02/15/24
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HanesBrands Reports Third-Quarter Financial Results
HanesBrands Reports Third-Quarter Financial Results
October 27, 2016 at 4:06 PM EDT
- Quarter Results Include Net Sales Growth of 11%, Record Cash Flow
from Operations of
- Sales Initiatives and Inventory-Reduction Efforts Delivering Intended Results
- Full-Year 2016 Guidance Continues to Expect Record Cash Flow, High-Single-Digit Net Sales Growth, and Double-Digit EPS Growth
With one quarter remaining in the fiscal year, Hanes updated its full-year 2016 guidance, which continues to call for record cash flow from operations, net sales growth in the high single digits, and double-digit growth for operating profit and EPS.
For the third quarter ended
On a GAAP basis, operating profit of
(All adjusted consolidated measures and comparisons in this news release
reflect continuing operations and exclude approximately
“As forecasted, we delivered strong growth in the third quarter, and we
are generating record cash flow,” said Hanes Chief Executive Officer
Key Callouts for Third-Quarter 2016 Financial Results
Growth in Net Sales, Operating Profit and Margin for Innerwear Segment. Innerwear sales increased 2 percent, driven by a successful focus-on-the-core initiative that saw high-single-digit growth combined for men’s, women’s and children’s underwear. The initial shipments of the company’s core products featuring FreshIQ odor control technology began late in the quarter. Segment operating profit increased 6 percent, and the operating profit margin increased 90 basis points to 22.0 percent.
Acquisitions Drive International Segment Growth. Acquisitions of
Pacific Brands of
Challenges in Activewear and Direct to Consumer Segments. Activewear segment sales decreased 2 percent as a result of bankruptcies of certain sporting goods retailers. Champion at mass, Hanes Activewear, and college bookstore sports apparel all increased sales. Total segment operating profit decreased 22 percent, affected by lower volume and the mix of products sold.
The Direct to Consumer segment, which is undergoing a transition to a growth-oriented brand strategy, had an 11 percent decrease in sales and a 52 percent decrease in operating profit. Results were affected by the segment’s exit from its legacy catalog business and noncore offerings to a more focused branded-product store and Internet strategy.
Record Cash Flow Driven by Inventory Management. Hanes generated
2016 Financial Guidance
Hanes has narrowed its 2016 full-year guidance to reflect year-to-date performance and expectations for the fourth quarter.
The company expects 2016 net sales of
The updated guidance compares with previous guidance for net sales of
The midpoint of the updated guidance represents growth over 2015 of 8 percent for net sales; 37 percent for GAAP operating profit; 10 percent for adjusted operating profit; 39 percent for GAAP EPS; 15 percent for adjusted EPS; and 241 percent for net cash from operations.
Based on year-to-date performance, the updated full-year guidance
implies fourth-quarter 2016 guidance for net sales of
Net sales guidance includes expected sales from acquisitions of
approximately
The company’s expectations for the pretax charges, capital expenditures, and income tax rate remain unchanged from previous guidance.
Full-year 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 will be divested and reported on a discontinued-operations basis.
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. See Table 5 for a reconciliation of these and other non-GAAP financial measures to the most directly comparable GAAP financial measures.
