Gildan Activewear Inc. (GIL: TSX and NYSE) today announced its
results for the second quarter ended June 30, 2019 and updated
its full year guidance.
As expected, sales for the second quarter returned to a growth
trajectory, consistent with the expected sales cadence for 2019
previously communicated. Sales of $802 million in the quarter,
which set another second quarter record, were up approximately 5%
over last year, setting us on track to deliver our full year sales
target of mid-single-digit growth. Our growth drivers continued to
perform well, including growth momentum in fashion basics, fleece,
and global lifestyle brand sales. Underwear sales grew more than
50% over the prior year quarter, reflecting the successful launch
of our new private label men’s underwear program with our largest
mass retail customer. We are pleased with the performance of the
product launch and have received confirmation from the retailer
that we will be awarded additional shelf space to expand the
program offering in the fourth quarter.
For the second quarter of 2019, we generated GAAP diluted EPS of
$0.49, and adjusted diluted EPS of $0.56 up 8% over the prior year
quarter, reflecting the benefit of a richer product-mix, higher net
selling prices, and a 50-basis point improvement in SG&A
expenses as a percentage of sales. These positive factors more than
offset gross margin pressure from increases in raw materials and
other input costs, which were anticipated and previously
communicated. During the quarter, we continued to execute on our
manufacturing optimization initiatives and remain on track to
generate gross margin expansion which we expect to flow through in
the fourth quarter as we exit the year.
Q2 2019 operating resultsSales for the second
quarter totaled $801.6 million, up 4.9% compared to the prior year
quarter. Higher sales reflected activewear sales of $665.6 million,
up 6.5% compared to the second quarter of 2018, partly offset by a
2.2% decline in the hosiery and underwear category where we
generated $136.0 million in overall sales. Activewear sales growth
was driven by higher unit sales volumes of fashion basics and
fleece, volume growth in global lifestyle brand products, and
higher e-commerce sales volumes, as well as more favourable
product-mix and higher net selling prices, partly offset by lower
unit sales of basics. While international sales were up slightly,
we saw softness in Europe and slower growth in China, particularly
in the first two months of the quarter, which we believe was
largely tied to the pace of broader economic activity in these
regions. Growth in international sales was stronger in the month of
June and we continue to project double digit growth in the second
half of the year. The slight sales decline in the hosiery and
underwear category resulted from lower sock sales volumes which
were largely offset by the large increase in underwear sales during
the quarter. The underwear sales increase was due to the full
roll-out of a new private label men's underwear program with our
largest mass retail customer, which began to ship at the end of the
first quarter this year. This new program replaced our previous
branded program with this retailer and now occupies significantly
more shelf space than our former branded program. The decline in
sock sales was primarily due to lower unit sales in mass, including
the exit of a sock program in the dollar channel, as we had
previously communicated, and lower sales in other channels,
including sports specialty, partly offset by higher sock sales to
global lifestyle brands.
As expected, gross margin of 27.8% in the second quarter of 2019
was down from 28.3% in the second quarter last year. The 50-basis
point decline reflected anticipated increases in raw material
costs, inflationary pressure on other input costs, and unfavourable
foreign exchange. These factors more than offset the benefit of
higher net selling prices and favourable product-mix.
SG&A expenses for the second quarter of 2019 of $92.0
million remained essentially flat compared to the second quarter of
2018, despite the rise in sales. As a percentage of sales, SG&A
expenses were 11.5%, reflecting a 50-basis point improvement over
the same period last year, primarily due to cost benefits stemming
from the Company's ongoing focus on SG&A rationalization.
The Company incurred $16.3 million of restructuring and
acquisition-related costs in the second quarter, compared to $3.0
million in the same period last year. Restructuring and
acquisition-related costs in the second quarter of 2019 related
primarily to previously announced manufacturing optimization
initiatives, including consolidation of textile, hosiery, sewing,
and yarn operations, as well as warehouse consolidation and sales
and marketing initiatives.
Operating income for the second quarter of 2019 totaled $114.1
million, down from $121.0 million in the second quarter of
2018. After excluding restructuring and acquisition-related
costs in both years, adjusted operating income1 for the three
months ended June 30, 2019 amounted to $130.4 million, up $6.4
million, or 5.2% higher than the same period last year. As a
percentage of sales, adjusted operating income for the second
quarter was 16.3%, 10 basis points better than adjusted operating
margin1 of 16.2% in the second quarter of 2018. The
improvement was due to the benefit of SG&A leverage, which more
than offset gross margin pressure primarily from higher raw
material and other input costs.
