- Continued improvement in key performance metrics, despite a
challenging sales environment.
- GAAP gross margin of 31.1% decreased 260 basis points compared
to prior year. Adjusted gross margin of 35.5% increased 100 basis
points over prior year, ahead of expectations.
- Reduced inventory by 17%, or $319 million sequentially, and
29%, or $620 million year-over-year.
- Generated cash flow from operations of $155 million in the
quarter and $287 million year-to-date.
- Reduced total debt by $144 million in the quarter and
approximately $270 million year-to-date. Ended quarter with
approximately $1.2 billion of liquidity.
- Company continues to expect to exit the year with meaningfully
higher gross and operating margins, generate approximately $500
million of full-year operating cash flow, and pay down more than
$400 million of debt in 2023. Updates full-year outlook.
HanesBrands Inc. (NYSE: HBI), a global leader in iconic apparel
brands, today announced results for the third-quarter 2023.
“We’ve continued to drive improvement in core fundamentals while
simultaneously assessing our business and options to unlock
shareholder value,” said Steve Bratspies, CEO. “Despite the
difficult global macroeconomic environment, which continues to
pressure sales, we delivered meaningful improvement across key
performance metrics and initiated an evaluation of strategic
alternatives for our global Champion business. Our innerwear
innovation is hitting the market and we’re gaining market share.
Adjusted margins continue to improve as input cost inflation eases
and we see the benefits of cost savings and efficiency initiatives.
We’re reducing inventory, generating operating cash flow in line
with historical levels, and paying down debt as planned. We expect
further improvement in these key performance metrics in the fourth
quarter.”
Highlights
- Input cost inflation continued to ease. The headwinds
from commodity and ocean freight inflation continued to ease and
represented approximately 135 net basis points of year-over-year
gross margin headwind in the quarter, which compares to
approximately 245 basis points of year-over-year gross margin
headwind in second-quarter 2023 and approximately 310 basis points
of year-over-year gross margin headwind in first-quarter 2023.
Third quarter GAAP gross margin of 31.1% decreased 260 basis points
as compared to prior year. Third quarter adjusted gross margin of
35.5% increased 100 basis points over prior year. The Company
remains on track to exit the year with GAAP and Adjusted gross
margin in the high 30% range.
- Further improved inventory position and generated positive
operating cash flow. For the quarter, inventory decreased 17%
sequentially and 29% year-over-year driven predominantly by the
benefits of the Company’s inventory management capabilities,
including SKU discipline and lifecycle management, and the
continued sell-through of higher-cost inventory. The improvement in
inventory helped generate $155 million of operating cash flow in
the quarter and $287 million year-to-date. The Company remains on
track to generate approximately $500 million of operating cash flow
for the full year and exit the year with inventory below $1.5
billion.
- Strengthened balance sheet, including an additional $144
million debt paydown and an increased liquidity position.
Through continued positive cash generation, the Company paid down
$144 million of debt in the third quarter. Year-to-date, the
Company has paid down approximately $270 million of debt and
remains on track to reduce debt by more than $400 million in 2023.
In addition, the Company proactively amended its credit agreement
to provide greater strategic financial flexibility. The Company
further strengthened its liquidity position to approximately $1.2
billion as of the end of the third quarter.
- Innovation helping drive market share gains in U.S.
Innerwear. Revenue from new product innovation is up 40% over
prior year in both the third quarter and year-to-date. The
Company’s Hanes Originals product line, launched earlier this year
supported by a national media campaign, is attracting new and
younger consumers to the Hanes franchise. M by Maidenform, a
collection of extremely soft-on-the-skin intimate apparel products
focused on younger consumers, launched across channels in the
quarter with strong initial consumer response. The Company is
successfully leveraging its global scale, launching its innovation
across geographies: Total Support Pouch in seven countries; Hanes
Originals in five countries; and M by Maidenform already in four
countries. The Company’s robust innovation pipeline provides
visibility to new product offerings through 2025.
- Initiated evaluation of strategic alternatives for the
global Champion business. On September 19, 2023, the Company
announced it initiated an evaluation of strategic alternatives for
its global Champion business, including, among others, a potential
sale as well as continuing to operate the business as part of
HanesBrands.
Third-Quarter 2023
Results
- Net sales from continuing operations of $1.51 billion
decreased 9.5% compared to last year as the challenging global
macroeconomic environment continued to pressure the topline.
Excluding the $4 million unfavorable impact from foreign exchange
rates, net sales on a constant currency basis decreased 9.3%. On a
constant currency basis, growth in Latin America and Japan as well
as consistent performance in U.S. Innerwear was more than offset by
a decrease in U.S. Activewear, the continued macroeconomic-driven
slowdown in consumer spending impacting Australia, as well as
decreases in Europe and parts of Asia.
- Global Champion brand sales decreased 19% on a reported
basis and 20% on a constant currency basis as compared to prior
year. U.S. sales decreased 16% driven by the continued challenging
activewear market dynamics. The U.S. performance also reflects the
expected short-term impact from the Company’s continued strategic
actions taken to strengthen the brand and position Champion for
long-term profitable growth, including disciplined product and
channel segmentation, shifting its mix, and assortment changes.
Internationally, sales decreased 22% on a reported basis and 24% on
a constant currency basis. Constant currency sales increased in
Japan, which was more than offset by decreases in Europe, due to
the expected cautious ordering from wholesale partners, as well as
the macroeconomic headwinds impacting demand in parts of Asia and
Australia.
- Gross Profit of $470 million decreased 16% and gross
margin decreased 260 basis points to 31.1% as compared to prior
year. Adjusted Gross Profit, which excludes certain costs
related to the Company’s Full Potential transformation plan and its
global Champion performance plan, was $536 million. Adjusted
Gross Margin of 35.5% increased 100 basis points as compared to
third-quarter 2022, ahead of the Company’s outlook. The improvement
was driven by a combination of factors, including the overlap of
last year’s manufacturing timeout costs and the benefits from
select price increases and cost savings initiatives, which more
than offset the impact from product mix as well as continued but
diminishing headwinds from input cost inflation. As expected,
headwinds from commodity and ocean freight inflation continued to
ease and represented approximately 135 net basis points of
year-over-year margin headwind in the quarter as the Company
continued to sell through its higher-cost inventory.
