Gildan Activewear Inc. (GIL: TSX and NYSE) today announced its
results for the third quarter ended September 29, 2019 in line
with the preliminary results published on October 17, 2019.
Sales of $740 million in the quarter were down 2% compared to
the prior year quarter mainly due to weak sales of activewear in
the imprintables channel both in North America and internationally,
combined with lower sock sales, including the exit of sock programs
in mass, which largely offset strong sales of activewear to global
lifestyle brands in the retail channel. The sales decline together
with higher manufacturing costs, including anticipated higher raw
material and other input costs, partially offset by lower selling,
general and administrative expenses (SG&A), led to lower
earnings for the quarter. GAAP diluted EPS totaled $0.51 and
adjusted diluted EPS totaled $0.53 for the three months ended
September 29, 2019, both down 7% over the prior year quarter.
While weaker imprintables order flow in North America and
ongoing softness in international imprintables markets is currently
dampening sales and earnings growth in 2019, we do not believe this
reflects a structural change to our business as a leading supplier
of basic replenishment apparel driven by our large scale, low-cost
vertically-integrated manufacturing system. Further, our sales to
retailers remains largely on track, particularly as we continue to
leverage our position as a preferred supplier of private brands. We
continue to remain focused on the execution of our supply chain
initiatives aimed at driving increased operational efficiency
across our manufacturing base and continue to expect benefits from
these initiatives to materialize, translating to gross margin
expansion as we move into 2020. As part of these initiatives, at
the end of October, we decided to move forward with plans for the
closure of our textile and sewing operations in Mexico and the
relocation of the equipment at these facilities to our operations
in Central America and the Caribbean Basin. We are also evaluating
additional opportunities to reduce costs and enhance the execution
of our growth drivers, including reducing complexity in certain
areas of our business. In this regard, we are currently assessing
fully phasing out of our direct ship-to-the-piece imprintables
business. This would allow us to continue to focus on our
distributor business, simplify our product offering, and reduce
costs. Finally, we are pleased with the progress of our cost
containment efforts related to SG&A infrastructure and continue
to expect to deliver lower SG&A as a percentage of sales in
2019.
Q3 2019 operating resultsSales for the third
quarter totaled $739.7 million, down 1.9% compared to the prior
year quarter. Lower sales reflected activewear sales of $619.2
million, up 1.1% compared to the third quarter of 2018, offset by a
15.1% decline in the hosiery and underwear category where we
generated $120.5 million in overall sales. The decline in overall
sales in the quarter reflected lower unit sales volumes, partly
offset by favourable product-mix and slightly higher net selling
prices. The slight increase in activewear sales was primarily
driven by double digit growth in sales of activewear to global
lifestyle brands, as well as higher fleece and fashion basics sales
in North America, partly offset by lower sales of imprintable
basics in North America and international markets.
Lower sales in the North American imprintables channel reflected
an overall decline in point of sales from distributors to
screenprinters in the high-single-digit range. While the Company
was projecting an improvement in demand in international markets
from the first half of the year, demand softness in Europe and
China extended through the third quarter. The sales decline in the
hosiery and underwear category was mainly due to lower sock sales
in mass and other channels, including the exit of a sock program in
the dollar channel, as well as the impact of weaker industry demand
in this category.
Gross margin of 27.4% in the third quarter of 2019 was down from
29.0% in the third quarter last year. The 160-basis point decline
reflected higher manufacturing costs, including anticipated
increases in raw material costs, inflationary pressure on other
input costs, as well as unfavourable foreign exchange. These
factors more than offset the benefit of more favourable product-mix
and slightly higher net selling prices.
SG&A expenses for the third quarter of 2019 of $79.0
million, were down $9.1 million, compared to SG&A expenses of
$88.1 million in the same quarter of 2018. As a percentage of
sales, SG&A expenses were 10.7%, reflecting an improvement of
100 basis points over the same period last year.