Hanes expects to incur approximately
In the first, second and third quarters of 2016, Hanes incurred
approximately
In the first, second and third 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
HANESBRANDS INC. Condensed Consolidated Statements of Income (Amounts in thousands, except per-share amounts) (Unaudited) |
|||||||||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
October 1, 2016 |
October 3, 2015 |
% Change |
October 1, 2016 |
October 3, 2015 |
% Change | ||||||||||||||||||||||||||||
Net sales | $ | 1,761,019 | $ | 1,591,038 | 10.7 | % | $ | 4,452,890 | $ | 4,321,992 | 3.0 | % | |||||||||||||||||||||
Cost of sales | 1,111,653 | 1,010,288 | 2,788,977 | 2,726,786 | |||||||||||||||||||||||||||||
Gross profit | 649,366 | 580,750 | 11.8 | % | 1,663,913 | 1,595,206 | 4.3 | % | |||||||||||||||||||||||||
As a % of net sales | 36.9 | % | 36.5 | % | 37.4 | % | 36.9 | % | |||||||||||||||||||||||||
Selling, general and administrative expenses | 421,014 | 372,422 | 1,091,946 | 1,158,014 | |||||||||||||||||||||||||||||
As a % of net sales | 23.9 | % | 23.4 | % | 24.5 | % | 26.8 | % | |||||||||||||||||||||||||
Operating profit | 228,352 | 208,328 | 9.6 | % | 571,967 | 437,192 | 30.8 | % | |||||||||||||||||||||||||
As a % of net sales | 13.0 | % | 13.1 | % | 12.8 | % | 10.1 | % | |||||||||||||||||||||||||
Other expenses | 1,559 | 718 | 50,533 | 1,930 | |||||||||||||||||||||||||||||
Interest expense, net | 43,433 | 31,356 | 111,539 | 87,263 | |||||||||||||||||||||||||||||
Income from continuing operations before income tax expense | 183,360 | 176,254 | 409,895 | 347,999 | |||||||||||||||||||||||||||||
Income tax expense | 10,570 | 14,100 | 28,693 | 38,307 | |||||||||||||||||||||||||||||
Income from continuing operations | 172,790 | 162,154 | 6.6 | % | 381,202 | 309,692 | 23.1 | % | |||||||||||||||||||||||||
Income from discontinued operations, net of tax | 1,068 | — |
|
1,068 | — | ||||||||||||||||||||||||||||
Net income | $ | 173,858 | $ | 162,154 | 7.2 | % | $ | 382,270 | $ | 309,692 | 23.4 | % | |||||||||||||||||||||
Earnings per share - basic: | |||||||||||||||||||||||||||||||||
Continuing operations | $ | 0.46 | $ | 0.41 | $ | 1.00 | $ | 0.77 | |||||||||||||||||||||||||
Discontinued operations | — | — | — | — | |||||||||||||||||||||||||||||
Net income | $ | 0.46 | $ | 0.41 | 12.2 | % | $ | 1.00 | $ | 0.77 | 29.9 | % | |||||||||||||||||||||
Earnings per share - diluted: | |||||||||||||||||||||||||||||||||
Continuing operations | $ | 0.45 | $ | 0.40 | $ | 0.99 | $ | 0.76 | |||||||||||||||||||||||||
Discontinued operations | — | — | — | — | |||||||||||||||||||||||||||||
Net income | $ | 0.45 | $ | 0.40 | 12.5 | % | $ | 0.99 | $ | 0.76 | 30.3 | % | |||||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||
Basic | 379,368 | 399,445 | 382,235 | 402,011 | |||||||||||||||||||||||||||||
Diluted | 382,558 | 402,979 | 385,478 | 406,363 | |||||||||||||||||||||||||||||
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited)
|
|||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
October 1, 2016 |
October 3, 2015 |
% Change |
October 1, 2016 |
October 3, 2015 |
% Change | ||||||||||||||||||||||||||
Segment net sales1: | |||||||||||||||||||||||||||||||
Innerwear | $ | 688,343 | $ | 674,854 | 2.0 |
% |
$ | 1,998,293 | $ | 2,014,858 | (0.8 | )% | |||||||||||||||||||
Activewear | 510,588 | 521,461 | (2.1 | )% | 1,187,507 | 1,203,558 | (1.3 | )% | |||||||||||||||||||||||
Direct to Consumer | 83,966 | 94,323 | (11.0 | )% | 240,219 | 255,294 | (5.9 | )% | |||||||||||||||||||||||
International | 478,122 | 300,400 | 59.2 |
% |
1,026,871 | 848,282 | 21.1 |
% |
|||||||||||||||||||||||
Total net sales | $ | 1,761,019 | $ | 1,591,038 | 10.7 |
% |
$ | 4,452,890 | $ | 4,321,992 | 3.0 |
% |
|||||||||||||||||||