- Selling, General and Administrative (SG&A) expenses
decreased 4% to $404 million as compared to last year. Adjusted
SG&A expenses, which exclude certain costs related to the
Company’s Full Potential transformation plan and its global
Champion performance plan, decreased 4%, or more than $15 million,
year-over-year to $393 million. The year-over-year decrease in
adjusted SG&A was driven by benefits from cost savings
initiatives, particularly in distribution, disciplined expense
management, as well as lower variable expenses, including selling
and marketing. As a percent of net sales, adjusted SG&A expense
of 26.0% increased 160 basis points over prior year as cost
controls and expense efficiencies were more than offset by the
overlap of last year’s variable compensation benefit and fixed cost
deleverage from lower sales.
- Operating Profit and Operating Margin in third-quarter
2023 were $66 million and 4.4%, respectively, which compared to
$141 million and 8.5%, respectively, in the prior year. Adjusted
Operating Profit of $143 million decreased from $168 million in
third-quarter 2022. Adjusted Operating Margin of 9.5%
decreased approximately 60 basis points from prior year.
- Interest and Other Expenses for third-quarter 2023 were
approximately $82 million as compared to approximately $45 million
in the prior year. The increase was driven primarily by higher
average interest rates.
- Tax Expense for third-quarter 2023 was $23 million.
Adjusted Tax Expense, which excluded an approximate $4
million discrete tax benefit in the quarter, was approximately $27
million. For third-quarter 2022, the tax expense and adjusted tax
expense were $16 million and $21 million, respectively.
Effective and Adjusted Tax Rates for third-quarter 2023 were
(146.2)% and 44.5%, respectively. For third-quarter 2022, the
effective tax rate and the adjusted effective tax rate were 17.0%.
The Company's effective tax rate for third-quarter 2023 is not
reflective of the U.S. statutory rate due to valuation allowances
against certain net deferred tax assets.
- Loss from continuing operations totaled approximately
$(39) million, or $(0.11) per diluted share in third-quarter 2023.
This compares to income from continuing operations of $80 million,
or $0.23 per diluted share, last year. Adjusted income from
continuing operations totaled $34 million, or $0.10 per diluted
share. This compares to adjusted income from continuing operations
of $102 million, or $0.29 per diluted share, in third-quarter
2022.
See the Note on Adjusted Measures and Reconciliation to GAAP
Measures later in this news release for additional discussion and
details of actions, which include Full Potential transformation
plan and global Champion performance plan charges.
Third-Quarter 2023 Business Segment
Summary
- Innerwear sales were consistent with prior year, in line
with the Company’s expectations, as it gained market share despite
a low single-digit decrease in the market. Market share gains
across its Men’s, Women’s and Socks categories were driven by a
combination of retail space gains, a successful back-to-school
campaign, improved on-shelf availability and consumer-focused
innovation. For the quarter, the Company delivered strong sales
growth in Women’s led by the continued positive consumer response
to its Hanes Originals innovation as well as the launch of its M by
Maidenform innovation. This year-over-year sales growth was offset
by a decrease in its Men’s business, which experienced a larger
part of its seasonal back-to-school shipment in the second quarter
of this year as opposed to a larger part of those seasonal
shipments occurring in the third quarter of last year. Operating
margin of 17.5% increased approximately 150 basis points over prior
year driven primarily by the overlap of last year’s manufacturing
timeout costs, which more than offset input cost inflation as the
Company sold through the remainder of its high-cost innerwear
inventory.
- Activewear sales decreased 17% compared to prior year.
The segment experienced decreases across most channels and brands
driven by ongoing headwinds within the activewear category,
including soft consumer demand and excess channel inventory. In
addition to the category headwinds, Champion sales performance in
the U.S. also reflects the expected short-term impact from the
Company’s continued strategic actions taken to strengthen the brand
and position Champion for long-term profitable growth, including a
more disciplined product and channel segmentation approach, a shift
in mix, and assortment changes. Operating margin for the segment of
6.5% increased 770 basis points sequentially. Compared to the third
quarter of last year, segment operating margin decreased
approximately 510 basis points. The year-over-year decrease was
driven by the impact from unfavorable product mix, input cost
inflation as the Company continues to sell through its higher-cost
activewear inventory and lower sales volume. These headwinds more
than offset the benefits from the overlap of last year’s
manufacturing timeout costs and disciplined expense
management.
- International sales decreased 12% on a reported basis,
including $4 million from unfavorable foreign exchange rates.
International sales decreased 11% on a constant currency basis
compared to prior year. In constant currency, Innerwear growth in
the Americas and Champion growth in Japan were more than offset by
a decrease in Australia, which was driven by a very challenging
macroeconomic environment, as well as Champion decreases in Europe
and parts of Asia. Operating margin for the segment of 12.7%
decreased approximately 120 basis points compared to prior year
driven primarily by the impact from lower sales volume and input
cost inflation, which was partially offset by the benefits from
cost savings and efficiency initiatives.
Cash Flow, Balance Sheet and
Liquidity
- Total liquidity position at the end of third-quarter
2023 was approximately $1.2 billion, consisting of $191 million of
cash and equivalents and approximately $1 billion of available
capacity under the Company’s credit facilities.
- Based on the calculation as defined in the Company’s senior
secured credit facility, the Leverage Ratio at the end of
third-quarter 2023 was 5.5 times on a net debt-to-adjusted EBITDA
basis, which was below its third-quarter 2023 covenant of 6.75
times and compared to 3.9 times at the end of third-quarter 2022
(See Table 6-B).
- Inventory at the end of third-quarter 2023 of $1.52
billion decreased 17% sequentially and decreased 29%, or $620
million, year-over-year. The year-over-year decrease was driven
predominantly by the benefits of its inventory management
capabilities, including SKU discipline and lifecycle management,
and the continued sell-through of higher-cost inventory.
- Cash flow from operations was $155 million in
third-quarter 2023 as compared to a use of cash of approximately
$(51) million last year. The $206 million year-over-year increase
in operating cash flow was driven by improved working capital.
Free cash flow was $153 million in third-quarter 2023, a
$237 million increase from last year’s $(84) million use of
cash.
Fourth-Quarter and Full-Year 2023
Financial Outlook
With respect to its 2023 guidance, the Company’s outlook
reflects, but is not limited to, the following assumptions: a muted
global consumer demand environment given the continued
macroeconomic uncertainty, and year-over-year improvement in
fourth-quarter margins, as lower-cost inventory currently being
produced is sold and it anniversaries last year’s manufacturing
time-out costs related to its inventory reduction initiative in
2022.