The Company incurred $4.4 million of restructuring and
acquisition-related costs in the third quarter, compared to
$3.1 million in the same period last year. Restructuring and
acquisition-related costs in the third 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 third quarter of 2019 totaled $117.9
million, down from $127.6 million in the third quarter of 2018.
After excluding restructuring and acquisition-related costs in both
years, adjusted operating income1 for the three months ended
September 29, 2019 amounted to $122.3 million, down $8.4
million, or 6.4% lower than the same period last year. As a
percentage of sales, adjusted operating income for the third
quarter of 16.5%, was down 80 basis points from adjusted operating
margin1 of 17.3% in the third quarter of 2018. The decline was
mainly due to the gross margin pressure in the quarter, offset in
part by SG&A reduction.
Net earnings for the three months ended September 29, 2019
amounted to $104.9 million, or $0.51 per share on a diluted
basis, compared with net earnings of $114.3 million, or $0.55
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, the Company reported
adjusted net earnings1 of $108.4 million, or $0.53 per share on a
diluted basis, in the third quarter of 2019, down from $118.1
million, or $0.57 per share on a diluted basis, in the third
quarter of 2018. The 7.0% decline in adjusted diluted EPS was
mainly due to the decline in sales and adjusted operating
margin.
The Company generated $87.3 million of free cash flow1 in the
third quarter of 2019, compared to free cash flow of $118.4 million
in the third quarter last year. The decline was mainly due to
higher working capital requirements. During the third quarter of
2019, capital expenditures were $40.2 million primarily for
expenditures related to manufacturing capacity expansion
initiatives. The Company ended the third quarter of 2019 with net
debt1 of $933.6 million and a net debt leverage ratio1 of
1.7 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
nine months ended September 29, 2019 of $2,165.2 million were
flat compared to the same period last year, as an increase of $26.2
million, or 1.5% in activewear sales offset a 6.5% decline in the
hosiery and underwear category. The growth in activewear where we
generated sales of $1,778.3 million was mainly due to favourable
product-mix, driven primarily by higher fleece sales, as well as
higher net selling prices, partly offset by the impact of lower
unit sales volumes in imprintable 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, partly offset by double-digit growth in
underwear sales.
Gross margin of 27.1% for the first nine months of 2019 was down
110 basis points compared to the same period last year due mainly
to higher manufacturing costs, including higher raw material costs
and inflationary pressures on other input costs, as well as
unfavourable foreign exchange, which more than offset the benefit
of higher net selling prices and more favourable product-mix.
SG&A expenses of $264.0 million for the nine months ended
September 29, 2019 declined $9.0 million, or 3.3%, compared to the
same period last year, improving 40 basis points as a percentage of
sales to 12.2%, driven by the Company's focus on SG&A cost
containment.
Operating income for the first nine months of 2019 totaled
$264.7 million, or 12.2% of sales, down from $325.0 million, or
15.0% of sales, for the same period last year. The decline was
primarily attributable to lower gross margin, an impairment of
trade accounts receivable related to a distributor receivership in
the first quarter of 2019, which negatively impacted operating
income by more than 100 basis points, as well as higher
restructuring and acquisition-related costs associated with the
Company's manufacturing and warehouse consolidation initiatives.
Excluding the impact of restructuring and acquisition-related
costs, adjusted operating income for the nine months ended
September 29, 2019 totaled $296.0 million, or 13.7% of sales,
compared to $337.5 million, or 15.6% of sales for the same period
last year.
Net earnings for the nine months ended September 29, 2019
amounted to $227.3 million, or $1.11 per share on a diluted basis,
compared with net earnings of $291.2 million, or $1.37 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, the Company reported adjusted net earnings of $256.2
million, or $1.25 per share on a diluted basis, for the nine months
ended September 29, 2019, down from $304.2 million, or $1.43
per share on a diluted basis for the first nine 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.
OutlookGiven the sales weakness for
imprintables both in North America and internationally in the third
quarter, which we continue to see in the fourth quarter, combined
with the expected impact of lower than previously projected
year-end distributor inventory levels, the Company is projecting
full year 2019 sales to be down low-single-digits compared to 2018.