Net earnings for the three months ended June 30, 2019
amounted to $99.7 million, or $0.49 per share on a diluted
basis, compared with net earnings of $109.0 million, or $0.51
per share on a diluted basis, for the same period last year.
Excluding the impact of after-tax restructuring and
acquisition-related costs in both years, Gildan reported adjusted
net earnings1 of $115.0 million, or $0.56 per share on a diluted
basis, up from $111.5 million, or $0.52 per share on a diluted
basis, in the second quarter of 2018. The 7.7% increase in
adjusted diluted EPS was mainly due to increased sales and adjusted
operating margin, as well as the benefit of a lower share count
compared to the prior year, partly offset by higher net financial
expenses.
The Company generated $26.0 million of free cash flow1 in the
second quarter of 2019 compared to free cash flow of $98.0 million
in the second quarter last year reflecting higher working capital
requirements and higher capital expenditures. During the second
quarter of 2019, capital expenditures were $56 million primarily
for the acquisition of land in Bangladesh and expenditures related
to manufacturing capacity expansion initiatives. During the
quarter, the Company repurchased 2,617,710 common shares at a total
cost of approximately $97.4 million pursuant to its normal course
issuer bid (NCIB) program. The Company ended the second quarter of
2019 with net debt1 of $989.2 million and a net debt leverage
ratio1 of 1.8 times net debt to trailing twelve months
adjusted EBITDA1, in line with the Company's target leverage
range.
Year-to-date operating resultsNet sales for the
six months ended June 30, 2019 totaled $1,425.6 million, up
1.0% from net sales of $1,411.5 million for the same period last
year, reflecting an increase of 1.7% in activewear sales, partly
offset by a 2.0% decline in the hosiery and underwear category. The
growth in activewear where we generated sales of $1,159.2 million
was mainly driven by favourable product-mix, particularly from
fleece sales and higher net selling prices, partly offset by lower
unit sales volumes of basics. The decline in the hosiery and
underwear sales category was mainly due to lower unit sales of
socks, including the impact of our exit of a sock program in the
dollar channel, mostly offset by higher underwear sales and more
favourable product-mix.
Gross margin of 26.9% for the first six months of 2019 was down
90 basis points compared to the same period last year due to higher
raw material and other input costs, including inflationary
pressures and unfavourable foreign exchange, partly offset by
higher net selling prices and more favourable product-mix. SG&A
expenses of $185.0 million for the six months ended June 30, 2019
were essentially unchanged from last year's level, improving 10
basis points as a percentage of sales to 13.0%, reflecting the
Company's focus on SG&A rationalization.
Operating income for the first six months of 2019 totaled $146.8
million, or 10.3% of sales, down from $197.3 million, or 14.0% of
sales, mainly due to the impairment of trade accounts receivable of
$24.4 million which was recorded in the first quarter this year
relating to the receivership of Heritage Sportswear, higher
restructuring and acquisition-related costs associated with the
Company's manufacturing and warehouse consolidation initiatives,
and lower gross margin. Excluding the impact of restructuring and
acquisition-related costs, adjusted operating income for the six
months ended June 30, 2019 totaled $173.7 million, or 12.2% of
sales, compared to $206.7 million, or 14.6% of sales for the same
period last year.
Net earnings for the six months ended June 30, 2019
amounted to $122.4 million, or $0.59 per share on a diluted basis,
compared with net earnings of $176.9 million, or $0.82 per
share on a diluted basis, for the same period last year. Excluding
the impact of after-tax restructuring and acquisition-related costs
in both years, Gildan reported adjusted net earnings of $147.8
million, or $0.72 per share on a diluted basis, down from $186.1
million, or $0.86 per share on a diluted basis for the first six
months of 2018. The decrease in GAAP diluted EPS and adjusted
diluted EPS was mainly due to the decline in operating and adjusted
operating margin and higher net financial expenses. On a diluted
per share basis, the decline was partly offset by the benefit of a
lower share count compared to the prior year.