The Company is providing guidance on tax expense due to the
expected fluctuation of its quarterly tax rate, stemming from the
deferred tax reserve matter previously disclosed in the fourth
quarter of 2022. Importantly, the reserve does not impact cash
taxes. Some portion of the reserve may reverse in future
periods.
For fiscal year 2023, which ends on December 30, 2023, the
Company currently expects, exclusive of any deferred tax reserve
reversal:
- Net sales from continuing operations of approximately $5.70
billion, which includes a projected headwind of approximately $65
million from changes in foreign currency exchange rates. This
represents an approximate 9% decrease as compared to prior year on
a reported basis and an approximate 8% decrease on a constant
currency basis.
- GAAP operating profit from continuing operations of
approximately $309 million.
- Adjusted operating profit from continuing operations of
approximately $425 million, which includes a projected headwind of
approximately $10 million from changes in foreign currency exchange
rates.
- Pretax charges for actions totaling approximately $123 million.
These charges include: Full Potential transformation plan-related
charges of approximately $31 million and global Champion
performance plan-related charges of approximately $85 million, both
included in operating profit; as well as refinancing-related
charges of approximately $7 million included in interest and other
expenses in first-quarter 2023.
- GAAP and Adjusted Interest and Other expenses of approximately
$317 million and $310 million, respectively.
- GAAP Tax expense of approximately $71 million. Adjusted Tax
expense of approximately $75 million, which excludes a $4 million
discrete tax benefit in third-quarter 2023.
- GAAP loss per share from continuing operations of approximately
$(0.22).
- Adjusted earnings per share from continuing operations of
approximately $0.12.
- Cash flow from operations of approximately $500 million.
- Capital investments of approximately $100 million, consisting
of approximately $50 million of capital expenditures and
approximately $50 million of cloud computing arrangements. Per
GAAP, capital expenditures are reflected in cash from investing
activities and certain cloud computing arrangements are reflected
in Other Assets within cash flow from operating activities. The
approximate $50 million of cloud computing arrangements is factored
into the full-year cash flow from operations guidance of
approximately $500 million.
- Free cash flow of approximately $450 million.
- Fully diluted shares outstanding of approximately 351
million.
For fourth-quarter 2023, which ends on December 30, 2023, the
Company currently expects, exclusive of any deferred tax reserve
reversal:
- Net sales from continuing operations of approximately $1.36
billion, which includes a projected headwind of approximately $12
million from changes in foreign currency exchange rates. This
represents a decrease of approximately 8% as compared to prior year
on a reported basis and approximately 7% on a constant currency
basis.
- GAAP operating profit from continuing operations of
approximately $116 million.
- Adjusted operating profit from continuing operations of
approximately $131 million, which includes a projected headwind of
approximately $2 million from changes in foreign currency exchange
rates.
- Pretax charges for actions related to the Full Potential
transformation plan and the global Champion performance plan of
approximately $15 million.
- GAAP and Adjusted Interest and Other expenses of approximately
$80 million.
- GAAP and Adjusted Tax expense of approximately $18
million.
- GAAP earnings per share from continuing operations of
approximately $0.05.
- Adjusted earnings per share from continuing operations of
approximately $0.09.
- Fully diluted shares outstanding of approximately 352
million.
HanesBrands has updated its quarterly frequently-asked-questions
document, which is available at www.Hanes.com/FAQ.
Note on Adjusted 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 from continuing
operations, adjusted income (loss) from continuing operations,
adjusted income tax expense, adjusted income (loss) from continuing
operations before income tax expense, adjusted operating profit
(and margin), adjusted SG&A, adjusted gross profit (and
margin), EBITDA, adjusted EBITDA, adjusted effective tax rate,
adjusted interest and other expense, net debt, leverage ratio and
free cash flow.
Adjusted EPS from continuing operations is defined as diluted
EPS from continuing operations excluding actions and the tax effect
on actions. Adjusted income (loss) from continuing operations is
defined as income (loss) from continuing operations excluding
actions and the tax effect on actions. Adjusted income tax expense
is defined as income tax expense excluding actions. Adjusted income
(loss) from continuing operations before income tax is defined as
income (loss) from continuing operations before income tax
excluding 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 interest and other expenses is defined as interest and
other expenses excluding actions and adjusted effective tax rate is
defined as adjusted income tax expense divided by adjusted income
(loss) from continuing operations before income tax.
Charges for actions taken in 2023 and 2022, as applicable,
include the global Champion performance plan, supply chain
segmentation, headcount actions and related severance charges,
technology charges, gain/loss on classification of assets held for
sale, professional services, loss on extinguishment of debt, gain
on final settlement of cross currency swap contracts and the tax
effects thereof. The global Champion performance plan includes
actions and related charges regarding the Company’s accelerated and
enhanced strategic initiatives to further streamline the operations
and position the brand for long term profitable growth and the
evaluation of strategic alternatives for the global Champion
business.
While these costs 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 future business plans and circumstances.
HanesBrands 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 the Full Potential transformation
plan, the global Champion performance plan and other actions that
are deemed to be material stand-alone initiatives apart from the
Company’s core operations. HanesBrands 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 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 net income (loss) before the impacts of
discontinued operations, interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA excluding (x)
restructuring charges related to the Full Potential transformation
plan, the global Champion performance plan, and other
action-related charges described in more detail in Table 6-A and
(y) certain other losses, charges and expenses as defined in the
Consolidated Net Total Leverage Ratio under its Fifth Amended and
Restated Credit Agreement, dated November 19, 2021, as amended (the
“Credit Agreement”) described in more detail in Table 6-B.
HanesBrands 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.
Net debt is defined as the total of current debt, long-term
debt, and borrowings under the accounts receivable securitization
facility (excluding long-term debt issuance costs and debt discount
and borrowings of unrestricted subsidiaries under the accounts
receivable securitization facility) less (x) other debt and cash
adjustments and (y) cash and cash equivalents. Leverage ratio is
the ratio of net debt to adjusted EBITDA as it is defined in our
Credit Agreement.
The Company defines free cash flow as net cash from operating
activities less capital expenditures. Management believes that free
cash flow, which measures our ability to generate additional cash
from our business operations, is an important financial measure for
use in evaluating the Company's financial performance.
