2016 Financial Guidance for Net Sales, Net Cash from Operations, and Another Year of Double-Digit EPS Growth
Consistent with the company’s expectations, net sales decreased 3
percent to
On a GAAP basis, operating profit of
(All adjusted consolidated measures and comparisons in this news release
exclude approximately
The second-quarter and year-to-date results are in line with the
company’s plans and consistent with the underlying assumptions for the
company’s full-year 2016 guidance. The company has updated 2016 GAAP
guidance for operating profit and EPS and has reaffirmed 2016 guidance
for net sales, adjusted operating profit, adjusted EPS, and net cash
from operations. The company’s 2016 guidance calls for net sales of
“We are confident in our plans for the year, with our sales, operating profit and EPS performance all tracking right in line with our expectations and consistent with our full-year guidance,” said Hanes Chief Operating Officer and CEO-Elect Gerald W. Evans Jr. “The second quarter, while having a tough comparison as expected to a strong year-ago quarter, came in on plan overall. Our growth initiatives for the second half are unfolding as planned and are tracking to our full-year guidance of 8 percent growth in net sales at the midpoint and double-digit growth in EPS.”
Key Callouts for First-Half and Second-Quarter 2016 Financial Results
Acquisition Contributions. Hanes continues to derive benefits and
synergies from the Maidenform, Knights Apparel, Hanes Europe Innerwear,
and Champion Japan acquisitions and integrations. Additionally, the
company completed its acquisition of Champion Europe on
Operating Cash Growth and Cash Deployment Benefits. Hanes generated a second-quarter record for net cash from operations, in part due to benefits from successful inventory-related actions. EPS is benefitting from the company’s cash deployment strategy, including repurchases of more than 25 million shares made in 2015 and early in 2016.
2016 Financial Guidance
Based on year-to-date results and expectations for the second half, Hanes has reaffirmed its full-year guidance for net sales and net cash from operations, updated its GAAP guidance for operating profit and EPS, and reaffirmed its guidance for non-GAAP adjusted operating profit and EPS. The company also has decided to provide guidance for the cadence of net sales and earnings in the second half of 2016 because of the timing of the recent acquisitions of Champion Europe and Pacific Brands and their associated seasonality.
Hanes expects net sales of approximately
On a GAAP basis, diluted EPS is expected to be in the range of
On a non-GAAP basis, which excludes debt refinancing and
acquisition-related actions, adjusted EPS guidance remains
Guidance for adjusted operating profit and adjusted EPS excludes an
estimated
The company expects capital expenditures of approximately
Full-year guidance also reflects the tax-rate effect of the new FASB Accounting Standards Update related to accounting for stock compensation and excludes non-core Pacific Brands businesses that are expected to be divested and reported on a discontinued-operations basis.
The company’s guidance incorporates expectations for the acquisitions of Champion Europe and Pacific Brands. The timing and seasonality of these acquisitions will favor the fourth-quarter versus the third-quarter. Approximately 55 percent of the net sales contributions from these acquisitions for 2016 will occur in the fourth-quarter, and the entire EPS contribution occurs in the fourth quarter.
Therefore, the company expects total company net sales for the remainder
of the year to be slightly greater in the third quarter than the fourth
quarter. GAAP EPS is expected to be in the range of
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
Change in Segment Reporting
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, which sells products directly to retailers, from the Direct to Consumer segment to the respective 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.
Note on Adjusted Measures and Reconciliation to GAAP Measures
To supplement its financial guidance prepared in accordance with generally accepted accounting principles, Hanes provides quarterly results and guidance concerning certain non-GAAP financial measures, including adjusted operating profit and adjusted EPS. Adjusted EPS is defined as diluted EPS excluding actions. Adjusted operating profit is defined as operating profit excluding actions.
Hanes expects to incur approximately
In the first and second quarters of 2016, Hanes incurred approximately
In the first and second quarters of 2015, the company incurred
approximately
The company believes providing quarterly results and guidance for adjusted EPS and adjusted operating profit provides investors with an additional means of analyzing the company’s performance absent the effect of acquisition-related expenses and other actions. However, non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.
