Gildan Activewear Inc. (GIL: TSX and NYSE) today announced its
results for the first quarter ended April 4, 2021.
“Our first quarter results reflected a strong start to 2021 as
continued benefits from our Back to Basics strategy supported
sell-through across all channels and drove strong operating margin
performance, allowing us to deliver net earnings significantly
above prior year and first quarter 2019 levels” said Gildan
President and CEO, Glenn J. Chamandy. “While large events have not
yet restarted, we continue to be encouraged by the strength of our
imprintables business and on the retail side we were pleased with
strong double-digit growth in underwear and activewear sales
compared to the first quarters of 2020 and 2019.”
Overall, the Company generated $590 million in sales, up 28%
over last year and down approximately 5% from the first quarter of
2019. Gross margin in the quarter of 32.0% and adjusted gross
margin1 of 31.1% were up 880 bps and 650 bps, respectively, over
the same quarter last year. Compared to the first quarter of 2019,
gross margin was up 620 bps and 530 bps on an adjusted basis.
Margin performance in the quarter was enhanced by the positive
impact of an approximate $18 million (300 bps) accrual of a
one-time payment from the USDA related to its Pandemic Assistance
for Cotton Users (PACU) program. Further, despite higher sales in
the quarter, we kept our selling, general and administrative
(SG&A) expenses flat compared to last year, which translated to
SG&A as a percentage of sales of 12.4% in the quarter, a strong
improvement over the same quarters in 2020 and 2019. Consequently,
we delivered GAAP diluted EPS of $0.50 and adjusted diluted EPS of
$0.48, including the $0.09 per share PACU benefit. Before
reflecting the PACU accrual, adjusted diluted EPS of $0.39 in the
quarter significantly exceeded adjusted diluted EPS of $0.06 and
$0.16 in the first quarters of 2020 and 2019, respectively.
During the first quarter, we generated strong free cash flow1 of
$38 million and our available liquidity position at the end of the
quarter remained at $1.6 billion. Net debt1 totaled $541.6 million
and our net debt to adjusted EBITDA1 ratio decreased to 2.1 from
3.5 at the end of 2020 for external reporting purposes. After
reflecting debt covenant adjustments, which exclude the impact of
the second quarter of 2020, the Company's net debt leverage ratio1
was 1.1. Effective April 5, 2021, the Company is no longer
required to comply with the restrictions and provisions established
in June of 2020 when the Company amended its loan agreements to
obtain temporary COVID-related covenant relief. Furthermore,
subsequent to the quarter-end, the Company repaid its $400 million
unsecured two-year term loan which was due on April 6, 2022.
Lastly, today we announced that our Board of Directors has approved
the reinstatement of the Company’s quarterly dividend of $0.154 per
share, in line with Gildan’s previous cash dividend rate prior to
suspending these payments after the first quarter of 2020. The
Board’s action to reinstate dividend payments reflects increased
confidence from the strong recovery so far, the Company’s solid
foundation for future cash flow generation, and the improvement in
the Company's reported net debt leverage ratio which has come down
near the high end of the Company’s historical target range of one
to two times net debt to adjusted EBITDA for the trailing twelve
month period. The Board will assess further capital returns to
shareholders through the potential reinstatement of our share
repurchase program when we gain further visibility on the COVID-19
recovery outlook and when the Company’s debt leverage ratio falls
well within its historical target range.
Q1 2021 Operating Results Net sales for the
first quarter ending April 4, 2021, of $589.6 million were up 28.4%
compared to the first quarter of 2020, consisting of activewear
sales of $484.6 million, up 30.1%, and sales of $105.0 million in
the hosiery and underwear category, up 21.4%. The increase in
activewear sales was driven by double digit unit sales volume
growth in North American and international imprintables markets and
activewear sold in retail channels, as well as favourable
product-mix, partly offset by lower net selling prices.
Imprintables volume growth reflected the impact of net restocking
by distributors and positive point-of-sales (POS) compared to the
first quarter last year. Compared to the first quarter of 2019, POS
in the U.S. and international markets remained relatively stable
with the levels we saw entering the quarter, down 10% to 15% over
2019. The increase in the hosiery and underwear category was driven
by the strength of our underwear sales which reflected strong
double-digit volume growth over both the first quarters of 2020 and
2019.
