Gildan Activewear Inc. (TSX: GIL)(NYSE: GIL)
- Fourth Quarter EPS of U.S. $0.35 After Negative Impact of U.S.
$0.07 Charge for Distributor Inventory Devaluation -
- Further Market Share Gains in U.S. Wholesale Distributor
Channel -
- Free Cash Flow of U.S. $113 million in Quarter -
- Company Announces New Retail Programs for Fiscal 2010 -
- Business Outlook and Assumptions Provided for Fiscal 2010
-
- Company Appoints New Independent Board Members -
Gildan Activewear Inc. (TSX: GIL)(NYSE: GIL) today announced its
financial results for the fourth quarter of its 2009 fiscal year as
well as for the full fiscal year. The Company also updated its
outlook and business plans for fiscal 2010, including the
announcement of new retail programs which Gildan has been
awarded.
Fourth Quarter Sales and Earnings
Gildan reported net earnings of U.S. $42.4 million and diluted
EPS of U.S. $0.35 for its fourth fiscal quarter ended October 4,
2009, after reflecting a charge of U.S. $8.9 million or U.S. $0.07
per share for a special distributor inventory devaluation discount,
as described more fully below. Net earnings in the fourth quarter
of fiscal 2008 amounted to U.S. $21.8 million, or U.S. $0.18 per
share on a diluted basis. Before a special income tax charge of
U.S. $26.9 million or U.S. $0.22 per share recorded in the fourth
quarter of last year, adjusted net earnings and diluted EPS in the
fourth quarter of fiscal 2008 amounted to U.S. $49.7 million or
U.S. $0.41, respectively.
Adjusted EPS in the fourth quarter of fiscal 2009, before
reflecting the impact of the special devaluation discount,
increased by U.S. $0.01 compared to adjusted EPS in the fourth
quarter of fiscal 2008, before reflecting the special income tax
charge. The positive EPS impact of increased manufacturing
efficiencies, favourable product-mix and lower selling, general and
administrative expenses was essentially offset by lower activewear
selling prices, lower unit sales, and the impact of planned
production downtime taken in the fourth quarter of fiscal 2009.
Early in the first quarter of fiscal 2010, the Company reduced
gross selling prices for the majority of its activewear products in
the U.S. wholesale distributor channel, and applied the benefit of
the selling price reduction to inventories held by distributors
through a special inventory devaluation discount. Net sales and
gross margins in the fourth quarter of fiscal 2009 reflected both
the significant negative impact of the short-term promotions in the
fourth quarter as well as the impact of the special discount, which
is accounted for as an adjustment to sales in the fourth quarter.
Gross margins in the first quarter of fiscal 2010 will reflect the
impact of the reduction in gross selling prices, but the negative
impact in the first quarter is expected to be partially offset by a
reduction in short-term promotions. The Company believes that the
approach it has taken to pricing is enhancing the ability of its
wholesale distributors to plan their business and helping to
stimulate screenprinter demand for Gildan products.
Net sales in the fourth quarter of fiscal 2009 amounted to U.S.
$301.7 million, down 7.1% from U.S. $324.7 million in the fourth
quarter of last year. Sales of activewear and underwear were U.S.
$240.8 million, down 4.8% from U.S. $253.0 million last year, and
sales of socks were U.S. $60.9 million, down 15.1% from U.S. $71.7
million last year.
The decrease in sales of activewear and underwear was due to
lower unit selling prices and a 1.3% reduction in unit sales
volumes, as a result of weaker economic conditions, as well as the
impact of the special discount and currency changes, partially
offset by more favourable activewear product-mix. The reduction in
unit sales volumes of activewear and underwear in the fourth
quarter was due to a 12.3% decline in overall industry unit
shipments from U.S. distributors to U.S. screenprinters, largely
offset by increased market share in all product categories, as well
as increased shipments to international and other screenprint
markets.
The table below summarizes data from the S.T.A.R.S. report
produced by ACNielsen Market Decisions, which tracks unit volume
shipments from U.S. wholesale distributors to U.S. screenprinters,
for the calendar quarter ended September 30, 2009.
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Three months ended Three months ended
September 30, September 30,
2009 vs. 2008 2009 2008
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Unit Growth Market Share
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Gildan Industry Gildan
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All products (6.0)% (12.3)% 57.1% 53.4%
T-shirts (6.6)% (12.3)% 57.7% 54.4%
Fleece 2.1% (10.7)% 56.9% 49.9%
Sport shirts (0.5)% (15.4)% 44.2% 37.8%
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Overall inventories in the U.S. wholesale distributor channel at
September 30, 2009 were down by 22.2% compared with a year ago, and
Gildan's share of distributor inventories was 50.1%, compared with
its market share of 57.1% in the fourth quarter as shown above.
