- 3Q Net Sales of $1.80 Billion Increased
2%; GAAP EPS of $0.55 Increased 22%; Adjusted EPS of $0.60
Increased 7%
- Year-to-Date Net Cash From Operations
Increased 59% to $331 Million
- Company to Increase Marketing and Brand
Growth Investment in 4Q and Updates Full-Year 2017 Guidance for Net
Sales, Operating Profit, EPS and Cash from Operations
HanesBrands (NYSE: HBI), a leading global marketer of everyday
basic apparel under world-class brands, today announced
third-quarter 2017 net sales and earnings growth in line with
company guidance and strong year-to-date net cash from
operations.
For the third quarter ended Sept. 30, 2017, net sales of $1.80
billion increased 2 percent, driven by double-digit International
segment growth. Domestic sales were affected by apparel’s
weaker-than-expected back-to-school retail environment, although
the company held share for Innerwear basics.
On a GAAP basis, third-quarter operating profit of $253 million
increased 11 percent and diluted EPS of $0.55 increased 22 percent.
When excluding pretax acquisition-related and integration charges,
adjusted operating profit of $270 million was comparable to a year
ago, and adjusted EPS of $0.60 increased 7 percent. (See Note on
Adjusted Measures and Reconciliation to GAAP Measures later in this
news release for additional discussion and details.)
Year-to-date net cash from operations of $331 million increased
$123 million, or 59 percent.
“We returned to organic growth in the quarter as International
results were stronger than expected, and we are tracking to the
midpoint or higher of our cash flow guidance for the year,” said
Hanes Chief Executive Officer Gerald W. Evans Jr. “The value of
diversifying our portfolio with international and activewear
acquisitions is evident, and we are making progress on several
initiatives to adapt to the evolving and challenging retail
environment in the United States.”
With one quarter remaining in the fiscal year, Hanes has updated
its full-year guidance to reflect year-to-date results and factors
related to the fourth-quarter, including additional incremental
marketing investment to drive growth, the expected adverse effect
of the Sears Canada bankruptcy, and the recently announced
acquisition of Alternative Apparel. (See full guidance details in
the 2017 Financial Guidance section later in this news
release.)
“In the fourth quarter, we expect to once again achieve organic
sales growth,” Evans said. “We are continuing to drive strong
double-digit online sales growth across businesses and geographies.
We are making progress on our goal to use our brands, innovations,
acquisitions and online investment to create shareholder value and
drive sustainable growth.”
Key Callouts for Third-Quarter 2017
Results
Company Returns to Organic Sales Growth. Hanes generated
organic sales growth – as reported and in constant currency – for
the first time in eight quarters. The company benefitted from
increasing geographic diversification as International sales growth
more than offset sluggish domestic sales. International sales,
bolstered by Hanes Europe Innerwear, Champion Europe, and Hanes
Australasia, accounted for 31 percent of sales in the third
quarter. Global Champion sales increased 16 percent in the
quarter.
Year-to-Date Cash Flow Growth Accelerates. Hanes
generated $297 million in cash from operations in the third quarter
and has generated $331 million year to date, up 59 percent from a
year ago. Cash flow is benefitting from working capital
improvements and increased profitability.
Double-Digit Online Sales Growth Continues. The growth
percentage of third-quarter sales in the online channel globally
was in the high 20s, and online sales represented approximately 9
percent of total sales. Online sales increased in every geography
across product categories.
Business Segment Highlights
Innerwear Sales Affected by Difficult Back-to-School
Environment. Innerwear net sales and operating profit each
decreased 5 percent in the third quarter and were lower than
expected as a result of a particularly challenging back-to-school
retail season for the apparel sector. The company maintained market
share in basics, while online sales, including those through
traditional retailer websites, increased by more than 20
percent.
Activewear Results Benefit from Acquisition
Contributions. Activewear net sales increased 1 percent and
operating profit increased 8 percent. The acquisition of GTM
Sportswear contributed approximately $15 million of sales in the
quarter. The segment was affected by the muted back-to-school
season at retail, but online sales increased by more than 30
percent and Champion sales in the midtier, sporting goods and
college bookstore channels achieved double-digit growth.
International Segment Growth. Net sales increased 16
percent and operating profit increased 25 percent for the
International segment in the third quarter. In constant currency,
International net sales increased 14 percent and operating profit
increased 23 percent. Champion growth in Europe and Asia, underwear
and intimate apparel growth in Australia and Latin America, and
widespread online growth drove results.
