Net Sales, operating profit, EPS and operating cash flow above
expectations
U.S. Innerwear sales up 8.4% over last year, excluding
protective garments; up 11.5% on rebased basis
Global Champion net sales more than doubled over previous
quarter
3Q net sales of $1.81 billion driven by improved sales trends
across apparel businesses
3Q GAAP EPS $0.29; Adjusted EPS $0.42
3Q net cash from operations of $249 million
Launches in-depth business review as it prepares long-term
growth strategy
Hanesbrands Inc. (NYSE: HBI), a leading global marketer of
branded everyday basic apparel, today announced third-quarter
results, delivering strong sales, operating profit and cash flow on
improving business trends, despite continued market disruption from
the COVID-19 pandemic.
Net sales for the third quarter ended September 26, 2020, were
$1.81 billion compared with $1.87 billion a year ago. The company
sold $179 million in personal protective garments globally. The
year-ago quarter included net sales of $119 million from the now
exited C9 Champion mass program and the DKNY intimate apparel
license. Excluding the exited programs and the effect of changes in
foreign exchange rates, total constant-currency net sales for
third-quarter 2020 increased 2.6%.
Third-quarter GAAP operating profit decreased 35% to $175
million, and the quarter’s adjusted operating profit excluding
actions decreased 9% to $227 million.
Third-quarter GAAP EPS decreased 43% to $0.29, and adjusted EPS
excluding actions decreased 11% to $0.42. (See the Note on
Reconciliation of Select GAAP Measures to Non-GAAP Measures later
in this news release for additional discussion and details of
actions, which include pandemic-related charges.)
“I want to thank our incredible team of more than 63,000 around
the globe for their commitment and dedication during these
challenging times,” said Hanes Chief Executive Officer Steve
Bratspies. “I’m pleased with our third-quarter results as we saw
significant improvements across our business and exceeded our
expectations for sales, profits and cash flow from operations. We
saw particularly strong performance in our U.S. Innerwear and
global Champion businesses, and I’m encouraged by our momentum even
as we continue to operate in a challenging environment.
“Hanesbrands has iconic brands, a strong balance sheet, global
reach, a deep commitment to sustainability and a passionate team.
We have tremendous opportunities ahead of us, and we are committed
to delivering long-term growth. We are conducting an in-depth
review of our business as we build our growth strategy. Parts of
our strategy will begin to unfold in the fourth quarter, and I look
forward to reporting on our progress in the months ahead.”
Callouts for Third-Quarter Results and
Ongoing Operations
Momentum across the business: Apparel revenue trends
improved sequentially in each business segment. Global sales of
Champion grew nearly 130% over the previous quarter, and consumer
demand remains strong.
Strong cash flow: The company delivered another strong
cash flow quarter, generating $249 million of operating cash flow.
The company expects to end the year with higher-than-anticipated
inventory of personal protective garments, but continues to expect
to generate positive operating cash flow in the second half and for
the full year.
Digital progress: For the third quarter, online sales
increased nearly 70% on a rebased basis through company e-commerce
websites, retailer websites, large internet pure-plays, and
business-to-business customers.
Improved liquidity: The company ended the third quarter
with $2 billion of liquidity, up from $1.8 billion last quarter,
while paying its regular dividend and reducing debt by
approximately $130 million.
Sustainability goals: In the quarter, Hanesbrands
announced 2030 global sustainability goals, including addressing
the use of plastics and sustainable raw materials in products and
packaging and improving the lives of 10 million people through
initiatives that focus on health, education and wellness. In
addition, the company launched a new sustainability website,
www.hbisustains.com, designed to increase transparency on key
metrics, including diversity, human rights benchmarks and risk
assessments for investors.
COVID-related uncertainty: The company continues to
operate in a highly uncertain environment due to increasing
concerns of COVID-19 and increased restrictions by governments
around the world.
Third-Quarter 2020 Business Segment
Summaries
Innerwear Segment. U.S. Innerwear sales increased 8.4%,
excluding protective garments, with growth in the basics and
intimate apparel businesses. Overall, U.S. Innerwear sales
increased 37% over prior year driven by sales of protective
garments, continued positive point-of-sale trends and inventory
restocking. When the year-ago quarter is rebased to reflect the
exit of the C9 Champion mass program and the DKNY intimate apparel
license, sales increased 11.5%, excluding protective garments, and
41% overall.
Activewear Segment. U.S. Activewear sales declined 41%, a
significant improvement from the second quarter. When the year-ago
quarter is rebased for the C9 Champion program exit, U.S Activewear
sales declined 27%.
