Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL)
- Fourth Quarter in Line with Prior Guidance -
- Full Year EPS Up 20.4% Compared to Fiscal 2010 -
-Loss Projected for Q1 2012 Due to High-Cost Cotton, Distributor
Inventory Destocking, Promotional Discounting and Special
Distributor Inventory Devaluation Discount -
- Balance of Fiscal 2012 Projected to Show Gradual Recovery Due
to Lower Cotton and Manufacturing Costs -
- Declaration of Quarterly Dividend of U.S. $0.075 per share
-
Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL) today announced its
results for the fourth quarter of fiscal 2011 as well as for the
full fiscal year, which were in line with its prior earnings
guidance. The Company also initiated its sales and earnings
guidance for fiscal 2012. The Company is projecting a loss in the
first quarter of fiscal 2012, followed by an anticipated gradual
strengthening in results in the balance of the fiscal year, as the
Company finishes consuming inventories produced with high-cost
cotton and achieves projected manufacturing efficiencies. Due to
the loss in the first quarter, full year adjusted EPS in fiscal
2012 is currently projected to be approximately U.S. $1.30,
compared to adjusted EPS of U.S. $2.01 in fiscal 2011.
Fourth Quarter Sales and Earnings
Net earnings for the fourth fiscal quarter ended October 2, 2011
were U.S. $48.5 million or U.S. $0.40 per share on a diluted basis,
down respectively 14.6% and 14.9% from U.S. $56.8 million or U.S.
$0.47 per share in the fourth quarter of fiscal 2010. Results for
the fourth quarter include restructuring charges totalling U.S.
$2.3 million after-tax or U.S. $0.02 per share, to write down the
carrying value of facilities held for sale and to recognize
additional pension costs for the former Gold Toe Moretz pension
plan, which the Company intends to terminate in 2012. Before the
restructuring charges in both years, adjusted net earnings were
U.S. $50.8 million or U.S. $0.42 per share, down respectively 12.9%
and 12.5% from U.S. $58.3 million or U.S. $0.48 per share.
The decline in adjusted net earnings and EPS in the fourth
quarter compared to last year was due to the significant increase
in the cost of cotton, which was not fully recovered in higher net
selling prices, lower unit sales volumes for activewear and the
non-recurrence of insurance proceeds and a cotton subsidy received
in the fourth quarter of last year. These negative factors were
partially offset by the positive impact of income tax recoveries in
the fourth quarter of fiscal 2011, more favourable activewear
product-mix, lower SG&A expenses and the earnings accretion
from the acquisition of Gold Toe Moretz.
Adjusted EPS slightly exceeded the Company's guidance for the
quarter of approximately U.S. $0.40 provided on August 4, 2011.
Compared to its August guidance, the unfavourable impact of weaker
demand and increased promotional discounting in the wholesale
distributor channel, lower inventory replenishment by mass-market
retailers and lower than forecast sock manufacturing efficiencies
was more than offset by the later than anticipated timing of
destocking of inventories by wholesale distributors, which is now
occurring in the first quarter of fiscal 2012, and the benefit of
income tax recoveries.
Net sales in the fourth quarter amounted to U.S. $481.8 million,
up 30.6% from U.S. $368.9 million in the fourth quarter of fiscal
2010. The Company had forecast in August that sales in the fourth
quarter would be slightly below U.S. $500 million. Sales of
activewear and underwear amounted to U.S. $368.9 million, up 20.0%
from fiscal 2010, and sales of socks were U.S. $112.9 million, up
83.6% from U.S. $61.5 million a year ago.
The growth in sales of activewear and underwear compared to the
fourth quarter of fiscal 2010 was due to an approximate 23%
increase in average net selling prices, partially offset by a 7.6%
reduction in unit volume shipments which declined due to a 6.3%
reduction in industry shipments from U.S. distributors to U.S.
screenprinters and seasonal destocking in the U.S. screenprint
market which was less than anticipated. Gildan's market share in
the U.S. distributor channel in the fourth quarter was 62.3%,
according to the CREST report, and was essentially unchanged from
62.1% in the fourth quarter of last year. Consequently, the Company
has recaptured the slight loss of market share incurred earlier in
the fiscal year, when it was unable to fully service demand for its
products due to capacity constraints and sub-optimal inventory
levels.
