Gildan Activewear Inc. (TSX: GIL)(NYSE: GIL) today announced its
financial results for the fourth quarter of its 2010 fiscal year as
well as for the full fiscal year. The Company also provided its
current forecast for revenues, gross margins and selling, general
and administrative expenses for fiscal 2011. In a separate press
release issued concurrently with its earnings release, Gildan has
announced the introduction of a quarterly dividend on its common
shares, as well as a normal course issuer bid to repurchase up to 1
million shares.
Fourth Quarter Sales and Earnings
Net earnings for the fourth fiscal quarter ended October 3, 2010
were U.S. $56.8 million or U.S. $0.47 per share, after reflecting a
restructuring charge of U.S. $0.01 per share related to the
consolidation of U.S. distribution activities announced on December
10, 2009. Before the restructuring charge, adjusted net earnings
for the fourth quarter amounted to U.S. $58.3 million or U.S. $0.48
per share, up 37.5% and 37.1% respectively from net earnings of
U.S. $42.4 million or U.S. $0.35 per share in the fourth quarter of
fiscal 2009. Both net earnings and earnings per share in the fourth
quarter of fiscal 2010 were a record for the fourth quarter of a
fiscal year.
The growth in net earnings compared to last year was primarily
due to strong unit sales growth in the U.S. distributor channel,
which was achieved in spite of low activewear finished goods
inventory levels throughout the quarter, lower promotional activity
in the channel, including the non-recurrence of a special
devaluation discount applicable to distributor inventories which
was recorded in the fourth quarter of last year, and the proceeds
from an insurance claim which partially compensated for the impact
of lost sales and additional supply chain costs in fiscal 2010 due
to the Haiti earthquake in January 2010.
These positive factors more than offset the unfavourable impact
of significantly higher cotton costs compared to the fourth quarter
of last year and higher selling, general and administrative
expenses. Although selling price increases have been implemented in
the U.S. wholesale distributor channel since July, to offset
inflation in cotton and other input costs, these price increases
were not applied to back-orders already placed at the time of
implementing the increases, and therefore only partially offset the
impact of the significant cotton cost increases in the quarter.
Net sales in the fourth quarter of fiscal 2010 amounted to U.S.
$368.9 million, up 22.3% from U.S. $301.7 million last year. Sales
of activewear and underwear amounted to U.S. $307.5 million, up
27.7% from fiscal 2009, and sales of socks were U.S. $61.5 million,
up 1.0% from last year. Unit sales volumes for socks increased
approximately 9% from the fourth quarter of fiscal 2009.
The growth in sales of activewear and underwear compared to the
fourth quarter of fiscal 2009 was primarily due to a 21.3% increase
in unit volume shipments as a result of increased market share in
the U.S. distributor channel, a 2.7% increase in overall industry
shipments from U.S. distributors to U.S. screenprinters, strong
growth in international markets, in particular in Europe, and
significantly increased shipments of underwear and activewear to
mass-market retailers, partially offset by a larger reduction of
distributor inventory levels during the fourth quarter compared to
the fourth quarter of fiscal 2009.
The table below summarizes the data from the S.T.A.R.S. report
produced by ACNielsen Market Decisions, which tracks unit volume
shipments of activewear from U.S. wholesale distributors to U.S.
screenprinters for the calendar quarter ended September 30,
2010.
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Three months ended Three months ended
September 30, September 30,
2010 vs. 2009 2010 2009
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Unit Growth Market Share
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Gildan Industry Gildan
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All products 15.1% 2.7 % 64.0% 57.1%
T-shirts 15.4% 3.1 % 64.5% 57.7%
Fleece 5.1% (2.1)% 61.1% 56.9%
Sport shirts 22.6% 0.4 % 54.1% 44.2%
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Market conditions continued to be strong at the end of the
fourth quarter. The Company continued to have a substantial open
order position at the quarter-end, and industry shipments from U.S.
distributors to U.S. screenprinters for the month of October were
up by 5.5% from October 2009, according to the S.T.A.R.S.
report.
The increase in sales of socks compared to the fourth quarter of
fiscal 2009 was due to the approximate 9% increase in unit
shipments of socks, which was largely offset by a lower-valued more
basic product-mix and lower selling prices for certain sock
programs, including the impact of significantly increased
participation in back-to-school promotions. Sell-through of socks
provided by Gildan from retailers to consumers was strong during
the fourth quarter in the men's and boys' categories.