Excluding $103 million of C9 Champion sales in mass retail in
the year-ago quarter, sales of the Champion brand, while down 27%
over the prior year, showed an 85% increase over the second
quarter, driven by strong point-of-sale trends and continued online
growth.
The vast majority of these declines occurred in the segment’s
sports apparel business, which was significantly impacted by
COVID-related issues, such as cancelled sporting events and the
closure of college bookstores.
International Segment. As reported, third quarter
International segment net sales declined 5% and operating profit
declined 10%. On a constant currency basis, net sales decreased 7%
and operating profit declined 12%.
Excluding sales of protective garments, core International sales
declined 7% as compared to prior year, marking a significant
improvement from the 44% decline in the second quarter.
Year over year constant currency sales growth in the company’s
Americas and Champion Europe businesses was more than offset by
declines in the company’s European innerwear, Asia and Australia
businesses, where COVID-related challenges continued to slow the
retail recovery.
Fourth-Quarter 2020 Financial
Guidance
The company’s outlook for the fourth quarter reflects continued
uncertainty due to the COVID-19 pandemic and is based on the
current business environment, including the recently implemented
COVID-related restrictions in Europe, but does not reflect any
potential impact to the consumer or operating environments should
governments or businesses institute additional lockdowns and store
closings.
For the fourth-quarter 2020, net sales are expected to be
approximately $1.60 billion to $1.66 billion. Included in our sales
outlook is approximately $50 million of protective garment sales
and approximately $10 million of foreign exchange benefit.
As reported last quarter, the company continues to face
second-half 2020 profitability headwinds. Negative manufacturing
variances and higher SG&A expense are expected to pressure both
gross and operating margins in the fourth quarter. GAAP operating
profit is expected to range from $154 million to $174 million.
Adjusted operating profit is expected to range from $160 million to
$180 million. GAAP earnings per share is expected to range from
$0.24 to $0.29 and adjusted EPS is expected to range from $0.25 to
$0.30.
For the fourth-quarter 2020, the midpoint of guidance represents
a net sales decline of 7% compared with 2019. When comparing the
midpoint of fourth-quarter 2020 guidance to 2019 results rebased to
account for the exits of the C9 Champion and DKNY programs, net
sales are expected to decline approximately 2%, GAAP operating
profit and adjusted operating profits are expected to decline
approximately 33% and 30%, respectively, and GAAP and adjusted EPS
are expected to decline approximately 47% and 39% respectively.
Full-year 2020 net cash from operations is expected to be $300
million to $400 million, which includes the impact from the
higher-than-anticipated protective garment inventory. Based on
year-to-date cash flow, this implies fourth quarter net cash from
operations of approximately $70 million to $170 million.
The fiscal year ending January 2, 2021, includes a 53rd week in
the fourth quarter, and the company’s net sales outlook includes
approximately $40 million from this week.
The tax rate for the quarter was 17.6%. The company expects its
fourth-quarter tax rate to be approximately 17.5%.
Hanesbrands has updated its quarterly frequently-asked-questions
document, which is available at www.Hanes.com/faq.
Note on Adjusted Measures, Rebased
Measures and Reconciliation to GAAP Measures
To supplement financial results prepared in accordance with
generally accepted accounting principles, the company provides
quarterly and full-year results concerning certain non‐GAAP
financial measures, including adjusted EPS, adjusted net income,
adjusted operating profit (and margin), adjusted SG&A, adjusted
gross profit (and margin), adjusted net sales, EBITDA and adjusted
EBITDA.
Adjusted EPS is defined as diluted EPS excluding actions and the
tax effect on actions. Adjusted net income is defined as net income
excluding actions and the tax effect on actions. Adjusted operating
profit is defined as operating profit excluding actions.
Adjusted SG&A is defined as selling, general and
administrative expenses excluding actions. Adjusted gross profit is
defined as gross profit excluding actions. Adjusted net sales are
defined as net sales excluding actions.
Charges for actions taken in 2019 primarily represented supply
chain network changes, program exit costs, and overhead reduction
as well as completion of outstanding acquisition integration.
Charges taken in 2020 include supply chain restructuring actions,
program exit costs and COVID-19 related non-cash charges and supply
chain re-startup charges. Acquisition and integration costs include
legal fees, consulting fees, bank fees, severance costs, certain
purchase accounting items, facility closures, inventory write-offs,
information technology integration costs and similar charges. While
these costs are not operational in nature and are not expected to
continue for any singular transaction on an ongoing basis, similar
types of costs, expenses and charges have occurred in prior periods
and may recur in future periods depending upon acquisition
activity.