OutlookWith results for the first half of 2019
tracking well within the Company's expectations, the Company
reconfirmed its 2019 full year sales guidance projecting sales
growth in the mid-single-digit range and updated its full year EPS
and adjusted diluted EPS guidance to the upper half of the ranges
previously provided. The Company is now projecting 2019 GAAP
diluted EPS of $1.80 to $1.85 and adjusted diluted EPS of $1.95 to
$2.00, compared to its previous guidance range projecting GAAP EPS
of $1.75 to $1.85 and adjusted diluted EPS of $1.90 to $2.00. The
Company also reconfirmed its projection for after-tax restructuring
and acquisition-related costs for 2019 of approximately $30 million
and capital expenditures of approximately $175 million. The Company
expects to generate adjusted EBITDA1 in excess of $615 million and
continues to project free cash flow for 2019 in the range of $300
to $350 million.
For the third quarter of 2019, the Company is projecting sales
growth to be in the mid-single-digit range, lower than previously
anticipated due to revised timing of fleece sales. The Company now
expects to deliver more fleece than previously projected in the
fourth quarter as it continues to ramp up production. We have good
order visibility for fleece products for the second half of the
year and are improving our fulfillment capability for these
high-margin products as we move into the fourth quarter. With lower
than previously anticipated fleece sales in the third quarter
combined with the impact of continued gross margin pressure from
higher raw material and other input costs, as previously
communicated, we now expect adjusted EPS growth to be flat in the
third quarter. For the fourth quarter of 2019, we are
projecting strong sales and adjusted EPS growth, aligning to our
updated full year guidance. We continue to project solid
gross margin expansion in the fourth quarter as increases in raw
material and other input costs subside and projected cost benefits
from our manufacturing initiatives start to flow through,
positioning us with strong momentum heading into 2020.
Declaration of quarterly dividendThe Board of
Directors has declared a cash dividend of $0.134 per share, payable
on September 9, 2019 to shareholders of record on
August 15, 2019. This dividend is an “eligible dividend” for
the purposes of the Income Tax Act (Canada) and any other
applicable provincial legislation pertaining to eligible
dividends.
Disclosure of outstanding share dataAs at
July 26, 2019, there were 203,686,402 common shares issued and
outstanding along with 2,255,238 stock options and 95,736 dilutive
restricted share units (Treasury RSUs) outstanding. Each stock
option entitles the holder to purchase one common share at the end
of the vesting period at a pre-determined option price. Each
Treasury RSU entitles the holder to receive one common share from
treasury at the end of the vesting period, without any monetary
consideration being paid to the Company.
Conference call informationGildan Activewear
Inc. will hold a conference call to discuss second quarter 2019
results and its business outlook today at 8:30 AM ET. A live
audio webcast of the conference call, as well as a replay, will be
available on its corporate site or on the following link:
http://www.gildancorp.com/events. The conference call can be
accessed by dialing (877) 282-2924 (Canada & U.S.) or (470)
495-9480 (international) and entering passcode 1359678#. A replay
will be available for 7 days starting at 11:30 AM ET by dialing
(855) 859-2056 (Canada & U.S.) or (404) 537-3406
(international) and entering the same passcode.
NotesThis release should be read in conjunction
with Gildan’s Management’s Discussion and Analysis and its
unaudited condensed interim consolidated financial statements as at
and for the three and six months ended June 30, 2019 available on
Gildan's corporate website, which will be filed by Gildan with the
Canadian securities regulatory authorities and with the U.S.
Securities and Exchange Commission.
Certain minor rounding variances may exist between the unaudited
condensed interim consolidated financial statements and the table
summaries contained in this press release.