2017 Financial Guidance
Hanes has updated its full-year guidance, including narrowing
the range for net sales and EPS, and revised operating profit
guidance. The company now expects net cash from operations to meet
or exceed the midpoint of its original guidance range.
For 2017, the company expects net sales of approximately $6.450
billion to $6.475 billion, GAAP operating profit of $830 million to
$840 million, adjusted operating profit excluding actions of $925
million to $935 million, GAAP EPS for continuing operations of
$1.68 to $1.70, adjusted EPS for continuing operations excluding
actions of $1.93 to $1.95, and net cash from operations of $625
million to $725 million.
Implied Fourth-Quarter Guidance. Based on year-to-date
results and full-year guidance, the company expects total net sales
of approximately $1.625 billion to $1.650 billion in the fourth
quarter, which represents organic growth of approximately 3 percent
at the midpoint.
The sales guidance reflects several factors, including: a
cautious outlook for the U.S. sales environment; an estimated $15
million in sales expected from the acquisition of Alternative
Apparel; and the expected adverse effect of the Sears Canada
bankruptcy.
GAAP EPS for the fourth quarter is expected to be $0.47 to
$0.49, and adjusted EPS is expected to be $0.51 to $0.53. The
guidance for both measures reflects an estimated $0.05 effect of
increased marketing investment to drive organic growth, a higher
mix of International segment sales than earlier expectations, and
the estimated impact from the Sears Canada bankruptcy, partially
offset by higher-than-expected acquisition synergies.
Other fourth-quarter implied guidance includes expectations for
GAAP operating profit of $227 million to $237 million, and adjusted
operating profit of $241 million to $251 million. The company
expects a tax rate of roughly 5 percent and approximately 369
million weighted average diluted shares outstanding.
Additional Full-Year Guidance. The company expects more
than $20 million in synergy cost benefits in 2017.
Including the acquisition of Alternative Apparel, the company
expects to incur an estimated $95 million of pretax charges for
acquisition and integration-related actions.
The company expects capital expenditures of approximately $90
million in 2017. The company is not required to make a pension
contribution in 2017 and does not anticipate making a voluntary
contribution.
Hanes expects interest expense and other expenses to be
approximately $180 million combined.
Hanes 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 our financial guidance prepared in accordance with
generally accepted accounting principles, we provide quarterly and
full-year results and guidance 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) and EBITDA. The company also discusses
organic sales, defined as net sales excluding contributions from
acquisitions until the closest period end to the acquisition’s
anniversary date.
Adjusted EPS is defined as diluted EPS from continuing
operations excluding actions and the tax effect on actions.
Adjusted net income is defined as net income from continuing
operations excluding actions and the tax effect on actions.
Adjusted operating profit is defined as operating profit excluding
actions. Adjusted gross profit is defined as gross profit excluding
actions. Adjusted SG&A is defined as selling, general and
administrative expenses excluding actions.
Actions during the periods presented include adjustments for
acquisition-related and integration costs. These 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 the future as the company
continues to integrate prior acquisitions and pursues any future
acquisitions.
Hanes has chosen to present these non‐GAAP measures, as well as
organic sales, 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.
In addition, the company has chosen to present EBITDA to
investors because it considers that measure to be an important
supplemental means of evaluating operating performance. EBITDA is
defined as earnings before interest, taxes, depreciation and
amortization.
Hanes believes that EBITDA is frequently used by securities
analysts, investors and other interested parties in the evaluation
of companies in the industry, and management uses EBITDA for
planning purposes in connection with setting its capital allocation
strategy. EBITDA should not, however, be considered as a measure of
discretionary cash available to invest in the growth of the
business.
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.
Hanes expects to incur approximately $95 million in pretax
charges in 2017 related to acquisition integrations of Hanes Europe
Innerwear, Hanes Australasia, Champion Europe, Knights Apparel, and
Alternative Apparel, along with an effective tax rate of
approximately 5 percent. In the fourth quarter of 2017, Hanes
expects approximately $14 million in pretax charges related to
acquisition integrations, along with an effective tax rate of
roughly 5 percent.
The company expects approximately 369 million and approximately
370 million weighted average diluted shares outstanding for the
fourth quarter and full-year 2017, respectively.
To calculate organic sales for the third quarter, net sales were
reduced by the approximately $15 million contributed by the
acquisition of GTM Sportswear. For the fourth quarter, organic
sales will exclude the contributions of Alternative Apparel, which
is expected to be approximately $15 million. With the third-quarter
anniversary of the GTM acquisition, GTM sales in the fourth quarter
will be considered organic.