This sales guidance reflects projected activewear sales to be down
low-single-digits due primarily to the downturn in imprintables
sales in North America and internationally. For the hosiery
and underwear category, given current overall industry demand in
socks and underwear, we are incorporating more cautious assumptions
in this guidance for the fourth quarter and we are now projecting
sales in this category to be flat to down low-single-digits versus
our prior mid-single-digit growth projection. While gross margin
for the full year of 2019 is now projected to be below the 2018
level, we continue to project gross margin expansion as we move
into 2020. In addition, we continue to project an improvement in
SG&A expenses as a percentage of sales over 2018. We now expect
estimated after-tax restructuring and acquisition-related costs for
2019 of approximately $45 million compared to our previous
projection of approximately $30 million. The increase reflects
estimated costs related to the decision we made at the end of
October to relocate our Mexican operations to Central America and
the Caribbean Basin. Adjusted operating margin for 2019 is expected
to be lower than 2018, GAAP diluted EPS for 2019 is now projected
to be $1.43 to $1.48 compared to its previous estimate of $1.50 to
$1.55, and adjusted diluted EPS is expected to be in the range of
$1.65 to $1.70. Adjusted EBITDA1 for the full year is projected to
be in the range of $545 to $555 million and free cash flow for 2019
is expected to be $200 to $250 million. Finally, the Company’s 2019
guidance does not include potential additional GAAP charges that
could range between $35 to $45 million in the fourth quarter, in
connection with the full phase out of its direct ship-to-the-piece
imprintables business that is currently under evaluation. These
charges, if incurred, are not expected to be included in adjusted
operating income, adjusted EBITDA, and adjusted diluted EPS.
Declaration of quarterly dividendThe Board of
Directors has declared a cash dividend of $0.134 per share, payable
on December 9, 2019 to shareholders of record on
November 14, 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
October 25, 2019, there were 203,693,574 common shares issued
and outstanding along with 2,255,238 stock options and 103,609
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 third 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 1459916#. 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 nine months ended September 29, 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.
Supplemental Financial Data |
|
CONSOLIDATED FINANCIAL DATA (UNAUDITED) |
|
|
|
|
|
|
|
|
(in U.S.$ millions, except per share amounts or otherwise
indicated) |
Q3 2019 |
|
Q3 2018 |
|
Variation (%) |
|
|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
Net sales |
739.7 |
|
754.4 |
|
(1.9 |
)% |
|
2,165.2 |
|
2,165.8 |
|
0.0 |
% |
Gross profit |
202.7 |
|
218.8 |
|
(7.4 |
)% |
|
586.2 |
|
610.6 |
|
(4.0 |
)% |
SG&A expenses |
79.0 |
|
88.1 |
|
(10.3 |
)% |
|
264.0 |
|
273.0 |
|
(3.3 |
)% |
Impairment of trade accounts
receivable |
1.5 |
|
— |
|