Gross margins in the fourth quarter were 27.3%, compared to
25.7% in the fourth quarter of fiscal 2009. The increase in gross
margins was due to the non-recurrence of the special distributor
inventory devaluation discount a year ago, the proceeds from the
Haiti insurance claim, which reflected the maximum benefit of U.S.
$8 million receivable by Gildan under the coverage in its insurance
policy, and the impact of a cotton subsidy in the Company's
yarn-spinning joint venture. Higher year-over-year cotton costs
negatively impacted gross margins by approximately 380 basis points
in the fourth quarter, of which only approximately 150 basis points
was recovered in increased selling prices. Gross margins in the
fourth quarter of fiscal 2010 were also negatively impacted by
start-up inefficiencies in underwear manufacturing and additional
costs incurred to mitigate the loss of production due to the Haiti
earthquake.
Selling, general and administrative expenses in the fourth
quarter were U.S. $42.0 million, or 11.4% of sales, compared to
U.S. $34.1 million, or 11.3% of sales in the fourth quarter of
fiscal 2009. The increase in selling, general and administrative
expenses was primarily due to higher volume-driven distribution
expenses, higher performance-driven variable compensation expenses,
increased administrative and distribution infrastructure to support
the development of the Company's retail initiatives, and the impact
of the higher-valued Canadian dollar on corporate administrative
expenses. Selling, general and administrative expenses in the
fourth quarter included a charge of U.S. $1.9 million for
provisions for doubtful accounts receivable, compared with U.S.
$3.0 million in the fourth quarter of last year.
Full Year Sales, Earnings and Cash Flow
Net sales in fiscal 2010 totaled U.S. $1,311.5 million, up
26.3%, from U.S. $1,038.3 million in fiscal 2009 due to a 31.2%
increase in unit sales volumes of activewear and underwear, more
favourable activewear product-mix and an increase in net selling
prices due to reduced promotional activity, partially offset by a
6.7% decrease in sock sales. The unit volume increase in sales of
activewear and underwear was mainly attributable to continued
market share penetration in all product categories in the U.S.
distributor channel and a 2.7% increase in overall industry unit
shipments from U.S. distributors to U.S screenprinters, combined
with strong growth in international and other screenprint markets
and significantly increased shipments of underwear and activewear
to retail customers. The decrease in sales of socks for fiscal 2010
was mainly attributable to lower unit sales volumes primarily due
to the discontinuance of unprofitable sock programs and the
elimination of baby apparel and layette programs, as well as
servicing issues resulting from the ramp-up of our new retail
distribution centre and the ramp-up of production at the new sock
manufacturing facility in Honduras.
Net earnings for fiscal 2010 amounted to U.S. $198.2 million, or
U.S. $1.63 per share on a diluted basis, up 108.0% and 106.3%,
respectively compared with net earnings of U.S. $95.3 million, or
U.S. $0.79 per share on a diluted basis in fiscal 2009. Net
earnings included after-tax restructuring and other charges of U.S.
$5.4 million in fiscal 2010 and U.S. $4.4 million in fiscal 2009.
Excluding the impact of restructuring charges, adjusted net
earnings and adjusted diluted EPS for fiscal 2010 totaled U.S.
$203.6 million and U.S. $1.67 per share compared with adjusted net
earnings of U.S. $99.7 million, or U.S. $0.82 per share, in fiscal
2009. The increase in adjusted net earnings and EPS was due to
strong sales growth and significantly higher gross margins,
partially offset by higher selling, general and administrative
expenses. Gross margins in fiscal 2010 increased to 27.8% from
22.2% in fiscal 2009 due to lower promotional discounting in the
U.S. distributor channel, more favourable product-mix and increased
manufacturing efficiencies.
The Company generated free cash flow of U.S. $175.9 million in
fiscal 2010, after financing capital expenditures of U.S. $127.9
million. Working capital was a source of cash in fiscal 2010 due to
a reduction of close to 4 million dozens in activewear finished
goods inventories and a significant reduction in days of sales
outstanding in accounts receivable. The Company used U.S. $15.9
million to acquire the shares of Shahriyar Fabric Industries
Limited, a manufacturer of T-shirts in Bangladesh, in March 2010.
The Company ended fiscal 2010 with cash and cash equivalents of
U.S. $258.4 million.