Our reported gross margin in the first quarter was 32.0%
compared to gross margin of 23.2% in the first quarter of 2020.
Adjusted gross margin totaled 31.1% in the quarter, up 650 bps from
adjusted gross margin of 24.6% in the first quarter last year. The
significant year-over-year increase was mainly due to the
non-recurrence of COVID-related charges incurred in the first
quarter of 2020, the impact of the PACU benefit, lower raw material
costs, favourable product mix, and the benefit of Back to Basics
initiatives. The positive impact of these factors more than offset
the impact of lower imprintables net selling prices. Excluding the
impact of the one-time PACU benefit (300 bps), adjusted gross
margin in the quarter totaled 28.1%.
SG&A expenses for the first quarter of $73.4 million, or
12.4% of sales, were down slightly by $0.5 million compared to
SG&A expenses of $73.9 million, or 16.1% of sales for the same
quarter last year. The year-over-year reduction reflected cost
savings stemming from our Back to Basics initiatives offset by
higher variable compensation expenses.
We generated operating income of $113.8 million, or 19.3% of
sales, in the first quarter of 2021 compared to an operating loss
of $92.3 million last year. Adjusted operating income1 totaled
$110.3 million, or 18.7% of sales, compared to $19.9 million, or
4.3% of sales, last year, driven by the impact of higher sales and
adjusted gross margin and the benefit of the non-recurrence of the
impairment of trade accounts receivable of $20.8 million recorded
in the first quarter of 2020. Net financial expenses of $10.8
million were up $2.9 million over the prior year, mainly due to
fees incurred in connection with the amendments made to our
long-term debt facilities and the impact of foreign exchange.
Consequently, we reported net earnings of $98.5 million, or $0.50
per share on a diluted basis, for the three months ended
April 4, 2021 and adjusted net earnings1 of $95.0 million, or
$0.48 per share on a diluted basis, compared to a net loss of $99.3
million, or $0.50 per diluted share, and adjusted net earnings of
$11.2 million, or $0.06 per diluted share, respectively, in the
first quarter last year.
We generated strong free cash flow of $38 million in the first
quarter 2021, compared to $235 million of free cash flow consumed
in the first quarter of 2020. Historically, the first quarter is a
period during which the Company consumes free cash flow due to
higher working capital requirements to build inventories to support
seasonal summer sales. The increase in free cash flow in the first
quarter compared to last year was primarily due to higher operating
earnings, a lower inventory build in the quarter, a net cash impact
of $30 million from insurance proceeds, and lower capital
expenditures compared to last year. While benefits from the
Company's Back to Basics initiatives are translating to more
efficient inventory management, higher than anticipated sales also
contributed to a lower than planned increase in inventory levels in
the quarter.
Current Market EnvironmentOur POS in
imprintables channels as we moved from the first quarter into the
second quarter has been running slightly better, with overall POS
in U.S. and international markets down approximately 10% compared
to pre-pandemic 2019 levels. In retail, sales in all product
categories are tracking above prior year levels. Overall, we are
encouraged by the economic recovery we are seeing related to
continued re-openings, the impact of U.S. stimulus on consumer
demand, and the strong progress of the vaccine rollout in the U.S.
However, large gatherings have not yet restarted and on the supply
chain side we are monitoring labour shortages in the U.S. affecting
certain industries, including yarn spinners, tightness in raw
material inputs, as well as the impact of port backlogs and
transportation-related factors globally. Consequently, we remain
cautious regarding the pace of overall recovery. Nonetheless, we
are confident that the combination of the steps we took during the
crisis in 2020 and the strength of our Back to Basics strategy is
positioning us well to capitalize on market share opportunities and
create value for our shareholders over the long-term.
Declaration of Quarterly DividendThe Board of
Directors has declared a cash dividend of $0.154 per share, payable
on June 21, 2021 to shareholders of record as of May 27, 2021.
This dividend is an “eligible dividend” for the purposes of the
Income Tax Act (Canada) and any other applicable provincial
legislation pertaining to eligible dividends.