n.m. |
|
|
26.3 |
|
0.1 |
|
n.m. |
|
Restructuring and
acquisition-related costs |
4.4 |
|
3.1 |
|
41.9 |
% |
|
31.3 |
|
12.5 |
|
n.m. |
|
Operating income |
117.9 |
|
127.6 |
|
(7.6 |
)% |
|
264.7 |
|
325.0 |
|
(18.6 |
)% |
Adjusted operating
income(1) |
122.3 |
|
130.7 |
|
(6.4 |
)% |
|
296.0 |
|
337.5 |
|
(12.3 |
)% |
Adjusted EBITDA(1) |
162.0 |
|
167.4 |
|
(3.2 |
)% |
|
419.8 |
|
457.6 |
|
(8.3 |
)% |
Financial expenses |
9.9 |
|
9.1 |
|
8.8 |
% |
|
29.6 |
|
22.4 |
|
32.1 |
% |
Income tax expense |
3.1 |
|
4.2 |
|
(26.2 |
)% |
|
7.8 |
|
11.4 |
|
(31.6 |
)% |
Net earnings |
104.9 |
|
114.3 |
|
(8.2 |
)% |
|
227.3 |
|
291.2 |
|
(21.9 |
)% |
Adjusted net earnings(1) |
108.4 |
|
118.1 |
|
(8.2 |
)% |
|
256.2 |
|
304.2 |
|
(15.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
0.51 |
|
0.55 |
|
(7.3 |
)% |
|
1.11 |
|
1.37 |
|
(19.0 |
)% |
Diluted EPS |
0.51 |
|
0.55 |
|
(7.3 |
)% |
|
1.11 |
|
1.37 |
|
(19.0 |
)% |
Adjusted diluted EPS(1) |
0.53 |
|
0.57 |
|
(7.0 |
)% |
|
1.25 |
|
1.43 |
|
(12.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
27.4 |
% |
29.0 |
% |
(1.6 |
) pp |
|
27.1 |
% |
28.2 |
% |
(1.1 |
) pp |
SG&A expenses as a
percentage of sales |
10.7 |
% |
11.7 |
% |
(1.0 |
) pp |
|
12.2 |
% |
12.6 |
% |
(0.4 |
) pp |
Operating margin |
15.9 |
% |
16.9 |
% |
(1.0 |
) pp |
|
12.2 |
% |
15.0 |
% |
(2.8 |
) pp |
Adjusted operating margin(1) |
16.5 |
% |
17.3 |
% |
(0.8 |
) pp |
|
13.7 |
% |
15.6 |
% |
(1.9 |
) pp |
|
|
|
|
|
|
|
|
Cash flows from (used in)
operating activities |
124.3 |
|
151.7 |
|
(18.1 |
)% |
|
98.6 |
|
264.4 |
|
n.m. |
|
Capital expenditures |
40.2 |
|
33.6 |
|
19.6 |
% |
|
118.9 |
|
99.0 |
|
20.1 |
% |
Free
cash flow(1) |
87.3 |
|
118.4 |
|
(26.3 |
)% |
|
(14.5 |
) |
176.5 |
|
n.m. |
|
n.m. = not
meaningful |
As at |
Sep 29, 2019 |
Dec 30, 2018 |
Inventories |
1,046.5 |
940.0 |
Trade accounts receivable |
527.7 |
317.2 |
Net indebtedness(1) |
933.6 |
622.3 |
Net
debt leverage ratio(1) |
1.7 |
1.0 |
(1) Please refer
to "Definition and reconciliation of non-GAAP financial measures"
in this press release. |
DISAGGREGATION OF REVENUE |
|
Net sales by
major product group were as follows: |
|
(in U.S.$ millions, or otherwise indicated) |
Q3 2019 |
|
Q3 2018 |
|
Variation (%) |
|
|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
Activewear |
619.2 |
|
612.4 |
|
1.1 |
% |
|
1,778.3 |
|
1,752.1 |
|
1.5 |
% |
Hosiery
and underwear |
120.5 |
|
142.0 |
|
(15.1 |
)% |
|
386.9 |
|
413.7 |
|
(6.5 |
)% |
|
739.7 |
|
754.4 |
|
(1.9 |
)% |
|
2,165.2 |
|
2,165.8 |
|
0.0 |
% |
|
|
|
|
|
|
|
|
Net sales were
derived from customers located in the following geographic
areas: |
|
(in U.S.$ millions, or otherwise indicated) |
Q3 2019 |
|
Q3 2018 |
|
Variation (%) |
|
|
YTD 2019 |
|
YTD 2018 |
|
Variation (%) |
|
United States |
632.5 |
|
642.6 |
|
(1.6 |
)% |
|
1,847.2 |
|
1,843.1 |
|
0.2 |
% |
Canada |
27.1 |
|
30.4 |
|
(10.9 |
)% |
|
80.2 |
|
85.9 |
|
(6.6 |
)% |
International |
80.0 |
|
81.3 |
|
(1.6 |
)% |
|
237.8 |
|
236.8 |
|
0.4 |
% |
|
739.6 |
|
754.3 |
|
(1.9 |
)% |
|
2,165.2 |
|
2,165.8 |
|
0.0 |
% |
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.