The increase in sales revenues for socks was due to the
acquisition of Gold Toe Moretz. Shipments of socks in the fourth
quarter of fiscal 2011 were negatively impacted by weak market
conditions and inventory destocking by mass-market retailers. Also,
sales of socks in the fourth quarter of fiscal 2010 were positively
impacted by the later timing of shipments of back-to-school
programs.
Gross margins in the fourth quarter were 20.4% compared with the
Company's guidance in August of approximately 22%, and 27.3% in the
fourth quarter of last year. Gross margins were lower than forecast
due to higher than forecast selling price promotions in the U.S.
wholesale distributor channel in the month of September and lower
than projected sock manufacturing efficiencies. The decrease in
gross margins compared to last year was due to the significant
increase in the cost of cotton, which was not fully recovered in
higher selling prices, and the non-recurrence of the proceeds from
the insurance claim for the Haiti earthquake and a cotton subsidy
received in Gildan's U.S. yarn-spinning joint venture, which
together positively impacted gross margins by over 400 basis points
in the fourth quarter of last year. These negative factors were
partially offset by more favourable activewear product-mix and the
impact of the acquisition of Gold Toe Moretz.
SG&A expenses in the fourth quarter increased to U.S. $53.3
million from U.S. $42.0 million in the fourth quarter of last year.
The increase in SG&A expenses was due to the impact of
including Gold Toe Moretz, which resulted in approximately U.S. $15
million of additional SG&A expenses, partially offset by the
non-recurrence of a U.S. $1.5 million provision for doubtful
accounts receivable in the fourth quarter of last year and lower
distribution expenses.
Adjusted EPS in the fourth quarter included income tax
recoveries totalling approximately U.S. $7.6 million arising from
losses in the Company's U.S. legal entities.
Full Year Sales and Earnings
Net sales for fiscal 2011 amounted to U.S. $1,726.0 million, up
31.6% from U.S. $1,311.5 million in fiscal 2010. The growth in
sales revenues was due to higher net selling prices and increased
unit sales volumes for activewear and underwear, as well as the
impact of the acquisition of Gold Toe Moretz, partially offset by
lower organic sock sales. Unit sales growth in activewear and
underwear of 7.7% reflected the recovery in market conditions in
the U.S. wholesale distributor channel in the first half of the
fiscal year, the Company's penetration in other screenprint markets
and increased shipments of activewear and underwear to mass-market
retailers, partially offset by an approximate 8% decline in overall
market demand in shipments from U.S. distributors to U.S.
screenprinters in the second half of the fiscal year.
Net earnings for fiscal 2011 amounted to U.S. $239.9 million or
U.S. $1.96 per share, up 21.0% and 20.2% respectively from U.S.
$198.2 million or U.S. $1.63 per share in fiscal 2010. Adjusted net
earnings before restructuring charges were U.S. $245.5 million or
U.S. $2.01 per share, up 20.6% and 20.4% respectively from U.S.
$203.6 million or U.S. $1.67 per share last year. The growth in
earnings and EPS was due to increased sales revenues for
activewear, which, together with the earnings and EPS accretion
attributable to the Gold Toe Moretz acquisition and income tax
recoveries, more than offset the impact of higher cotton and other
input costs, lower organic sales of socks and increased selling,
general and administrative expenses.
Cash Flow and Financial Position
The Company ended the fourth quarter and the financial year with
cash and cash equivalents of U.S. $88.8 million and U.S. $209.0
million of bank indebtedness. In the fourth quarter the Company
generated EBITDA of U.S. $65.6 million and free cash flow of U.S.
$61.8 million. Inventories, which had been at sub-optimal levels to
adequately service customer demand throughout the first three
quarters of the fiscal year, increased by approximately U.S. $55.0
million during the fourth quarter. Capital expenditures in the
fourth quarter amounted to U.S. $50.8 million. During the fourth
quarter, the Company utilized its normal course issuer bid program
to repurchase 400,000 of its common shares outstanding.
EBITDA for the full fiscal year amounted to U.S. $312.5 million
and the Company generated free cash flow of U.S. $7.3 million in
fiscal 2011.
