– Employees rise to meet pandemic challenges globally with
safety-first manufacturing, distribution and selling to mitigate
COVID-19 market disruptions
– 2Q GAAP EPS increases 12% to $0.46; Adjusted EPS increases 58%
to $0.60
– 2Q net sales of $1.74 billion driven by
better-than-base-case-scenario apparel sales, including increasing
point-of-sale trends and market-share gains, and
better-than-expected new personal protective garments business
– 2Q net cash from operations of $65 million; year-to-date
operating cash flow $40 million better than a year ago
– Quarter-end liquidity of approximately $1.8 billion provides
continued balance sheet strength and operational flexibility
HanesBrands (NYSE: HBI), a leading global marketer of branded
everyday basic apparel, today announced second-quarter results with
double-digit growth in diluted earnings per share despite market
disruption from the COVID-19 pandemic.
The earnings growth resulted from the company’s ability to pivot
to production and sales of personal protective garments (face masks
and medical gowns) combined with relatively strong apparel
performance in pandemic conditions, including 68% sales growth in
the online channel.
In the midst of the global pandemic, HanesBrands is focused on:
serving channels of trade that remain open; reopening production,
distribution and selling operations in a safe and prudent manner;
generating and preserving cash; and developing a product line of
personal protective garments to meet emerging government,
commercial and consumer demand.
Net sales for the second quarter ended June 27, 2020, were $1.74
billion compared with $1.76 billion a year ago. The company sold
$752 million in protective garments globally. The year-ago quarter
included net sales of $119 million from the now exited C9 Champion
mass program and the DKNY intimate apparel license. Excluding the
exited programs and foreign exchange rates, total constant-currency
net sales for second-quarter 2020 increased 7%.
Second-quarter GAAP operating profit increased 5% to $242
million, and the quarter’s adjusted operating profit excluding
actions increased 41% to $305 million.
Second-quarter GAAP EPS increased 12% to $0.46, and adjusted EPS
excluding actions increased 58% to $0.60. (See the Note on
Reconciliation of Select GAAP Measures to Non-GAAP Measures later
in this news release for additional discussion and details of
actions, which include pandemic-related charges.)
“The HanesBrands organization did a phenomenal job overcoming
significant challenges in order to mitigate the effects of the
global pandemic,” said Hanes Chief Executive Officer Gerald W.
Evans Jr. “The professionalism, ingenuity and dedication of our
worldwide employees was on display in generating double-digit EPS
growth, establishing a new protective garments business line from
scratch, and starting the reopening of manufacturing, distribution
and selling in the most safe and effective manner possible.
“Despite the effects of pandemic-caused disruptions to global
economies, our business is in great shape. We performed
significantly better than our base-case scenario in both our
apparel business and our new protective garment business.
Point-of-sale trends are improving for apparel, and in the case of
U.S. Innerwear basics and U.S. Champion, point-of-sale trends in
May and June were higher than pre-COVID levels.
“Our brands are strong, and we are gaining market share and
building momentum. Our liquidity remains strong allowing us to
maintain our quarterly cash dividend and have ample operating
flexibility. While there is still near-term uncertainty concerning
the ongoing economic impact of the COVID-19 pandemic, we believe we
are positioned to drive growth and seize opportunities over the
next several years.”
As a result of the COVID-19 pandemic and the lack of visibility
to business conditions, Hanes withdrew its quarterly and full-year
performance guidance on March 25, 2020. The company then modeled
several different financial scenarios based on assumptions of when
retailer stores and economies would begin to reopen. Under the
company’s base-case scenario, stores were assumed to gradually
reopen beginning in late May.
Callouts for Results and Ongoing
Operations During the Pandemic
Apparel Sales and Protective Garments Contribute to
Results. Apparel sales and protective garment sales both
exceeded the company’s base-case scenario for the quarter. The
company continues to generate significant sales growth through
channels of trade that have remained open during the pandemic,
including online, mass retail, dollar store, and food and drug.
On a rebased comparison to a year ago, second-quarter global
online sales increased more than 70% through company e-commerce
websites, retailer websites, large internet pure-plays, and
business-to-business customers. Excluding sales of protective
garments, approximately 30% of total sales in the quarter were
through the online channel.
The company sold $752 million in personal protection garments
globally to governments, large organizations, consumers and
business-to-business customers. The sales of the face masks and
medical gowns significantly exceeded initial expectations for the
new business lines. As part of the protective-garment sales in the
quarter, the company delivered more than 450 million cloth face
coverings and more than 20 million medical gowns to the U.S.
government.