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 acquisitions and other actions, as
well as the COVID-19 pandemic. 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 and
integration of any of the aforementioned actions taken.
The company has also chosen to present EBITDA and adjusted
EBITDA to investors because it considers these measures to be an
important supplemental means of evaluating operating performance.
EBITDA is defined as earnings before interest, taxes, depreciation
and amortization. Adjusted EBITDA is defined as EBITDA excluding
actions and stock compensation expense. 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.
In addition, with respect to 2020 financial performance,
Hanesbrands has chosen to present certain year-over-year
comparisons with respect to the company’s rebased 2019 business,
which excludes the exited C9 Champion program at mass retail and
DKNY intimate apparel license. Hanes believes this information is
useful to management and investors to facilitate a more meaningful
comparison of the results of the company’s ongoing business between
2019 and 2020. The company has provided rebased 2019 quarterly
income statements in Supplemental Table B dated February 7, 2020,
which is available online at www.hanes.com/investors.
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, Hanes also
presents constant-currency financial information, which is a
non-GAAP financial measure that excludes the impact of translating
foreign currencies into U.S. dollars. The company uses
constant-currency information to provide a framework to assess how
the business performed excluding the effects of changes in the
rates used to calculate foreign currency translation.
To calculate foreign currency translation on a constant currency
basis, operating results for the current-year period for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average exchange rates in effect during
the comparable period of the prior year (rather than the actual
exchange rates in effect during the current year period).
Hanes believes constant-currency information is useful to
management and investors to facilitate comparison of operating
results and better identify trends in the company’s businesses.
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as an alternative to,
or substitute for, financial results prepared in accordance with
GAAP. Further, the non-GAAP measures presented may be different
from non-GAAP measures with similar or identical names presented by
other companies.
Reconciliations of these non-GAAP measures to the most directly
comparable GAAP financial measures are presented in the
supplemental financial information included with this news
release.
Webcast Conference Call
Hanes will host an internet webcast of its third-quarter
investor conference call at 8:30 a.m. EST today, November 5, 2020.
The webcast of the call, which will consist of prepared remarks
followed by a question-and-answer session, may be accessed at
www.Hanes.com/investors. The call is expected to conclude by 9:30
a.m.
An archived replay of the conference call webcast will be
available in the investors section of the Hanes corporate website.
A telephone playback will be available from noon EST today through
midnight EST November 12, 2020. The replay will be available by
calling toll-free (855) 859-2056 or by toll call at (404) 537-3406.
The replay ID is 8793586.
Cautionary Statement Concerning Forward-Looking
Statements
This press release contains certain forward-looking statements,
as defined under U.S. federal securities laws, with respect to our
long-term goals and trends associated with our business, as well as
guidance as to future performance. In particular, among others,
statements regarding the potential impact of the COVID-19 outbreak
on our business and financial performance; guidance and predictions
regarding expected operating results, including related to our new
business line for cotton face masks and other personal protection
garments; our belief that we have sufficient liquidity to fund our
ongoing business operations; and statements made in the
Fourth-Quarter 2020 Financial Guidance section of this news
release, are forward-looking statements. These forward-looking
statements are based on our current intent, beliefs, plans and
expectations. Readers are cautioned not to place any undue reliance
on any forward-looking statements. Forward-looking statements
necessarily involve risks and uncertainties, many of which are
outside of our control, that could cause actual results to differ
materially from such statements and from our historical results and
experience. These risks and uncertainties include such things as:
the potential effects of the COVID-19 outbreak, including on
consumer spending, global supply chains and the financial markets;
the highly competitive and evolving nature of the industry in which
we compete; the rapidly changing retail environment; any
inadequacy, interruption, integration failure or security failure
with respect to our information technology; the impact of
significant fluctuations and volatility in various input costs,
such as cotton and oil-related materials, utilities, freight and
wages; our ability to attract and retain a senior management team
with the core competencies needed to support growth in global
markets; our ability to properly manage strategic projects in order
to achieve the desired results; significant fluctuations in foreign
exchange rates; our reliance on a relatively small number of
customers for a significant portion of our sales; legal,
regulatory, political and economic risks related to our
international operations; our ability to effectively manage our
complex multinational tax structure; the existence of a material
weakness in our internal control over financial reporting; and
other risks identified from time to time in our most recent
Securities and Exchange Commission reports, including our annual
report on Form 10-K and quarterly reports on Form 10-Q. Since it is
not possible to predict or identify all of the risks, uncertainties
and other factors that may affect future results, the above list
should not be considered a complete list. Any forward-looking
statement speaks only as of the date on which such statement is
made, and Hanesbrands undertakes no obligation to update or revise
any forward-looking statement, whether as a result of new
information, future events or otherwise, other than as required by
law.