Segmented Reporting
Beginning in the first quarter of fiscal 2012, Gildan will begin
reporting its retail business as a separate operating business
segment, in line with the new operating and internal financial
reporting structure of the Company. Gildan is now structured as two
operating businesses, each of which has accountability for its
financial performance and return on capital. The screenprint
business will continue to be headquartered in Barbados and the new
retail business operations are headquartered in Charleston, South
Carolina.
The Company has made significant investments in its
manufacturing and distribution facilities to support the
development of its retail business, and has also undertaken the
recent strategic acquisition of Gold Toe Moretz. The Company
believes that its investments in manufacturing technology and the
consistently high quality of its products will enable it over time
to successfully develop the Gildan® brand for retail, and maximize
the further growth potential of its Gold Toe®, PowerSox®,
SilverToe®, Auro®, All Pro®, and GT® brands as well as its
exclusive U.S. sock license for the Under Armour® and New Balance®
brands. The Company will also evaluate other possible consumer
brand acquisitions to complement its organic retail growth.
A major objective for the Company in fiscal 2012 will be to
achieve more acceptable profit margins and returns on capital for
its retail business, which has been unprofitable in fiscal 2011 due
to a combination of factors, including the high cost of cotton, the
transition of sock manufacturing from the U.S. to Honduras, the
ramp-up of its new distribution centre, and the development of a
significant overhead infrastructure to implement the Company's
retail strategy and drive the future growth of the business.
In addition, the Company has been shifting its retail
product-mix to de-emphasize and forego private label programs which
do not meet its profit criteria and to focus on the development of
its owned and licensed brands, together with selective private
label programs which fit with its efficient large-scale vertical
manufacturing and which provide acceptable profitability and
returns.
Gildan is projecting that its retail business will begin to
report operating profits during the course of fiscal 2012, due to
lower-cost cotton and manufacturing efficiencies. Subsequent future
growth in retail operating margins will be driven by unit volume
growth, which will result in increased manufacturing efficiencies
and increased SG&A leverage, as well as by projected additional
synergies from the Gold Toe Moretz acquisition.
Outlook
The Company is providing sales and earnings guidance, based on
the assumption of continuing weak overall economic conditions and
weak industry demand. Also, the industry is managing through a
unique transition from rapid inflation in cotton costs to rapid
deflation.
The Company is projecting a loss of approximately $0.40 per
share in its first fiscal quarter on projected sales of
approximately U.S. $300 million, compared with EPS of U.S. $0.30 in
the first quarter of fiscal 2011 on sales of U.S. $331.3
million.
Short-term promotional discounting began to increase at the end
of the fourth quarter, and has continued to increase in the first
quarter of fiscal 2012. Also, in the first quarter, in anticipation
of selling price reductions, distributors have been supplying
screenprinter demand without replenishing inventory levels,
resulting in excess producer inventories and further increases in
promotional discounting as producers seek to maintain capacity
utilization in their manufacturing facilities. As the market
leader, in order to enable distributors to plan their business and
stimulate screenprinter demand for Gildan products, Gildan
announced yesterday that it is reducing gross selling prices in the
U.S. wholesale distributor channel effective December 5, 2011, and
applying the benefit of this price reduction to existing
distributor inventories. The impact of the special distributor
inventory devaluation discount on first quarter results is
projected to be approximately U.S. $0.16 per share.
Although Gildan is no longer constrained by lack of capacity and
is maintaining a high market share, the combination of weak end-use
demand and distributor destocking is projected to result in an
approximate 40% decline in Gildan's unit sales volumes in the
screenprint market in the first quarter, compared to the first
quarter of fiscal 2011. In addition, the first quarter is
seasonally the lowest-volume quarter of the fiscal year.
The projected results for the first fiscal quarter are due to a
combination of factors including the significant destocking of
inventories by distributors, increased promotional pricing at the
same time that the Company is consuming inventories produced with
high cotton costs, the impact of the special distributor inventory
devaluation discount, and extension of the normal holiday
production downtime in December, in order to manage inventory
levels.
In the second half of the fiscal year, the Company expects to
benefit from significantly lower cotton costs compared with both
the first half of fiscal 2012 and the second half of fiscal 2011.