Disclosure of Outstanding Share DataAs at
April 30, 2021, there were 198,429,822 common shares issued
and outstanding along with 3,519,127 stock options and 17,818
dilutive restricted share units (Treasury RSUs) outstanding. Each
stock option entitles the holder to purchase one common share at
the end of the vesting period at a pre-determined option price.
Each Treasury RSU entitles the holder to receive one common share
from treasury at the end of the vesting period, without any
monetary consideration being paid to the Company.
Conference Call InformationGildan Activewear
Inc. will hold a conference call to discuss the Company's first
quarter 2021 results today at 5:00 PM ET. A live audio webcast
of the conference call, as well as a replay, will be available on
its corporate site or on the following link:
https://gildancorp.com/en/investors/events-and-presentations/. The
conference call can be accessed by dialing (877) 282-2924 (Canada
& U.S.) or (470) 495-9480 (international) and entering passcode
4652399#. A replay will be available for 7 days starting at 8:00 PM
ET by dialing (855) 859-2056 (Canada & U.S.) or
(404) 537-3406 (international) and entering the same
passcode.
NotesThis release should be read in conjunction
with Gildan’s Management’s Discussion and Analysis and its
unaudited condensed interim consolidated financial statements as at
and for the three months ended April 4, 2021, which will be filed
by Gildan with the Canadian securities regulatory authorities and
with the U.S. Securities and Exchange Commission and which will be
available on Gildan’s corporate website.
Certain minor rounding variances may exist between the unaudited
condensed interim consolidated financial statements and the table
summaries contained in this press release.
Supplemental Financial Data
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(in $ millions, except per share amounts or otherwise
indicated) |
Q1 2021 |
|
|
Q1 2020 |
|
|
Variation (%) |
|
|
Net sales |
589.6 |
|
|
459.1 |
|
|
28.4 |
|
% |
Gross profit |
188.5 |
|
|
106.5 |
|
|
77.0 |
|
% |
Adjusted gross profit(1) |
183.5 |
|
|
114.5 |
|
|
60.3 |
|
% |
SG&A expenses |
73.4 |
|
|
73.9 |
|
|
(0.7 |
) |
% |
(Reversal of impairment)
Impairment of trade accounts receivable |
(0.2 |
) |
|
20.8 |
|
|
n.m. |
|
|
Restructuring and
acquisition-related costs |
1.5 |
|
|
10.2 |
|
|
(85.3 |
) |
% |
Impairment of goodwill and
intangible assets |
— |
|
|
94.0 |
|
|
n.m. |
|
|
Operating income (loss) |
113.8 |
|
|
(92.3 |
) |
|
n.m. |
|
|
Adjusted operating
income(1) |
110.3 |
|
|
19.9 |
|
|
n.m. |
|
|
Adjusted EBITDA(1) |
145.8 |
|
|
50.2 |
|
|
n.m. |
|
|
Financial expenses |
10.8 |
|
|
7.9 |
|
|
36.7 |
|
% |
Income tax expense
(recovery) |
4.4 |
|
|
(0.9 |
) |
|
n.m. |
|
|
Net earnings (loss) |
98.5 |
|
|
(99.3 |
) |
|
n.m. |
|
|
Adjusted net earnings(1) |
95.0 |
|
|
11.2 |
|
|
n.m. |
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
0.50 |
|
|
(0.50 |
) |
|
n.m. |
|
|
Diluted EPS |
0.50 |
|
|
(0.50 |
) |
|
n.m. |
|
|
Adjusted diluted EPS(1) |
0.48 |
|
|
0.06 |
|
|
n.m. |
|
|
|
|
|
|
|
|
Gross margin |
32.0 |
|
% |
23.2 |
|
% |
8.8 |
|
pp |
Adjusted gross margin(1) |
31.1 |
|
% |
24.6 |
|
% |
6.5 |
|
pp |
SG&A expenses as a
percentage of sales |
12.4 |
|
% |
16.1 |
|
% |
(3.7 |
) |
pp |
Operating margin |
19.3 |
|
% |
(20.1 |
) |
% |
39.4 |
|
pp |
Adjusted operating margin(1) |
18.7 |
|
% |
4.3 |
|
% |
14.4 |
|
pp |
|
|
|
|
|
|
Cash flows from (used in)
operating activities |
20.6 |
|
|
(209.4 |
) |
|
n.m. |
|
|
Capital expenditures |
(13.1 |
) |
|
(25.6 |
) |
|
(48.8 |
) |
% |
Free
cash flow(1) |
37.6 |
|
|
(235.0 |
) |
|
n.m. |
|
|
n.m. = not meaningful
As at |
Apr 4,2021 |
|
Jan 3,2021 |
|
Inventories |
736.4 |
|
728.0 |
|
Trade accounts receivable |
268.6 |
|
196.5 |
|
Net indebtedness(1) |
541.6 |
|
577.2 |
|
Net
debt leverage ratio(1)(2) |
2.1 |
|
3.5 |
|
(1) Please refer to "Definition and reconciliation of non-GAAP
financial measures" in this press release.(2) The Company's net
debt to EBITDA ratio for purposes of its loan and note agreements
was 1.1 at April 4, 2021.
DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
(in $ millions, or otherwise indicated) |
Q1 2021 |
|
Q1 2020 |
|
Variation (%) |
|
Activewear |
484.6 |
|
372.6 |
|
30.1 |
% |
Hosiery
and underwear |
105.0 |
|
86.5 |
|
21.4 |
% |
|
589.6 |
|
459.1 |
|
28.4 |
% |
Net sales were derived from customers located in the following
geographic areas:
(in $ millions, or otherwise indicated) |
Q1 2021 |
|
Q1 2020 |
|
Variation (%) |
|
United States |
508.7 |
|
389.3 |
|
30.7 |
% |
Canada |
22.6 |
|
16.3 |
|
38.7 |
% |
International |
58.3 |
|
53.4 |
|
9.2 |
% |
|
589.6 |
|
459.0 |
|
28.4 |
% |
Definition and Reconciliation of Non-GAAP Financial
MeasuresThis press release includes references to certain
non-GAAP financial measures as described below. These non-GAAP
measures do not have any standardized meanings prescribed by
International Financial Reporting Standards (IFRS) and are
therefore unlikely to be comparable to similar measures presented
by other companies. Accordingly, they should not be considered in
isolation. The terms and definitions of the non-GAAP measures used
in this press release and a reconciliation of each non-GAAP measure
to the most directly comparable IFRS measure are provided below.
The non-GAAP measures are presented on a consistent basis for all
periods presented in this press release, except as otherwise
discussed below.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, income taxes relating to restructuring
and acquisition-related actions, income taxes related to the
re-assessment of the probability of realization of previously
recognized or de-recognized deferred income tax assets, and income
taxes relating to the revaluation of deferred income tax assets and
liabilities as a result of statutory income tax rate changes in the
countries in which we operate. Adjusted net earnings also excludes
impairment of goodwill and intangible assets, net insurance gains
related to the two hurricanes which impacted the Company’s
operations in Central America, the discontinuance of personal
protective equipment (PPE) stock-keeping unit (SKUs), the impact of
the Company's strategic initiative to significantly reduce its
retail product line SKU count which the Company began implementing
in the fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. Adjusted diluted EPS is calculated as adjusted net earnings
divided by the diluted weighted average number of common shares
outstanding. The Company uses adjusted net earnings and adjusted
diluted EPS to measure its performance from one period to the next,
without the variation caused by the impacts of the items described
above. The Company excludes these items because they affect the
comparability of its financial results and could potentially
distort the analysis of trends in its business performance.
Excluding these items does not imply they are necessarily
non-recurring.