Fiscal 2011 Outlook and Capital Expenditure Plans
The Company is currently projecting full year net sales revenues
for fiscal 2011 of approximately U.S. $1.6 billion, gross margins
of approximately 25%, and selling, general and administrative
expenses of approximately 10.5% of sales. The main assumptions used
for the Company's current full year sales and gross margin
projections are:
-- No material adverse change occurs in overall economic conditions or
industry demand;
-- Gildan expects to operate its textile facilities which produce
activewear and underwear at full capacity utilization, to support
projected sales demand in both the screenprint and retail channels and
rebuild activewear finished goods inventories;
-- The forecast reflects the implementation of previously announced
selling price increases which cumulatively total close to 13% in the
U.S. distributor channel. The in-year impact of these selling price
increases is approximately 10%, as they have not been applied to back-
orders. Possible further selling price increases in the U.S.
distributor channel have not been included in the forecast. Initial
selling price increases averaging approximately 5% are being
implemented during the year in the retail channel;
-- The Company has made forward commitments for all of the cotton which
will be consumed in cost of sales in the first half of the fiscal year
and has purchased a significant proportion of its projected
requirements for the second half of the fiscal year, resulting in a
projected full year cost of cotton of approximately U.S. $1.00 per
pound; and
-- Gross margins reflect the benefit of planned cost reduction
investments and initiatives and the non-recurrence of certain
inefficiencies incurred in fiscal 2010 which is assumed to be
partially offset by inflation in other cost inputs and a lower-valued
activewear product-mix.
The Company emphasizes that there are still unknowns and
uncertainties which may potentially impact its financial outlook
for fiscal 2011.
The Company plans to invest in excess of U.S. $150 million in
capital expenditures in fiscal 2011, to implement its further
capacity expansion plans for production of activewear and underwear
in Honduras, the Dominican Republic and Bangladesh and complete the
ramp-up of its second sock manufacturing facility in Honduras, as
well as to finance its ongoing cost reduction initiatives including
the completion of its biomass alternative energy projects in
Honduras. In addition, the Company plans to invest in new
technology in its U.S. yarn-spinning joint venture. The Company
also expects to use cash in fiscal 2011 to finance the planned
increase in activewear finished goods inventories and higher
carrying costs of inventories due to the higher cost of cotton and
other purchased cost inputs.
The Company is currently projecting net sales in excess of U.S.
$300 million and gross margins of approximately 25% in the first
quarter of fiscal 2011. The projected growth in sales revenues of
approximately 40% compared to the first quarter of fiscal 2010 is
due primarily to continuing strong industry demand for activewear
in the U.S. distributor channel, combined with significantly
increased penetration in international and other screenprint
markets, as well as in underwear and socks in the retail channel.
The strong projected sales growth in activewear is largely due to
distributor inventory replenishment in anticipation of supply
shortages and selling price increases. The projected reduction in
gross margins in the first quarter, compared to gross margins of
29.8% in the first quarter of fiscal 2010, is primarily
attributable to higher cotton and other purchased input costs,
which will only partially be offset by selling price increases as
the Company has not applied selling price increases in the
distributor channel to back-orders, and also reflects the impact of
projected more unfavourable product-mix compared with the first
quarter of fiscal 2010. The strong sales growth in the first
quarter is resulting in faster than anticipated consumption of
opening finished goods inventories which were produced with lower
cost cotton purchased in fiscal 2010. The Company will not derive
significant benefits from planned cost reduction initiatives in the
first quarter of the fiscal year, when it is largely consuming
inventories purchased during fiscal 2010, although these
initiatives are still expected to have a positive impact on
manufacturing efficiencies in the balance of fiscal 2011.
Board Appointment
Gildan also announced today the appointment of Russell Goodman
to its Board of Directors. Mr. Goodman is a senior partner of
PricewaterhouseCoopers, where he has served successively as
Managing Partner of Project Finance and Privatization for the
Americas, Managing Partner of the Montreal office, and Canadian
Managing Partner of the Transactions Advisory Services group during
the past 12 years. Prior to the formation of PricewaterhouseCoopers
in 1998, Mr. Goodman served for 21 years with Price Waterhouse,
including 11 as a partner. Mr. Goodman has announced his intention
to retire from PricewaterhouseCoopers in the summer of 2011. Mr.
