- Seventh Consecutive Quarter of Record Results
-
Net Sales of
$1.59 Billion Increased 14%, Adjusted Operating Profit of$251 Million Increased 16%, and Adjusted Earnings per Share of$0.50 Increased 16% -
Company Increases 2015 Guidance for Adjusted Operating Profit and
Adjusted EPS; Adjusted EPS Expectation of
$1.66 to $1.68 is 17% to 18% Higher than 2014 -
Company Repurchased 10.7 Million Shares of Stock in Third Quarter
for
$311 Million
The seventh consecutive quarter of record results was driven by continued acquisition benefits, global supply chain performance and core sales and margin growth in the Innerwear and Activewear segments.
Net sales increased 14 percent to
Adjusted operating profit excluding actions increased 16 percent to
Hanes also expanded its strategic use of cash flow in the quarter by
beginning to repurchase company stock in the open market. In the third
quarter, the company purchased 10.7 million shares for approximately
“We had another great quarter of double-digit growth that reflects our
continued value-creation potential,” Hanes Chairman and Chief Executive
Officer
For 2015, Hanes has updated its full-year guidance, including increased
expectations for adjusted operating profit and adjusted EPS. The company
now expects full-year net sales of approximately
Third-Quarter 2015 Financial Highlights and Business Segment Summary
Key accomplishments for the third quarter of 2015 include:
-
Core Sales Growth. Innerwear sales increased 3 percent, and
Activewear sales, excluding acquisition benefits, increased 2 percent.
In constant currency, total company core net sales increased 3
percent, excluding acquisitions and the exit of a retailer from
Canada . - Significant Adjusted Operating Profit and Margin Growth. The company’s adjusted operating profit margin increased 30 basis points in the third quarter to 15.8 percent. Innerwear and Activewear operating profit margins increased by 40 basis points and 230 basis points, respectively, as a result of strong supply chain performance and Innovate-to-Elevate benefits.
- Acquisitions Contribute to Results and Integrations on Plan.
The
April 2015 acquisition of Knights Apparel, a licensed apparel leader, added net sales of$84 million to Activewear results in the third quarter. In the International segment, DBApparel, a leading marketer of intimate apparel and underwear inEurope that was acquiredAug. 29, 2014 , contributed net sales of$179 million (€161 million) in the third quarter.The integration of DBApparel is underway following the completion of consultations with appropriate works councils and unions, while implementation of the Knights Apparel integration plan will begin late in the fourth quarter of 2015.
Key segment highlights for the quarter include:
Innerwear net sales increased 3 percent in the third quarter, and operating profit increased 5 percent. Sales of intimates rebounded with high-single-digit growth on strength in bras and shapewear. Sales of basics were up slightly versus the year-ago quarter, despite the expected inventory adjustment of a major retailer that was discussed with second-quarter results.
Activewear results in the quarter were strong with net sales growth of 22 percent and operating profit growth of 39 percent driven by double-digit Champion growth and the acquisition of Knights Apparel. Core sales, which exclude acquisitions, increased 2 percent with growth of more than 30 percent for Champion in the department-store, midtier and sporting goods channels.
International sales and operating profit increased significantly,
despite negative foreign currency impacts, as a result of the
acquisition of DBApparel in
2015 Financial Guidance
Based on year-to-date results and the outlook for the remaining quarter of the year, Hanes has refined its full-year 2015 guidance for net sales and increased guidance for adjusted operating profit and adjusted EPS.