Webcast Conference Call
Hanes will host an internet webcast of its quarterly investor
conference call at 4:30 p.m. EDT today. The broadcast, 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 5:30 p.m.
An archived replay of the conference call webcast will be
available at www.Hanes.com/investors. A telephone playback will be
available from approximately 7:30 p.m. EDT today through midnight
EST Nov. 8, 2017. The replay will be available by calling toll-free
(855) 859-2056, or by toll call at (404) 537-3406. The replay pass
code is 2460422.
Cautionary Statement Concerning Forward-Looking
Statements
This press release contains certain forward-looking statements,
as defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements following the heading 2017 Financial Guidance, as well
as statements about the benefits anticipated from the acquisitions
of GTM Sportswear and Alternative Apparel and assumptions regarding
organic growth and fourth-quarter financial performance. These
forward-looking statements are based on our current intent,
beliefs, plans and expectations. Readers are cautioned not to place
any undue reliance on any forward-looking statements.
Forward-looking statements necessarily involve risks and
uncertainties, many of which are outside of our control, that could
cause actual results to differ materially from such statements and
from our historical results and experience. These risks and
uncertainties include such things as: the highly competitive and
evolving nature of the industry in which we compete; any
inadequacy, interruption, integration failure or security failure
with respect to our information technology; significant
fluctuations in foreign exchange rates; the rapidly changing retail
environment; our complex multinational tax structure; our ability
to properly manage strategic projects; our ability to attract and
retain a senior management team with the core competencies needed
to support our growth in global markets; risks related to our
international operations, including the impact to our business as a
result of the United Kingdom’s recent referendum to leave the
European Union; 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 access
sufficient capital at reasonable rates or commercially reasonable
terms or to maintain sufficient liquidity in the amounts and at the
times needed; 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,
Maidenform, DIM, Bali, Playtex, Bonds, JMS/Just My Size, Nur
Die/Nur Der, L’eggs, Lovable, Wonderbra, Berlei, Alternative, 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 member of the S&P
500 stock index, Hanes has approximately 68,000 employees in more
than 40 countries and is ranked No. 432 on the Fortune 500 list of
America’s largest companies by sales. Hanes takes pride in its
strong reputation for ethical business practices. The company is
the only apparel producer to ever be honored by the Great Place to
Work Institute for its workplace practices in Central America and
the Caribbean, and is ranked No. 110 on the Forbes magazine list of
America’s Best Large Employers. For eight consecutive years, Hanes
has won the U.S. Environmental Protection Agency Energy Star
sustained excellence/partner of the year award – the only apparel
company to earn sustained excellence honors. The company ranks No.
172 on Newsweek magazine’s green list of 500 largest U.S. companies
for environmental achievement. More information about the company
and its corporate social responsibility initiatives, including
environmental, social compliance and community improvement
achievements, may be found at www.Hanes.com/corporate. Connect with
HanesBrands via social media on Twitter (@hanesbrands) and Facebook
(www.facebook.com/hanesbrandsinc).
TABLE 1
HANESBRANDS INC.
Condensed Consolidated Statements of
Income
(Amounts in thousands, except per-share
amounts)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, 2017 October 1, 2016 %
Change September 30, 2017 October 1, 2016
% Change Net sales $ 1,799,270 $ 1,761,019 2.2 % $ 4,826,235
$ 4,452,890 8.4 % Cost of sales 1,120,813 1,111,653
2,962,345 2,788,977 Gross profit 678,457 649,366 4.5
% 1,863,890 1,663,913 12.0 % As a % of net sales
37.7
% 36.9 % 38.6 % 37.4
% Selling, general and administrative expenses 425,153
421,014 1,260,641 1,091,946 As a % of net sales
23.6
% 23.9 % 26.1 % 24.5
% Operating profit 253,304 228,352 10.9 % 603,249 571,967
5.5 % As a % of net sales
14.1 % 13.0 %
12.5 % 12.8 % Other expenses 1,881
1,559 4,659 50,533 Interest expense, net 43,917 43,433
130,184 111,539 Income from continuing
operations before income tax expense 207,506 183,360 468,406
409,895 Income tax expense 4,150 10,570 19,804
28,693 Income from continuing operations 203,356 172,790
17.7 % 448,602 381,202 17.7 % Income (loss) from discontinued
operations, net of tax — 1,068 (2,097 ) 1,068
Net income $ 203,356 $ 173,858 17.0 % $
446,505 $ 382,270 16.8 % Earnings per share -
basic: Continuing operations $ 0.56 $ 0.46 $ 1.22 $ 1.00
Discontinued operations — — (0.01 ) — Net
income $ 0.56 $ 0.46 21.7 % $ 1.21 $ 1.00
21.0 % Earnings per share - diluted: Continuing
operations $ 0.55 $ 0.45 $ 1.21 $ 0.99 Discontinued operations —
— (0.01 ) — Net income $ 0.55 $ 0.45
22.2 % $ 1.20 $ 0.99 21.2 % Weighted
average shares outstanding: Basic 366,083 379,368 368,885 382,235
Diluted 368,160 382,558 370,947 385,478
TABLE 2
HANESBRANDS INC.