(in $ millions, except per share amounts) |
Q1 2021 |
|
|
Q1 2020 |
|
|
Net earnings (loss) |
98.5 |
|
|
(99.3 |
) |
|
Adjustments for: |
|
|
Restructuring and acquisition-related costs |
1.5 |
|
|
10.2 |
|
|
Impairment of goodwill and intangible assets |
— |
|
|
94.0 |
|
|
Impact of strategic product line initiatives(1) |
1.2 |
|
|
8.0 |
|
|
Net insurance gains(2) |
(6.2 |
) |
|
— |
|
|
Income tax recovery relating to the above-noted adjustments |
— |
|
|
(1.7 |
) |
|
Adjusted net earnings |
95.0 |
|
|
11.2 |
|
|
Basic EPS |
0.50 |
|
|
(0.50 |
) |
|
Diluted EPS |
0.50 |
|
|
(0.50 |
) |
|
Adjusted diluted EPS |
0.48 |
|
|
0.06 |
|
|
(1) Includes $1.2 million (2020 - $8.0 million) of charges
related to the Company’s strategic initiatives to significantly
reduce its product line SKU counts. For the three months ended
March 29, 2020, the $8.0 million charge includes the $2.8 million
gross profit impact of a sales return allowance for anticipated
product returns related to discontinued SKUs which reduced net
sales by $6.2 million and cost of sales by $3.4 million.(2)
Net insurance gains are related to the two hurricanes that occurred
in Central America in November 2020, consisting of the following
costs which were more than offset by related accrued insurance
recoveries to date: losses on disposal of unrepairable equipment,
equipment repairs, salary and benefits continuation for idle
employees, and other costs, and unabsorbed salary, benefits, and
overhead costs, that resulted from related production
interruptions.
Adjusted gross profit and adjusted gross marginAdjusted gross
profit is calculated as gross profit excluding the impact of net
insurance gains related to the two hurricanes which impacted the
Company’s operations in Central America, the discontinuance of PPE
SKUs, the impact of the Company's strategic initiative to
significantly reduce its retail product line SKU count which the
Company began implementing in the fourth quarter of fiscal 2020,
and the impact of adjustments related to the Company’s decision in
the fourth quarter of fiscal 2019 to implement a strategic
initiative to significantly reduce its imprintables product line
SKU count, by exiting all ship to-the-piece activities and
discontinuing overlapping and less productive styles and SKUs
between brands. These product line initiatives are aimed at
simplifying the Company's product portfolio and reducing complexity
in its manufacturing and warehouse distribution activities. The
impact of the strategic initiatives includes inventory write-downs
and a sales return allowance for anticipated product returns
related to discontinued SKUs. Adjusted gross margin is calculated
as adjusted gross profit divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. The Company uses adjusted gross profit and
adjusted gross margin to measure its performance from one period to
the next, without the variation caused by the impacts of the items
described above. The Company excludes these items because they
affect the comparability of its financial results and could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
(in $ millions, or otherwise indicated) |
Q1 2021 |
|
Q1 2020 |
|
Gross profit |
188.5 |
|
106.5 |
|
Adjustments for: |
|
|
Impact of strategic product line initiatives(1) |
1.2 |
|
8.0 |
|
Net insurance gains(1) |
(6.2 |
) |
— |
|
Adjusted gross profit |
183.5 |
|
114.5 |
|
Gross margin |
32.0 |
% |
23.2 |
% |
Adjusted gross margin(2) |
31.1 |
% |
24.6 |
% |
(1) See footnotes to table "Adjusted net
earnings and adjusted diluted EPS" in this press release.(2)
Calculated as adjusted gross profit divided by net sales excluding
the sales return allowance for anticipated product returns related
to discontinued SKUs.
Adjusted operating income and adjusted operating
marginAdjusted operating income is calculated as operating income
before restructuring and acquisition-related costs. Adjusted
operating income also excludes impairment of goodwill and
intangible assets, net insurance gains related to the two
hurricanes which impacted the Company’s operations in Central
America, the discontinuance of PPE SKUs, the impact of the
Company's strategic initiative to significantly reduce its retail
product line SKU count which the Company began implementing in the
fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. Adjusted operating margin is calculated as adjusted operating
income divided by net sales excluding the sales return allowance
for anticipated product returns related to discontinued SKUs.
Management uses adjusted operating income and adjusted operating
margin to measure its performance from one period to the next,
without the variation caused by the impacts of the items described
above. The Company excludes these items because they affect the
comparability of its financial results and could potentially
distort the analysis of trends in its business performance.
Excluding these items does not imply they are necessarily
non-recurring.