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 “2016 Financial Guidance,” as well as statements about the
benefits anticipated from the Hanes Europe Innerwear, Knights Apparel,
Champion Japan licensee, and Champion Europe and Pacific Brands
acquisitions, and assumptions regarding consumer behavior 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 achieve expected synergies and
successfully complete the integration of Champion Europe, Pacific Brands
and other acquisitions, the level of expenses and other charges related
to the Champion Europe and Pacific Brands acquisitions and the funding
thereof; 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; our
ability to manage our inventory effectively and accurately forecast
demand for our products; the highly competitive and evolving nature of
the industry in which we compete; the risk of improper conduct by any of
our employees, agents or business partners that threatens our reputation
and ability to do business; our complex multinational tax structure;
significant fluctuations in foreign exchange rates; our ability to
access sufficient capital at reasonable rates or commercially reasonable
terms or to maintain sufficient liquidity in the amounts and at the
times needed; risks associated with our indebtedness; other 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 |
||||||||||||||||||||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
July 2, |
July 4, |
% Change |
July 2, |
July 4, |
% Change | |||||||||||||||||||||||
Net sales | $ | 1,472,731 | $ | 1,522,033 | (3.2 | )% | $ | 2,691,871 | $ | 2,730,954 | (1.4 | )% | ||||||||||||||||
Cost of sales | 915,440 | 953,808 | 1,677,324 | 1,716,498 | ||||||||||||||||||||||||
Gross profit | 557,291 | 568,225 | (1.9 | )% | 1,014,547 | 1,014,456 | — | % | ||||||||||||||||||||
As a % of net sales | 37.8 | % | 37.3 | % | 37.7 | % | 37.1 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 336,081 | 429,292 | 670,932 | 785,592 | ||||||||||||||||||||||||
As a % of net sales | 22.8 | % | 28.2 | % | 24.9 | % | 28.8 | % | ||||||||||||||||||||
Operating profit | 221,210 | 138,933 | 59.2 | % | 343,615 | 228,864 | 50.1 | % | ||||||||||||||||||||
As a % of net sales | 15.0 | % | 9.1 | % | 12.8 | % | 8.4 | % | ||||||||||||||||||||
Other expenses | 48,325 | 830 | 48,974 | 1,212 | ||||||||||||||||||||||||
Interest expense, net | 36,540 | 29,020 | 68,106 | 55,907 | ||||||||||||||||||||||||
Income before income tax expense | 136,345 | 109,083 | 226,535 | 171,745 | ||||||||||||||||||||||||
Income tax expense | 8,202 | 14,181 | 18,123 | 24,207 | ||||||||||||||||||||||||
Net income | $ | 128,143 | $ | 94,902 | 35.0 | % | $ | 208,412 | $ | 147,538 | 41.3 | % | ||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||||
Basic | $ | 0.34 | $ | 0.23 | 47.8 | % | $ | 0.54 | $ | 0.37 | 45.9 | % | ||||||||||||||||
Diluted | $ | 0.34 | $ | 0.23 | 47.8 | % | $ | 0.54 | $ | 0.36 | 50.0 | % | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 379,233 | 403,949 | 383,448 | 403,819 | ||||||||||||||||||||||||
Diluted | 382,511 | 407,510 | 386,756 | 407,384 | ||||||||||||||||||||||||
TABLE 2 |
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HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) |
||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||||||||||
July 2, |
July 4, |
% Change |
July 2, |
July 4, |
% Change | |||||||||||||||||||||||
Segment net sales1: | ||||||||||||||||||||||||||||
Innerwear | $ | 749,224 | $ | 786,400 | (4.7 | )% | $ | 1,309,950 | $ | 1,340,004 | (2.2 | )% | ||||||||||||||||