The company is selling face masks to consumers under its leading
brands globally, including Hanes, Champion, Bonds and Dim, and
protective garments represent an ongoing business opportunity.
Excluding the potential for additional government contracts, the
company estimates that it could sell more than $150 million of
protective garments in the second half of 2020.
First-Half Operating Cash Flow Improves, Despite COVID-19
Impact. Operating cash flow of $65 million in the second
quarter resulted in a first-half operating cash improvement of
approximately $40 million versus a year ago. Working capital
discipline, temporary cost reductions, and inventory control and
production timeouts contributed to cash generation. Inventory
declined 12% versus a year ago.
Second-Quarter Restructuring Charges Related to Planned
Actions and Additional COVID-Related Costs. The company
incurred approximately $63 million in both planned restructuring
actions and additional COVID-related costs in the second quarter.
The previously disclosed planned supply chain restructuring actions
accounted for $11 million of second-quarter charges. The remaining
$52 million of noncash pandemic-related charges incurred in the
second quarter consisted of a $20 million write down of intangible
assets, $11 million of bad debt expense, and approximately $21
million related to canceled orders of specialized seasonal
inventory. (See the Note on Reconciliation of Select GAAP Measures
to Non-GAAP Measures later in this news release for additional
discussion and details.)
Second-Quarter 2020 Business Segment
Summaries
International Segment. As reported, second-quarter
International segment total sales declined 20% while operating
profit decreased 2%. On a constant-currency basis, net sales
decreased 17% and operating profit decreased 3%.
Apparel performance, excluding protective garments, exceeded the
company’s base-case scenario with strong online sales growth and
strong point-of-sale trends after closed company and retailer
stores began to reopen. Excluding protective garment sales, segment
revenue declined 44%.
Innerwear Segment. U.S. Innerwear segment results
benefited from better-than-expected apparel performance and
significant sales of protective garments. Second-quarter segment
revenue increased 61% and operating profit increased 104%.
Operating-margin enhancement resulted from fixed-cost leverage and
SG&A expense control, including temporary cost reductions.
Apparel performance, excluding protective garments,
significantly exceeded the company’s pandemic base-case scenario
with revenue decreasing 29%. When year-ago results are rebased to
reflect the exit of the C9 Champion mass retail program and DKNY
intimates license, segment revenue decreased 27%.
Innerwear point-of-sale trends excluding protective garments
accelerated through the quarter, turning significantly positive in
May and June. Innerwear basics gained more than 300 basis points of
market share in the quarter, and Innerwear intimate apparel
point-of-sale trends returned to pre-COVID levels entering
July.
Activewear Segment. U.S. Activewear second-quarter
performance exceeded the company’s base-case pandemic scenario.
Segment sales decreased 62% as a result of the pandemic-related
demand impacts and $98 million of C9 Champion sales in mass retail
in the year-ago quarter. The segment recorded an operating loss in
the quarter.
When the year-ago quarter is rebased for the C9 Champion program
exit, sales decreased 52% and operating profit decreased 113%. The
company maintained Champion marketing investment consistent with
the year-ago quarter.
The COVID pandemic resulted in retailer door closures and lower
demand for the segment’s printwear and sports apparel businesses.
Point-of-sale trends for Champion accelerated as the quarter
progressed, and strong positive trends continued in July. Sales
through the enhanced Champion.com website increased nearly 200% in
the quarter.
2020 Financial Guidance
Due to the continued uncertainty and unpredictability of the
COVID-19 pandemic, HanesBrands will not provide quarterly and
full-year performance guidance until visibility of the pandemic’s
effect on global economies improves.
The decline in apparel sales in the second quarter was better
than the company’s base-case scenario. Absent a slowdown of store
reopenings or recurrence of store closures, the company anticipates
sequential improvement of sales declines in the third and fourth
quarters. U.S. Innerwear sales on the strength of basics could
return to rebased year-ago levels by the end of the year.
The company is selling face masks to consumers under its leading
brands globally. Excluding the potential for additional government
contracts, the company estimates that it could sell more than $150
million of protective garments in the second half of 2020,
primarily in the third quarter.
The company expects to generate positive cash flow in the second
half.
The fiscal year ending Jan. 2, 2021, includes a 53rd week in the
fourth quarter. The company has exited the C9 Champion mass program
and DKNY license for intimate apparel. The company expects foreign
currency exchange rates to reduce net sales and operating profit in
2020.
The company’s tax rate for the second quarter was 17.3%. The
company expects its second-half tax rate to be approximately
17.5%.
The company repurchased approximately 14.5 million shares in the
first quarter and has suspended share repurchases for the remainder
of the year. The weighted average of diluted shares outstanding for
the second quarter was 351 million.