HanesBrands
HanesBrands, based in Winston-Salem, N.C., is a socially
responsible leading marketer of everyday basic innerwear and
activewear apparel in the Americas, Europe, Australia and
Asia-Pacific. The company sells its products under some of the
world’s strongest apparel brands, including Hanes, Champion, Bonds,
DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things, Nur Die/Nur
Der, Alternative, L’eggs, JMS/Just My Size, Wonderbra, Berlei, and
Gear for Sports. The company sells T-shirts, bras, panties,
shapewear, underwear, socks, hosiery, and activewear produced in
the company’s low-cost global supply chain. A Fortune 500 company
and member of the S&P 500 stock index (NYSE: HBI), Hanes has
approximately 63,000 employees in more than 40 countries. For more
information, visit the company’s corporate website at
www.Hanes.com/corporate and newsroom at
https://newsroom.hanesbrands.com/. Connect with the company via
social media: Twitter (@hanesbrands), Facebook
(www.facebook.com/hanesbrandsinc), Instagram
(@hanesbrands_careers), and LinkedIn (@Hanesbrandsinc).
TABLE 1
HANESBRANDS INC.
Condensed Consolidated
Statements of Income and Supplemental Financial Information
(in thousands, except
per-share amounts)
(Unaudited)
Quarters Ended
Nine Months Ended
September 26,
2020
September 28,
2019
% Change
September 26,
2020
September 28,
2019
% Change
Net sales
$
1,808,266
$
1,866,967
(3.1)
%
$
4,863,507
$
5,215,918
(6.8)
%
Cost of sales
1,191,553
1,149,934
3,140,050
3,203,331
Gross profit
616,713
717,033
(14.0)
%
1,723,457
2,012,587
(14.4)
%
As a % of net sales
34.1
%
38.4
%
35.4
%
38.6
%
Selling, general and administrative
expenses
442,142
449,962
1,273,220
1,366,272
As a % of net sales
24.5
%
24.1
%
26.2
%
26.2
%
Operating profit
174,571
267,071
(34.6)
%
450,237
646,315
(30.3)
%
As a % of net sales
9.7
%
14.3
%
9.3
%
12.4
%
Other expenses
5,309
8,066
16,849
23,766
Interest expense, net
43,868
43,091
122,376
137,672
Income before income tax expense
125,394
215,914
311,012
484,877
Income tax expense
22,116
30,823
54,427
69,143
Net income
$
103,278
$
185,091
(44.2)
%
$
256,585
$
415,734
(38.3)
%
Earnings per share:
Basic
$
0.29
$
0.51
$
0.73
$
1.14
Diluted
$
0.29
$
0.51
$
0.72
$
1.14
Weighted average shares outstanding:
Basic
350,703
364,743
353,419
364,650
Diluted
351,604
365,597
353,956
365,478
The following tables present a
reconciliation of reported results on a constant currency basis for
the quarter and nine months ended September 26, 2020 and a
comparison to prior year:
Quarter Ended September 26,
2020
As Reported
Impact from Foreign
Currency1
Constant Currency
Quarter Ended September
28, 2019
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
1,808,266
$
14,064
$
1,794,202
$
1,866,967
(3.1)
%
(3.9)
%
Gross profit
616,713
7,394
609,319
717,033
(14.0)
(15.0)
Operating profit
174,571
1,922
172,649
267,071
(34.6)
(35.4)
Diluted earnings per share
$
0.29
$
0.00
$
0.29
$
0.51
(43.1)
%
(43.1)
%
As adjusted:2
Net sales
$
1,808,266
$
14,064
$
1,794,202
$
1,748,269
3.4
%
2.6
%
Gross profit
664,349
7,394
656,955
690,167
(3.7)
(4.8)
Operating profit
227,140
1,922
225,218
249,736
(9.0)
(9.8)
Diluted earnings per share
$
0.42
$
0.00
$
0.41
$
0.47
(10.6)
%
(12.8)
%
Nine Months Ended September
26, 2020
As Reported
Impact from Foreign
Currency1
Constant Currency
Nine Months Ended
September 28, 2019
% Change, As
Reported
% Change, Constant
Currency
As reported under GAAP:
Net sales
$
4,863,507
$
(19,790)
$
4,883,297
$
5,215,918
(6.8)
%
(6.4)
%
Gross profit
1,723,457
(9,166)
1,732,623
2,012,587
(14.4)
(13.9)
Operating profit
450,237
1,148
449,089
646,315
(30.3)
(30.5)
Diluted earnings per share
$
0.72
$
0.00
$
0.72
$
1.14
(36.8)
%
(36.8)
%
As adjusted:2
Net sales
$
4,863,507
$
(19,790)
$
4,883,297
$
4,884,406
(0.4)
%
(0.0)
%
Gross profit
1,819,440
(9,166)
1,828,606
1,950,954
(6.7)
(6.3)
Operating profit
595,301
1,148
594,153
616,582
(3.5)
(3.6)
Diluted earnings per share
$
1.06
$
0.00
$
1.06
$
1.07
(0.9)
%
(0.9)
%
1
Effect of the change in foreign currency
exchange rates year-over-year. Calculated by applying prior period
exchange rates to the current year financial results.