The company expects full-year net sales of approximately
To reflect higher profit margins, the company has increased its guidance
for full-year adjusted operating profit to a range of
Hanes increased its full-year expectations for adjusted EPS to a range
of
The guidance reflects full-year expectations for the acquisitions of
Knights Apparel and DBApparel. Knights Apparel is expected to contribute
net sales of approximately
The company has modified its expectations for full-year net cash from
operating activities to a range of approximately
Interest expense and other expense are now expected to total
approximately
For the fourth quarter, the company expects approximately 397 million
fully-diluted weighted-average shares outstanding, and for the full
year, the company expects approximately 404 million fully-diluted
weighted-average shares outstanding. The repurchase of 10.7 million
shares in the third quarter is expected to contribute
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
Through the third 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 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, Hanes’ current estimate for pretax charges related to
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 | Nine Months Ended | ||||||||||||||||||||
October 3, |
September 27, | % Change |
October 3, |
September 27, | % Change | ||||||||||||||||
Net sales | $ | 1,591,038 | $ | 1,400,728 | 13.6 | % | $ | 4,321,992 | $ | 3,802,150 | 13.7 | % | |||||||||
Cost of sales | 1,010,288 | 903,013 | 2,726,786 | 2,443,304 | |||||||||||||||||
Gross profit | 580,750 | 497,715 | 16.7 | % | 1,595,206 | 1,358,846 | 17.4 | % | |||||||||||||
As a % of net sales | 36.5 | % | 35.5 | % | 36.9 | % | 35.7 | % | |||||||||||||
Selling, general and administrative expenses | 372,422 | 343,823 | 1,158,014 | 926,042 | |||||||||||||||||
As a % of net sales | 23.4 | % | 24.5 | % | 26.8 | % | 24.4 | % | |||||||||||||
Operating profit | 208,328 | 153,892 | 35.4 | % | 437,192 | 432,804 | 1.0 | % | |||||||||||||
As a % of net sales | 13.1 | % | 11.0 | % | 10.1 | % | 11.4 | % | |||||||||||||
Other expenses | 718 | 795 | 1,930 | 1,890 | |||||||||||||||||
Interest expense, net | 31,356 | 23,528 | 87,263 | 66,465 | |||||||||||||||||
Income before income tax expense | 176,254 | 129,569 | 347,999 | 364,449 | |||||||||||||||||
Income tax expense | 14,100 | 10,625 | 38,307 | 49,367 | |||||||||||||||||
Net income | $ | 162,154 | $ | 118,944 | 36.3 | % | $ | 309,692 | $ | 315,082 | (1.7 | )% | |||||||||
Earnings per share: | |||||||||||||||||||||
Basic | $ | 0.41 | $ | 0.30 | 36.7 | % | $ | 0.77 | $ | 0.78 | (1.3 | )% | |||||||||
Diluted | $ | 0.40 | $ | 0.29 | 37.9 | % | $ | 0.76 | $ | 0.77 | (1.3 | )% | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 399,445 | 402,392 | 402,011 | 401,968 | |||||||||||||||||
Diluted | 402,979 | 408,524 | 406,363 | 408,056 | |||||||||||||||||
TABLE 2 | |||||||||||||||||||||
HANESBRANDS INC. Supplemental Financial Information (Dollars in thousands) (Unaudited) | |||||||||||||||||||||
Quarters Ended | Nine Months Ended | ||||||||||||||||||||
October 3, |
September 27, | % Change |
October 3, |
September 27, | % Change | ||||||||||||||||
Segment net sales: | |||||||||||||||||||||
Innerwear | $ | 667,192 | $ | 648,310 | 2.9 | % | $ | 1,990,979 | $ | 2,007,794 | (0.8 | )% | |||||||||
Activewear | 516,804 | 424,745 | 21.7 | % | 1,193,057 | 1,037,063 | 15.0 | % | |||||||||||||
Direct to Consumer | 106,642 | 112,663 | (5.3 | )% | 289,674 | 300,729 | (3.7 | )% | |||||||||||||
International | 300,400 | 215,010 | 39.7 | % | 848,282 | 456,564 | 85.8 | % | |||||||||||||
Total net sales | $ | 1,591,038 | $ | 1,400,728 | 13.6 | % | $ | 4,321,992 | $ | 3,802,150 | 13.7 | % | |||||||||