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Supplemental Financial Data |
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CONSOLIDATED FINANCIAL DATA (UNAUDITED) |
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|
(in U.S.$ millions, except per share amounts or otherwise
indicated) |
Q2 2019 |
|
Q2 2018 |
|
Variation (%) |
|
|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
Net sales |
801.6 |
|
764.2 |
|
4.9 |
% |
|
1,425.6 |
|
1,411.5 |
|
1.0 |
% |
Gross profit |
222.8 |
|
215.9 |
|
3.2 |
% |
|
383.5 |
|
391.7 |
|
(2.1 |
)% |
SG&A expenses |
92.0 |
|
92.1 |
|
(0.1 |
)% |
|
185.0 |
|
184.9 |
|
0.1 |
% |
Impairment of trade accounts
receivable |
0.4 |
|
(0.1 |
) |
n.m. |
|
|
24.8 |
|
0.1 |
|
n.m. |
|
Restructuring and
acquisition-related costs |
16.3 |
|
3.0 |
|
n.m. |
|
|
26.9 |
|
9.4 |
|
n.m. |
|
Operating income |
114.1 |
|
121.0 |
|
(5.7 |
)% |
|
146.8 |
|
197.3 |
|
(25.6 |
)% |
Adjusted operating
income(1) |
130.4 |
|
124.0 |
|
5.2 |
% |
|
173.7 |
|
206.7 |
|
(16.0 |
)% |
Adjusted EBITDA(1) |
174.5 |
|
166.0 |
|
5.1 |
% |
|
257.8 |
|
290.1 |
|
(11.1 |
)% |
Financial expenses |
10.6 |
|
8.0 |
|
32.5 |
% |
|
19.7 |
|
13.2 |
|
49.2 |
% |
Income tax expense |
3.8 |
|
4.0 |
|
(5.0 |
)% |
|
4.7 |
|
7.2 |
|
(34.7 |
)% |
Net earnings |
99.7 |
|
109.0 |
|
(8.5 |
)% |
|
122.4 |
|
176.9 |
|
(30.8 |
)% |
Adjusted net earnings(1) |
115.0 |
|
111.5 |
|
3.1 |
% |
|
147.8 |
|
186.1 |
|
(20.6 |
)% |
|
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|
Basic EPS |
0.49 |
|
0.51 |
|
(3.9 |
)% |
|
0.59 |
|
0.82 |
|
(28.0 |
)% |
Diluted EPS |
0.49 |
|
0.51 |
|
(3.9 |
)% |
|
0.59 |
|
0.82 |
|
(28.0 |
)% |
Adjusted diluted EPS(1) |
0.56 |
|
0.52 |
|
7.7 |
% |
|
0.72 |
|
0.86 |
|
(16.3 |
)% |
|
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|
Gross margin |
27.8 |
% |
28.3 |
% |
(0.5 |
) pp |
|
26.9 |
% |
27.8 |
% |
(0.9 |
) pp |
SG&A expenses as a
percentage of sales |
11.5 |
% |
12.0 |
% |
(0.5 |
) pp |
|
13.0 |
% |
13.1 |
% |
(0.1 |
) pp |
Operating margin |
14.2 |
% |
15.8 |
% |
(1.6 |
) pp |
|
10.3 |
% |
14.0 |
% |
(3.7 |
) pp |
Adjusted operating margin(1) |
16.3 |
% |
16.2 |
% |
0.1 |
pp |
|
12.2 |
% |
14.6 |
% |
(2.4 |
)
pp |
|
|
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|
|
|
|
Cash flows from (used in)
operating activities |
79.5 |
|
130.3 |
|
(39.0 |
)% |
|
(25.7 |
) |
112.7 |
|
n.m. |
|
Capital expenditures |
55.9 |
|
43.0 |
|
30.0 |
% |
|
78.8 |
|
65.4 |
|
20.5 |
% |
Free
cash flow(1) |
26.0 |
|
98.0 |
|
(73.5 |
)% |
|
(101.8 |
) |
58.1 |
|
n.m. |
|
n.m. = not
meaningful |
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As at |
Jun 30, 2019 |
Dec 30, 2018 |
Inventories |
1,008.5 |
940.0 |
Trade accounts receivable |
509.2 |
317.2 |
Net indebtedness(1) |
989.2 |
622.3 |
Net
debt leverage ratio(1) |
1.8 |
1.0 |
(1) Please refer
to "Definition and reconciliation of non-GAAP financial measures"
in this press release. |
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DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
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(in U.S.$ millions, or otherwise indicated) |
Q2 2019 |
|
Q2 2018 |
|
Variation (%) |
|
|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
Activewear |
665.6 |
|
625.2 |
|
6.5 |
% |
|
1,159.2 |
|
1,139.7 |
|
1.7 |
% |
Hosiery
and underwear |
136.0 |
|
139.0 |
|
(2.2 |
)% |
|
266.4 |
|
271.8 |
|
(2.0 |
)% |
|
801.6 |
|
764.2 |
|
4.9 |
% |
|
1,425.6 |
|
1,411.5 |
|
1.0 |
% |
|
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|
Net sales were derived from customers located in the following
geographic areas:
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|
(in U.S.$ millions, or otherwise indicated) |
Q2 2019 |
|
Q2 2018 |
|
Variation (%) |
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|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
United States |
683.9 |
|
644.7 |
|
6.1 |
% |
|
1,214.7 |
|
1,200.4 |
|
1.2 |
% |
Canada |
27.3 |
|
30.1 |
|
(9.3 |
)% |
|
53.1 |
|
55.5 |
|
(4.3 |
)% |
International |
90.5 |
|
89.4 |
|
1.2 |
% |
|
157.8 |
|
155.5 |
|
1.5 |
% |
|
801.7 |
|
764.2 |
|
4.9 |
% |
|
1,425.6 |
|
1,411.4 |
|
1.0 |
% |
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Definition and reconciliation of non-GAAP financial
measuresThis press release includes references to certain
non-GAAP financial measures as described below. These non-GAAP
measures do not have any standardized meanings prescribed by
International Financial Reporting Standards (IFRS) and are
therefore unlikely to be comparable to similar measures presented
by other companies. Accordingly, they should not be considered in