2
Results for the quarters and nine months
ended September 26, 2020 and September 28, 2019 reflect adjustments
for restructuring and other action-related charges. Results for the
quarter and nine months ended September 28, 2019 also reflect
adjustments for the exited C9 Champion mass program and DKNY
intimate apparel license. See “Reconciliation of Select GAAP
Measures to Non-GAAP Measures” in Table 5.
TABLE 2
HANESBRANDS INC.
Supplemental Financial
Information
(in thousands)
(Unaudited)
Quarters Ended
Nine Months Ended
September 26,
2020
September 28, 2019
Rebased1
% Change
September 26,
2020
September 28, 2019
Rebased1
% Change
Segment net sales:
Innerwear
$
792,600
$
562,285
41.0
%
$
2,309,816
$
1,686,176
37.0
%
Activewear
324,921
445,587
(27.1)
781,300
1,117,048
(30.1)
International
632,117
663,525
(4.7)
1,644,893
1,878,568
(12.4)
Other
58,628
76,872
(23.7)
127,498
202,614
(37.1)
Total net sales
$
1,808,266
$
1,748,269
3.4
%
$
4,863,507
$
4,884,406
(0.4)
%
Segment operating profit:
Innerwear
$
172,000
$
117,771
46.0
%
$
558,075
$
367,894
51.7
%
Activewear
29,568
73,738
(59.9)
31,925
143,763
(77.8)
International
96,076
107,168
(10.4)
227,218
288,019
(21.1)
Other
1,006
9,643
(89.6)
(17,389)
16,429
(205.8)
General corporate expenses/other
(71,510)
(58,584)
22.1
(204,528)
(199,523)
2.5
Total operating profit before
restructuring and other action-related charges
227,140
249,736
(9.0)
595,301
616,582
(3.5)
Restructuring and other action-related
charges
(52,569)
(9,937)
429.0
(145,064)
(43,919)
230.3
Total operating profit
$
174,571
$
239,799
(27.2)
%
$
450,237
$
572,663
(21.4)
%
1
Results for the quarter and nine months
ended September 28, 2019 reflect adjustments for the exited C9
Champion mass program and DKNY intimate apparel license. See
“Reconciliation of Select GAAP Measures to Non-GAAP Measures” in
Table 5.
The following table presents a
reconciliation of reported net sales adjusted for personal
protective equipment (“PPE”) sales for the quarter and nine months
ended September 26, 2020 and a comparison to prior year.
Quarter Ended September 26,
2020
As Reported
% Change1
PPE
Adjusted for PPE
% Change1
Segment net sales:
Innerwear
$
792,600
41.0
%
$
165,518
$
627,082
11.5
%
Activewear
324,921
(27.1)
—
324,921
(27.1)
International
632,117
(4.7)
13,108
619,009
(6.7)
Other
58,628
(23.7)
—
58,628
(23.7)
Net sales
$
1,808,266
3.4
%
$
178,626
$
1,629,640
(6.8)
%
Nine Months Ended September
26, 2020
As Reported
% Change1
PPE
Adjusted for PPE
% Change1
Segment net sales:
Innerwear
$
2,309,816
37.0
%
$
779,034
$
1,530,782
(9.2)
%
Activewear
781,300
(30.1)
—
781,300
(30.1)
International
1,644,893
(12.4)
151,815
1,493,078
(20.5)
Other
127,498
(37.1)
—
127,498
(37.1)
Net sales
$
4,863,507
(0.4)
%
$
930,849
$
3,932,658
(19.5)
%
1
The comparison to the quarter and nine
months ended September 28, 2019 reflects adjustments for the exited
C9 Champion mass program and DKNY intimate apparel license. See
“Reconciliation of Select GAAP Measures to Non-GAAP Measures” in
Table 5.