The reduction in sales of socks in the fourth quarter compared
to a year ago was due to the discontinuance of unprofitable sock
programs and inventory fluctuations at the retailer level. The
impact of these factors was largely offset by double-digit
increases in the sell-through to consumers of continuing programs
with major mass-retailer customers. New mass retailer private label
sock brands which have been introduced during fiscal 2009 performed
strongly in the fourth quarter and gained market share.
Gross margins in the fourth quarter were 25.7%, including the
negative impact of the special distributor inventory devaluation
discount. Before reflecting the impact of this charge, gross
margins for the quarter were 28.7%, compared to 26.8% in the fourth
quarter of fiscal 2008. The improvement in gross margins before the
special discount was primarily due to increased manufacturing
efficiencies, including lower cotton and energy costs, and more
favourable activewear product-mix, partially offset by
significantly increased promotional discounts for activewear in the
U.S. distributor channel, compared with a year ago. Gross margins
in the fourth quarter of fiscal 2009 were also impacted by
production downtime, which reduced margins by approximately
1.6%.
Selling, general and administrative expenses in the fourth
quarter were U.S. $34.1 million, or 11.3% of sales, compared to
U.S. $36.7 million, or 11.3% of sales in the fourth quarter of
fiscal 2008. The reduction in SG&A expenses was primarily due
to efficiencies and savings achieved in the management of
distribution expenses, as well as the impact of the lower-valued
Canadian dollar on corporate administrative expenses, partially
offset by higher depreciation expenses and an increase in
provisions for doubtful accounts receivable exposures.
Full Year Sales and Earnings
Net sales for fiscal 2009 were U.S. $1,038.3 million, down 16.9%
from fiscal 2008 due to a 10.2% decline in activewear unit volumes,
unfavourable activewear product-mix, lower activewear net selling
prices, a 17.0% decrease in sock sales primarily due to the
elimination of unprofitable sock product-lines during fiscal 2008,
and the negative impact of the stronger U.S. dollar on Canadian and
international activewear sales. The lower unit sales volumes for
activewear were primarily due to the decline in overall industry
unit shipments by U.S. wholesale distributors to screenprinters and
inventory reductions by U.S. wholesale distributors, which more
than offset Gildan's market share gains in the U.S. screenprint
channel, and increased penetration of other target screenprint
markets.
Net earnings for fiscal 2009 were U.S. $95.3 million, or U.S.
$0.79 per share on a diluted basis, compared with net earnings of
U.S. $146.4 million or U.S. $1.20 per share for the same period
last year. Before restructuring charges in both years, adjusted net
earnings were U.S. $99.7 million, or U.S. $0.82 per share, compared
to U.S. $151.3 million, or U.S. $1.24 per share, for the same
period last year. The reduction in net earnings and EPS compared to
fiscal 2008 was due to significantly lower activewear unit sales
volumes and gross margins, partially offset by lower SG&A and
financial expenses and the non-recurrence of an income tax charge
in the fourth quarter of 2008.
Cash Flows and Financial Position
The Company generated free cash flow of U.S. $112.9 million in
the fourth quarter. Inventories in the fourth quarter were reduced
by U.S. $37.7 million, and the Company ended the fiscal year with
inventories of U.S. $301.9 million, compared with U.S. $316.2
million at the end of fiscal 2008. The Company believes that its
current level of finished goods inventories is appropriate in the
context of current market conditions, and is not currently planning
production downtime in the first quarter of fiscal 2010, other than
the normal holiday shutdown over the Christmas period. Accounts
receivable collections were further improved during the fourth
quarter. Days of sales outstanding in accounts receivable at the
end of the fiscal year amounted to 45 days, compared to 52 days at
the end of fiscal 2008. The Company ended the fiscal year with cash
and cash equivalents of U.S. $99.7 million, and its U.S. $400
million bank credit facility was unutilized.
New Retail Programs for Fiscal 2010
The Company has continued to build on the successful performance
of its private label sock programs and has been awarded a major
strategic underwear program as well as a smaller underwear program
and three further sock programs, which are all expected to begin
shipment in the second quarter of fiscal 2010. The Company is
currently in active discussions to secure further opportunities
with mass retailers for new programs during fiscal 2010. The
annualized full year incremental sales revenue from the additional
new mass-market retail programs already obtained by the Company in
fiscal 2010 is currently estimated to be approximately U.S. $70
million. In addition, the Company is continuing to achieve further
penetration with its Gildan branded products in regional retail
chains.