Supplemental Financial
Information
(Dollars in thousands)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, 2017 October 1, 2016 %
Change September 30, 2017 October 1, 2016
% Change Segment net sales1: Innerwear $ 644,059 $ 679,096
(5.2 )% $ 1,868,255 $ 1,953,807 (4.4 )% Activewear 519,496 516,713
0.5 % 1,226,595 1,207,767 1.6 % International 556,730 478,122 16.4
% 1,509,370 1,026,871 47.0 % Other 78,985 87,088 (9.3
)% 222,015 264,445 (16.0 )% Total net sales $
1,799,270 $ 1,761,019 2.2 % $ 4,826,235 $
4,452,890 8.4 % Segment operating profit1: Innerwear
$ 141,002 $ 147,902 (4.7 )% $ 407,982 $ 435,660 (6.4 )% Activewear
79,015 72,962 8.3 % 162,053 160,076 1.2 % International 76,414
61,312 24.6 % 185,216 109,184 69.6 % Other 10,162 9,199 10.5 %
16,250 27,408 (40.7 )% General corporate expenses/other (36,415 )
(20,436 ) 78.2 % (86,949 ) (68,710 ) 26.5 % Acquisition-related and
integration charges (16,874 ) (42,587 ) (60.4 )% (81,303 ) (91,651
) (11.3 )% Total operating profit $ 253,304 $ 228,352
10.9 % $ 603,249 $ 571,967 5.5 % EBITDA2: Net
income from continuing operations $ 203,356 $ 172,790 17.7 % $
448,602 $ 381,202 17.7 % Interest expense, net 43,917 43,433 1.1 %
130,184 111,539 16.7 % Income tax expense 4,150 10,570 (60.7 )%
19,804 28,693 (31.0 )% Depreciation and amortization 31,667
26,888 17.8 % 89,762 73,715 21.8 % Total
EBITDA $ 283,090 $ 253,681 11.6 % $ 688,352 $
595,149 15.7 %
1
In the first quarter of 2017, the Company realigned its
reporting segments to reflect the new model under which the
business will be managed and results will be reviewed by the chief
executive officer, who is the Company’s chief operating decision
maker. The former Direct to Consumer segment, which consisted of
the Company’s U.S. value-based (“outlet”) stores, legacy catalog
business and U.S. retail Internet operations, was eliminated. The
Company’s U.S. retail Internet operations, which sells products
directly to consumers, is now reported in the respective Innerwear
and Activewear segments. The Other category consists of the
Company’s U.S. value-based (“outlet”) stores, U.S. hosiery business
(previously reported in the Innerwear segment) and legacy catalog
operations. Prior year segment sales and operating profit results
have been revised to conform to the current year presentation.
2
Earnings from continuing operations before interest, taxes,
depreciation and amortization (EBITDA) is a non-GAAP financial
measure.
TABLE 3
HANESBRANDS INC.
Condensed Consolidated Balance
Sheets
(Dollars in thousands)
(Unaudited)
September 30, 2017 December 31, 2016
Assets Cash and cash equivalents $ 400,045 $ 460,245 Trade
accounts receivable, net 1,009,188 836,924 Inventories 1,953,918
1,840,565 Other current assets 196,875 137,535 Current assets of
discontinued operations — 45,897 Total current assets
3,560,026 3,321,166 Property, net 624,602 692,464
Trademarks and other identifiable intangibles, net 1,371,007
1,285,458 Goodwill 1,141,942 1,098,540 Deferred tax assets 504,059
464,872 Other noncurrent assets 79,087 67,980 Total assets $
7,280,723 $ 6,930,480
Liabilities Accounts
payable and accrued liabilities $ 1,467,270 $ 1,381,442 Notes
payable 23,969 56,396 Accounts Receivable Securitization Facility
250,995 44,521 Current portion of long-term debt 154,395 133,843
Current liabilities of discontinued operations — 9,466 Total
current liabilities 1,896,629 1,625,668 Long-term
debt 3,566,547 3,507,685 Pension and postretirement benefits
378,573 371,612 Other noncurrent liabilities 207,807 201,601
Total liabilities 6,049,556 5,706,566
Equity
1,231,167 1,223,914 Total liabilities and equity $ 7,280,723
$ 6,930,480
TABLE 4
HANESBRANDS INC.