Also, the Company is projecting increased efficiencies in its sock
manufacturing operations. Adjusted EPS for fiscal 2012 is projected
to be approximately U.S. $1.30, down 35% from U.S. $2.01 per share
in fiscal 2011. Net sales revenues in fiscal 2012 are projected to
be approximately U.S. $1.9 billion, compared with U.S. $1,726
million in fiscal 2011. Sales revenues for the screenprint business
are projected to be approximately U.S. $1.3 billion, and retail
sales revenues are projected to be approximately U.S. $0.6
billion.
The projected reduction in full year EPS in fiscal 2012 compared
to 2011 is primarily due to higher cotton costs in the first half
of the year, lower selling prices for activewear, the special
distributor devaluation discount and the non-recurrence of income
tax recoveries during fiscal 2011. These negative factors are
assumed to be partially offset by assumed lower cotton costs in the
second half of the year, projected higher net selling prices for
socks and underwear, projected higher activewear sales volumes,
more favourable manufacturing efficiencies, after taking account of
shutdown costs assumed in fiscal 2012, and the EPS accretion from a
full year of earnings from the acquisition of Gold Toe Moretz.
It is emphasized that the current environment for the Company's
business is highly uncertain and volatile, and the financial
projections provided for fiscal 2012 could be significantly
impacted by any improvement or further deterioration in conditions
and in the underlying assumptions for the business.
The main assumptions underlying the Company's sales and earnings
guidance for fiscal 2012 are set out below. Projected results are
highly sensitive to changes in assumptions for unit volumes and
unit selling prices, as well as for future cotton prices and the
Company's ability to achieve projected manufacturing cost
reductions.
- Overall industry shipments from U.S. distributors to U.S.
screenprinters are assumed to be down by approximately 2.5% in
fiscal 2012 compared to fiscal 2011. Industry shipments in the
second quarter of fiscal 2012 are assumed to be down by 5% compared
to the second quarter of fiscal 2011, the same decline as projected
in the first quarter. Industry shipments in the second half of
fiscal 2012 are assumed to be essentially unchanged from a low base
in the second half of fiscal 2011. The Company is assuming an
average market share of approximately 65% in the U.S. wholesale
distributor channel in fiscal 2012. The Company is projecting
growth in sales volumes in international and other markets in
fiscal 2012. The Company estimates that every one million dozen
change in demand for activewear impacts annual EPS by over U.S.
$0.05. The Company has scheduled additional manufacturing downtime
in addition to the shutdown in the first quarter due to the assumed
weak market demand.
- It has been assumed that net selling prices in the screenprint
market will decline slightly during the balance of fiscal 2012 and
that selling prices will be lower than in fiscal 2011. However,
there is no assurance that selling price competition will not be
more severe than projected, as manufacturers seek to maintain mill
capacity utilization. The Company estimates that every 1% change in
screenprint net selling prices impacts projected EPS for fiscal
2012 by approximately U.S. $0.10.
- Selling price increases which were recently implemented in the
retail market did not reflect the full pass-through of high-cost
cotton. Therefore, while gross margins for retail products are
continuing to be adversely affected in the first half of fiscal
2012 by the high cost of cotton, it is not currently expected that
Gildan's selling prices to retailers will decline when the Company
benefits from lower cotton costs in the second half of the fiscal
year.
- Cotton costs in the first half of the fiscal year will be
significantly higher than the first half of fiscal 2011. The weak
demand environment is projected to result in slower consumption of
inventories manufactured with high-cost cotton. The consumption of
such inventories is now assumed to continue until early in the
third quarter of fiscal 2012. However, based on current futures,
cotton costs in the second half of the fiscal year are expected to
be significantly lower than the second half of fiscal 2011.
- SG&A in fiscal 2012 is assumed to increase by
approximately U.S. $25 million compared to fiscal 2011, due to the
inclusion of Gold Toe Moretz for the full fiscal year. The income
tax rate in fiscal 2012 is currently assumed to be approximately
1%.
The Company expects to generate free cash flow of approximately
U.S. $75 million - U.S. $100 million in fiscal 2012. The Company
expects to use cash in the first half of the fiscal year, due to
the loss in the first quarter and working capital requirements for
the peak summer selling season in the T-shirt industry. Capital
expenditures are projected to amount to approximately U.S. $100
million, including the ramp-up of the Rio Nance V facility.