Hanes has updated its quarterly frequently-asked-questions
document, which is available at www.Hanes.com/faq.
Note on Adjusted Measures, Rebased
Measures and Reconciliation to GAAP Measures
To supplement financial results prepared in accordance with
generally accepted accounting principles, the company provides
quarterly and full-year results concerning certain non‐GAAP
financial measures, including adjusted EPS, adjusted net income,
adjusted operating profit (and margin), adjusted SG&A, adjusted
gross profit (and margin), adjusted net sales, EBITDA and adjusted
EBITDA.
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 SG&A is defined as selling, general and
administrative expenses excluding actions. Adjusted gross profit is
defined as gross profit excluding actions. Adjusted net sales are
defined as net sales excluding actions.
Charges for actions taken in 2019 primarily represented supply
chain network changes, program exit costs, and overhead reduction
as well as completion of outstanding acquisition integration.
Charges taken in 2020 include supply chain restructuring actions,
program exit costs and COVID-19 related non-cash charges.
Acquisition and integration costs include legal fees, consulting
fees, bank fees, severance costs, certain purchase accounting
items, facility closures, inventory write-offs, information
technology integration costs and similar charges. While these costs
are not operational in nature and are not expected to continue for
any singular transaction on an ongoing basis, similar types of
costs, expenses and charges have occurred in prior periods and may
recur in future periods depending upon acquisition activity.
Hanes has chosen to present these non‐GAAP measures to investors
to enable additional analyses of past, present and future operating
performance and as a supplemental means of evaluating operations
absent the effect of acquisitions and other actions. Hanes believes
these non-GAAP measures provide management and investors with
valuable supplemental information for analyzing the operating
performance of the company’s ongoing business during each period
presented without giving effect to costs associated with the
execution and integration of any of the aforementioned actions
taken.
The company has also chosen to present EBITDA and adjusted
EBITDA to investors because it considers these measures to be an
important supplemental means of evaluating operating performance.
EBITDA is defined as earnings before interest, taxes, depreciation
and amortization. Adjusted EBITDA is defined as EBITDA excluding
actions and stock compensation expense. Hanes believes that EBITDA
and adjusted EBITDA are frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies in the industry, and management uses EBITDA and adjusted
EBITDA for planning purposes in connection with setting its capital
allocation strategy. EBITDA and adjusted EBITDA should not,
however, be considered as measures of discretionary cash available
to invest in the growth of the business.
In addition, with respect to 2020 financial performance, Hanes
has chosen to present certain year-over-year comparisons with
respect to the company’s rebased 2019 business, which excludes the
exited C9 Champion program at mass retail and DKNY license. Hanes
believes this information is useful to management and investors to
facilitate a more meaningful comparison of the results of the
company’s ongoing business between 2019 and 2020. The company has
provided rebased 2019 quarterly income statements in Supplemental
Table B dated Feb. 7, 2020, which is available online at
www.hanes.com/investors.
Hanes is a global company that reports financial information in
U.S. dollars in accordance with GAAP. As a supplement to the
company’s reported operating results, Hanes also presents
constant-currency financial information, which is a non-GAAP
financial measure that excludes the impact of translating foreign
currencies into U.S. dollars. The company uses constant-currency
information to provide a framework to assess how the business
performed excluding the effects of changes in the rates used to
calculate foreign currency translation.
To calculate foreign currency translation on a constant currency
basis, operating results for the current-year period for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average exchange rates in effect during
the comparable period of the prior year (rather than the actual
exchange rates in effect during the current year period).
Hanes believes constant-currency information is useful to
management and investors to facilitate comparison of operating
results and better identify trends in the company’s businesses.
Non‐GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as an alternative to,
or substitute for, financial results prepared in accordance with
GAAP. Further, the non-GAAP measures presented may be different
from non-GAAP measures with similar or identical names presented by
other companies.
Reconciliations of these non-GAAP measures to the most directly
comparable GAAP financial measures are presented in the
supplemental financial information included with this news
release.
Webcast Conference Call
Hanes will host an internet webcast of its second-quarter
investor conference call at 8:30 a.m. EDT today, July 30, 2020. The
webcast of the call, which will consist of prepared remarks
followed by a question-and-answer session, may be accessed at
www.Hanes.com/investors. The call is expected to conclude by 9:30
a.m.
An archived replay of the conference call webcast will be
available in the investors section of the Hanes corporate website.