Activewear | 367,394 | 381,087 | (3.6 | )% | 676,919 | 682,097 | (0.8 | )% | ||||||||||||||||||||
Direct to Consumer | 86,451 | 89,814 | (3.7 | )% | 156,253 | 160,971 | (2.9 | )% | ||||||||||||||||||||
International | 269,662 | 264,732 | 1.9 | % | 548,749 | 547,882 | 0.2 | % | ||||||||||||||||||||
Total net sales | $ | 1,472,731 | $ | 1,522,033 | (3.2 | )% | $ | 2,691,871 | $ | 2,730,954 | (1.4 | )% | ||||||||||||||||
Segment operating profit1: | ||||||||||||||||||||||||||||
Innerwear | $ | 181,447 | $ | 202,036 | (10.2 | )% | $ | 299,419 | $ | 318,099 | (5.9 | )% | ||||||||||||||||
Activewear | 55,816 | 60,033 | (7.0 | )% | 88,385 | 91,203 | (3.1 | )% | ||||||||||||||||||||
Direct to Consumer | 8,299 | 8,856 | (6.3 | )% | 5,277 | 4,326 | 22.0 | % | ||||||||||||||||||||
International | 23,153 | 20,384 | 13.6 | % | 47,872 | 41,879 | 14.3 | % | ||||||||||||||||||||
General corporate expenses/other | (23,110 | ) | (26,410 | ) | (12.5 | )% | (48,274 | ) | (57,449 | ) | (16.0 | )% | ||||||||||||||||
Acquisition, integration and other action related charges | (24,395 | ) | (125,966 | ) | (80.6 | )% | (49,064 | ) | (169,194 | ) | (71.0 | )% | ||||||||||||||||
Total operating profit | $ | 221,210 | $ | 138,933 | 59.2 | % | $ | 343,615 | $ | 228,864 | 50.1 | % | ||||||||||||||||
EBITDA2: | ||||||||||||||||||||||||||||
Net income | $ | 128,143 | $ | 94,902 | $ | 208,412 | $ | 147,538 | ||||||||||||||||||||
Interest expense, net | 36,540 | 29,020 | 68,106 | 55,907 | ||||||||||||||||||||||||
Income tax expense | 8,202 | 14,181 | 18,123 | 24,207 | ||||||||||||||||||||||||
Depreciation and amortization | 24,007 | 26,234 | 46,827 | 50,807 | ||||||||||||||||||||||||
Total EBITDA | $ | 196,892 | $ | 164,337 | 19.8 | % | $ | 341,468 | $ | 278,459 | 22.6 | % | ||||||||||||||||
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. | |
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) |
||||||||
July 2, 2016 | January 2, 2016 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 660,997 | $ | 319,169 | ||||
Trade accounts receivable, net | 857,562 | 680,417 | ||||||
Inventories | 2,006,867 | 1,814,602 | ||||||
Other current assets | 108,066 | 103,679 | ||||||
Total current assets | 3,633,492 | 2,917,867 | ||||||
Property, net | 672,807 | 650,462 | ||||||
Intangible assets and goodwill | 1,786,104 | 1,534,830 | ||||||
Other noncurrent assets | 522,247 | 494,431 | ||||||
Total assets | $ | 6,614,650 | $ | 5,597,590 | ||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,189,637 | $ | 1,133,305 | ||||
Notes payable | 85,528 | 117,785 | ||||||
Accounts Receivable Securitization Facility | 208,434 | 195,163 | ||||||
Current portion of long-term debt | 67,315 | 57,656 | ||||||
Total current liabilities | 1,550,914 | 1,503,909 | ||||||
Long-term debt | 3,466,525 | 2,232,712 | ||||||
Other noncurrent liabilities | 547,519 | 585,078 | ||||||
Total liabilities | 5,564,958 | 4,321,699 | ||||||
Equity | 1,049,692 | 1,275,891 | ||||||
Total liabilities and equity | $ | 6,614,650 | $ | 5,597,590 | ||||
TABLE 4 |
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HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
||||||||||
Six Months Ended | ||||||||||
July 2, 2016 | July 4, 2015 | |||||||||
Operating Activities: | ||||||||||
Net income | $ | 208,412 | $ | 147,538 | ||||||
Depreciation and amortization | 46,827 | 50,807 | ||||||||
Other noncash items | 54,288 | 3,851 | ||||||||
Changes in assets and liabilities, net | (438,605 | ) | (435,264 | ) | ||||||