Segment operating profit1: | |||||||||||||||||||||||||||||||
Innerwear | $ | 151,147 | $ | 142,196 | 6.3 |
% |
$ | 450,566 | $ | 460,295 | (2.1 | )% | |||||||||||||||||||
Activewear | 74,575 | 95,980 | (22.3 | )% | 162,960 | 187,183 | (12.9 | )% | |||||||||||||||||||||||
Direct to Consumer | 4,341 | 9,052 | (52.0 | )% | 9,618 | 13,378 | (28.1 | )% | |||||||||||||||||||||||
International | 61,312 | 34,200 | 79.3 |
% |
109,184 | 76,079 | 43.5 |
% |
|||||||||||||||||||||||
General corporate expenses/other | (20,436 | ) | (30,313 | ) | (32.6 | )% | (68,710 | ) | (87,762 | ) | (21.7 | )% | |||||||||||||||||||
Acquisition, integration and other action related charges | (42,587 | ) | (42,787 | ) | (0.5 | )% | (91,651 | ) | (211,981 | ) | (56.8 | )% | |||||||||||||||||||
Total operating profit | $ | 228,352 | $ | 208,328 | 9.6 |
% |
$ | 571,967 | $ | 437,192 | 30.8 |
% |
|||||||||||||||||||
EBITDA2: | |||||||||||||||||||||||||||||||
Net income from continuing operations | $ | 172,790 | $ | 162,154 | 6.6 |
% |
$ | 381,202 | $ | 309,692 | 23.1 |
% |
|||||||||||||||||||
Interest expense, net | 43,433 | 31,356 | 38.5 |
% |
111,539 | 87,263 | 27.8 |
% |
|||||||||||||||||||||||
Income tax expense | 10,570 | 14,100 | (25.0 | )% | 28,693 | 38,307 | (25.1 | )% | |||||||||||||||||||||||
Depreciation and amortization | 26,888 | 24,943 | 7.8 |
% |
73,715 | 75,750 | (2.7 | )% | |||||||||||||||||||||||
Total EBITDA | $ | 253,681 | $ | 232,553 | 9.1 |
% |
$ | 595,149 | $ | 511,012 | 16.5 |
% |
|||||||||||||||||||
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 from continuing operations before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure. |
HANESBRANDS INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) |
||||||||||
October 1, 2016 | January 2, 2016 | |||||||||
Assets | ||||||||||
Cash and cash equivalents | $ | 450,213 | $ | 319,169 | ||||||
Trade accounts receivable, net | 961,659 | 680,417 | ||||||||
Inventories | 2,004,997 | 1,814,602 | ||||||||
Other current assets | 120,792 | 103,679 | ||||||||
Current assets of discontinued operations | 24,466 | — | ||||||||
Total current assets | 3,562,127 | 2,917,867 | ||||||||
Property, net | 718,999 | 650,462 | ||||||||
Trademarks and other identifiable intangibles, net | 1,347,536 | 700,515 | ||||||||
Goodwill | 1,142,523 | 834,315 | ||||||||
Deferred tax assets | 471,010 | 445,179 | ||||||||
Other noncurrent assets | 62,139 | 49,252 | ||||||||
Total assets | $ | 7,304,334 | $ | 5,597,590 | ||||||
Liabilities | ||||||||||
Accounts payable and accrued liabilities | $ | 1,420,393 | $ | 1,133,305 | ||||||
Notes payable | 60,646 | 117,785 | ||||||||
Accounts Receivable Securitization Facility | 244,074 | 195,163 | ||||||||
Current portion of long-term debt | 139,362 | 57,656 | ||||||||
Current liabilities of discontinued operations | 8,405 | — | ||||||||
Total current liabilities | 1,872,880 | 1,503,909 | ||||||||
Long-term debt | 3,684,408 | 2,232,712 | ||||||||
Pension and postretirement benefits | 317,351 | 362,266 | ||||||||
Other noncurrent liabilities | 243,170 | 222,812 | ||||||||
Total liabilities | 6,117,809 | 4,321,699 | ||||||||
Equity | 1,186,525 | 1,275,891 | ||||||||
Total liabilities and equity | $ | 7,304,334 | $ | 5,597,590 | ||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
|||||||||||
Nine Months Ended | |||||||||||
October 1, 2016 | October 3, 2015 | ||||||||||
Operating Activities: | |||||||||||
Net income | $ | 382,270 | $ | 309,692 | |||||||
Depreciation and amortization | 73,715 | 75,750 | |||||||||
Other noncash items | 51,046 | 10,737 | |||||||||
Changes in assets and liabilities, net | (298,740 | ) | (483,333 | ) | |||||||
Net cash from operating activities | 208,291 | (87,154 | ) | ||||||||
Investing Activities: | |||||||||||