HanesBrands 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, HanesBrands
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).
HanesBrands 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.
Cautionary Statement Concerning Forward-Looking
Statements
This news release contains certain forward-looking statements,
as defined under U.S. federal securities laws, with respect to our
plans, expectations, long-term goals and trends associated with our
business, as well as guidance as to future performance. In
particular, among others, guidance and predictions regarding
expected operating results, including related to our ability to
successfully execute our Full Potential transformation plan, global
Champion performance plan, and other strategic actions to achieve
the desired results; statements made in the Fourth-Quarter and
Full-Year 2023 Financial Outlook section of this release; and
statements regarding our future capital allocation strategy, are
forward-looking statements. These forward-looking statements are
based on our current intentions, beliefs, plans and expectations.
Readers are cautioned not to place undue reliance on any
forward-looking statements. Forward-looking statements inherently
involve risks and uncertainties, many of which are outside of our
control, that could cause actual results to differ materially from
such statements and from our historical results and experience.
These risks and uncertainties include such things as: our ability
to identify, execute, and realize the benefits from, any potential
strategic transaction involving Champion; our ability to
successfully execute our Full Potential transformation plan, global
Champion performance plan, or any modifications thereto to achieve
the desired results; the rapidly changing retail environment and
the level of consumer demand; our reliance on a relatively small
number of customers for a significant portion of our sales; our
ability to deleverage on the anticipated time frame or at all,
which could negatively impact our ability to satisfy the financial
covenants in our Credit Agreement or other contractual
arrangements; any inadequacy, interruption, integration failure or
security failure with respect to our information technology
(including the ransomware attack announced May 31, 2022); the
impact of significant fluctuations and volatility in various input
costs, such as cotton and oil-related materials, utilities, freight
and wages; the availability of global supply chain resources;
future intangible assets or goodwill impairment due to changes in
our business, market conditions, or other factors, including any
sale of the Champion business; our ability to attract and retain a
senior management team with the core competencies needed to support
growth in global markets and ongoing labor shortages generally;
significant fluctuations in foreign exchange rates; legal,
regulatory, political and economic risks related to our
international operations, including regional and global military
conflicts; our ability to effectively manage our complex
multinational tax structure; 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 (NYSE: HBI) makes everyday apparel that is known and
loved by consumers around the world for comfort, quality and value.
Among the Company’s iconic brands are Hanes, the leading basic
apparel brand in the United States; Champion, an innovator at the
intersection of lifestyle and athletic apparel; and Bonds, which is
setting new standards for design and sustainability. HBI employs
51,000 associates in 32 countries and has built a strong reputation
for workplace quality and ethical business practices. The Company,
a longtime leader in sustainability, launched aggressive 2030 goals
to improve the lives of people, protect the planet and produce
sustainable products. HBI is building on its unmatched strengths to
unlock its #FullPotential and deliver long-term growth that
benefits all of its stakeholders.
TABLE 1
HANESBRANDS INC.
Condensed Consolidated
Statements of Operations
(in thousands, except per
share data)
(Unaudited)
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
% Change
September 30,
2023
October 1, 2022
% Change
Net sales
$
1,511,306
$
1,670,741
(9.5
)%
$
4,339,696
$
4,760,364
(8.8
)%
Cost of sales
1,040,995
1,107,889
2,936,955
3,041,233
Gross profit
470,311
562,852
(16.4
)%
1,402,741
1,719,131
(18.4
)%
As a % of net sales
31.1
%
33.7
%
32.3
%
36.1
%
Selling, general and administrative
expenses
404,349
421,408
(4.0
)%
1,210,056
1,259,921
(4.0
)%
As a % of net sales
26.8
%
25.2
%
27.9
%
26.5
%
Operating profit
65,962
141,444
(53.4
)%
192,685
459,210
(58.0
)%
As a % of net sales
4.4
%
8.5
%
4.4
%
9.6
%
Other expenses
9,111
3,212
31,145
6,088
Interest expense, net
72,609
41,721
205,666
107,408
Income (loss) from continuing operations
before income tax expense
(15,758
)
96,511
(44,126
)
345,714
Income tax expense
23,041
16,410
51,541
58,775
Income (loss) from continuing
operations
(38,799
)
80,101
(148.4
)%
(95,667
)
286,939
(133.3
)%
Income from discontinued operations, net
of tax
—
—
—
3,965
Net income (loss)
$
(38,799
)
$
80,101
$
(95,667
)
$
290,904
Earnings (loss) per share - basic:
Continuing operations
$
(0.11
)
$
0.23
$
(0.27
)
$
0.82
Discontinued operations
—
—
—
0.01
Net income (loss)
$
(0.11
)
$
0.23
$
(0.27
)
$
0.83
Earnings (loss) per share - diluted:
Continuing operations
$
(0.11
)
$
0.23
$
(0.27
)
$
0.82
Discontinued operations
—
—
—
0.01
Net income (loss)
$
(0.11
)
$
0.23
$
(0.27
)
$
0.83
Weighted average shares outstanding:
Basic
350,667
349,884
350,534
349,969
Diluted
350,667
350,316
350,534
350,691
TABLE 2
HANESBRANDS INC.
Supplemental Financial
Information
Impact of Foreign
Currency
(in thousands, except per
share data)
(Unaudited)
The following tables present a
reconciliation of reported results on a constant currency basis for
the quarter and nine months ended September 30, 2023 and a
comparison to prior year:
Quarter Ended September 30,
2023
As Reported
Impact from Foreign
Currency1
Constant Currency
Quarter Ended October
1, 2022
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
1,511,306
$
(3,941
)
$
1,515,247
$
1,670,741
(9.5
)%
(9.3
)%
Gross profit
470,311
(4,077
)
474,388
562,852
(16.4
)
(15.7
)
Operating profit
65,962
(1,476
)
67,438
141,444
(53.4
)
(52.3
)
Diluted earnings (loss) per share from
continuing operations
$
(0.11
)
$
0.00
$
(0.11
)
$
0.23
(147.8
)%
(147.8
)%
As adjusted:2
Net sales
$
1,511,306
$
(3,941
)
$
1,515,247
$
1,670,741
(9.5
)%
(9.3
)%
Gross profit
535,945
(4,077
)
540,022
575,954
(6.9
)
(6.2
)
Operating profit
143,033
(1,476
)
144,509
167,895
(14.8
)
(13.9
)
Diluted earnings per share from continuing
operations
$
0.10
$
0.00
$
0.10
$
0.29
(65.5
)%
(65.5
)%
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 ended September
30, 2023 and October 1, 2022 reflect adjustments for restructuring
and other action-related charges. See "Reconciliation of Select
GAAP Measures to Non-GAAP Measures" in Table 6-A.