isolation. The terms and definitions of the non-GAAP measures used
in this press release and a reconciliation of each non-GAAP measure
to the most directly comparable IFRS measure are provided below.
The non-GAAP measures are presented on a consistent basis for all
periods presented in this press release, except for those measures
impacted by the initial adoption of IFRS 16, Leases, as discussed
below.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, income taxes relating to restructuring
and acquisition-related actions, and income taxes relating to the
revaluation of deferred income tax assets and liabilities as a
result of statutory income tax rate changes in the countries in
which we operate. Adjusted diluted EPS is calculated as adjusted
net earnings divided by the diluted weighted average number of
common shares outstanding. The Company uses adjusted net earnings
and adjusted diluted EPS to measure its performance from one period
to the next, without the variation caused by the impacts of the
items described above. The Company excludes these items because
they affect the comparability of its financial results and could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
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|
(in U.S.$ millions, except per share amounts) |
Q2 2019 |
|
Q2 2018 |
|
|
YTD 2019 |
|
YTD 2018 |
|
Net earnings |
99.7 |
|
109.0 |
|
|
122.4 |
|
176.9 |
|
Adjustments for: |
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Restructuring and acquisition-related costs |
16.3 |
|
3.0 |
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|
26.9 |
|
9.4 |
|
Income tax recovery relating to restructuring and
acquisition-related actions |
(1.0 |
) |
(0.5 |
) |
|
(1.5 |
) |
(0.2 |
) |
Adjusted net earnings |
115.0 |
|
111.5 |
|
|
147.8 |
|
186.1 |
|
Basic EPS |
0.49 |
|
0.51 |
|
|
0.59 |
|
0.82 |
|
Diluted EPS |
0.49 |
|
0.51 |
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|
0.59 |
|
0.82 |
|
Adjusted diluted EPS |
0.56 |
|
0.52 |
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|
0.72 |
|
0.86 |
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Adjusted operating income and adjusted operating
marginAdjusted operating income is calculated as operating income
before restructuring and acquisition-related costs. Adjusted
operating margin is calculated as adjusted operating income divided
by net sales. Management uses adjusted operating income and
adjusted operating margin to measure its performance from one
period to the next without the variation caused by the impacts of
the items described above. The Company excludes these items because
they affect the comparability of its financial results and could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
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|
(in U.S.$ millions, or otherwise indicated) |
Q2 2019 |
|
Q2 2018 |
|
|
YTD 2019 |
|
YTD 2018 |
|
Operating income(1) |
114.1 |
|
121.0 |
|
|
146.8 |
|
197.3 |
|
Adjustment for: |
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|
Restructuring and acquisition-related costs |
16.3 |
|
3.0 |
|
|
26.9 |
|
9.4 |
|
Adjusted operating income(1) |
130.4 |
|
124.0 |
|
|
173.7 |
|
206.7 |
|
Operating margin |
14.2 |
% |
15.8 |
% |
|
10.3 |
% |
14.0 |
% |
Adjusted operating margin |
16.3 |
% |
16.2 |
% |
|
12.2 |
% |
14.6 |
% |
(1) Operating
income and adjusted operating income for the three and six months
ended June 30, 2019 were positively impacted by $0.8 million and
$1.6 million, respectively, due to the initial adoption of IFRS 16,
Leases as described in note 2(d) to the unaudited condensed interim
consolidated financial statements as at and for the three and six
months ended June 30, 2019. Prior year operating income and
adjusted operating income were not impacted. |
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Adjusted EBITDAAdjusted EBITDA is calculated as earnings before
financial expenses, income taxes, and depreciation and
amortization, and excludes the impact of restructuring and
acquisition-related costs. The Company uses adjusted EBITDA,
among other measures, to assess the operating performance of its
business. The Company also believes this measure is commonly used
by investors and analysts to measure a company’s ability to service
debt and to meet other payment obligations, or as a common
valuation measurement. The Company excludes depreciation and
amortization expenses, which are non-cash in nature and can vary
significantly depending upon accounting methods or non-operating
factors. Excluding these items does not imply they are necessarily
non-recurring.