Segment operating profit: | |||||||||||||||||||||
Innerwear | $ | 136,777 | $ | 130,592 | 4.7 | % | $ | 443,589 | $ | 412,515 | 7.5 | % | |||||||||
Activewear | 97,240 | 69,974 | 39.0 | % | 191,476 | 151,178 | 26.7 | % | |||||||||||||
Direct to Consumer | 11,756 | 16,629 | (29.3 | )% | 21,432 | 26,526 | (19.2 | )% | |||||||||||||
International | 34,821 | 28,826 | 20.8 | % | 77,941 | 52,946 | 47.2 | % | |||||||||||||
General corporate expenses/other | (29,479 | ) | (28,994 | ) | 1.7 | % | (85,265 | ) | (80,544 | ) | 5.9 | % | |||||||||
Acquisition, integration and other action related | (42,787 | ) | (63,135 | ) | (32.2 | )% | (211,981 | ) | (129,817 | ) | 63.3 | % | |||||||||
Total operating profit | $ | 208,328 | $ | 153,892 | 35.4 | % | $ | 437,192 | $ | 432,804 | 1.0 | % | |||||||||
EBITDA1: | |||||||||||||||||||||
Net income | $ | 162,154 | $ | 118,944 | $ | 309,692 | $ | 315,082 | |||||||||||||
Interest expense, net | 31,356 | 23,528 | 87,263 | 66,465 | |||||||||||||||||
Income tax expense | 14,100 | 10,625 | 38,307 | 49,367 | |||||||||||||||||
Depreciation and amortization | 24,943 | 23,500 | 75,750 | 69,540 | |||||||||||||||||
Total EBITDA | $ | 232,553 | $ | 176,597 | 31.7 | % | $ | 511,012 | $ | 500,454 | 2.1 | % | |||||||||
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) | |||||||||
October 3, 2015 | January 3, 2015 | ||||||||
Assets | |||||||||
Cash and cash equivalents | $ | 284,595 | $ | 239,855 | |||||
Trade accounts receivable, net | 850,334 | 672,048 | |||||||
Inventories | 1,813,510 | 1,537,200 | |||||||
Other current assets | 317,015 | 316,129 | |||||||
Total current assets | 3,265,454 | 2,765,232 | |||||||
Property, net | 652,391 | 674,379 | |||||||
Intangible assets and goodwill | 1,549,192 | 1,414,321 | |||||||
Other noncurrent assets | 352,363 | 367,849 | |||||||
Total assets | $ | 5,819,400 | $ | 5,221,781 | |||||
Liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 1,154,383 | $ | 1,116,847 | |||||
Notes payable | 120,083 | 144,438 | |||||||
Accounts Receivable Securitization Facility | 258,264 | 210,963 | |||||||
Current portion of long-term debt | 39,407 | 14,354 | |||||||
Total current liabilities | 1,572,137 | 1,486,602 | |||||||
Long-term debt | 2,361,607 | 1,613,997 | |||||||
Other noncurrent liabilities | 635,357 | 734,410 | |||||||
Total liabilities | 4,569,101 | 3,835,009 | |||||||
Equity | 1,250,299 | 1,386,772 | |||||||
Total liabilities and equity | $ | 5,819,400 | $ | 5,221,781 | |||||
TABLE 4 | ||||||||||
HANESBRANDS INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
October 3, 2015 | September 27, 2014 | |||||||||
Operating Activities: | ||||||||||
Net income | $ | 309,692 | $ | 315,082 | ||||||
Depreciation and amortization | 75,750 | 69,540 | ||||||||
Other noncash items | 10,737 | 13,771 | ||||||||
Changes in assets and liabilities, net | (483,333 | ) | (183,072 | ) | ||||||
Net cash from operating activities | (87,154 | ) | 215,321 | |||||||
Investing Activities: | ||||||||||
Purchases/sales of property and equipment, net, and other | (58,521 | ) | (50,326 | ) | ||||||
Acquisition of business, net of cash acquired | (192,829 | ) | (352,986 | ) | ||||||
Net cash from investing activities | (251,350 | ) | (403,312 | ) | ||||||
Financing Activities: | ||||||||||
Cash dividends paid | (121,713 | ) | (89,638 | ) | ||||||
Net borrowings on notes payable, debt and other | 508,117 | 382,339 | ||||||||
Net cash from financing activities | 386,404 | 292,701 | ||||||||
Effect of changes in foreign currency exchange rates on cash | (3,160 | ) | (4,741 | ) | ||||||
Change in cash and cash equivalents | 44,740 | 99,969 | ||||||||