Purchases/sales of property and equipment, net, and other | 3,262 | (58,521 | ) | ||||||||
Acquisition of businesses, net of cash acquired | (963,127 | ) | (192,829 | ) | |||||||
Net cash from investing activities | (959,865 | ) | (251,350 | ) | |||||||
Financing Activities: | |||||||||||
Cash dividends paid | (125,798 | ) | (121,713 | ) | |||||||
Share repurchases | (379,901 | ) | (306,094 | ) | |||||||
Net borrowings on notes payable, debt and other | 1,385,624 | 814,211 | |||||||||
Net cash from financing activities | 879,925 | 386,404 | |||||||||
Effect of changes in foreign currency exchange rates on cash | 2,693 | (3,160 | ) | ||||||||
Change in cash and cash equivalents | 131,044 | 44,740 | |||||||||
Cash and cash equivalents at beginning of year | 319,169 | 239,855 | |||||||||
Cash and cash equivalents at end of period | $ | 450,213 | $ | 284,595 | |||||||
HANESBRANDS INC. Supplemental Financial Information Reconciliation of Select GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per-share amounts) (Unaudited) |
|||||||||||||||||||||||
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||
October 1, 2016 |
October 3, 2015 |
October 1, 2016 |
October 3, 2015 |
||||||||||||||||||||
Gross profit, as reported under GAAP | $ | 649,366 | $ | 580,750 | $ | 1,663,913 | $ | 1,595,206 | |||||||||||||||
Acquisition, integration and other action related charges | 13,563 | 7,720 | 27,732 | 47,939 | |||||||||||||||||||
Gross profit, as adjusted | $ | 662,929 | $ | 588,470 | $ | 1,691,645 | $ | 1,643,145 | |||||||||||||||
As a % of net sales | 37.6 | % | 37.0 | % | 38.0 | % | 38.0 | % | |||||||||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 421,014 | $ | 372,422 | $ | 1,091,946 | $ | 1,158,014 | |||||||||||||||
Acquisition, integration and other action related charges | (29,024 | ) | (35,067 | ) | (63,919 | ) | (164,042 | ) | |||||||||||||||
Selling, general and administrative expenses, as adjusted | $ | 391,990 | $ | 337,355 | $ | 1,028,027 | $ | 993,972 | |||||||||||||||
As a % of net sales | 22.3 | % | 21.2 | % | 23.1 | % | 23.0 | % | |||||||||||||||
Operating profit, as reported under GAAP | $ | 228,352 | $ | 208,328 | $ | 571,967 | $ | 437,192 | |||||||||||||||
Acquisition, integration and other action related charges included in gross profit | 13,563 | 7,720 | 27,732 | 47,939 | |||||||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 29,024 | 35,067 | 63,919 | 164,042 | |||||||||||||||||||
Operating profit, as adjusted | $ | 270,939 | $ | 251,115 | $ | 663,618 | $ | 649,173 | |||||||||||||||
As a % of net sales | 15.4 | % | 15.8 | % | 14.9 | % | 15.0 | % | |||||||||||||||
Net income from continuing operations, as reported under GAAP | $ | 172,790 | $ | 162,154 | $ | 381,202 | $ | 309,692 | |||||||||||||||
Acquisition, integration and other action related charges included in gross profit | 13,563 | 7,720 | 27,732 | 47,939 | |||||||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 29,024 | 35,067 | 63,919 | 164,042 | |||||||||||||||||||
Debt refinance charges included in other expenses | — | — | 47,291 | — | |||||||||||||||||||
Tax effect on actions | (2,017 | ) | (3,423 | ) | (9,726 | ) | (26,715 | ) | |||||||||||||||
Net income from continuing operations, as adjusted | $ | 213,360 | $ | 201,518 | $ | 510,418 | $ | 494,958 | |||||||||||||||
Diluted earnings per share from continuing operations, as reported under GAAP | $ | 0.45 | $ | 0.40 | $ | 0.99 | $ | 0.76 | |||||||||||||||
Acquisition, integration and other action related charges and debt refinance charges | 0.11 | 0.10 | 0.34 | 0.46 | |||||||||||||||||||
Diluted earnings per share from continuing operations, as adjusted | $ | 0.56 | $ | 0.50 | $ | 1.32 | $ | 1.22 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20161027006660/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.