Fiscal 2010 Outlook and Business Plans
The Company is currently planning for fiscal 2010 on the basis
of the continuation of weak macro economic conditions, although it
believes that it is in a position to take advantage of any
unanticipated improvement in overall industry demand during fiscal
2010. Based on assuming no growth in industry demand, and without
including any further new retail programs which the Company may
obtain during fiscal 2010, Gildan expects to achieve unit volume
growth of approximately 25% in activewear and underwear and
approximately 5% in socks compared to fiscal 2009, after taking
account of the negative impact of the discontinued sock programs.
The projected growth in unit sales is due to assumed higher market
share in the U.S. wholesale distributor channel, the assumed
non-recurrence of wholesale distributor destocking which occurred
during the first half of fiscal 2009, continued penetration of
international and other screenprint markets, the impact of the new
retail programs which have been obtained and continued growth in
existing retail programs.
In order to maintain its market leadership and drive top-line
growth, the Company is prepared to continue to price aggressively,
in the assumed environment of weak global economic conditions and
weak industry demand. Assuming an approximate 5% decline in selling
prices in fiscal 2010 compared to fiscal 2009, and the impact of a
higher proportion of underwear in the Company's product-mix,
consolidated net sales in fiscal 2010 are projected to be slightly
in excess of U.S. $1.2 billion, up approximately 17% from fiscal
2009.
Although gross margins in the fourth quarter of fiscal 2009,
before reflecting the impact of the devaluation charge, were 28.7%,
and gross margins in the first quarter of fiscal 2010 are expected
to be close to the same level, gross margins in the balance of
fiscal 2010 are expected to be negatively impacted by further
promotional discounting and by volatility in cotton, energy and
other commodity costs. Also, gross margins in the first and fourth
quarters of the fiscal year traditionally benefit from a more
favourable seasonal activewear product-mix. Assuming that net
selling prices in the balance of the year are impacted by
additional promotional discounting and that the Company covers the
balance of its cotton requirements for fiscal 2010 at current
forward rates, the Company is currently projecting that gross
margins for the full fiscal year will be approximately 26%.
Gildan is projecting capital expenditures of approximately U.S.
$130 million in fiscal 2010, compared to U.S. $45 million in fiscal
2009. In November 2009, the Company completed the acquisition of a
state-of-the-art distribution centre in Charleston, S.C., for
approximately U.S. $20 million. This facility will be utilized to
support the Company's retail strategy, and is also expected to
generate cost reductions and improved efficiencies as a result of
consolidating existing distribution capacity. Other significant
capital projects that are planned for fiscal 2010 include the
completion of the Rio Nance 4 sock facility, further textile
expansion and energy cost reduction projects, and the purchase of a
new office building in Barbados which was not finalized during the
fourth quarter of fiscal 2009.
The Company expects to continue to generate positive free cash
flow after capital expenditures in fiscal 2010, and therefore
expects to continue to accumulate cash on its balance sheet. During
the 2010 fiscal year, the Company intends to conduct an evaluation
of options for the deployment of cash balances not required to
finance its organic growth, in order to maximize returns to
shareholders.
Board Appointments
Gildan also announced today the appointments of George Heller
and James R. Scarborough to its Board of Directors. Mr. Heller and
Mr. Scarborough have both had successful careers as business
leaders in the retail sector spanning over thirty-five years. Until
his retirement in 2006, George Heller served as President and Chief
Executive Officer of the Hudson's Bay Company, Canada's largest
diversified general merchandise retailer. Mr. Heller previously
held a number of other senior positions in the retail industry,
including President and Chief Executive Officer of Kmart Canada,
President, North America and Europe for Bata Industries Ltd. and
Executive Vice-President of Woodwards Department Stores. Mr. Heller
also served as President and Chief Executive Officer of the
Victoria Commonwealth Games. James R. Scarborough currently serves
as Chairman of the Board of Stage Stores, Inc., a U.S.-based
specialty department store retailer that operates over 730
department stores in thirty-eight states. Mr. Scarborough joined
Stage Stores in 2000 as President and Chief Executive Officer, and
held this position until his retirement in 2008. Mr. Scarborough
previously held other senior positions in the retail sector,
including President and Chief Executive Officer of Busy Body, Inc.
and Seattle Lighting Fixtures Co. With the addition of Mr. Heller
and Mr. Scarborough, Gildan's Board of Directors now comprises nine
members, of which eight are independent of management.