Although the Company is continuing to accelerate its ramp-up of the
new facility, it plans to carefully manage production in line with
market demand. The Company is currently planning to manage capacity
and inventory levels by temporarily reducing capacity at the Rio
Nance I facility.
Declaration of Quarterly Dividend and Renewal of Normal Course
Issuer Bid
The Board of Directors has declared a cash dividend of U.S.
$0.075 per share, payable on January 6, 2012 to shareholders of
record on December 15, 2011. This dividend is an "eligible
dividend" for the purposes of the Income Tax Act (Canada) and any
other applicable provincial legislation pertaining to eligible
dividends.
In addition, the Company announced that it is renewing its
normal course issuer bid to repurchase outstanding shares of the
Company in the open market. Under its renewed bid, the Company
intends to purchase up to 1 million common shares, representing
approximately 0.8% of the Company's issued and outstanding common
shares, in accordance with the requirements of the TSX. As of
November 30, 2011 the Company had 121,410,406 shares issued and
outstanding.
Gildan is authorized to make purchases under the bid during the
period from December 6, 2011 to December 5, 2012, or until such
time as the bid is completed or terminated at Gildan's option.
Purchases will be made on the open market on both the TSX and the
NYSE. Under the bid, Gildan may purchase up to a maximum of 107,619
shares daily, which represents 25% of the average daily trading
volume on the TSX for the most recently completed six calendar
months. The price to be paid will be the market price of the shares
on the stock exchange on which such shares are purchased at the
time of acquisition. Shares purchased under the bid will be
cancelled.
At the date hereof, directors, senior officers and other
insiders of the Company have indicated that they may sell up to
approximately 55,000 shares of the Company during the course of the
bid primarily to cover tax liabilities from the vesting of
restricted share unit grants and from the exercise of certain stock
option awards that are expiring, having reached their maximum
ten-year term. The benefits to any insider whose shares are
purchased would be the same as the benefits available to all other
shareholders whose shares are purchased.
The purchase of common shares under the normal course issuer bid
may, in the Company's opinion, represent an appropriate use of
funds in the event that the shares trade at a price which does not
adequately reflect their value in relation to Gildan's assets,
business and future business prospects. The purchase of shares will
also offset the dilutive effect of the issuance of shares pursuant
to Gildan's compensation plans.
During the period from December 6, 2010 to December 5, 2011
inclusively, the Company purchased under its current normal course
issuer bid a total of 400,000 of its issued and outstanding common
shares.
International Financial Reporting Standards (IFRS)
As disclosed in our previous regulatory filings, IFRS is
replacing Canadian GAAP for publicly accountable enterprises for
fiscal years beginning on or after January 1, 2011. As a result,
the Company will begin reporting under IFRS for its fiscal 2012
interim and annual financial statements beginning October 3, 2011,
with comparative information presented for fiscal 2011. Our 2011
Annual Management's Discussion and Analysis will include an update
on the status of our IFRS transition plan as well as an updated
summary of the impact of the significant differences identified
between Canadian GAAP and IFRS on our opening fiscal 2011 balance
sheet and our consolidated statement of earnings and comprehensive
income for the year ended October 2, 2011. The Company's adjusted
net earnings outlook for fiscal 2012 reflects the adoption of IFRS
in fiscal 2012, and the Company does not expect the adoption of
IFRS to have a material impact on its net earnings or adjusted net
earnings for fiscal 2012.
Disclosure of Outstanding Share Data
As of November 30, 2011, there were 121,410,406 common shares
issued and outstanding along with 1,150,000 stock options and
914,390 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 each Treasury RSU grant is
contingent on the achievement of performance conditions that are
primarily based on the Company's average return on assets
performance for the period as compared to the S&P/TSX Capped
Consumer Discretionary Index, excluding income trusts, or as
determined by the Board of Directors.
Information for Shareholders
Gildan Activewear Inc. will hold a conference call to discuss
these results today at 8:30 AM ET. The conference call can be
accessed by dialing 866-321-6651 (Canada & U.S.) or
416-642-5212 (international) and entering passcode 4653929, 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 ET by dialing
888-203-1112 (Canada & U.S.) or 647-436-0148 (international)
and entering passcode 4653929, until December 8, 2011 at midnight,
or by sound web cast on Gildan's Internet site for 30 days.