Net cash from operating activities | (129,078 | ) | (233,068 | ) | ||||||
Investing Activities: | ||||||||||
Purchases/sales of property and equipment, net, and other | (27,037 | ) | (51,093 | ) | ||||||
Acquisition of businesses, net of cash acquired | (193,396 | ) | (193,461 | ) | ||||||
Net cash from investing activities | (220,433 | ) | (244,554 | ) | ||||||
Financing Activities: | ||||||||||
Cash dividends paid | (84,234 | ) | (81,470 | ) | ||||||
Share repurchases | (379,901 | ) | — | |||||||
Net borrowings on notes payable, debt and other | 1,154,816 | 638,171 | ||||||||
Net cash from financing activities | 690,681 | 556,701 | ||||||||
Effect of changes in foreign currency exchange rates on cash | 658 | (3,580 | ) | |||||||
Change in cash and cash equivalents | 341,828 | 75,499 | ||||||||
Cash and cash equivalents at beginning of year | 319,169 | 239,855 | ||||||||
Cash and cash equivalents at end of period | $ | 660,997 | $ | 315,354 | ||||||
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) |
||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
July 2, |
July 4, |
July 2, |
July 4, |
|||||||||||||||||
Gross profit, as reported under GAAP | $ | 557,291 | $ | 568,225 | $ | 1,014,547 | $ | 1,014,456 | ||||||||||||
Acquisition, integration and other action related charges | 9,300 | 26,151 | 14,169 | 40,219 | ||||||||||||||||
Gross profit, as adjusted | $ | 566,591 | $ | 594,376 | $ | 1,028,716 | $ | 1,054,675 | ||||||||||||
As a % of net sales | 38.5 | % | 39.1 | % | 38.2 | % | 38.6 | % | ||||||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 336,081 | $ | 429,292 | $ | 670,932 | $ | 785,592 | ||||||||||||
Acquisition, integration and other action related charges | (15,095 | ) | (99,815 | ) | (34,895 | ) | (128,975 | ) | ||||||||||||
Selling, general and administrative expenses, as adjusted | $ | 320,986 | $ | 329,477 | $ | 636,037 | $ | 656,617 | ||||||||||||
As a % of net sales | 21.8 | % | 21.6 | % | 23.6 | % | 24.0 | % | ||||||||||||
Operating profit, as reported under GAAP | $ | 221,210 | $ | 138,933 | $ | 343,615 | $ | 228,864 | ||||||||||||
Acquisition, integration and other action related charges included in gross profit | 9,300 | 26,151 | 14,169 | 40,219 | ||||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 15,095 | 99,815 | 34,895 | 128,975 | ||||||||||||||||
Operating profit, as adjusted | $ | 245,605 | $ | 264,899 | $ | 392,679 | $ | 398,058 | ||||||||||||
As a % of net sales | 16.7 | % | 17.4 | % | 14.6 | % | 14.6 | % | ||||||||||||
Net income, as reported under GAAP | $ | 128,143 | $ | 94,902 | $ | 208,412 | $ | 147,538 | ||||||||||||
Acquisition, integration and other action related charges included in gross profit | 9,300 | 26,151 | 14,169 | 40,219 | ||||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 15,095 | 99,815 | 34,895 | 128,975 | ||||||||||||||||
Debt refinance charges included in other expenses | 47,291 | — | 47,291 | — | ||||||||||||||||
Tax effect on actions | (4,996 | ) | (16,376 | ) | (7,709 | ) | (23,292 | ) | ||||||||||||
Net income, as adjusted | $ | 194,833 | $ | 204,492 | $ | 297,058 | $ | 293,440 | ||||||||||||
Diluted earnings per share, as reported under GAAP | $ | 0.34 | $ | 0.23 | $ | 0.54 | $ | 0.36 | ||||||||||||
Acquisition, integration and other action related charges and debt refinance charges | 0.17 | 0.27 | 0.23 | 0.36 | ||||||||||||||||
Diluted earnings per share, as adjusted | $ | 0.51 | $ | 0.50 | $ | 0.77 | $ | 0.72 | ||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160802006869/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.