A telephone playback will be available from approximately noon EDT
today through midnight EDT Aug. 6, 2020. The replay will be
available by calling toll-free (855) 859-2056 or by toll call at
(404) 537-3406. The replay ID is 5907699.
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 regarding the potential impact of the COVID-19 outbreak
on our business and financial performance; guidance and predictions
regarding expected operating results, including related to our new
business line for cotton face masks and other personal protection
garments; our belief that we have sufficient liquidity to fund our
ongoing business operations; and statements made in 2020 Financial
Guidance section of this news release, 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 potential
effects of the COVID-19 outbreak, including on consumer spending,
global supply chains and the financial markets; the highly
competitive and evolving nature of the industry in which we
compete; the rapidly changing retail environment; any inadequacy,
interruption, integration failure or security failure with respect
to our information technology; the impact of significant
fluctuations and volatility in various input costs, such as cotton
and oil-related materials, utilities, freight and wages; our
ability to attract and retain a senior management team with the
core competencies needed to support growth in global markets; our
ability to properly manage strategic projects in order to achieve
the desired results; significant fluctuations in foreign exchange
rates; our reliance on a relatively small number of customers for a
significant portion of our sales; legal, regulatory, political and
economic risks related to our international operations; our ability
to effectively manage our complex multinational tax structure; the
existence of a material weakness in our internal control over
financial reporting; and other risks identified from time to time
in our most recent Securities and Exchange Commission reports,
including our annual report on Form 10-K and quarterly reports on
Form 10-Q. Since it is not possible to predict or identify all of
the risks, uncertainties and other factors that may affect future
results, the above list should not be considered a complete list.
Any forward-looking statement speaks only as of the date on which
such statement is made, and HanesBrands undertakes no obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise, other than as
required by law.
HanesBrands
HanesBrands, based in Winston-Salem, N.C., is a socially
responsible leading marketer of everyday basic innerwear and
activewear apparel in the Americas, Europe, Australia and
Asia-Pacific. The company sells its products under some of the
world’s strongest apparel brands, including Hanes, Champion, Bonds,
DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things, Nur Die/Nur
Der, Alternative, L’eggs, JMS/Just My Size, Wonderbra, Berlei, and
Gear for Sports. The company sells T-shirts, bras, panties,
shapewear, underwear, socks, hosiery, and activewear produced in
the company’s low-cost global supply chain. A Fortune 500 company
and member of the S&P 500 stock index (NYSE: HBI), Hanes has
approximately 63,000 employees in more than 40 countries. For more
information, visit the company’s corporate website at
www.Hanes.com/corporate and newsroom at
https://newsroom.hanesbrands.com/. Connect with the company via
social media: Twitter (@hanesbrands), Facebook
(www.facebook.com/hanesbrandsinc), Instagram
(@hanesbrands_careers), and LinkedIn (@Hanesbrandsinc).
TABLE 1
HANESBRANDS INC.
Condensed Consolidated
Statements of Income and Supplemental Financial Information
(in thousands, except
per-share amounts)
(Unaudited)
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019
% Change
June 27, 2020
June 29, 2019
% Change
Net sales
$
1,738,779
$
1,760,927
(1.3
)%
$
3,055,241
$
3,348,951
(8.8
)%
Cost of sales
1,105,767
1,085,404
1,948,497
2,053,397
Gross profit
633,012
675,523
(6.3
)%
1,106,744
1,295,554
(14.6
)%
As a % of net sales
36.4
%
38.4
%
36.2
%
38.7
%
Selling, general and administrative
expenses
391,476
445,923
831,078
916,310
As a % of net sales
22.5
%
25.3
%
27.2
%
27.4
%
Operating profit
241,536
229,600
5.2
%
275,666
379,244
(27.3
)%
As a % of net sales
13.9