The Company expects to file its 2011 Management's Discussion and
Analysis and its 2011 audited Consolidated Financial Statements
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission during the week of December
5, 2011.
About Gildan
Gildan is a marketer and globally low-cost vertically-integrated
manufacturer of quality branded basic apparel. Gildan® is the
leading activewear brand in the screenprint market in the U.S. and
Canada. The brand is continuing to grow in Europe, Mexico and the
Asia-Pacific region. The Company sells T-shirts, sport shirts and
fleece as undecorated "blanks", which are subsequently decorated by
screenprinters with designs and logos. The Company is also one of
the world's largest suppliers of branded and private label
athletic, casual and dress socks sold to a broad spectrum of
retailers in the U.S. Gildan markets its sock products under a
diversified portfolio of company-owned brands, including Gold Toe®,
PowerSox®, SilverToe®, Auro®, All Pro®, GT®, and the Gildan® brand.
The Company is also the exclusive U.S. sock licensee for the Under
Armour® and New Balance® brands. In addition to socks, the Company
is increasingly becoming a significant supplier of underwear and
undecorated activewear products in the retail channel. With
approximately 29,500 employees worldwide, Gildan owns and operates
highly efficient, large-scale, environmentally and socially
responsible facilities in Central America and the Caribbean Basin
and has begun the development of a manufacturing hub in Bangladesh
to support its planned growth in Asia and Europe. More information
on the Company can be found on Gildan's website at
www.gildan.com.
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 industry demand and
unit volume growth, sales revenue, gross margins, selling, general
and administrative expenses, earnings per share, capital
expenditures, market share, selling prices, cotton costs, income
tax rate, and free cash flow. 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 "Critical Accounting
Estimates" and "Financial Risk Management" sections 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 and finished goods;
-- the impact of climate, political, social and economic risks in the
countries in which we operate or from which we source;
-- 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 local labour laws or
international labour standards, 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/or
retain key personnel;
-- changes to and failure to comply with consumer product safety laws and
regulations;
-- adverse changes in third party licensing arrangements and licensed
brands;
-- our ability to protect our intellectual property rights;
-- 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, asset
impairment losses or other charges announced or occurring after
forward-looking statements are made. The financial impact of such
transactions and non-recurring and other special items can be
complex and necessarily depends on the facts particular to each of
them.
There can be no assurance that the expectations represented by
our forward-looking statements will prove to be correct. The
purpose of the forward-looking statements is to provide the reader
with a description of management's expectations regarding the
Company's fiscal 2012 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 press release includes references to certain non-GAAP
financial measures such as EBITDA, adjusted net earnings, adjusted
diluted EPS, free cash flow, total indebtedness, and net
indebtedness (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.
EBITDA
EBITDA is calculated as earnings before interest, taxes and
depreciation and amortization and excludes the impact of
restructuring and acquisition-related costs, as well as the
non-controlling interest in consolidated joint venture. The Company
uses EBITDA, among other measures, to assess the operating
performance of its business. The Company also believes this measure
is commonly used by investors and analysts to measure a company's
ability to service debt and to meet other payment obligations, or
as a common valuation measurement. The Company excludes
depreciation and amortization expenses, which are non-cash in
nature and can vary significantly depending upon accounting methods
or non-operating factors such as historical cost. Excluding these
items does not imply they are necessarily non-recurring.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in U.S.$ millions) Q4 2011 Q4 2010 YTD 2011 YTD 2010
----------------------------------------------------------------------------
Net earnings 48.5 56.8 239.9 198.2
Restructuring and acquisition-
related costs 3.6 2.8 8.5 8.7
Depreciation and amortization 21.9 17.6 79.8 66.5
Variation of depreciation
included in inventories (1.4) 0.1 (3.4) 2.7
Interest expense, net 1.7 0.1 2.9 0.4
Income taxes (8.9) (2.5) (15.7) (1.9)
Non-controlling interest of
consolidated joint venture 0.2 2.7 0.5 3.8
----------------------------------------------------------------------------
EBITDA 65.6 77.6 312.5 278.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Certain minor rounding variances exist between the financial statements and
this summary.