Goodman is a member of the Board of Directors of another TSX-listed
company, where he is also a member of the Audit Committee, and
serves on a number of advisory and not-for-profit boards. He is the
past-president of the Canadian Club of Montreal. Mr. Goodman was
educated at McGill University. He is a Fellow of the Order of
Chartered Accountants of Quebec, is certified by the Institute of
Corporate Directors and is a Certified Fraud Examiner. With the
addition of Mr. Goodman, Gildan's Board of Directors now comprises
ten members, of which nine are independent of management.
Disclosure of Outstanding Share Data
As of November 30, 2010, there were 121,357,204 common shares
issued and outstanding along with 1,365,464 stock options and
747,714 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 at least 50% 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
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 96401902, 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 38808559, until December 9, 2010 at midnight,
or by sound web cast on Gildan's Internet site for 30 days.
The Company expects to file its 2010 Management's Discussion and
Analysis and its 2010 audited Consolidated Financial Statements
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission on December 6, 2010.
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, including, without
limitation, our expectation with regards to unit volume growth,
sales revenue, cost reductions and efficiencies, gross margins,
selling, general and administrative expenses, capital expenditures
and the impact of non-recurring items. 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" in 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 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 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 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;
-- disruption to manufacturing and distribution activities due to labour
disruptions, political instability, bad weather, natural disasters,
pandemics 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;
-- 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, 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 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 2011 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.
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. 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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(in U.S.$ millions) Q4 2010 Q4 2009 YTD 2010 YTD 2009
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Net earnings 56.8 42.4 198.2 95.3
Restructuring and other charges 2.8 0.8 8.7 6.2
Depreciation and amortization 17.6 17.0 66.5 65.4
Variation of depreciation included in
inventories 0.1 1.8 2.7 (2.4)
Interest, net 0.1 0.2 0.4 1.8
Income taxes (2.5) (0.7) (1.9) (5.8)
Non-controlling interest of consolidated
joint venture 2.7 0.1 3.8 0.1
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EBITDA 77.6 61.6 278.4 160.6
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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. 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 U.S.$ millions, except per share
amounts) Q4 2010 Q4 2009 YTD 2010 YTD 2009
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Net earnings 56.8 42.4 198.2 95.3
Adjustments for:
Restructuring and other charges 2.8 0.8 8.7 6.2
Income tax recovery on restructuring
and other charges (1.3) (0.8) (3.3) (1.8)
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Adjusted net earnings 58.3 42.4 203.6 99.7
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Basic EPS(i) 0.47 0.35 1.64 0.79
Diluted EPS(i) 0.47 0.35 1.63 0.79
Adjusted diluted EPS(i) 0.48 0.35 1.67 0.82
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(i) 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 U.S.$ millions) Q4 2010 Q4 2009 YTD 2010 YTD 2009
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Cash flows from operating activities 90.0 122.1 301.6 169.2
Cash flows used in investing activities (33.1) (8.5) (141.2) (34.2)
Adjustments for:
Business acquisitions 0.5 1.2 15.8 1.2
Restricted cash reimbursed related to
a business acquisition - (1.9) (0.3) (4.0)
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Free cash flow 57.4 112.9 175.9 132.2
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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
We consider total indebtedness and cash in excess of total
indebtedness to be important indicators of the financial leverage
of the Company.