%
13.0
%
9.0
%
11.3
%
Other expenses
5,050
8,249
11,540
15,700
Interest expense, net
41,659
46,522
78,508
94,581
Income before income tax expense
194,827
174,829
185,618
268,963
Income tax expense
33,646
25,274
32,311
38,320
Net income
$
161,181
$
149,555
7.8
%
$
153,307
$
230,643
(33.5
)%
Earnings per share:
Basic
$
0.46
$
0.41
$
0.43
$
0.63
Diluted
$
0.46
$
0.41
$
0.43
$
0.63
Weighted average shares outstanding:
Basic
350,538
364,637
354,778
364,603
Diluted
350,829
365,537
355,133
365,418
The following tables present a
reconciliation of reported results on a constant currency basis for
the quarter and six months ended June 27, 2020 and a comparison to
prior year:
Quarter Ended June 27,
2020
As Reported
Impact from Foreign
Currency1
Constant Currency
Quarter Ended June 29,
2019
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
1,738,779
$
(13,653
)
$
1,752,432
$
1,760,927
(1.3
)%
(0.5
)%
Gross profit
633,012
(6,298
)
639,310
675,523
(6.3
)
(5.4
)
Operating profit
241,536
111
241,425
229,600
5.2
5.2
Diluted earnings per share
$
0.46
$
0.00
$
0.46
$
0.41
12.2
%
12.2
%
As adjusted:2
Net sales
$
1,738,779
$
(13,653
)
$
1,752,432
$
1,642,217
5.9
%
6.7
%
Gross profit
659,546
(6,298
)
665,844
652,952
1.0
2.0
Operating profit
304,832
111
304,721
216,752
40.6
40.6
Diluted earnings per share
$
0.60
$
0.00
$
0.60
$
0.38
57.9
%
57.9
%
Six Months Ended June 27,
2020
As Reported
Impact from Foreign
Currency1
Constant Currency
Six Months Ended
June 29, 2019
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
3,055,241
$
(33,854
)
$
3,089,095
$
3,348,951
(8.8
)%
(7.8
)%
Gross profit
1,106,744
(16,560
)
1,123,304
1,295,554
(14.6
)
(13.3
)
Operating profit
275,666
(774
)
276,440
379,244
(27.3
)
(27.1
)
Diluted earnings per share
$
0.43
$
0.00
$
0.43
$
0.63
(31.7
)%
(31.7
)%
As adjusted:2
Net sales
$
3,055,241
$
(33,854
)
$
3,089,095
$
3,136,137
(2.6
)%
(1.5
)%
Gross profit
1,155,091
(16,560
)
1,171,651
1,260,787
(8.4
)
(7.1
)
Operating profit
368,161
(774
)
368,935
366,846
0.4
0.6
Diluted earnings per share
$
0.65
$
0.00
$
0.65
$
0.60
8.3
%
8.3
%
1
Effect of the change in foreign currency
exchange rates year-over-year. Calculated by applying prior period
exchange rates to the current year financial results.
2
Results for the quarters and six months
ended June 27, 2020 and June 29, 2019 reflect adjustments for
restructuring and other action-related charges. Results for the
quarter and six months ended June 29, 2019 also reflect adjustments
for the exited C9 Champion program at Target and DKNY Intimates
license. See “Reconciliation of Select GAAP Measures to Non-GAAP
Measures” in Table 5.
TABLE 2
HANESBRANDS INC.
Supplemental Financial
Information
(in thousands, except
per-share amounts)
(Unaudited)
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019 Rebased1
% Change
June 27, 2020
June 29, 2019 Rebased1
% Change
Segment net sales:
Innerwear
$
1,094,814
$
657,477
66.5
%
$
1,517,216
$
1,123,891
35.0
%
Activewear
168,379
350,694
(52.0
)
456,379
671,461
(32.0
)
International
456,875
568,863
(19.7
)
1,012,776
1,215,043
(16.6
)
Other
18,711
65,183
(71.3
)
68,870
125,742
(45.2
)
Total net sales
$
1,738,779
$
1,642,217
5.9
%
$
3,055,241
$
3,136,137
(2.6
)%
Segment operating profit:
Innerwear
$
304,524
$
146,997
107.2
%
$
386,075
$
250,123
54.4
%
Activewear
(5,751
)
45,855
(112.5
)
2,357
70,025
(96.6
)
International
79,124
81,078
(2.4
)
131,142
180,851
(27.5
)
Other
(12,270
)
6,032
(303.4
)
(18,395
)
6,786
(371.1
)
General corporate expenses/other
(60,795
)
(63,210
)
(3.8
)
(133,018
)
(140,939
)
(5.6
)
Total operating profit before
restructuring and other action-related charges
304,832
216,752
40.6
368,161
366,846
0.4
Restructuring and other action-related
charges
(63,296
)
(12,609
)
402.0
(92,495
)
(33,982
)
172.2
Total operating profit
$
241,536
$
204,143
18.3
%
$
275,666
$
332,864
(17.2
)%
1
Results for the quarter and six months
ended June 29, 2019 reflect adjustments for the exited C9 Champion
program at Target and DKNY Intimates license. See “Reconciliation
of Select GAAP Measures to Non-GAAP Measures” in Table 5.
The following table presents a
reconciliation of reported net sales adjusted for personal
protective equipment (“PPE”) sales for the quarter and six months
ended June 27, 2020 and a comparison to prior year.