Disclosure of Outstanding Share Data
As of November 30, 2009, there were 120,970,339 common shares
issued and outstanding along with 1,503,514 stock options and
951,403 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.
However, the vesting of 50% or more of the Treasury RSU grants are
dependent upon the financial performance of the Company, relative
to a benchmark group of Canadian publicly-listed companies.
Information for Shareholders
This release should be read in conjunction with Gildan's 2009
Annual Management's Discussion and Analysis ("MD&A") dated
December 9, 2009 and its annual consolidated financial statements
for the year ended October 4, 2009 (available later today at
http://gildan.com/corporate/IR/quarterlyReports.cfm) which is
incorporated by reference in this release, and which will be filed
by Gildan with the Canadian securities regulatory authorities and
with the U.S. Securities and Exchange Commission.
Gildan Activewear Inc. will hold a conference call to discuss
these results today at 8:30 AM EST. The conference call can be
accessed by dialing 800-261-3417 (Canada & U.S.) or
617-614-3673 (international) and entering passcode 98938094, or by
live sound webcast on Gildan's Internet site ("Investor Relations"
section) at the following address:
http://gildan.com/corporate/IR/webcastPresentations.cfm. If you are
unable to participate in the conference call, a replay will be
available starting that same day at 11:30 AM EST by dialing
888-286-8010 (Canada & U.S.) or 617-801-6888 (international)
and entering passcode 51896641, until December 17, 2009 at
midnight, or by sound web cast on Gildan's Internet site for 30
days.
Profile
Gildan is a vertically-integrated marketer and manufacturer of
quality branded basic apparel. The Company is the leading supplier
of activewear for the screenprint market in the U.S. and Canada. It
is also a leading supplier to this market in Europe, and is
establishing a growing presence in Mexico and the Asia-Pacific
region. The Company sells T-shirts, sport shirts and fleece in
large quantities to wholesale distributors as undecorated "blanks",
which are subsequently decorated by screenprinters with designs and
logos. Consumers ultimately purchase the Company's products, with
the Gildan label, in venues such as sports, entertainment and
corporate events, and travel and tourism destinations. The
Company's products are also utilized for work uniforms and other
end-uses to convey individual, group and team identity. The Company
is also a leading supplier of private label and Gildan branded
socks primarily sold to mass-market retailers. In addition, Gildan
has an objective to become a significant supplier of men's and
boys' underwear and undecorated activewear products to mass-market
retailers in North America.
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 and Uncertainties" section and the risks
described under the section "Financial Risk Management" of the 2009
Annual MD&A 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 this
document.
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:
- our ability to implement our growth strategies and plans,
including achieving market share gains, implementing cost reduction
initiatives and completing and successfully integrating
acquisitions;
- the intensity of competitive activity and our ability to
compete effectively;
- adverse changes in general economic and financial conditions
globally or in one or more of the markets we serve;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit contractually to
minimum quantity purchases;
- our ability to anticipate changes in consumer preferences and
trends;
- our ability to manage 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 and polyester
fibres;
- our dependence on key suppliers and our ability to maintain an
uninterrupted supply of raw materials;
- the impact of climate, political, social and economic risks in
the countries in which we operate, including the current political
instability in Honduras;
- disruption to manufacturing and distribution activities due to
labour disruptions, political instability, bad weather, natural
disasters and other unforeseen adverse events;
- changes to international trade legislation 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;
- compliance with applicable environmental, tax, trade,
employment, health and safety, and other laws and regulations in
the jurisdictions in which we operate;
- our significant reliance on computerized information systems
for our business operations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of violation of labour laws or
unethical labour or other business practices by the Company or one
of its third-party contractors;
- our dependence on key management and our ability to attract
and retain key personnel;
- changes to and failure to comply with consumer product safety
laws and regulations, including the recently enacted U.S. Consumer
Product Safety Improvement Act;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments,
including credit risk, liquidity risk, foreign currency risk and
interest rate risk.
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 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
necessarily depends on the facts particular to each of them.
We believe that the expectations represented by our
forward-looking statements are reasonable, yet there can be no
assurance that such expectations 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 fiscal 2010 financial performance and may not be
appropriate for other purposes. Furthermore, unless otherwise
stated, the forward-looking statements contained in this report are
made as of the date of this report, 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 report are expressly qualified by this cautionary
statement.