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(in U.S.$ millions) Q4 2010 Q4 2009
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Current portion of long-term debt - (2.8)
Long-term debt - (1.6)
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Total indebtedness - (4.4)
Cash and cash equivalents 258.4 99.7
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Cash in excess of total indebtedness 258.4 95.3
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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 U.S. dollars)
October 3, 2010 October 4, 2009
----------------------------------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 258,442 $ 99,732
Trade accounts receivable 145,684 159,645
Inventories 332,542 301,867
Prepaid expenses and deposits 9,584 11,604
Other current assets 9,079 7,117
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755,331 579,965
Property, plant and equipment 479,292 402,203
Assets held for sale 3,246 6,544
Intangible assets 61,321 69,092
Goodwill 10,197 6,709
Other assets 11,805 9,985
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Total assets $ 1,321,192 $ 1,074,498
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----------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 186,205 $ 124,378
Income taxes payable 5,024 11,822
Current portion of long-term debt - 2,803
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191,229 139,003
Long-term debt - 1,584
Future income taxes 4,476 15,854
Non-controlling interest in consolidated
joint venture 11,058 7,272
Shareholders' equity:
Share capital 97,036 93,042
Contributed surplus 10,091 6,976
Retained earnings 982,764 784,519
Accumulated other comprehensive income 24,538 26,248
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1,007,302 810,767
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1,114,429 910,785
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Total liabilities and shareholders' equity $ 1,321,192 $ 1,074,498
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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 U.S. dollars, except per share data)
Three months ended Twelve months ended
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October 3, October 4, October 3, October 4,
2010 2009 2010 2009
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(unaudited) (unaudited) (unaudited) (audited)
Net sales $ 368,935 $ 301,720 $ 1,311,463 $ 1,038,319
Cost of sales 268,268 224,064 947,206 807,986
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Gross profit 100,667 77,656 364,257 230,333
Selling, general and
administrative expenses 42,045 34,151 154,674 134,785
Restructuring and other
charges (note 1) 2,783 778 8,705 6,199
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Operating income 55,839 42,727 200,878 89,349
Financial (income) expense,
net (note 2) (1,132) 1,000 751 (304)
Non-controlling interest in
consolidated joint venture 2,691 88 3,786 110
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Earnings before income taxes 54,280 41,639 196,341 89,543
Income taxes (2,536) (746) (1,904) (5,786)
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Net earnings 56,816 42,385 198,245 95,329
Other comprehensive loss,
net of related income taxes (3,425) - (1,710) -
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Comprehensive income $ 53,391 $ 42,385 $ 196,535 $ 95,329
------------------------------------------------
------------------------------------------------
Earnings per share:
Basic EPS $ 0.47 $ 0.35 $ 1.64 $ 0.79
Diluted EPS $ 0.47 $ 0.35 $ 1.63 $ 0.79
Weighted average number of
shares outstanding
(in thousands):
Basic 121,334 120,959 121,159 120,811
Diluted 122,141 121,668 121,980 121,435
See accompanying condensed notes to consolidated financial statements.
Gildan Activewear Inc.
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
Three months ended Twelve months ended
------------------------------------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
------------------------------------------------
(unaudited) (unaudited) (unaudited) (audited)
Cash flows from (used in)
operating activities:
Net earnings $ 56,816 $ 42,385 $ 198,245 $ 95,329
Adjustments for:
Depreciation and
amortization (note 3) 17,617 16,990 66,472 65,407
Variation of
depreciation included
in inventories (note 3) 58 1,828 2,725 (2,437)
Restructuring charges
related to assets held
for sale and property,
plant and equipment
(note 1) 1,472 408 4,351 976
(Gain) loss on disposal
of property, plant and
equipment (165) (10) 842 561
Stock-based compensation
costs 935 812 4,081 3,007
Future income taxes (8,366) (2,063) (11,427) (2,434)
Non-controlling interest 2,691 88 3,786 110
Unrealized net (gain)
loss on foreign
exchange and financial
derivatives not
designated as cash flow
hedges (973) 2,494 846 (1,012)
Realized (loss) gain on
financial derivatives
included in other
comprehensive loss, net
of amounts reclassified
to net earnings (25) - 684 -
------------------------------------------------
70,060 62,932 270,605 159,507
Changes in non-cash
working capital balances:
Trade accounts
receivable 23,673 22,221 16,018 45,608
Inventories (7,989) 35,860 (32,280) 16,742
Prepaid expenses and
deposits 1,012 614 2,020 (1,191)
Other current assets 921 (2,461) (168) 2,743
Accounts payable and
accrued liabilities (3,310) 3,208 52,127 (22,731)
Income taxes payable 5,586 (282) (6,771) (31,499)
------------------------------------------------
89,953 122,092 301,551 169,179
Cash flows from (used in)
financing activities:
Decrease in amounts drawn
under revolving long-term
credit facility - (88,000) - (45,000)
Increase in other long-
term debt - - 43 44
Repayment of other long-
term debt (58) (535) (4,430) (3,661)
Proceeds from the issuance
of shares 203 167 1,869 906
Recovery related to
repricing of stock
options previously
exercised - - 1,159 -
------------------------------------------------
145 (88,368) (1,359) (47,711)
Cash flows from (used in)
investing activities:
Purchase of property,
plant and equipment (33,242) (10,136) (126,855) (43,877)
Purchase of intangible
assets (109) (165) (1,026) (1,061)
Business acquisition (524) (1,196) (15,850) (1,196)
Restricted cash related to
a business acquisition - 1,922 254 3,958
Proceeds on disposal of
assets held for sale 320 661 4,708 6,349
Net decrease (increase) in
other assets 423 412 (2,477) 1,629
------------------------------------------------
(33,132) (8,502) (141,246) (34,198)
Effect of exchange rate
changes on cash and cash
equivalents denominated in
foreign currencies 267 32 (236) 105
------------------------------------------------
Net increase in cash and
cash equivalents during the
period 57,233 25,254 158,710 87,375
Cash and cash equivalents,
beginning of period 201,209 74,478 99,732 12,357
------------------------------------------------
Cash and cash equivalents,
end of period $ 258,442 $ 99,732 $ 258,442 $ 99,732
------------------------------------------------
------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
Gildan Activewear Inc.- Condensed notes to the consolidated
financial statements (unaudited)
(Tabular amounts in thousands of U.S. dollars, unless otherwise
noted)
For complete notes to the consolidated financial statements,
please refer to the filings with the various securities regulatory
authorities which are expected to be available on December 6,
2010.