Adjusted net earnings and adjusted diluted EPS
Adjusted net earnings and adjusted diluted earnings per share
are calculated as net earnings and earnings per share excluding
restructuring and acquisition-related costs. 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 acquisition-related costs that could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in U.S.$ millions, except per
share amounts) Q4 2011 Q4 2010 YTD 2011 YTD 2010
----------------------------------------------------------------------------
Net earnings 48.5 56.8 239.9 198.2
Adjustments for:
Restructuring and acquisition-
related costs 3.6 2.8 8.5 8.7
Income tax recovery on
restructuring and
acquisition-related costs (1.3) (1.3) (2.9) (3.3)
----------------------------------------------------------------------------
Adjusted net earnings 50.8 58.3 245.5 203.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic EPS(i) 0.40 0.47 1.97 1.64
Diluted EPS(i) 0.40 0.47 1.96 1.63
Adjusted diluted EPS(i) 0.42 0.48 2.01 1.67
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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.
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. The Company considers free cash flow to be an
important indicator of the financial strength and performance of
its business, because it shows how much cash is available after
capital expenditures to repay debt and to reinvest in its business.
The Company believes this measure is commonly used by investors and
analysts when valuing a business and its underlying assets.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in U.S.$ millions) Q4 2011 Q4 2010 YTD 2011 YTD 2010
----------------------------------------------------------------------------
Cash flows from operating
activities 110.7 90.0 181.6 301.6
Cash flows used in investing
activities (46.0) (33.1) (523.9) (141.2)
Adjustments for:
Business acquisitions (2.9) 0.5 349.6 15.8
Restricted cash reimbursed
related to a business
acquisition - - - (0.3)
----------------------------------------------------------------------------
Free cash flow 61.8 57.4 7.3 175.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Certain minor rounding variances exist between the financial statements and
this summary.
Total indebtedness and Net indebtedness (Cash in excess of total
indebtedness)
The Company considers total indebtedness and net indebtedness
(cash in excess of total indebtedness) to be important indicators
of the financial leverage of the Company.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(in U.S.$ millions) Q4 2011 Q4 2010
----------------------------------------------------------------------------
Long-term debt and Total indebtedness 209.0 -
Cash and cash equivalents (88.8) (258.4)
----------------------------------------------------------------------------
Net indebtedness (Cash in excess of total
indebtedness) 120.2 (258.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 2, 2011 October 3, 2010
----------------------------------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 88,802 $ 258,442
Trade accounts receivable 191,594 145,684
Income taxes receivable 515 -
Inventories 575,594 332,542
Prepaid expenses and deposits 10,966 9,584
Future income taxes 11,666 6,340
Other current assets 9,307 9,079
----------------------------------
888,444 761,671
Property, plant and equipment 565,398 479,292
Assets held for sale 13,142 3,246
Intangible assets 256,467 61,321
Goodwill 153,219 10,197
Other assets 13,051 11,805
----------------------------------
Total assets $ 1,889,721 $ 1,327,532
----------------------------------
----------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 315,269 $ 186,205
Income taxes payable - 5,024
----------------------------------
315,269 191,229
Long-term debt 209,000 -
Future income taxes 26,575 10,816
Non-controlling interest in consolidated
joint venture 11,562 11,058
Shareholders' equity:
Share capital 100,436 97,036
Contributed surplus 16,526 10,091
Retained earnings 1,184,781 982,764
Accumulated other comprehensive income 25,572 24,538
----------------------------------
1,210,353 1,007,302
----------------------------------
1,327,315 1,114,429
----------------------------------
Total liabilities and shareholders' equity $ 1,889,721 $ 1,327,532
----------------------------------
----------------------------------
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
----------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
----------------------------------------------------