Quarter Ended June 27,
2020
As Reported
% Change1
PPE
Adjusted for PPE
% Change1
Segment net sales:
Innerwear
$
1,094,814
66.5
%
$
613,516
$
481,298
(26.8
)%
Activewear
168,379
(52.0
)
—
168,379
(52.0
)
International
456,875
(19.7
)
138,707
318,168
(44.1
)
Other
18,711
(71.3
)
—
18,711
(71.3
)
Net sales
$
1,738,779
5.9
%
$
752,223
$
986,556
(39.9
)%
Six Months Ended June 27,
2020
As Reported
% Change1
PPE
Adjusted for PPE
% Change1
Segment net sales:
Innerwear
$
1,517,216
35.0
%
$
613,516
$
903,700
(19.6
)%
Activewear
456,379
(32.0
)
—
456,379
(32.0
)
International
1,012,776
(16.6
)
138,707
874,069
(28.1
)
Other
68,870
(45.2
)
—
68,870
(45.2
)
Net sales
$
3,055,241
(2.6
)%
$
752,223
$
2,303,018
(26.6
)%
1
The comparison to the quarter and six
months ended June 29, 2019 reflects adjustments for the exited C9
Champion program at Target and DKNY Intimates license. See
“Reconciliation of Select GAAP Measures to Non-GAAP Measures” in
Table 5.
Including the unfavorable foreign currency
impact of $0.7 million, global Champion sales outside the mass
channel decreased approximately 46% in the second quarter of 2020
compared to the second quarter of 2019. On a constant currency
basis, the global Champion sales decrease remained the same at
approximately 46%.
TABLE 3
HANESBRANDS INC.
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
June 27, 2020
December 28, 2019
Assets
Cash and cash equivalents
$
683,114
$
328,876
Trade accounts receivable, net
1,196,826
815,210
Inventories
1,958,443
1,905,845
Other current assets
193,422
174,634
Total current assets
4,031,805
3,224,565
Property, net
565,849
587,896
Right-of-use assets
479,677
487,787
Trademarks and other identifiable
intangibles, net
1,478,721
1,520,800
Goodwill
1,233,184
1,235,711
Deferred tax assets
200,047
203,331
Other noncurrent assets
123,677
93,896
Total assets
$
8,112,960
$
7,353,986
Liabilities
Accounts payable
$
1,152,273
$
959,006
Accrued liabilities
568,228
531,184
Lease liabilities
160,432
166,091
Notes payable
8,803
4,244
Accounts Receivable Securitization
Facility
—
—
Current portion of long-term debt
112,512
110,914
Total current liabilities
2,002,248
1,771,439
Long-term debt
3,985,631
3,256,870
Lease liabilities - noncurrent
362,570
358,281
Pension and postretirement benefits
374,052
403,458
Other noncurrent liabilities
309,139
327,343
Total liabilities
7,033,640
6,117,391
Stockholders’ equity
Preferred stock
—
—
Common stock
3,481
3,624
Additional paid-in capital
302,522
304,395
Retained earnings
1,404,326
1,546,224
Accumulated other comprehensive loss
(631,009
)
(617,648
)
Total stockholders’ equity
1,079,320
1,236,595
Total liabilities and stockholders’
equity
$
8,112,960
$
7,353,986
TABLE 4
HANESBRANDS INC.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Operating Activities:
Net income
$
161,181
$
149,555
$
153,307
$
230,643
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation
22,618
24,035
45,399
46,889
Amortization of acquisition
intangibles
6,086
6,247
12,199
12,537
Other amortization
2,630
1,973
5,107
5,063
Impairment of intangible assets
20,319
—
20,319
—
Amortization of debt issuance costs
2,996
2,318
5,119
4,758
Stock compensation expense
4,466
2,069
9,189
7,247
Deferred taxes
(1,740
)
1,272
(2,201
)
(2,582
)
Other
18,779
1,228
9,259
5,475
Changes in assets and liabilities:
Accounts receivable
(465,828
)
(75,167
)
(392,134
)
(137,445
)
Inventories
25,376
12,893
(61,409
)
(165,512
)
Other assets
(58,360
)
3,793
(31,570
)
(28,579
)
Accounts payable
223,943
25,912
210,338
7,699
Accrued pension and postretirement
benefits
2,163
3,657
(19,318
)
(18,321
)
Accrued liabilities and other
100,794
(22,857
)
18,603
(25,235
)
Net cash from operating activities
65,423
136,928
(17,793
)
(57,363
)
Investing Activities:
Capital expenditures
(20,753
)
(33,016
)
(46,512
)
(58,285
)
Proceeds from sales of assets