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|
(in U.S.$ millions) |
Q2 2019 |
|
Q2 2018 |
|
|
YTD 2019 |
|
YTD 2018 |
|
Net earnings |
99.7 |
|
109.0 |
|
|
122.4 |
|
176.9 |
|
Restructuring and
acquisition-related costs |
16.3 |
|
3.0 |
|
|
26.9 |
|
9.4 |
|
Depreciation and
amortization |
44.1 |
|
42.0 |
|
|
84.1 |
|
83.4 |
|
Financial expenses, net |
10.6 |
|
8.0 |
|
|
19.7 |
|
13.2 |
|
Income
tax expense |
3.8 |
|
4.0 |
|
|
4.7 |
|
7.2 |
|
Adjusted EBITDA(1) |
174.5 |
|
166.0 |
|
|
257.8 |
|
290.1 |
|
(1) Adjusted
EBITDA for the three and six months ended June 30, 2019 was
positively impacted by $3.9 million and $8.1 million, respectively,
due to the initial adoption of IFRS 16, Leases as described in note
2(d) to the unaudited condensed interim consolidated financial
statements as at and for the three and six months ended June 30,
2019. Prior year adjusted EBITDA was not impacted. |
|
Free cash flowFree cash flow is defined as cash
from operating activities less cash flow used in investing
activities excluding business acquisitions. The Company considers
free cash flow to be an important indicator of the financial
strength and liquidity of its business, and it is a key metric
which indicates how much cash is available after capital
expenditures to repay debt, to pursue business acquisitions, and/or
to redistribute to its shareholders. The Company believes this
measure is commonly used by investors and analysts when valuing a
business and its underlying assets.
|
|
|
|
|
|
|
|
|
|
(in U.S.$ millions) |
Q2 2019 |
|
Q2 2018 |
|
|
YTD 2019 |
|
YTD 2018 |
|
Cash flows from (used in)
operating activities |
79.5 |
|
130.3 |
|
|
(25.7 |
) |
112.7 |
|
Cash flows used in investing
activities |
(53.5 |
) |
(32.3 |
) |
|
(77.4 |
) |
(54.7 |
) |
Adjustment for: |
|
|
|
|
|
Business acquisitions |
— |
|
— |
|
|
1.3 |
|
0.1 |
|
Free
cash flow(1) |
26.0 |
|
98.0 |
|
|
(101.8 |
) |
58.1 |
|
(1) Free cash
flow for the three and six months ended June 30, 2019 increased by
$3.4 million and $6.6 million, respectively, due to the initial
adoption of IFRS 16, Leases as described in note 2(d) to the
unaudited condensed interim consolidated financial statements as at
and for the three and six months ended June 30, 2019. Prior year
free cash flow was not impacted. |
|
Total indebtedness and net indebtednessTotal indebtedness is
defined as the total bank indebtedness, long-term debt (including
any current portion), and lease obligations (including any current
portion), and net indebtedness is calculated as total indebtedness
net of cash and cash equivalents. The Company considers total
indebtedness and net indebtedness to be important indicators of the
financial leverage of the Company. The Company has included lease
obligations in total indebtedness and net indebtedness beginning in
fiscal 2019, consistent with the adoption of IFRS 16, Leases as
described in note 2(d) to the unaudited condensed interim
consolidated financial statements as at and for the three and six
months ended June 30, 2019. Comparative periods have not been
revised and therefore may not be directly comparable.