Condensed Consolidated Statements of
Cash Flows
(Dollars in thousands)
(Unaudited)
Nine Months Ended September 30, 2017
October 1, 2016 Operating Activities: Net income $
446,505 $ 382,270 Depreciation and amortization 89,762 73,715 Other
noncash items 3,703 51,046 Changes in assets and liabilities, net
(208,880 ) (298,740 ) Net cash from operating activities 331,090
208,291
Investing Activities:
Purchases/sales of property and equipment, net, and other (56,020 )
3,262 Acquisition of businesses, net of cash acquired (524 )
(963,127 ) Disposition of businesses 40,285 — Net
cash from investing activities (16,259 ) (959,865 )
Financing Activities: Cash dividends paid (165,211 )
(125,798 ) Share repurchases (299,919 ) (379,901 ) Net borrowings
on notes payable, debt and other 97,532 1,385,624 Net
cash from financing activities (367,598 ) 879,925 Effect of
changes in foreign currency exchange rates on cash (7,433 ) 2,693
Change in cash and cash equivalents (60,200 ) 131,044 Cash
and cash equivalents at beginning of year 460,245 319,169
Cash and cash equivalents at end of period $ 400,045
$ 450,213
TABLE 5
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP Measures
to Non-GAAP Measures
(Amounts in thousands, except per-share
amounts)
(Unaudited)
Quarter Ended Nine Months Ended September
30, 2017 October 1, 2016 September 30,
2017 October 1, 2016 Gross profit, as reported
under GAAP $ 678,457 $ 649,366 $ 1,863,890 $ 1,663,913
Acquisition-related and integration charges 2,230 13,563
21,989 27,732 Gross profit, as adjusted $
680,687 $ 662,929 $ 1,885,879 $ 1,691,645
As a % of net sales
37.8 % 37.6
% 39.1 % 38.0 % Selling,
general and administrative expenses, as reported under GAAP $
425,153 $ 421,014 $ 1,260,641 $ 1,091,946 Acquisition-related and
integration charges (14,644 ) (29,024 ) (59,314 ) (63,919 )
Selling, general and administrative expenses, as adjusted $ 410,509
$ 391,990 $ 1,201,327 $ 1,028,027 As a
% of net sales
22.8 % 22.3 %
24.9 % 23.1 % Operating profit,
as reported under GAAP $ 253,304 $ 228,352 $ 603,249 $ 571,967
Acquisition-related and integration charges included in gross
profit 2,230 13,563 21,989 27,732 Acquisition-related and
integration charges included in SG&A 14,644 29,024
59,314 63,919 Operating profit, as adjusted $
270,178 $ 270,939 $ 684,552 $ 663,618
As a % of net sales
15.0 % 15.4 %
14.2 % 14.9 % Net income from
continuing operations, as reported under GAAP $ 203,356 $ 172,790 $
448,602 $ 381,202 Acquisition-related and integration charges
included in gross profit 2,230 13,563 21,989 27,732
Acquisition-related and integration charges included in SG&A
14,644 29,024 59,314 63,919 Debt refinance charges included in
other expenses — — — 47,291 Tax effect on actions (338 ) (2,017 )
(4,204 ) (9,726 ) Net income from continuing operations, as
adjusted $ 219,892 $ 213,360 $ 525,701 $
510,418 Diluted earnings per share from continuing
operations, as reported under GAAP $ 0.55 $ 0.45 $ 1.21 $ 0.99
Acquisition-related and integration charges 0.04 0.11
0.21 0.34 Diluted earnings per share from continuing
operations, as adjusted $ 0.60 $ 0.56 $ 1.42 $
1.32
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171101006775/en/
HanesBrandsNews Media:Matt Hall, 336-519-3386orAnalysts and
Investors:T.C. Robillard, 336-519-2115
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