Nine Months Ended September
30, 2023
As Reported
Impact from Foreign
Currency1
Constant Currency
Nine Months Ended
October 1, 2022
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
4,339,696
$
(53,023
)
$
4,392,719
$
4,760,364
(8.8
)%
(7.7
)%
Gross profit
1,402,741
(28,201
)
1,430,942
1,719,131
(18.4
)
(16.8
)
Operating profit
192,685
(7,617
)
200,302
459,210
(58.0
)
(56.4
)
Diluted earnings (loss) per share from
continuing operations
$
(0.27
)
$
(0.01
)
$
(0.26
)
$
0.82
(132.9
)%
(131.7
)%
As adjusted:2
Net sales
$
4,339,696
$
(53,023
)
$
4,392,719
$
4,760,364
(8.8
)%
(7.7
)%
Gross profit
1,473,150
(28,201
)
1,501,351
1,733,264
(15.0
)
(13.4
)
Operating profit
293,938
(7,617
)
301,555
496,843
(40.8
)
(39.3
)
Diluted earnings per share from continuing
operations 3
$
0.02
$
(0.01
)
$
0.04
$
0.91
(97.8
)%
(95.6
)%
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 nine months ended
September 30, 2023 and October 1, 2022 reflect adjustments for
restructuring and other action-related charges. See "Reconciliation
of Select GAAP Measures to Non-GAAP Measures" in Table 6-A.
3
Amounts may not be additive due to
rounding.
TABLE 3
HANESBRANDS INC.
Supplemental Financial
Information
By Business Segment
(in thousands)
(Unaudited)
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
% Change
September 30,
2023
October 1, 2022
% Change
Segment net sales:
Innerwear
$
622,567
$
625,082
(0.4
)%
$
1,881,452
$
1,889,807
(0.4
)%
Activewear
383,600
461,043
(16.8
)
966,089
1,178,380
(18.0
)
International
440,923
502,066
(12.2
)
1,311,509
1,436,384
(8.7
)
Other
64,216
82,550
(22.2
)
180,646
255,793
(29.4
)
Total net sales
$
1,511,306
$
1,670,741
(9.5
)%
$
4,339,696
$
4,760,364
(8.8
)%
Segment operating profit:
Innerwear
$
108,970
$
99,797
9.2
%
$
305,546
$
343,602
(11.1
)%
Activewear
24,853
53,491
(53.5
)
31,740
125,332
(74.7
)
International
56,130
69,890
(19.7
)
140,060
215,281
(34.9
)
Other
3,351
4,839
(30.8
)
(5,479
)
9,501
(157.7
)
General corporate expenses/other
(50,271
)
(60,122
)
(16.4
)
(177,929
)
(196,873
)
(9.6
)
Total operating profit before
restructuring and other action-related charges
143,033
167,895
(14.8
)
293,938
496,843
(40.8
)
Restructuring and other action-related
charges
(77,071
)
(26,451
)
191.4
(101,253
)
(37,633
)
169.1
Total operating profit
$
65,962
$
141,444
(53.4
)%
$
192,685
$
459,210
(58.0
)%
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
Basis Points Change
September 30,
2023
October 1, 2022
Basis Points Change
Segment operating margin:
Innerwear
17.5
%
16.0
%
154
16.2
%
18.2
%
(194
)
Activewear
6.5
11.6
(512
)
3.3
10.6
(735
)
International
12.7
13.9
(119
)
10.7
15.0
(431
)
Other
5.2
5.9
(64
)
(3.0
)
3.7
(675
)
General corporate expenses/other
(3.3
)
(3.6
)
27
(4.1
)
(4.1
)
4
Total operating margin before
restructuring and other action-related charges
9.5
10.0
(58
)
6.8
10.4
(366
)
Restructuring and other action-related
charges
(5.1
)
(1.6
)
(352
)
(2.3
)
(0.8
)
(154
)
Total operating margin
4.4
%
8.5
%
(410
)
4.4
%
9.6
%
(521
)
TABLE 4
HANESBRANDS INC.
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
September 30,
2023
December 31,
2022
Assets
Cash and cash equivalents
$
191,091
$
238,413
Trade accounts receivable, net
712,828
721,396
Inventories
1,516,779
1,979,672
Other current assets
175,058
178,946
Current assets held for sale
—
13,327
Total current assets
2,595,756
3,131,754
Property, net
415,527
442,404
Right-of-use assets
427,610
414,894
Trademarks and other identifiable
intangibles, net
1,201,008
1,255,693
Goodwill
1,093,099
1,108,907
Deferred tax assets
20,133
20,162
Other noncurrent assets
160,155
130,062
Total assets
$
5,913,288
$
6,503,876
Liabilities
Accounts payable
$
789,923
$
917,481
Accrued liabilities
493,134
498,028
Lease liabilities
112,721
114,794
Accounts Receivable Securitization
Facility
200,500
209,500
Current portion of long-term debt
59,000
37,500
Current liabilities held for sale
—
13,327
Total current liabilities
1,655,278
1,790,630
Long-term debt
3,310,256
3,612,077
Lease liabilities - noncurrent
348,072
326,644
Pension and postretirement benefits
107,539
116,167
Other noncurrent liabilities
218,107
260,094
Total liabilities
5,639,252
6,105,612
Stockholders’ equity
Preferred stock
—
—
Common stock
3,500
3,490
Additional paid-in capital
348,837
334,676
Retained earnings
476,796
572,106
Accumulated other comprehensive loss
(555,097
)
(512,008
)
Total stockholders’ equity
274,036
398,264
Total liabilities and stockholders’
equity
$
5,913,288
$
6,503,876
TABLE 5
HANESBRANDS INC.