Cash and cash equivalents at beginning of year | 239,855 | 115,863 | ||||||||
Cash and cash equivalents at end of period | $ | 284,595 | $ | 215,832 | ||||||
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 | Nine Months Ended | |||||||||||||||||
October 3, |
September 27, |
October 3, |
September 27, | |||||||||||||||
Gross profit, as reported under GAAP | $ | 580,750 | $ | 497,715 | $ | 1,595,206 | $ | 1,358,846 | ||||||||||
Acquisition, integration and other action related charges (1) | 7,719 | 22,565 | 47,938 | 41,227 | ||||||||||||||
Gross profit, as adjusted | $ | 588,469 | $ | 520,280 | $ | 1,643,144 | $ | 1,400,073 | ||||||||||
As a % of net sales | 37.0 | % | 37.1 | % | 38.0 | % | 36.8 | % | ||||||||||
Selling, general and administrative expenses, as reported under GAAP | $ | 372,422 | $ | 343,823 | $ | 1,158,014 | $ | 926,042 | ||||||||||
Acquisition, integration and other action related charges (2) | (35,067 | ) | (40,570 | ) | (164,043 | ) | (88,590 | ) | ||||||||||
Selling, general and administrative expenses, as adjusted | $ | 337,355 | $ | 303,253 | $ | 993,971 | $ | 837,452 | ||||||||||
As a % of net sales | 21.2 | % | 21.6 | % | 23.0 | % | 22.0 | % | ||||||||||
Operating profit, as reported under GAAP | $ | 208,328 | $ | 153,892 | $ | 437,192 | $ | 432,804 | ||||||||||
Acquisition, integration and other action related charges included in gross profit | 7,719 | 22,565 | 47,938 | 41,227 | ||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 35,067 | 40,570 | 164,043 | 88,590 | ||||||||||||||
Operating profit, as adjusted | $ | 251,114 | $ | 217,027 | $ | 649,173 | $ | 562,621 | ||||||||||
As a % of net sales | 15.8 | % | 15.5 | % | 15.0 | % | 14.8 | % | ||||||||||
Net income, as reported under GAAP | $ | 162,154 | $ | 118,944 | $ | 309,692 | $ | 315,082 | ||||||||||
Acquisition, integration and other action related charges included in gross profit | 7,719 | 22,565 | 47,938 | 41,227 | ||||||||||||||
Acquisition, integration and other action related charges included in SG&A | 35,067 | 40,570 | 164,043 | 88,590 | ||||||||||||||
Tax effect on actions | (3,423 | ) | (5,176 | ) | (26,715 | ) | (16,033 | ) | ||||||||||
Net income, as adjusted | $ | 201,517 | $ | 176,903 | $ | 494,958 | $ | 428,866 | ||||||||||
Diluted earnings per share, as reported under GAAP | $ | 0.40 | $ | 0.29 | $ | 0.76 | $ | 0.77 | ||||||||||
Acquisition, integration and other action related charges | 0.10 | 0.14 | 0.46 | 0.28 | ||||||||||||||
Diluted earnings per share, as adjusted | $ | 0.50 | $ | 0.43 | $ | 1.22 | $ | 1.05 | ||||||||||
(1) Acquisition, integration and other action related
charges included in gross profit | ||||||||||||||||||
Acquisition and integration costs | $ | 6,581 | $ | 22,109 | $ | 31,749 | $ | 34,098 | ||||||||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 882 | 456 | $ | 3,021 | $ | 4,629 | ||||||||||||
Other costs | 256 | — | 13,168 | $ | 2,501 | |||||||||||||
$ | 7,719 | $ | 22,565 | $ | 47,938 | $ | 41,228 | |||||||||||
(2) Acquisition, integration and other action related
charges included in SG&A | ||||||||||||||||||
Acquisition and integration costs | $ | 24,647 | $ | 37,130 | $ | 119,938 | $ | 71,540 | ||||||||||
Foundational costs (costs associated with building infrastructure to match current business with acquisitions) | 8,097 | 364 | 25,594 | (1,199 | ) | |||||||||||||
Other costs | 2,324 | 3,076 | 18,511 | 18,248 | ||||||||||||||
$ | 35,068 | $ | 40,570 | $ | 164,043 | $ | 88,589 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20151028006560/en/
Source:
HanesBrands
Matt Hall, News Media
336-519-3386
or
T.C.
Robillard, Analysts and Investors
336-519-2115
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