(in U.S.$ millions, except per share amounts) |
Q3 2019 |
|
Q3 2018 |
|
YTD 2019 |
|
YTD 2018 |
|
Net earnings |
104.9 |
|
114.3 |
|
227.3 |
|
291.2 |
|
Adjustments for: |
|
|
|
|
Restructuring and acquisition-related costs |
4.4 |
|
3.1 |
|
31.3 |
|
12.5 |
|
Income tax recovery relating to restructuring and
acquisition-related actions |
(0.9 |
) |
(0.3 |
) |
(2.4 |
) |
(0.5 |
) |
Income tax expense related to the revaluation of deferred income
tax assets and liabilities due to statutory income tax rate changes
(1) |
— |
|
1.0 |
|
— |
|
1.0 |
|
Adjusted net earnings |
108.4 |
|
118.1 |
|
256.2 |
|
304.2 |
|
Basic EPS |
0.51 |
|
0.55 |
|
1.11 |
|
1.37 |
|
Diluted EPS |
0.51 |
|
0.55 |
|
1.11 |
|
1.37 |
|
Adjusted diluted EPS |
0.53 |
|
0.57 |
|
1.25 |
|
1.43 |
|
(1) The income tax
expense related to the impact of statutory income rate changes is
primarily related to the impact of U.S. tax reform, reflecting the
reduction in the U.S. statutory federal tax rate that took effect
in 2018. |
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.
(in U.S.$ millions, or otherwise indicated) |
Q3 2019 |
|
Q3 2018 |
|
YTD 2019 |
|
YTD 2018 |
|
Operating income(1) |
117.9 |
|
127.6 |
|
264.7 |
|
325.0 |
|
Adjustment for: |
|
|
|
|
Restructuring and acquisition-related costs |
4.4 |
|
3.1 |
|
31.3 |
|
12.5 |
|
Adjusted operating income(1) |
122.3 |
|
130.7 |
|
296.0 |
|
337.5 |
|
|
|
|
|
|
Operating margin |
15.9 |
% |
16.9 |
% |
12.2 |
% |
15.0 |
% |
Adjusted operating margin |
16.5 |
% |
17.3 |
% |
13.7 |
% |
15.6 |
% |
(1) Operating
income and adjusted operating income for the three and nine months
ended September 29, 2019 were positively impacted by $0.7 million
and $2.4 million, respectively, due to the initial adoption of IFRS
16, Leases as described in note 2(d) to the unaudited condensed
interim consolidated financial statements as at and for the three
and nine months ended September 29, 2019. Prior year operating
income and adjusted operating income were not impacted. |
Adjusted EBITDAAdjusted EBITDA is calculated as earnings before
financial expenses, income taxes, and depreciation and
amortization, and excludes the impact of restructuring and
acquisition-related costs. The Company uses adjusted EBITDA,
among other measures, to assess the operating performance of its
business. The Company also believes this measure is commonly used
by investors and analysts to measure a company’s ability to service
debt and to meet other payment obligations, or as a common
valuation measurement. The Company excludes depreciation and
amortization expenses, which are non-cash in nature and can vary
significantly depending upon accounting methods or non-operating
factors. Excluding these items does not imply they are necessarily
non-recurring.