—
382
66
518
Other
4,607
—
5,823
—
Net cash from investing activities
(16,146
)
(32,634
)
(40,623
)
(57,767
)
Financing Activities:
Borrowings on notes payable
54,357
79,818
116,669
162,592
Repayments on notes payable
(48,021
)
(80,944
)
(112,373
)
(163,703
)
Borrowings on Accounts Receivable
Securitization Facility
—
16,870
227,061
123,812
Repayments on Accounts Receivable
Securitization Facility
(152,152
)
(26,560
)
(227,061
)
(95,110
)
Borrowings on Revolving Loan
Facilities
—
830,000
1,638,000
1,602,500
Repayments on Revolving Loan
Facilities
(950,000
)
(742,000
)
(1,638,000
)
(1,422,500
)
Borrowings on Senior Notes
700,000
—
700,000
—
Repayments on Term Loan Facilities
—
(130,998
)
—
(141,623
)
Borrowings on International Debt
—
—
31,222
7,141
Repayments on International Debt
—
(27,941
)
—
(27,941
)
Share repurchases
—
—
(200,269
)
—
Cash dividends paid
(52,213
)
(54,228
)
(105,896
)
(108,449
)
Payments of debt issuance costs
(14,602
)
(106
)
(14,834
)
(768
)
Taxes paid related to net shares
settlement of equity awards
(18
)
(251
)
(80
)
(1,157
)
Other
453
412
879
985
Net cash from financing activities
(462,196
)
(135,928
)
415,318
(64,221
)
Effect of changes in foreign exchange
rates on cash
12,392
2,178
(2,669
)
4,282
Change in cash, cash equivalents and
restricted cash
(400,527
)
(29,456
)
354,233
(175,069
)
Cash, cash equivalents and restricted cash
at beginning of period
1,084,683
310,119
329,923
455,732
Cash, cash equivalents and restricted cash
at end of period
684,156
280,663
684,156
280,663
Less restricted cash at end of period
1,042
22,722
1,042
22,722
Cash and cash equivalents per balance
sheet at end of period
$
683,114
$
257,941
$
683,114
$
257,941
TABLE 5
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except
per-share amounts)
(Unaudited)
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Net sales, as reported under GAAP
$
1,738,779
$
1,760,927
$
3,055,241
$
3,348,951
Net sales from exited programs
—
(118,710
)
—
(212,814
)
Net sales, rebased
$
1,738,779
$
1,642,217
$
3,055,241
$
3,136,137
Gross profit, as reported under GAAP
$
633,012
$
675,523
$
1,106,744
$
1,295,554
Restructuring and other action-related
charges
26,534
12,598
48,347
30,290
Gross profit on exited programs
—
(35,169
)
—
(65,057
)
Adjusted gross profit, rebased
$
659,546
$
652,952
$
1,155,091
$
1,260,787
As a % of net sales, rebased
37.9
%
39.8
%
37.8
%
40.2
%
Selling, general and administrative
expenses, as reported under GAAP
$
391,476
$
445,923
$
831,078
$
916,310
Restructuring and other action-related
charges
(36,762
)
(11
)
(44,148
)
(3,692
)
Selling, general and administrative
expenses related to exited programs
—
(9,712
)
—
(18,677
)
Adjusted selling, general and
administrative expenses, rebased
$
354,714
$
436,200
$
786,930
$
893,941
As a % of net sales, rebased
20.4
%
26.6
%
25.8
%
28.5
%
Operating profit, as reported under
GAAP
$
241,536
$
229,600
$
275,666
$
379,244
Restructuring and other action-related
charges included in gross profit
26,534
12,598
48,347
30,290
Restructuring and other action-related
charges included in SG&A
36,762
11
44,148
3,692
Gross profit on exited programs
—
(35,169
)
—
(65,057
)
Selling, general and administrative
expenses related to exited programs
—
9,712
—
18,677
Adjusted operating profit, rebased
$
304,832
$
216,752
$
368,161
$
366,846
As a % of net sales, rebased
17.5
%
13.2
%
12.1
%
11.7
%
Net income, as reported under GAAP
$
161,181
$
149,555
$
153,307
$
230,643
Restructuring and other action-related
charges included in gross profit
26,534
12,598
48,347
30,290
Restructuring and other action-related
charges included in SG&A
36,762
11
44,148
3,692
Gross profit on exited programs
—
(35,169
)
—
(65,057
)
Selling, general and administrative
expenses related to exited programs
—
9,712
—
18,677
Tax effect on actions
(12,415
)
1,812
(16,649
)
1,749