(in $ millions, or otherwise indicated) |
Q1 2021 |
|
|
Q1 2020 |
|
|
Operating income (loss) |
113.8 |
|
|
(92.3 |
) |
|
Adjustment for: |
|
|
|
|
|
|
Restructuring and acquisition-related costs |
1.5 |
|
|
10.2 |
|
|
Impairment of goodwill and intangible assets |
— |
|
|
94.0 |
|
|
Impact of strategic product line initiatives(1) |
1.2 |
|
|
8.0 |
|
|
Net insurance gains(1) |
(6.2 |
) |
|
— |
|
|
Adjusted operating income |
110.3 |
|
|
19.9 |
|
|
Operating margin |
19.3 |
|
% |
(20.1 |
) |
% |
Adjusted operating margin(2) |
18.7 |
|
% |
4.3 |
|
% |
(1) See footnotes to table "Adjusted net
earnings and adjusted diluted EPS" in this press release.(2)
Calculated as adjusted operating income divided by net sales
excluding the sales return allowance for anticipated product
returns related to discontinued SKUs.
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses, income taxes, and depreciation
and amortization, and excludes the impact of restructuring and
acquisition-related costs. Adjusted EBITDA also excludes impairment
of goodwill and intangible assets, net insurance gains related to
the two hurricanes which impacted the Company’s operations in
Central America, the discontinuance of PPE SKUs, the impact of the
Company's strategic initiative to significantly reduce its retail
product line SKU count which the Company began implementing in the
fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. The Company uses adjusted EBITDA, among other measures, to
assess the operating performance of its business. The Company also
believes this measure is commonly used by investors and analysts to
measure a company’s ability to service debt and to meet other
payment obligations, or as a common valuation measurement. The
Company excludes depreciation and amortization expenses, which are
non-cash in nature and can vary significantly depending upon
accounting methods or non-operating factors. Excluding these items
does not imply they are necessarily non-recurring.
(in $ millions) |
Q1 2021 |
|
|
Q1 2020 |
|
|
Net earnings (loss) |
98.5 |
|
|
(99.3 |
) |
|
Restructuring and
acquisition-related costs |
1.5 |
|
|
10.2 |
|
|
Impairment of goodwill and
intangible assets |
— |
|
|
94.0 |
|
|
Impact of strategic product
line initiatives(1) |
1.2 |
|
|
8.0 |
|
|
Net insurance gains(1) |
(6.2 |
) |
|
— |
|
|
Depreciation and
amortization |
35.6 |
|
|
30.3 |
|
|
Financial expenses, net |
10.8 |
|
|
7.9 |
|
|
Income
tax expense (recovery) |
4.4 |
|
|
(0.9 |
) |
|
Adjusted EBITDA |
145.8 |
|
|
50.2 |
|
|
(1) See footnotes to table "Adjusted net
earnings and adjusted diluted EPS" in this press release.
Free cash flow Free cash flow is defined as cash from operating
activities, less cash flow used in investing activities excluding
business acquisitions. The Company considers free cash flow to be
an important indicator of the financial strength and liquidity of
its business, and it is a key metric which indicates how much cash
is available after capital expenditures to repay debt, to pursue
business acquisitions, and/or to redistribute to its shareholders.
The Company believes this measure is commonly used by investors and
analysts when valuing a business and its underlying assets.
(in $ millions) |
Q1 2021 |
|
Q1 2020 |
|
|
Cash flows from (used in) operating activities |
20.6 |
|
(209.4 |
) |
|
Cash flows from (used in)
investing activities |
17.0 |
|
(25.6 |
) |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
|
Free cash flow |
37.6 |
|
(235.0 |
) |
|
Total indebtedness and net indebtednessTotal
indebtedness is defined as the total bank indebtedness, long-term
debt (including any current portion), and lease obligations
(including any current portion), and net indebtedness is calculated
as total indebtedness net of cash and cash equivalents. The Company
considers total indebtedness and net indebtedness to be important
indicators of the financial leverage of the Company.