Including the favorable foreign currency
impact of $8 million, global Champion sales outside the mass
channel decreased approximately 9% in the third quarter of 2020
compared to the third quarter of 2019. On a constant currency
basis, global Champion sales decreased approximately 10%.
TABLE 3
HANESBRANDS INC.
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
September 26,
2020
December 28,
2019
Assets
Cash and cash equivalents
$
731,481
$
328,876
Trade accounts receivable, net
984,571
815,210
Inventories
2,170,552
1,905,845
Other current assets
210,617
174,634
Total current assets
4,097,221
3,224,565
Property, net
553,748
587,896
Right-of-use assets
461,117
487,787
Trademarks and other identifiable
intangibles, net
1,501,161
1,520,800
Goodwill
1,246,113
1,235,711
Deferred tax assets
200,877
203,331
Other noncurrent assets
99,447
93,896
Total assets
$
8,159,684
$
7,353,986
Liabilities
Accounts payable
$
1,144,190
$
959,006
Accrued liabilities
716,590
531,184
Lease liabilities
156,709
166,091
Notes payable
5,257
4,244
Accounts Receivable Securitization
Facility
—
—
Current portion of long-term debt
—
110,914
Total current liabilities
2,022,746
1,771,439
Long-term debt
3,972,212
3,256,870
Lease liabilities - noncurrent
347,604
358,281
Pension and postretirement benefits
371,330
403,458
Other noncurrent liabilities
296,259
327,343
Total liabilities
7,010,151
6,117,391
Stockholders’ equity
Preferred stock
—
—
Common stock
3,483
3,624
Additional paid-in capital
306,157
304,395
Retained earnings
1,454,676
1,546,224
Accumulated other comprehensive loss
(614,783)
(617,648)
Total stockholders’ equity
1,149,533
1,236,595
Total liabilities and stockholders’
equity
$
8,159,684
$
7,353,986
TABLE 4
HANESBRANDS INC.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Quarters Ended
Nine Months Ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Operating Activities:
Net income
$
103,278
$
185,091
$
256,585
$
415,734
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation
22,277
24,723
67,676
71,612
Amortization of acquisition
intangibles
6,304
6,172
18,503
18,709
Other amortization
2,984
2,458
8,091
7,521
Impairment of intangible assets
—
—
20,319
—
Amortization of debt issuance costs
3,184
2,263
8,303
7,021
Stock compensation expense
4,612
1,547
13,801
8,794
Deferred taxes
9,054
(1,079)
6,853
(3,661)
Other
(4,255)
(3,813)
5,004
1,662
Changes in assets and liabilities:
Accounts receivable
216,255
(32,903)
(175,879)
(170,348)
Inventories
(197,958)
109,042
(259,367)
(56,470)
Other assets
(11,789)
2,548
(43,359)
(26,031)
Accounts payable
(20,772)
(19,668)
189,566
(11,969)
Accrued pension and postretirement
benefits
353
3,960
(18,965)
(14,361)
Accrued liabilities and other
115,488
21,722
134,091
(3,513)
Net cash from operating activities
249,015
302,063
231,222
244,700
Investing Activities:
Capital expenditures
(2,521)
(21,665)
(49,033)
(79,950)
Proceeds from sales of assets
265
3,012
331
3,530
Acquisition of business
—
(21,360)
—
(21,360)
Other
1,795
—
7,618
—
Net cash from investing activities
(461)
(40,013)
(41,084)
(97,780)
Financing Activities:
Borrowings on notes payable
49,889
88,120
166,558
250,712
Repayments on notes payable
(53,735)
(88,381)
(166,108)
(252,084)
Borrowings on Accounts Receivable
Securitization Facility
—
83,293
227,061
207,105
Repayments on Accounts Receivable
Securitization Facility
—
(65,000)
(227,061)
(160,110)
Borrowings on Revolving Loan
Facilities
—
981,777
1,638,000
2,584,277
Repayments on Revolving Loan
Facilities
(118,189)
(1,163,092)
(1,756,189)
(2,585,592)
Borrowings on Senior Notes
—
—
700,000
—