Condensed Consolidated
Statements of Cash Flows1
(in thousands)
(Unaudited)
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Operating Activities:
Net income (loss)
$
(38,799
)
$
80,101
$
(95,667
)
$
290,904
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation
20,543
19,585
56,246
56,140
Amortization of acquisition
intangibles
4,133
4,558
12,478
14,045
Other amortization
3,458
2,925
9,856
8,121
Loss on extinguishment of debt
—
—
8,466
—
(Gain) loss on sale of business and
classification of assets held for sale
(1,558
)
4,310
3,641
(6,185
)
Amortization of debt issuance costs and
debt discount
2,338
1,727
6,577
5,483
Other
(2,853
)
5,276
8,984
11,717
Changes in assets and liabilities:
Accounts receivable
(34,502
)
(23,919
)
12,169
(63,003
)
Inventories
311,636
(72,529
)
444,592
(612,544
)
Other assets
15,784
(22,080
)
(20,833
)
(71,613
)
Accounts payable
(164,440
)
(74,052
)
(125,411
)
(22,289
)
Accrued pension and postretirement
benefits
1,241
(571
)
4,181
(1,066
)
Accrued liabilities and other
38,130
24,061
(37,935
)
(101,392
)
Net cash from operating activities
155,111
(50,608
)
287,344
(491,682
)
Investing Activities:
Capital expenditures
(2,220
)
(33,009
)
(35,790
)
(70,955
)
Purchase of trademarks
—
—
—
(103,000
)
Proceeds from sales of assets
66
37
172
259
Other
1,300
—
20,241
(5,640
)
Net cash from investing activities
(854
)
(32,972
)
(15,377
)
(179,336
)
Financing Activities:
Borrowings on Term Loan Facilities
—
—
891,000
—
Repayments on Term Loan Facilities
(14,750
)
(6,250
)
(29,500
)
(18,750
)
Borrowings on Accounts Receivable
Securitization Facility
677,500
565,800
1,728,500
1,303,589
Repayments on Accounts Receivable
Securitization Facility
(626,000
)
(459,000
)
(1,737,500
)
(1,092,089
)
Borrowings on Revolving Loan
Facilities
639,000
610,000
1,616,500
1,337,500
Repayments on Revolving Loan
Facilities
(820,000
)
(539,000
)
(1,908,500
)
(908,500
)
Borrowings on Senior Notes
—
—
600,000
—
Repayments on Senior Notes
—
—
(1,436,884
)
—
Borrowings on notes payable
—
—
—
21,454
Repayments on notes payable
—
—
—
(21,713
)
Share repurchases
—
—
—
(25,018
)
Cash dividends paid
—
(52,341
)
—
(156,962
)
Payments to amend and refinance credit
facilities
(268
)
(182
)
(28,503
)
(633
)
Other
(92
)
(85
)
(2,884
)
(3,630
)
Net cash from financing activities
(144,610
)
118,942
(307,771
)
435,248
Effect of changes in foreign exchange
rates on cash
(10,388
)
(30,153
)
(11,518
)
(71,728
)
Change in cash and cash equivalents
(741
)
5,209
(47,322
)
(307,498
)
Cash and cash equivalents at beginning of
period
191,832
247,922
238,413
560,629
Cash and cash equivalents at end of
period
$
191,091
$
253,131
$
191,091
$
253,131
1
The cash flows related to discontinued
operations have not been segregated and remain included in the
major classes of assets and liabilities in the periods prior to the
sale of the European Innerwear business on March 5, 2022.
Accordingly, the Condensed Consolidated Statements of Cash Flows
include the results of continuing and discontinued operations.
TABLE 6-A
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except per
share data)
(Unaudited)
The following tables present a
reconciliation of results as reported under GAAP to the results as
adjusted for the quarter and nine months ended September 30, 2023
and a comparison to prior year. The Company has chosen to present
the following 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
the global Champion performance plan, the Full Potential
transformation plan and other actions that are deemed to be
material stand-alone initiatives apart from the Company’s core
operations. While these costs 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 future business plans and
circumstances.
Restructuring and other action-related
charges in 2023 and 2022 include the following:
Global Champion performance plan
The global Champion performance plan
includes actions and related charges regarding the Company’s
accelerated and enhanced strategic initiatives to further
streamline the operations and position the brand for long term
profitable growth and the evaluation of strategic alternatives for
the global Champion business, which includes over $59 million of
inventory write-downs related to the execution of its channel, mix
and product segmentation strategy including the exit of
discontinued programs, which are reflected in gross profit, and
over $14 million of charges related to supply chain segmentation,
store closures, severance and other costs of which nearly $5
million are reflected in gross profit and over $9 million are
reflected in selling, general and administrative expenses.
Supply chain segmentation
Represents charges related to the supply
chain segmentation to restructure and position the Company’s
manufacturing network to align with its Full Potential
transformation plan demand trends.
Headcount actions and related
severance
Represents charges related to operating
model initiatives primarily headcount actions and related severance
charges and adjustments as a result of the implementation of the
Company’s Full Potential transformation plan.
Technology
Represents technology charges related to
the implementation of the Company’s technology modernization
initiative which includes a global enterprise resource planning
platform under its Full Potential transformation plan.
Professional services
Represents professional fees, primarily
including consulting and advisory services, related to the
implementation of the Company’s Full Potential transformation
plan.
Gain/loss on sale of business and
classification of assets held for sale
Gain/loss associated with the sale of the
Company’s U.S. Sheer Hosiery business and adjustments to the
related valuation allowance prior to the sale, primarily from the
changes in carrying value due to changes in working capital.
Loss on extinguishment of debt
Represents charges related to the
redemption of the Company’s 4.625% Senior Notes and 3.5% Senior
Notes in the first quarter of 2023.
Gain on final settlement of cross currency
swap contracts
Primarily represents the remaining gain
related to cross-currency swap contracts previously designated as
cash flow hedges in AOCI which was released into earnings as the
Company unwound the cross-currency swap contracts in connection
with the redemption of the 3.5% Senior Notes at the time of
settlement in the first quarter of 2023.
Discrete tax benefits
Represents an adjustment to non-cash
reserves established at December 31, 2022 related to deferred taxes
established for Swiss statutory impairments, which are not
indicative of the Company’s core business operations.
Tax effect on actions
Represents the applicable effective tax
rate on the restructuring and other action-related charges based on
the jurisdiction of where the charges were incurred.