(in U.S.$ millions) |
Q3 2019 |
|
Q3 2018 |
|
YTD 2019 |
|
YTD 2018 |
|
Net earnings |
104.9 |
|
114.3 |
|
227.3 |
|
291.2 |
|
Restructuring and
acquisition-related costs |
4.4 |
|
3.1 |
|
31.3 |
|
12.5 |
|
Depreciation and
amortization |
39.7 |
|
36.7 |
|
123.8 |
|
120.1 |
|
Financial expenses, net |
9.9 |
|
9.1 |
|
29.6 |
|
22.4 |
|
Income
tax expense |
3.1 |
|
4.2 |
|
7.8 |
|
11.4 |
|
Adjusted EBITDA(1) |
162.0 |
|
167.4 |
|
419.8 |
|
457.6 |
|
(1) Adjusted
EBITDA for the three and nine months ended September 29, 2019 was
positively impacted by $4.0 million and $12.1 million,
respectively, due to the initial adoption of IFRS 16, Leases as
described in note 2(d) to the unaudited condensed interim
consolidated financial statements as at and for the three and nine
months ended September 29, 2019. Prior year adjusted EBITDA was not
impacted. |
Free cash flowFree cash flow is defined as cash
from operating activities less cash flow used in investing
activities excluding business acquisitions. The Company considers
free cash flow to be an important indicator of the financial
strength and liquidity of its business, and it is a key metric
which indicates how much cash is available after capital
expenditures to repay debt, to pursue business acquisitions, and/or
to redistribute to its shareholders. The Company believes this
measure is commonly used by investors and analysts when valuing a
business and its underlying assets.
(in U.S.$ millions) |
Q3 2019 |
|
Q3 2018 |
|
YTD 2019 |
|
YTD 2018 |
|
Cash flows from operating
activities |
124.3 |
|
151.7 |
|
98.6 |
|
264.4 |
|
Cash flows used in investing
activities |
(37.0 |
) |
(33.3 |
) |
(114.4 |
) |
(88.0 |
) |
Adjustment for: |
|
|
|
|
Business acquisitions |
— |
|
— |
|
1.3 |
|
0.1 |
|
Free
cash flow(1) |
87.3 |
|
118.4 |
|
(14.5 |
) |
176.5 |
|
(1) Free cash flow
for the three and nine months ended September 29, 2019 increased by
$3.5 million and $10.1 million, respectively, due to the initial
adoption of IFRS 16, Leases as described in note 2(d) to the
unaudited condensed interim consolidated financial statements as at
and for the three and nine months ended September 29, 2019. Prior
year free cash flow was not impacted. |
Total indebtedness and net indebtednessTotal indebtedness is
defined as the total bank indebtedness, long-term debt (including
any current portion), and lease obligations (including any current
portion), and net indebtedness is calculated as total indebtedness
net of cash and cash equivalents. The Company considers total
indebtedness and net indebtedness to be important indicators of the
financial leverage of the Company. The Company has included lease
obligations in total indebtedness and net indebtedness beginning in
fiscal 2019, consistent with the adoption of IFRS 16, Leases as
described in note 2(d) to the unaudited condensed interim
consolidated financial statements as at and for the three and nine
months ended September 29, 2019. Comparative periods have not been
revised and therefore may not be directly comparable.
(in U.S.$ millions) |
Sep 29, 2019 |
|
Dec 30, 2018 |
|
Long-term debt and total bank
indebtedness |
907.0 |
|
669.0 |
|
Lease obligations |
82.4 |
|
— |
|
Total indebtedness |
989.4 |
|
669.0 |
|
Cash
and cash equivalents |
(55.8 |
) |
(46.7 |
) |
Net
indebtedness |
933.6 |
|
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) |
Sep 29, 2019 |
|
Dec 30, 2018 |
|
Adjusted EBITDA for the
trailing twelve months |
557.9 |
|
595.5 |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
557.9 |
|
595.5 |
|
Net indebtedness |
933.6 |
|
622.3 |
|
Net
debt leverage ratio(1) |
1.7 |
|
1.0 |
|
(1) The net debt
leverage ratio as at September 29, 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 nine months ended September
29, 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 nine months ended September 29, 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 53,000 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:Genevieve GosselinDirector,
Corporate Marketing and Communications(514)
343-8814ggosselin@gildan.com |
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