Repayments on Term Loan Facilities
—
(10,625)
—
(152,248)
Borrowings on International Debt
—
20,539
31,222
27,680
Repayments on International Debt
(36,383)
(13,483)
(36,383)
(41,424)
Share repurchases
—
—
(200,269)
—
Cash dividends paid
(52,236)
(54,240)
(158,132)
(162,689)
Payments of debt issuance costs
(104)
(330)
(14,938)
(1,098)
Taxes paid related to net shares
settlement of equity awards
(1,535)
(366)
(1,615)
(1,523)
Other
416
393
1,295
1,378
Net cash from financing activities
(211,877)
(221,395)
203,441
(285,616)
Effect of changes in foreign exchange
rates on cash
11,721
(3,274)
9,052
1,008
Change in cash, cash equivalents and
restricted cash
48,398
37,381
402,631
(137,688)
Cash, cash equivalents and restricted cash
at beginning of period
684,156
280,663
329,923
455,732
Cash, cash equivalents and restricted cash
at end of period
732,554
318,044
732,554
318,044
Less restricted cash at end of period
1,073
1,020
1,073
1,020
Cash and cash equivalents per balance
sheet at end of period
$
731,481
$
317,024
$
731,481
$
317,024
TABLE 5
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures
(in thousands, except
per-share amounts)
(Unaudited)
Quarters Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net sales, as reported under GAAP
$
1,808,266
$
1,866,967
$
4,863,507
$
5,215,918
Net sales from exited programs
—
(118,698)
—
(331,512)
Net sales, rebased
$
1,808,266
$
1,748,269
$
4,863,507
$
4,884,406
Gross profit, as reported under GAAP
$
616,713
$
717,033
$
1,723,457
$
2,012,587
Restructuring and other action-related
charges
47,636
9,424
95,983
39,714
Gross profit on exited programs
—
(36,290)
—
(101,347)
Adjusted gross profit, rebased
$
664,349
$
690,167
$
1,819,440
$
1,950,954
As a % of net sales, rebased
36.7
%
39.5
%
37.4
%
39.9
%
Selling, general and administrative
expenses, as reported under GAAP
$
442,142
$
449,962
$
1,273,220
$
1,366,272
Restructuring and other action-related
charges
(4,933)
(513)
(49,081)
(4,205)
Selling, general and administrative
expenses related to exited programs
—
(9,018)
—
(27,695)
Adjusted selling, general and
administrative expenses, rebased
$
437,209
$
440,431
$
1,224,139
$
1,334,372
As a % of net sales, rebased
24.2
%
25.2
%
25.2
%
27.3
%
Operating profit, as reported under
GAAP
$
174,571
$
267,071
$
450,237
$
646,315
Restructuring and other action-related
charges included in gross profit
47,636
9,424
95,983
39,714
Restructuring and other action-related
charges included in SG&A
4,933
513
49,081
4,205
Gross profit on exited programs
—
(36,290)
—
(101,347)
Selling, general and administrative
expenses related to exited programs
—
9,018
—
27,695
Adjusted operating profit, rebased
$
227,140
$
249,736
$
595,301
$
616,582
As a % of net sales, rebased
12.6
%
14.3
%
12.2
%
12.6
%
Net income, as reported under GAAP
$
103,278
$
185,091
$
256,585
$
415,734
Restructuring and other action-related
charges included in gross profit
47,636
9,424
95,983
39,714
Restructuring and other action-related
charges included in SG&A
4,933
513
49,081
4,205
Gross profit on exited programs
—
(36,290)
—
(101,347)
Selling, general and administrative
expenses related to exited programs
—
9,018
—
27,695
Tax effect on actions
(8,737)
2,446
(25,386)
4,195
Adjusted net income, rebased
$
147,110
$
170,202
$
376,263
$
390,196
Diluted earnings per share, as reported
under GAAP1
$
0.29
$
0.51
$
0.72
$
1.14
Restructuring and other action-related
charges
0.12
0.02
0.34
0.10
Exited programs
—
(0.06)
—
(0.17)
Adjusted diluted earnings per share,
rebased
$
0.42
$
0.47
$
1.06
$
1.07
1
Amounts may not be additive due to
rounding.