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Gross profit, as reported under
GAAP
$
470,311
$
562,852
$
1,402,741
$
1,719,131
As a % of net sales
31.1
%
33.7
%
32.3
%
36.1
%
Restructuring and other action-related
charges:
Global Champion performance plan
64,105
—
64,105
—
Full Potential transformation plan:
Supply chain segmentation
660
13,298
5,435
14,587
Headcount actions and related
severance
869
(196
)
869
(196
)
Other
—
—
—
(258
)
Gross profit, as adjusted
$
535,945
$
575,954
$
1,473,150
$
1,733,264
As a % of net sales
35.5
%
34.5
%
33.9
%
36.4
%
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Selling, general and administrative
expenses, as reported under GAAP
$
404,349
$
421,408
$
1,210,056
$
1,259,921
As a % of net sales
26.8
%
25.2
%
27.9
%
26.5
%
Restructuring and other action-related
charges:
Global Champion performance plan
(9,630
)
—
(9,630
)
—
Full Potential transformation plan:
Technology
(1,013
)
(2,622
)
(8,296
)
(9,052
)
Headcount actions and related
severance
(1,662
)
(178
)
(4,507
)
916
Professional services
(165
)
(6,020
)
(3,813
)
(21,014
)
Gain (loss) on classification of assets
held for sale
1,558
(4,310
)
(3,641
)
6,558
Other
(525
)
(219
)
(957
)
(908
)
Selling, general and administrative
expenses, as adjusted
$
392,912
$
408,059
$
1,179,212
$
1,236,421
As a % of net sales
26.0
%
24.4
%
27.2
%
26.0
%
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Operating profit, as reported under
GAAP
$
65,962
$
141,444
$
192,685
$
459,210
As a % of net sales
4.4
%
8.5
%
4.4
%
9.6
%
Restructuring and other action-related
charges:
Global Champion performance plan
73,735
—
73,735
—
Full Potential transformation plan:
Technology
1,013
2,622
8,296
9,052
Supply chain segmentation
660
13,298
5,435
14,587
Headcount actions and related
severance
2,531
(18
)
5,376
(1,112
)
Professional services
165
6,020
3,813
21,014
(Gain) loss on sale of business and
classification of assets held for sale
(1,558
)
4,310
3,641
(6,558
)
Other
525
219
957
650
Operating profit, as adjusted
$
143,033
$
167,895
$
293,938
$
496,843
As a % of net sales
9.5
%
10.0
%
6.8
%
10.4
%
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Interest expense, net and other
expenses, as reported under GAAP
$
81,720
$
44,933
$
236,811
$
113,496
Restructuring and other action-related
charges:
Loss on extinguishment of debt
—
—
(8,466
)
—
Gain on final settlement of cross currency
swaps
—
—
1,370
—
Interest expense, net and other expenses,
as adjusted
$
81,720
$
44,933
$
229,715
$
113,496
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Income (loss) from continuing
operations before income tax expense, as reported under
GAAP
$
(15,758
)
$
96,511
$
(44,126
)
$
345,714
Restructuring and other action-related
charges:
Global Champion performance plan
73,735
—
73,735
—
Full Potential transformation plan:
Technology
1,013
2,622
8,296
9,052
Supply chain segmentation
660
13,298
5,435
14,587
Headcount actions and related
severance
2,531
(18
)
5,376
(1,112
)
Professional services
165
6,020
3,813
21,014
(Gain) loss on sale of business and
classification of assets held for sale
(1,558
)
4,310
3,641
(6,558
)
Other
525
219
957
650
Loss on extinguishment of debt
—
—
8,466
—
Gain on final settlement of cross currency
swaps
—
—
(1,370
)
—
Income from continuing operations before
income tax expense, as adjusted
$
61,313
$
122,962
$
64,223
$
383,347
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Income tax expense, as reported under
GAAP
$
23,041
$
16,410
$
51,541
$
58,775
Restructuring and other action-related
charges:
Discrete tax benefits
4,263
—
4,263
—
Tax effect on actions
—
4,493
—
6,394
Total benefit included in income tax
expense
4,263
4,493
4,263
6,394
Income tax expense, as adjusted
$
27,304
$
20,903
$
55,804
$
65,169
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Income (loss) from continuing
operations, as reported under GAAP
$
(38,799
)
$
80,101
$
(95,667
)
$
286,939
Restructuring and other action-related
charges:
Global Champion performance plan
73,735
—
73,735
—
Full Potential transformation plan:
Technology
1,013
2,622
8,296
9,052
Supply chain segmentation
660
13,298
5,435
14,587
Headcount actions and related
severance
2,531
(18
)
5,376
(1,112
)
Professional services
165
6,020
3,813
21,014
(Gain) loss on sale of business and
classification of assets held for sale
(1,558
)
4,310
3,641
(6,558
)
Other
525
219
957
650
Loss on extinguishment of debt
—
—
8,466
—
Gain on final settlement of cross currency
swaps
—
—
(1,370
)
—
Discrete tax benefits
(4,263
)
—
(4,263
)
—
Tax effect on actions
—
(4,493
)
—
(6,394
)
Income from continuing operations, as
adjusted
$
34,009
$
102,059
$
8,419
$
318,178
Quarters Ended1
Nine Months Ended1
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Diluted earnings (loss) per share from
continuing operations, as reported under GAAP
$
(0.11
)
$
0.23
$
(0.27
)
$
0.82
Restructuring and other action-related
charges:
Global Champion performance plan
0.21
—
0.21
—
Full Potential transformation plan:
Technology
0.00
0.01
0.02
0.03
Supply chain segmentation
0.00
0.04
0.02
0.04
Headcount actions and related
severance
0.01
0.00
0.02
0.00
Professional services
0.00
0.02
0.01
0.06
(Gain) loss on sale of business and
classification of assets held for sale
0.00
0.01
0.01
(0.02
)
Other
0.00
0.00
0.00
0.00
Loss on extinguishment of debt
—
—
0.02
—
Gain on final settlement of cross currency
swaps
—
—
0.00
—
Discrete tax benefits
(0.01
)
—
(0.01
)
—
Tax effect on actions
—
(0.01
)
—
(0.02
)
Diluted earnings per share from continuing
operations, as adjusted
$
0.10
$
0.29
$
0.02
$
0.91
1
Amounts may not be additive due to
rounding.
Including the favorable foreign currency impact of $6 million,
global Champion sales excluding C9 Champion decreased approximately
19% in the third quarter of 2023 compared to the third quarter of
2022. On a constant currency basis, global Champion sales excluding
C9 Champion decreased approximately 20% in the third quarter of
2023 compared to the third quarter of 2022.