Non-GAAP Financial Measures
This release includes reference to certain non-GAAP financial
measures such as EBITDA, adjusted net earnings, adjusted diluted
EPS, free cash flow, total indebtedness, and cash in excess of
total indebtedness/net indebtedness. These non-GAAP measures do not
have any standardized meanings prescribed by Canadian GAAP 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 GAAP measure are provided
below.
(1) EBITDA
EBITDA is calculated as earnings before interest, taxes and
depreciation and amortization and excludes the impact of
restructuring and other charges, as well as the non-controlling
interest in consolidated joint venture. The Company uses EBITDA,
among other measures, to assess the operating performance of our
business. We also believe 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. We exclude depreciation and amortization
expenses, which are non-cash in nature and can vary significantly
depending upon accounting methods or non-operating factors such as
historical cost. Excluding these items does not imply they are
necessarily non-recurring.
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Q4 2008 YTD 2008
(in US$ millions) Q4 2009 Recast(i) YTD 2009 Recast(i)
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Net earnings 42.4 21.8 95.3 146.4
Restructuring and
other charges 0.8 1.6 6.2 5.5
Depreciation and
amortization 17.0 15.2 65.4 57.1
Variation of
depreciation
included in
inventories 1.8 (1.3) (2.4) (1.0)
Interest, net 0.2 1.2 1.8 7.2
Income taxes (0.7) 25.3 (5.8) 34.4
Non-controlling
interest of
consolidated
joint venture 0.1 (0.1) 0.1 0.2
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EBITDA 61.6 63.7 160.6 249.8
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(i) Reflects the impact of the change in accounting policy as described in
Note 2 to the Condensed notes to the consolidated financial statements.
Certain minor rounding variances exist between the financial statements
and this summary.
(2) Adjusted net earnings and adjusted diluted EPS
Adjusted net earnings and adjusted diluted earnings are
calculated as net earnings and earnings per share excluding
restructuring and other charges, as discussed in Note 16 to the
2009 audited Consolidated Financial Statements. The Company uses
and presents these non-GAAP measures to assess its operating
performance from one period to the next without the variation
caused by restructuring and other charges that could potentially
distort the analysis of trends in our business performance.
Excluding these items does not imply they are necessarily
non-recurring.
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(in US$ millions,)
except per share Q4 2008 YTD 2008
amounts) Q4 2009 Recast(i) YTD 2009 Recast(i)
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Net earnings and
comprehensive income 42.4 21.8 95.3 146.4
Adjustments for:
Restructuring and
other charges 0.8 1.6 6.2 5.5
Income tax recovery
on restructuring
and other charges (0.8) (0.6) (1.8) (0.6)
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Adjusted net earnings 42.4 22.8 99.7 151.3
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Basic EPS(ii) 0.35 0.18 0.79 1.21
Diluted EPS(ii) 0.35 0.18 0.79 1.20
Adjusted diluted EPS(ii) 0.35 0.19 0.82 1.24
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(i) Reflects the impact of the change in accounting policy as described
in Note 2 to the Condensed notes to the consolidated financial
statements.
(ii) Quarterly EPS may not add to year-to-date EPS due to rounding
Certain minor rounding variances exist between the financial statements
and this summary.
(3) Free cash flow
Free cash flow is defined as cash from operating activities
including net changes in non-cash working capital balances, less
cash flow used in investing activities excluding business
acquisitions. We consider free cash flow to be an important
indicator of the financial strength and performance of our
business, because it shows how much cash is available after capital
expenditures to repay debt and to reinvest in our business. We
believe this measure is commonly used by investors and analysts
when valuing a business and its underlying assets.
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(in US$ millions) Q4 2009 Q4 2008 YTD 2009 YTD 2008
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Cash flows from
operating activities 122.1 70.5 169.2 238.9
Cash flows used in
investing activities (8.5) (14.3) (34.2) (227.3)
Adjustments for:
Business acquisitions 1.2 - 1.2 126.8
Restricted cash
(reimbursed) paid
related to
acquisition (1.9) - (4.0) 10.0
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Free cash flow 112.9 56.2 132.2 148.4
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Certain minor rounding variances exist between the financial statements
and this summary.
(4) Total indebtedness and Cash in excess of total
indebtedness/net indebtedness
We consider total indebtedness and (Cash in excess of total
indebtedness) net indebtedness to be important indicators of the
financial leverage of the Company.