|
|
|
|
|
(in U.S.$ millions) |
Jun 30, 2019 |
|
Dec 30, 2018 |
|
Long-term debt and total bank
indebtedness |
958.0 |
|
669.0 |
|
Lease obligations |
81.8 |
|
— |
|
Total indebtedness |
1,039.8 |
|
669.0 |
|
Cash
and cash equivalents |
(50.6 |
) |
(46.7 |
) |
Net
indebtedness |
989.2 |
|
622.3 |
|
|
|
|
|
|
Net debt leverage ratioThe net debt leverage
ratio is defined as the ratio of net indebtedness to pro-forma
adjusted EBITDA for the trailing twelve months. The pro-forma
adjusted EBITDA for the trailing twelve months reflects business
acquisitions made during the period as if they had occurred at the
beginning of the trailing twelve month period. The Company has set
a target net debt leverage ratio of one to two times pro-forma
adjusted EBITDA for the trailing twelve months. The Company uses,
and believes that certain investors and analysts use, the net debt
leverage ratio to measure the financial leverage of the
Company.
|
|
(in U.S.$ millions, or otherwise indicated) |
Jun 30, 2019 |
|
Dec 30, 2018 |
|
Adjusted EBITDA for the
trailing twelve months |
563.3 |
|
595.5 |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
563.3 |
|
595.5 |
|
Net indebtedness |
989.2 |
|
622.3 |
|
Net
debt leverage ratio(1) |
1.8 |
|
1.0 |
|
(1) The net debt
leverage ratio as at June 30, 2019 increased by approximately 0.1
due to the initial adoption of IFRS 16, Leases as described in note
2(d) to the unaudited condensed interim consolidated financial
statements as at and for the three and six months ended June 30,
2019. The prior year net debt leverage ratio was not impacted. |
|
Caution concerning forward-looking
statementsCertain statements included in this press
release constitute “forward-looking statements” within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and
Canadian securities legislation and regulations, and are subject to
important risks, uncertainties, and assumptions. This
forward-looking information includes, amongst others, information
with respect to our objectives and the strategies to achieve these
objectives, as well as information with respect to our beliefs,
plans, expectations, anticipations, estimates, and intentions,
including, without limitation, our expectation with regards to net
sales, gross margin, SG&A expenses, restructuring and
acquisition-related costs, operating margin, adjusted operating
margin, adjusted EBITDA, diluted earnings per share, adjusted
diluted earnings per share, income tax rate, free cash flow,
capital expenditures, and capacity expansion plans. Forward-looking
statements generally can be identified by the use of conditional or
forward-looking terminology such as “may”, “will”, “expect”,
“intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”,
“foresee”, “believe”, or “continue”, or the negatives of these
terms or variations of them or similar terminology. We refer you to
the Company’s filings with the Canadian securities regulatory
authorities and the U.S. Securities and Exchange Commission, as
well as the risks described under the “Financial risk management”,
“Critical accounting estimates and judgments”, and “Risks and
uncertainties” sections of the Company’s Management’s Discussion
and Analysis for the three and six months ended June 30, 2019 and
for the fiscal year ended December 30, 2018 for a discussion of the
various factors that may affect the Company’s future results.
Material factors and assumptions that were applied in drawing a
conclusion or making a forecast or projection are also set out
throughout such documents and this press release.