TABLE 6-B
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except per
share data)
(Unaudited)
Last Twelve Months
September 30,
2023
October 1, 2022
Leverage Ratio:
EBITDA1:
Income (loss) from continuing
operations
$
(513,775
)
$
354,893
Interest expense, net
255,331
142,715
Income tax expense
476,673
63,721
Depreciation and amortization
106,541
105,015
Total EBITDA
324,770
666,344
Total restructuring and other
action-related charges (excluding tax effect on actions)2
130,574
147,889
Other net losses, charges and
expenses3
125,134
117,923
Total EBITDA, as adjusted
$
580,478
$
932,156
Net debt:
Debt (current and long-term debt and
Accounts Receivable Securitization Facility excluding long term
debt issuance costs and debt discount of $36,744 and $13,211,
respectively)
$
3,606,500
$
3,911,850
(Less) debt related to an unrestricted
subsidiary4
(200,500
)
—
Other debt and cash adjustments5
3,992
10,973
(Less) Cash and cash equivalents
(191,091
)
(253,131
)
Net debt
$
3,218,901
$
3,669,692
Debt/Income (loss) from continuing
operations6
(7.0
)
11.0
Net debt/EBITDA, as adjusted7
5.5
3.9
1
Earnings from continuing operations before
interest, taxes, depreciation and amortization (EBITDA) is a
non-GAAP financial measure.
2
The last twelve months ended September 30,
2023 includes $74 million of global Champion performance plan
charges, $15 million of headcount actions and related severance
charges, $11 million of technology charges, $9 million of supply
chain segmentation charges, $8 million of a loss on extinguishment
of debt, $7 million of professional services, $7 million of a loss
on the sale of business and classification of assets held for sale,
$1 million related to other restructuring and other action-related
charges and $1 million of a gain on the final settlement of cross
currency swap contracts. The last twelve months ended October 1,
2022 includes $46 million of a loss on extinguishment of debt, $32
million of a loss on classification of assets held for sale, $29
million of professional services, $18 million of supply chain
segmentation charges, $11 million of technology charges, $8 million
related to other restructuring and other action-related charges and
$4 million of headcount actions and related severance charges. The
items included in restructuring and other action-related charges
are described in more detail in Table 6-A.
3
Represents other net losses, charges and
expenses that can be excluded from the Company’s leverage ratio as
defined under its Fifth Amended and Restated Credit Agreement,
dated November 19, 2021, as amended. The last twelve months ended
September 30, 2023, primarily includes $59 million of excess and
obsolete inventory write-offs, $23 million in other compensation
related items primarily stock compensation expense, $16 million of
pension non-cash expense, $14 million in charges related to sales
incentive amortization, $9 million of bad debt expense, $6 million
in charges related to the ransomware attack and extraordinary
events, $6 million of non-cash cloud computing expense, $6 million
of net unrealized gains due to hedging activities and $2 million of
interest expense on debt and amortization of debt issuance costs
related to an unrestricted subsidiary. The last twelve months ended
October 1, 2022, primarily includes $39 million of excess and
obsolete inventory write-offs, $29 million in charges related to
the ransomware attack and extraordinary events, $25 million in
other compensation related items primarily stock compensation
expense, $22 million of pension non-cash expense, $2 million of bad
debt expense and $1 million of non-cash cloud computing
expense.
4
Represents amounts outstanding under an
existing accounts receivable securitization facility entered into
by an unrestricted subsidiary of the Company.
5
Includes drawn letters of credit,
financing leases and cash balances in certain geographies.
6
Represents Debt divided by Income (loss)
from continuing operations which is the most comparable GAAP
financial measure to Net debt/EBITDA, as adjusted.
7
Represents the Company’s leverage ratio
defined as Consolidated Net Total Leverage Ratio under its Fifth
Amended and Restated Credit Agreement, dated November 19, 2021, as
amended, which excludes net other losses, charges and expenses in
addition to restructuring and other action-related charges.
Quarters Ended
Nine Months Ended
September 30,
2023
October 1, 2022
September 30,
2023
October 1, 2022
Free cash flow1:
Net cash from operating activities
$
155,111
$
(50,608
)
$
287,344
$
(491,682
)
Capital expenditures
(2,220
)
(33,009
)
(35,790
)
(70,955
)
Free cash flow
$
152,891
$
(83,617
)
$
251,554
$
(562,637
)
1
Free cash flow includes the results from
continuing and discontinued operations in the periods prior to the
sale of the European Innerwear business on March 5, 2022.
TABLE 7
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of GAAP Outlook
to Adjusted Outlook
(in thousands, except per
share data)
(Unaudited)
Quarter Ended
Year Ended
December 30,
2023
December 30,
2023
Operating profit outlook, as calculated
under GAAP
$
116,000
$
309,000
Restructuring and other action-related
charges
15,000
116,000
Operating profit outlook, as adjusted
$
131,000
$
425,000
Interest expense, net and other expenses
outlook, as calculated under GAAP
$
80,000
$
317,000
Restructuring and other action-related
charges
—
7,000
Interest expense, net and other expenses
outlook, as adjusted
$
80,000
$
310,000
Income tax expense outlook, as calculated
under GAAP
$
18,000
$
71,000
Restructuring and other action-related
charges
—
4,000
Income tax expense outlook, as
adjusted
$
18,000
$
75,000
Diluted earnings (loss) per share from
continuing operations, as calculated under GAAP1
$
0.05
$
(0.22
)
Restructuring and other action-related
charges
0.04
0.34
Diluted earnings per share from continuing
operations, as adjusted
$
0.09
$
0.12
Cash flow from operations outlook, as
calculated under GAAP
$
500,000
Capital expenditures outlook
50,000
Free cash flow outlook
$
450,000
1
The company expects approximately 352
million diluted weighted average shares outstanding for the quarter
ended December 30, 2023 and approximately 351 million diluted
weighted average shares outstanding for the year ended December 30,
2023.
The Company is unable to reconcile projections of financial
performance beyond 2023 without unreasonable efforts, because the
Company cannot predict, with a reasonable degree of certainty, the
type and extent of certain items that would be expected to impact
these figures in 2023 and beyond, such as net sales, operating
profit, tax rates and action related charges.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109210783/en/
News Media contact: Nicole Ducouer (336) 986-7090 Analysts and
Investors contact: T.C. Robillard (336) 519-2115
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