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(in US$ millions) Q4 2009 Q4 2008
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Current portion of long-term debt 2.8 3.6
Long-term debt 1.6 49.4
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Total indebtedness 4.4 53.0
Cash and cash equivalents (99.7) (12.4)
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(Cash in excess of total indebtedness)
Net indebtedness (95.3) 40.6
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Certain minor rounding variances exist between the financial statements
and this summary.
Gildan Activewear Inc.
Consolidated Balance Sheets
(in thousands of US dollars)
October 4, October 5,
2009 2008
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(audited) (audited)
(Recast -
note 2)
Current assets:
Cash and cash equivalents $99,732 $12,357
Accounts receivable 166,762 215,833
Inventories 301,867 316,172
Prepaid expenses and deposits 11,604 10,413
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579,965 554,775
Property, plant and equipment 414,538 436,516
Intangible assets 56,757 59,954
Other assets 9,985 17,277
Assets held for sale 6,544 10,497
Goodwill 6,709 6,709
Future income taxes 7,910 9,283
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Total assets $1,082,408 $1,095,011
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Current liabilities:
Accounts payable and accrued liabilities $124,378 $149,344
Income taxes payable 11,822 46,627
Current portion of long-term debt 2,803 3,556
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139,003 199,527
Long-term debt 1,584 49,448
Future income taxes 23,764 27,331
Non-controlling interest
in consolidated joint venture 7,272 7,162
Shareholders' equity:
Share capital 93,042 89,377
Contributed surplus 6,976 6,728
Retained earnings 784,519 689,190
Accumulated other comprehensive income 26,248 26,248
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810,767 715,438
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910,785 811,543
Total liabilities and shareholders' equity $1,082,408 $1,095,011
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See accompanying condensed notes to consolidated financial statements
Gildan Activewear Inc.
Consolidated Statements of Earnings and Comprehensive Income
(in thousands of US dollars, except per share data)
Three months ended Twelve months ended
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October 4, October 5, October 4, October 5,
2009 2008 2009 2008
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(unaudited) (unaudited) (audited) (audited)
(Recast - (Recast -
note 1 note 1
& note 2) & note 2)
Net sales $301,720 $324,717 $1,038,319 $1,249,711
Cost of sales 224,064 237,631 807,986 911,242
-------------------------------------------------------------------------
Gross profit 77,656 87,086 230,333 338,469
Selling, general
and administrative
expenses 34,151 36,709 134,785 142,760
Restructuring and
other charges
(note 3) 778 1,560 6,199 5,489
-------------------------------------------------------------------------
Operating income 42,727 48,817 89,349 190,220
Financial expense
(income), net
(note 5) 1,000 1,795 (304) 9,240
Non-controlling
interest in
consolidated
joint venture 88 (127) 110 230
-------------------------------------------------------------------------
Earnings before
income taxes 41,639 47,149 89,543 180,750
Income taxes (746) 25,324 (5,786) 34,400
-------------------------------------------------------------------------
Net earnings and
comprehensive income $42,385 $21,825 $95,329 $146,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share:
Basic EPS $0.35 $0.18 $0.79 $1.21
Diluted EPS 0.35 0.18 0.79 1.20
Weighted average
number of shares
outstanding
(in thousands):
Basic 120,959 120,531 120,811 120,479
Diluted 121,668 121,558 121,435 121,622
See accompanying condensed notes to consolidated financial statements
Gildan Activewear Inc.