1. Restructuring and other charges:
Three months ended Twelve months ended
------------------------------------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
------------------------------------------------
Loss (gain) on disposal of
assets held for sale $ 470 $ 34 $ 37 $ (619)
Accelerated depreciation 218 - 2,488 -
Asset impairment loss and
write-down of assets held
for sale 784 374 1,826 1,595
Employee termination costs
and other benefits 71 81 744 2,180
Other exit costs 1,335 366 3,705 3,120
Adjustment for employment
contract (95) (77) (95) (77)
------------------------------------------------
$ 2,783 $ 778 $ 8,705 $ 6,199
------------------------------------------------
------------------------------------------------
2. Financial (income) expense, net:
Three months ended Twelve months ended
------------------------------------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
------------------------------------------------
Interest expense $ 137 $ 209 $ 436 $ 1,824
Bank and other financial
charges 462 326 1,392 1,039
Foreign exchange (gain) loss (1,731) 465 (1,077) (3,167)
------------------------------------------------
$ (1,132)$ 1,000 $ 751 $ (304)
------------------------------------------------
------------------------------------------------
3. Depreciation and amortization:
Three months ended Twelve months ended
------------------------------------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
------------------------------------------------
Depreciation and
amortization of property,
plant and equipment and
intangible assets $ 17,617 $ 16,990 $ 66,472 $ 65,407
Adjustment for the variation
of depreciation of
property, plant and
equipment and intangible
assets included in
inventories at the
beginning and end of the
period 58 1,828 2,725 (2,437)
------------------------------------------------
Depreciation and
amortization included in
the consolidated statements
of earnings and
comprehensive income $ 17,675 $ 18,818 $ 69,197 $ 62,970
------------------------------------------------
Consists of:
Depreciation of property,
plant and equipment $ 15,462 $ 16,604 $ 60,378 $ 53,925
Amortization of intangible
assets 2,210 2,178 8,797 8,843
Amortization of deferred
financing costs and other 3 36 22 202
------------------------------------------------
Depreciation and
amortization included in
the consolidated
statements of earnings
and comprehensive income $ 17,675 $ 18,818 $ 69,197 $ 62,970
------------------------------------------------
------------------------------------------------
4. Segmented Sales:
Three months ended Twelve months ended
------------------------------------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
------------------------------------------------
The company has two
customers accounting for at
least 10% of total net
sales:
Company A 17.6% 19.9% 21.0% 18.6%
Company B 16.9% 14.6% 14.3% 15.5%
------------------------------------------------
------------------------------------------------
Net sales were derived from
customers located in the
following geographic areas:
United States $ 328,050 $ 272,882 $ 1,154,776 $ 939,717
Canada 16,128 11,967 54,160 35,134
Europe and other 24,757 16,871 102,527 63,468
------------------------------------------------
$ 368,935 $ 301,720 $ 1,311,463 $ 1,038,319
------------------------------------------------
------------------------------------------------
Net sales by major product
group:
Activewear and underwear $ 307,476 $ 240,781 $ 1,084,953 $ 795,535
Socks 61,459 60,939 226,510 242,784
------------------------------------------------
$ 368,935 $ 301,720 $ 1,311,463 $ 1,038,319
------------------------------------------------
------------------------------------------------
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 Media Relations
Genevieve Gosselin Director, Corporate Communications 514-343-8814
ggosselin@gildan.com
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