(in $ millions) |
Apr 4, 2021 |
|
|
Jan 3, 2021 |
|
|
Long-term debt and total bank indebtedness |
1,000.0 |
|
|
1,000.0 |
|
|
Lease
obligations |
77.6 |
|
|
82.5 |
|
|
Total indebtedness |
1,077.6 |
|
|
1,082.5 |
|
|
Cash
and cash equivalents |
(536.0 |
) |
|
(505.3 |
) |
|
Net indebtedness |
541.6 |
|
|
577.2 |
|
|
Net debt leverage ratio The net debt leverage ratio is defined
as the ratio of net indebtedness to pro-forma adjusted EBITDA for
the trailing twelve months. The pro-forma adjusted EBITDA for the
trailing twelve months reflects business acquisitions made during
the period, as if they had occurred at the beginning of the
trailing twelve month period. The Company has set a fiscal year-end
net debt leverage target ratio of one to two times pro-forma
adjusted EBITDA for the trailing twelve months. Due to the current
economic environment, the Company is currently slightly above its
target year-end range. The Company uses and believes that certain
investors and analysts use the net debt leverage ratio to measure
the financial leverage of the Company.
(in $ millions, or otherwise indicated) |
Apr 4, 2021 |
|
Jan 3, 2021 |
|
Adjusted EBITDA for the trailing twelve months |
260.8 |
|
165.1 |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
260.8 |
|
165.1 |
|
Net indebtedness |
541.6 |
|
577.2 |
|
Net
debt leverage ratio(1) |
2.1 |
|
3.5 |
|
(1) The Company's net debt to EBITDA ratio for purposes of its
loan and note agreements was 1.1 at April 4, 2021.
Caution Concerning Forward-Looking Statements
Certain statements included in this press release constitute
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations and are subject to important risks,
uncertainties, and assumptions. This forward-looking information
includes, amongst others, information with respect to our
objectives and the strategies to achieve these objectives, as well
as information with respect to our beliefs, plans, expectations,
anticipations, estimates, and intentions. Forward-looking
statements generally can be identified by the use of conditional or
forward-looking terminology such as “may”, “will”, “expect”,
“intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”,
“foresee”, “believe”, or “continue”, or the negatives of these
terms or variations of them or similar terminology. We refer you to
the Company’s filings with the Canadian securities regulatory
authorities and the U.S. Securities and Exchange Commission, as
well as the risks described under the “Financial risk management”,
“Critical accounting estimates and judgments”, and “Risks and
uncertainties” sections of our most recent Management’s Discussion
and Analysis for a discussion of the various factors that may
affect the Company’s future results. Material factors and
assumptions that were applied in drawing a conclusion or making a
forecast or projection are also set out throughout such document
and this press release.
Forward-looking information is inherently uncertain and the
results or events predicted in such forward-looking information may
differ materially from actual results or events. Material factors,
which could cause actual results or events to differ materially
from a conclusion, forecast, or projection in such forward-looking
information, include, but are not limited to:
- the magnitude and length of
economic disruption as a result of the worldwide coronavirus
(COVID-19) pandemic and the more recent appearance of COVID
variants, including the scope and duration of government mandated
general, partial, or targeted private sector shutdowns, travel
restrictions, social distancing measures, and the pace of mass
vaccination campaigns;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve, including those
resulting from the impact of the COVID-19 pandemic and the more
recent appearance of COVID variants;
- our ability to implement our growth strategies and plans;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- the intensity of competitive activity and our ability to
compete effectively;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit to minimum quantity
purchases;
- our ability to anticipate, identify, or react to changes in
consumer preferences and trends;
- our ability to manage production and inventory levels
effectively in relation to changes in customer demand;
- fluctuations and volatility in the price of raw materials used
to manufacture our products, such as cotton, polyester fibres, dyes
and other chemicals;
- our reliance on key suppliers and our ability to maintain an
uninterrupted supply of raw materials and finished goods;
- the impact of climate, political, social, and economic risks,
natural disasters, epidemics, pandemics and endemics, such as the
COVID-19 pandemic, in the countries in which we operate or sell to,
or from which we source production;
- disruption to manufacturing and distribution activities due to
such factors as operational issues, disruptions in transportation
logistic functions, labour shortages or disruptions, political or
social instability, weather-related events, natural disasters,
epidemics and pandemics, such as the COVID-19 pandemic, and other
unforeseen adverse events;
- the impacts of the COVID-19 pandemic on our business and