Consolidated Statements of Cash Flows
(in thousands of US dollars)
Three months ended Twelve months ended
-------------------------------------------------------------------------
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
-------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)
(Recast - (Recast -
& note 2) & note 2)
Cash flows from
(used in)
operating
activities:
Net earnings $42,385 $21,825 $95,329 $146,350
Adjustments for:
Depreciation and
amortization
(note 4) 16,990 15,240 65,407 57,135
Variation of
depreciation
included in
inventories
(note 4) 1,828 (1,334) (2,437) (957)
Restructuring
charges related
to assets held
for sale and
property, plant
and equipment
(note 3) 408 840 976 2,174
(Gain) loss on
disposal of
property, plant
and equipment (10) 382 561 1,369
Stock-based
compensation costs 812 882 3,007 2,965
Future income taxes (2,063) (16,088) (2,434) (15,885)
Non-controlling
interest 88 (127) 110 230
Unrealized net loss
(gain) on foreign
exchange and
financial
derivatives 2,494 (2,475) (1,012) (2,222)
-------------------------------------------------------------------------
62,932 19,145 159,507 191,159
Changes in non-cash
working capital
balances:
Accounts receivable 19,760 27,587 48,351 10,263
Inventories 35,860 (23,342) 16,742 (31,178)
Prepaid expenses
and deposits 614 1,045 (1,191) (881)
Accounts payable
and accrued
liabilities 3,208 8,391 (22,731) 25,700
Income taxes payable (282) 37,646 (31,499) 43,802
-------------------------------------------------------------------------
122,092 70,472 169,179 238,865
Cash flows from (used
in) financing
activities:
Decrease in amounts
drawn under
revolving long-term
credit facility (88,000) (55,000) (45,000) (4,000)
Decrease in bank
indebtedness - (1,478) - (2,739)
Increase in other
long-term debt - 699 44 2,805
Repayment of other
long-term debt (535) (1,134) (3,661) (5,461)
Proceeds from the
issuance of shares 167 178 906 1,138
Repurchase of shares - (12) - (12)
-------------------------------------------------------------------------
(88,368) (56,747) (47,711) (8,269)
Cash flows from (used
in) investing
activities:
Purchase of
property, plant
and equipment (10,301) (17,239) (44,938) (97,030)
Business acquisition (1,196) - (1,196) (126,819)
Restricted cash
related to business
acquisition 1,922 - 3,958 (10,000)
Proceeds on disposal
of assets held
for sale 661 2,612 6,349 3,736
Net decrease in
other assets 412 294 1,629 2,826
-------------------------------------------------------------------------
(8,502) (14,333) (34,198) (227,287)
Effect of exchange
rate changes on cash
and cash equivalents
denominated in
foreign currencies 32 (230) 105 (202)
-------------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents during
the period 25,254 (838) 87,375 3,107
Cash and cash
equivalents,
beginning of period 74,478 13,195 12,357 9,250
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $99,732 $12,357 $99,732 $12,357
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
Gildan Activewear Inc.- Condensed notes to the consolidated
financial Statements
(Tabular amounts in thousands of US dollars, unless otherwise
noted)
For complete notes to the consolidated financial statements,
please refer to the filings with the various securities regulatory
authorities dated December 9, 2009.
1. Statement of earnings classification:
Effective the first quarter of fiscal 2009, the Company changed
certain classifications of its statement of earnings and
comprehensive income with retrospective application to comparative
figures presented for prior periods. These new classifications
align the results of operations by function and incorporate
presentation requirements under the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3031, Inventories, which has
been adopted effective the first quarter of fiscal 2009. Pursuant
to the requirements of Section 3031, depreciation expense related
to manufacturing activities is now included in cost of sales. The
remaining depreciation and amortization expense has been
reclassified to selling, general and administrative expenses.
Depreciation and amortization expense is therefore no longer
presented as a separate caption on the statement of earnings and
comprehensive income. In addition, the Company reclassified certain
other items in its statement of earnings and comprehensive income.
Outbound freight to customers, previously classified within
selling, general and administrative expenses, is now reported
within cost of sales. Also, a new caption is now presented for
financial expenses and income, which includes interest income and
expenses (including mark-to-market adjustments of interest rate
swap contracts), foreign exchange gains and losses (including
mark-to-market adjustments of forward foreign exchange contracts),
and other financial charges. Interest expense net of interest
income was previously reported as a separate caption, while foreign
exchange gains and losses were previously included in cost of
sales. Other financial charges were previously reflected in
selling, general and administrative expenses. For the year ended
October 5, 2008 these changes in classification have resulted in a
decrease of $63.8 million and $8.7 million in gross profit and
selling, general and administrative expenses, respectively,
compared to the amounts previously reported. The decrease of $63.8
million in gross profit is due to reclassifications of $44.1
million of depreciation and amortization expense, $20.6 million of
outbound freight to customers less $0.9 million of foreign exchange
loss and other financial income. There was no impact on net
earnings as a result of these changes in classification.
For the fourth quarter of fiscal 2008, these changes in
classification have resulted in a decrease in amounts previously
reported for gross profit of $16.3 million and a decrease of $1.7
million in selling, general and administrative expenses. The
decrease of $16.3 million in gross profit is due to
reclassifications of $11.8 million of depreciation and amortization
expense, $4.7 million of outbound freight to customers less $0.2
million of foreign exchange loss and other financial income.