Quarter Ended September 28,
2019
As Reported
Less: Exited Programs
Adjusted for Exited
Programs
Less: Restructuring and other
action-related charges
Rebased
Segment net sales:
Innerwear
$
578,453
$
16,168
$
562,285
$
—
$
562,285
Activewear
548,117
102,530
445,587
—
445,587
International
663,525
—
663,525
—
663,525
Other
76,872
—
76,872
—
76,872
Total net sales
$
1,866,967
$
118,698
$
1,748,269
$
—
$
1,748,269
Segment operating profit:
Innerwear
$
121,467
$
3,696
$
117,771
$
—
$
117,771
Activewear
97,314
23,576
73,738
—
73,738
International
107,168
—
107,168
—
107,168
Other
9,643
—
9,643
—
9,643
General corporate expenses/other
(58,584)
—
(58,584)
—
(58,584)
Restructuring and other action-related
charges
(9,937)
—
(9,937)
(9,937)
—
Total operating profit
$
267,071
$
27,272
$
239,799
$
(9,937)
$
249,736
Nine Months Ended September
28, 2019
As Reported
Less: Exited Programs
Adjusted for Exited
Programs
Less: Restructuring and other
action-related
charges
Rebased
Segment net sales:
Innerwear
$
1,733,002
$
46,826
$
1,686,176
$
—
$
1,686,176
Activewear
1,401,734
284,686
1,117,048
—
1,117,048
International
1,878,568
—
1,878,568
—
1,878,568
Other
202,614
—
202,614
—
202,614
Total net sales
$
5,215,918
$
331,512
$
4,884,406
$
—
$
4,884,406
Segment operating profit:
Innerwear
$
375,623
$
7,729
$
367,894
$
—
$
367,894
Activewear
209,686
65,923
143,763
—
143,763
International
288,019
—
288,019
—
288,019
Other
16,429
—
16,429
—
16,429
General corporate expenses/other
(199,523)
—
(199,523)
—
(199,523)
Restructuring and other action-related
charges
(43,919)
—
(43,919)
(43,919)
—
Total operating profit
$
646,315
$
73,652
$
572,663
$
(43,919)
$
616,582
Quarters Ended
Nine Months Ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Restructuring and other action-related
charges by category:
Supply chain actions - 2019
$
934
$
9,424
$
6,632
$
39,714
Supply chain actions - 2020
1,201
—
14,705
—
Program exit costs
356
—
9,856
—
Other restructuring costs
1,185
513
12,799
4,205
COVID-19 related charges:
Supply chain re-startup1
48,893
—
48,893
—
Bad debt
—
—
11,375
—
Inventory
—
—
20,485
—
Intangible assets
—
—
20,319
—
Tax effect on actions
(8,737)
(1,402)
(25,386)
(6,193)
Total restructuring and other
action-related charges
$
43,832
$
8,535
$
119,678
$
37,726
1
Supply chain re-startup charges primarily
relate to incremental costs incurred (freight, sourcing premiums,
etc.) to expedite product to meet customer demand following the
extended shut-down of parts of our manufacturing network.
Last Twelve Months
September 26,
2020
September 28,
2019
EBITDA1:
Net income
$
441,571
$
565,762
Interest expense, net
163,283
185,359
Income tax expense
64,291
108,772
Depreciation and amortization
127,395
130,324
Total EBITDA
796,540
990,217
Total restructuring and other
action-related charges (excluding tax effect on actions)
164,631
58,603
Stock compensation expense
14,284
25,589
Total EBITDA, as adjusted
$
975,455
$
1,074,409
Net debt:
Debt (current and long-term debt and
Accounts Receivable Securitization Facility)
$
3,972,212
$
3,828,104
Notes payable
5,257
4,275
(Less) Cash and cash equivalents
(731,481)
(317,024)
Net debt
$
3,245,988
$
3,515,355
Net debt/EBITDA, as adjusted
3.3
3.3
1
Earnings before interest, taxes,
depreciation and amortization (EBITDA) is a non-GAAP financial
measure.
Quarters Ended
Nine Months Ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
Free cash flow:
Net cash from operating activities
$
249,015
$
302,063
$
231,222
$
244,700
Capital expenditures
(2,521)
(21,665)
(49,033)
(79,950)
Free cash flow
$
246,494
$
280,398
$
182,189
$
164,750
TABLE 6
HANESBRANDS INC.
Supplemental Financial
Information
Reconciliation of GAAP Outlook
to Adjusted Outlook
(in thousands, except
per-share amounts)
(Unaudited)
Quarter Ended
January 2, 2021
Operating profit outlook, as calculated
under GAAP
$154,000 to $174,000
Restructuring and other action-related
charges
$6,000
Operating profit outlook, as adjusted
$160,000 to $180,000
Diluted earnings per share, as calculated
under GAAP1
$0.24 to $0.29
Restructuring and other action-related
charges
$0.01
Diluted earnings per share, as
adjusted
$0.25 to $0.30
1
The company expects approximately 352
million diluted weighted average shares outstanding for the quarter
ended January 2, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005149/en/
News Media contact: Kirk Saville (336) 519-6192
Analysts and Investors contact: T.C. Robillard (336)
519-2115
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