Adjusted net income, rebased
$
212,062
$
138,519
$
229,153
$
219,994
Diluted earnings per share, as reported
under GAAP
$
0.46
$
0.41
$
0.43
$
0.63
Restructuring and other action-related
charges
0.15
0.03
0.21
0.08
Exited programs
—
(0.06
)
—
(0.11
)
Adjusted diluted earnings per share,
rebased
$
0.60
$
0.38
$
0.65
$
0.60
Quarter Ended June 29,
2019
As Reported
Less: Exited Programs
Adjusted for Exited
Programs
Less: Restructuring and other
action-related charges
Rebased
Segment net sales:
Innerwear
$
678,604
$
21,127
$
657,477
$
—
$
657,477
Activewear
448,277
97,583
350,694
—
350,694
International
568,863
—
568,863
—
568,863
Other
65,183
—
65,183
—
65,183
Total net sales
$
1,760,927
$
118,710
$
1,642,217
$
—
$
1,642,217
Segment operating profit:
Innerwear
$
149,530
$
2,533
$
146,997
$
—
$
146,997
Activewear
68,779
22,924
45,855
—
45,855
International
81,078
—
81,078
—
81,078
Other
6,032
—
6,032
—
6,032
General corporate expenses/other
(63,210
)
—
(63,210
)
—
(63,210
)
Restructuring and other action-related
charges
(12,609
)
—
(12,609
)
(12,609
)
—
Total operating profit
$
229,600
$
25,457
$
204,143
$
(12,609
)
$
216,752
Six Months Ended June 29,
2019
As Reported
Less: Exited Programs
Adjusted for Exited
Programs
Less: Restructuring and other
action-related charges
Rebased
Segment net sales:
Innerwear
$
1,154,549
$
30,658
$
1,123,891
$
—
$
1,123,891
Activewear
853,617
182,156
671,461
—
671,461
International
1,215,043
—
1,215,043
—
1,215,043
Other
125,742
—
125,742
—
125,742
Total net sales
$
3,348,951
$
212,814
$
3,136,137
$
—
$
3,136,137
Segment operating profit:
Innerwear
$
254,156
$
4,033
$
250,123
$
—
$
250,123
Activewear
112,372
42,347
70,025
—
70,025
International
180,851
—
180,851
—
180,851
Other
6,786
—
6,786
—
6,786
General corporate expenses/other
(140,939
)
—
(140,939
)
—
(140,939
)
Restructuring and other action-related
charges
(33,982
)
—
(33,982
)
(33,982
)
—
Total operating profit
$
379,244
$
46,380
$
332,864
$
(33,982
)
$
366,846
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Restructuring and other action-related
charges by category:
Supply chain actions - 2019
$
1,896
$
12,598
$
5,698
$
30,290
Supply chain actions - 2020
3,241
—
13,504
—
Program exit costs
1,285
—
9,500
—
Other restructuring costs
4,695
11
11,614
3,692
COVID-19 related charges:
Bad debt
11,375
—
11,375
—
Inventory
20,485
—
20,485
—
Intangible assets
20,319
—
20,319
—
Tax effect on actions
(12,415
)
(1,778
)
(16,649
)
(4,791
)
Total restructuring and other
action-related charges
$
50,881
$
10,831
$
75,846
$
29,191
Last Twelve Months
June 27, 2020
June 29, 2019
EBITDA1:
Net income
$
523,384
$
551,480
Interest expense, net
162,506
195,063
Income tax expense
72,998
103,117
Depreciation and amortization
129,183
130,792
Total EBITDA
888,071
980,452
Total restructuring and other
action-related charges (excluding tax effect on actions)
121,999
69,398
Stock compensation expense
11,219
25,630
Total EBITDA, as adjusted
$
1,021,289
$
1,075,480
Net debt:
Debt (current and long-term debt and
Accounts Receivable Securitization Facility)
$
4,098,143
$
4,017,566
Notes payable
8,803
4,695
(Less) Cash and cash equivalents
(683,114
)
(257,941
)
Net debt
$
3,423,832
$
3,764,320
Net debt/EBITDA, as adjusted
3.4
3.5
1
Earnings before interest, taxes,
depreciation and amortization (EBITDA) is a non-GAAP financial
measure.
Quarters Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Free cash flow:
Net cash from operating activities
$
65,423
$
136,928
$
(17,793
)
$
(57,363
)
Capital expenditures
(20,753
)
(33,016
)
(46,512
)
(58,285
)
Free cash flow
$
44,670
$
103,912
$
(64,305
)
$
(115,648
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005165/en/
News Media, contact: Matt Hall, (336) 519-3386
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519-2115
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