2. Adoption of new accounting policy:
In February 2008, Canada's Accounting Standard's Board (AcSB)
issued CICA Handbook Section 3064, Goodwill and Intangible Assets,
replacing Section 3062, Goodwill and Other Intangible Assets, and
Section 3450, Research and Development Costs. Section 3064
establishes revised standards for the recognition, measurement,
presentation and disclosure of goodwill and intangible assets. The
new Section also provides guidance for the treatment of
preproduction and start-up costs and requires that these costs be
expensed as incurred. This Section applies to annual financial
statements relating to the Company's fiscal year beginning on
October 6, 2008 and has been adopted on a retrospective basis
effective from the first quarter of fiscal 2009.
Prior to the adoption of Section 3064, the Company deferred and
amortized plant start-up costs on a straight-line basis over two
years. The impact of adopting this Section, on a retrospective
basis, was an increase of $1.8 million in net earnings for fiscal
2008 (increase of $0.01 in basic and diluted earnings per share).
The adoption of this Section also resulted in a decrease of $0.8
million in other assets as at October 5, 2008 and a decrease of
$2.5 million in shareholders' equity at October 1, 2007.
The impact of adopting this Section, on a retrospective basis,
was an increase of $0.5 million in net earnings for the three
months ended October 5, 2008 with no change in the reported basic
or diluted earnings per share.
3. Restructuring and other charges:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Twelve months ended
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
-------------------------------------------------------------------------
Loss (gain) on
disposal of assets
held for sale $34 $(160) $(619) $(526)
Asset impairment
loss and write-down
of assets held
for sale 374 1,000 1,595 2,700
Employee termination
costs and other
benefits 4 (555) 2,103 (155)
Carrying and
dismantling costs
associated with assets
held for sale 366 1,275 3,120 3,470
-------------------------------------------------------------------------
$778 $1,560 $6,199 $5,489
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4. Depreciation and amortization:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Twelve months ended
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
-------------------------------------------------------------------------
(Recast - (Recast -
note 2) note 2)
Depreciation and
amortization of
property, plant and
equipment and
intangible assets $16,990 $15,240 $65,407 $57,135
Adjustment for the
variation of
depreciation of
property, plant
and equipment
included in
inventories at
the beginning and
end of the period 1,828 (1,334) (2,437) (957)
-------------------------------------------------------------------------
Depreciation and
amortization
included in the
consolidated
statements of
earnings and
comprehensive income $18,818 $13,906 $62,970 $56,178
-------------------------------------------------------------------------
Consists of:
Depreciation of
property, plant
and equipment $17,983 $13,137 $59,571 $52,887
Amortization of
intangible assets 799 579 3,197 3,070
Amortization of
deferred financing
costs and other 36 190 202 221
-------------------------------------------------------------------------
Depreciation and
amortization
included in the
consolidated
statements of
earnings and
comprehensive
income $18,818 $13,906 $62,970 $56,178
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5. Financial expense (income) net:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Twelve months ended
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
-------------------------------------------------------------------------
Interest expense $209 $1,158 $1,824 $7,223
Bank and other
financial charges 326 208 1,039 946
Foreign exchange loss
(gain) 465 429 (3,167) 1,071
-------------------------------------------------------------------------
$1,000 $1,795 $(304) $9,240
-------------------------------------------------------------------------
-------------------------------------------------------------------------
6. Segmented Sales:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Twelve months ended
October 4, October 5, October 4, October 5,
2009 2008 2009 2008
-------------------------------------------------------------------------
The company has two
customers accounting
for at least 10% of
total net sales:
Company A 19.9% 22.9% 18.6% 23.1%
Company B 14.6% 13.4% 15.5% 13.6%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net sales were derived
from customers located
in the following
geographic areas:
United States $272,882 $292,732 $939,717 $1,125,961
Canada 11,967 14,136 35,134 56,353
Europe and other 16,871 17,849 63,468 67,397
-------------------------------------------------------------------------
$301,720 $324,717 $1,038,319 $1,249,711
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net sales by major
product group:
Activewear and
underwear $240,781 $253,031 $795,535 $957,061
Socks 60,939 71,686 242,784 292,650
-------------------------------------------------------------------------
$301,720 $324,717 $1,038,319 $1,249,711
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contacts: Investor Relations: Laurence G. Sellyn, Executive
Vice-President Chief Financial and Administrative Officer
514-343-8805 lsellyn@gildan.com Sophie Argiriou, Director, Investor
Communications 514-343-8815 sargiriou@gildan.com Benoit Leroux,
Director, Corporate Development 514-343-8898 bleroux@gildan.com
Media Relations: Genevieve Gosselin Director, Corporate
Communications 514-343-8814 ggosselin@gildan.com
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