financial performance and consequently on our ability to comply
with the financial covenants under our debt agreements;
- compliance with applicable trade, competition, taxation,
environmental, health and safety, product liability, employment,
patent and trademark, corporate and securities, licensing and
permits, data privacy, bankruptcy, anti-corruption, and other laws
and regulations in the jurisdictions in which we operate;
- the imposition of trade remedies, or changes to duties and
tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs that
the Company is currently relying on in conducting its manufacturing
operations or the application of safeguards thereunder;
- factors or circumstances that could increase our effective
income tax rate, including the outcome of any tax audits or changes
to applicable tax laws or treaties;
- changes to and failure to comply with consumer product safety
laws and regulations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of actual, alleged, or perceived
violations of human rights, labour and environmental laws or
international labour standards, or unethical labour or other
business practices by the Company or one of its third-party
contractors;
- changes in third-party licensing arrangements and licensed
brands;
- our ability to protect our intellectual property rights;
- operational problems with our information systems as a result
of system failures, viruses, security and cyber security breaches,
disasters, and disruptions due to system upgrades or the
integration of systems;
- an actual or perceived breach of data security;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments, including
credit risk on trade accounts receivables and other financial
instruments, liquidity risk, foreign currency risk, and interest
rate risk, as well as risks arising from commodity prices.
These factors may cause the Company’s actual performance and
financial results in future periods to differ materially from any
estimates or projections of future performance or results expressed
or implied by such forward-looking statements. Forward-looking
statements do not take into account the effect that transactions or
non-recurring or other special items announced or occurring after
the statements are made may have on the Company’s business. For
example, they do not include the effect of business dispositions,
acquisitions, other business transactions, asset write-downs, asset
impairment losses, or other charges announced or occurring after
forward-looking statements are made. The financial impact of such
transactions and non-recurring and other special items can be
complex and depends on the facts particular to each of them.
There can be no assurance that the expectations represented by
our forward-looking statements will prove to be correct. The
purpose of the forward-looking statements is to provide the reader
with a description of management’s expectations regarding the
Company’s future financial performance and may not be appropriate
for other purposes. Furthermore, unless otherwise stated, the
forward-looking statements contained in this press release are made
as of the date of this press release, and we do not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events, or otherwise unless required by applicable
legislation or regulation. The forward-looking statements contained
in this press release are expressly qualified by this cautionary
statement.
About GildanGildan is a leading
manufacturer of everyday basic apparel which markets its products
in North America, Europe, Asia-Pacific, and Latin America, under a
diversified portfolio of Company-owned brands, including Gildan®,
American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®,
GoldToe®, Anvil® by Gildan®, Alstyle®, Secret®, Silks®, Kushyfoot®,
Secret Silky®, Therapy Plus®, Peds® and MediPeds®, and under the
Under Armour® brand through a sock licensing agreement providing
exclusive distribution rights in the United States and Canada. Our
product offering includes activewear, underwear, socks, hosiery,
and legwear products sold to a broad range of customers, including
wholesale distributors, screenprinters or embellishers, as well as
to retailers that sell to consumers through their physical stores
and/or e-commerce platforms, and to global lifestyle brand
companies.
Gildan owns and operates vertically-integrated, large-scale
manufacturing facilities which are primarily located in Central
America, the Caribbean, North America, and Bangladesh. With
approximately 46,000 employees worldwide, Gildan operates with a
strong commitment to industry-leading labour and environmental
practices throughout its supply chain in accordance with its
comprehensive Genuine Responsibility® program embedded in the
Company's long-term business strategy. More information about the
Company and its corporate citizenship practices and initiatives can
be found at www.gildancorp.com and www.genuineresponsibility.com,
respectively.
Investor inquiries:Sophie ArgiriouVice President,
Investor Communications(514) 343-8815sargiriou@gildan.com |
Media inquiries:Genevieve GosselinDirector,
Corporate Communications & Marketing(514)
343-8814ggosselin@gildan.com |
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