Forward-looking information is inherently uncertain and the
results or events predicted in such forward-looking information may
differ materially from actual results or events. Material factors,
which could cause actual results or events to differ materially
from a conclusion, forecast, or projection in such forward-looking
information, include, but are not limited to:
- our ability to implement our growth strategies and plans;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- the intensity of competitive activity and our ability to
compete effectively;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit to minimum quantity
purchases;
- our ability to anticipate, identify, or react to changes in
consumer preferences and trends;
- our ability to manage production and inventory levels
effectively in relation to changes in customer demand;
- fluctuations and volatility in the price of raw materials used
to manufacture our products, such as cotton, polyester fibres, dyes
and other chemicals;
- our reliance on key suppliers and our ability to maintain an
uninterrupted supply of raw materials and finished goods;
- the impact of climate, political, social, and economic risks in
the countries in which we operate or from which we source
production;
- disruption to manufacturing and distribution activities due to
such factors as operational issues, disruptions in transportation
logistic functions, labour disruptions, political or social
instability, bad weather, natural disasters, pandemics, and other
unforeseen adverse events;
- compliance with applicable trade, competition, taxation,
environmental, health and safety, product liability, employment,
patent and trademark, corporate and securities, licensing and
permits, data privacy, bankruptcy, anti-corruption, and other laws
and regulations in the jurisdictions in which we operate;
- the imposition of trade remedies, or changes to duties and
tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs that
the Company is currently relying on in conducting its manufacturing
operations or the application of safeguards thereunder;
- factors or circumstances that could increase our effective
income tax rate, including the outcome of any tax audits or changes
to applicable tax laws or treaties;
- changes to and failure to comply with consumer product safety
laws and regulations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of actual, alleged, or perceived
violations of labour and environmental laws or international labour
standards, or unethical labour or other business practices by the
Company or one of its third-party contractors;
- changes in third-party licensing arrangements and licensed
brands;
- our ability to protect our intellectual property rights;
- operational problems with our information systems as a result
of system failures, viruses, security and cyber security breaches,
disasters, and disruptions due to system upgrades or the
integration of systems;
- an actual or perceived breach of data security;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments, including
credit risk on trade accounts receivables and other financial
instruments, liquidity risk, foreign currency risk, and interest
rate risk, as well as risks arising from commodity prices.
These factors may cause the Company’s actual performance and
financial results in future periods to differ materially from any
estimates or projections of future performance or results expressed
or implied by such forward-looking statements. Forward-looking
statements do not take into account the effect that transactions or
non-recurring or other special items announced or occurring after
the statements are made may have on the Company’s business. For
example, they do not include the effect of business dispositions,
acquisitions, other business transactions, asset write-downs, asset
impairment losses, or other charges announced or occurring after
forward-looking statements are made. The financial impact of such
transactions and non-recurring and other special items can be
complex and depends on the facts particular to each of them.
There can be no assurance that the expectations represented by
our forward-looking statements will prove to be correct. The
purpose of the forward-looking statements is to provide the reader
with a description of management’s expectations regarding the
Company’s future financial performance and may not be appropriate
for other purposes. Furthermore, unless otherwise stated, the
forward-looking statements contained in this press release are made
as of the date of this press release, and we do not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events, or otherwise unless required by applicable
legislation or regulation. The forward-looking statements contained
in this press release are expressly qualified by this cautionary
statement.
About GildanGildan is a leading
manufacturer of everyday basic apparel which markets its products
in North America, Europe, Asia-Pacific, and Latin America, under a
diversified portfolio of Company-owned brands, including Gildan®,
American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®,
Gold Toe®, Anvil®, Alstyle®, Secret®, Silks®, Kushyfoot®, Secret
Silky®, Therapy Plus™, Peds® and MediPeds®, and under the Under
Armour® brand through a sock licensing agreement providing
exclusive distribution rights in the United States and Canada. Our
product offering includes activewear, underwear, socks, hosiery,
and legwear products sold to a broad range of customers, including
wholesale distributors, screenprinters or embellishers, as well as
to retailers that sell to consumers through their physical stores
and/or e-commerce platforms, and to global lifestyle brand
companies. In addition, we sell directly to consumers through our
own direct-to-consumer platforms.
Gildan owns and operates vertically-integrated, large-scale
manufacturing facilities which are primarily located in Central
America, the Caribbean Basin, North America, and Bangladesh. With
approximately 54,000 employees worldwide Gildan operates with a
strong commitment to industry-leading labour and environmental
practices throughout its supply chain in accordance with its
comprehensive Genuine Responsibility™ program embedded in the
Company's long-term business strategy. More information about the
Company and its corporate citizenship practices and initiatives can
be found at www.gildancorp.com and
www.genuineresponsibility.com, respectively.
Investor inquiries:Sophie ArgiriouVice President,
Investor Communications(514) 343-8815sargiriou@gildan.com |
Media
inquiries:Garry BellVice President, Corporate Marketing
and Communications(514) 744-8600gbell@gildan.com |
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