(unaudited) (unaudited) (unaudited) (audited)
Net sales $ 481,755 $ 368,935 $ 1,726,041 $ 1,311,463
Cost of sales 383,304 268,268 1,288,293 947,206
----------------------------------------------------
Gross profit 98,451 100,667 437,748 364,257
Selling, general and
administrative expenses 53,291 42,045 199,132 154,674
Restructuring and
acquisition-related
costs (note 1) 3,554 2,783 8,465 8,705
----------------------------------------------------
Operating income 41,606 55,839 230,151 200,878
Financial expense
(income), net (note 2) 1,825 (1,132) 5,485 751
Non-controlling interest
in consolidated joint
venture 198 2,691 504 3,786
----------------------------------------------------
Earnings before income
taxes 39,583 54,280 224,162 196,341
Income taxes (8,951) (2,536) (15,742) (1,904)
----------------------------------------------------
Net earnings 48,534 56,816 239,904 198,245
Other comprehensive
(loss) income, net of
related income taxes (330) (3,425) 1,034 (1,710)
----------------------------------------------------
Comprehensive income $ 48,204 $ 53,391 $ 240,938 $ 196,535
----------------------------------------------------
----------------------------------------------------
Earnings per share:
Basic EPS $ 0.40 $ 0.47 $ 1.97 $ 1.64
Diluted EPS $ 0.40 $ 0.47 $ 1.96 $ 1.63
Weighted average number
of shares outstanding
(in thousands):
Basic 121,548 121,334 121,526 121,159
Diluted 122,143 122,141 122,283 121,980
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 2, October 3, October 2, October 3,
2011 2010 2011 2010
----------------------------------------------------
(unaudited) (unaudited) (unaudited) (audited)
Cash flows from (used
in) operating
activities:
Net earnings $ 48,534 $ 56,816 $ 239,904 $ 198,245
Adjustments for non-
cash items (note 3) 16,449 13,244 70,851 72,360
----------------------------------------------------
64,983 70,060 310,755 270,605
Changes in non-cash
working capital
balances:
Trade accounts
receivable 81,230 23,673 (18,861) 16,018
Inventories (54,495) (7,989) (182,080) (32,280)
Prepaid expenses and
deposits 1,525 1,012 698 2,020
Other current assets 1,885 921 1,883 (168)
Accounts payable and
accrued liabilities 21,544 (3,310) 74,496 52,127
Income taxes payable (5,992) 5,586 (5,341) (6,771)
----------------------------------------------------
110,680 89,953 181,550 301,551
Cash flows from (used
in) financing
activities:
(Decrease) increase in
amounts drawn under
revolving long-term
credit facility (43,000) - 209,000 -
Dividends paid (9,154) - (27,496) -
Increase in other
long-term debt - - - 43
Repayment of other
long-term debt - (58) - (4,430)
Proceeds from the
issuance of shares 326 203 4,017 1,869
Repurchase and
cancellation of
shares (10,537) - (10,537) -
Repurchase of shares (2,152) - (2,152) -
Recovery related to
repricing of stock
options previously
exercised - - - 1,159
----------------------------------------------------
(64,517) 145 172,832 (1,359)
Cash flows from (used
in) investing
activities:
Purchase of property,
plant and equipment (49,042) (33,242) (159,946) (126,855)
Purchase of intangible
assets (1,776) (109) (4,776) (1,026)
Business acquisitions 2,856 (524) (349,639) (15,850)
Payment of contingent
consideration - - (5,815) -
Restricted cash
related to a business
acquisition - - - 254
Purchase of corporate
asset, net of
proceeds - - (3,693) -
Proceeds on disposal
of assets held for
sale 657 320 1,125 4,708
Net decrease
(increase) in other
assets 1,324 423 (1,193) (2,477)
----------------------------------------------------
(45,981) (33,132) (523,937) (141,246)
Effect of exchange rate
changes on cash and
cash equivalents
denominated in foreign
currencies (373) 267 (85) (236)
----------------------------------------------------
Net (decrease) increase
in cash and cash
equivalents during the
period (191) 57,233 (169,640) 158,710
Cash and cash
equivalents, beginning
of period 88,993 201,209 258,442 99,732
----------------------------------------------------
Cash and cash
equivalents, end of
period $ 88,802 $ 258,442 $ 88,802 $ 258,442
----------------------------------------------------
----------------------------------------------------
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 during the week of
December 5, 2011.
1. Restructuring and acquisition-related costs
Three months ended Twelve months ended
--------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
--------------------------------------------------
Loss on disposal of assets
held for sale $ 475 $ 470 $ 634 $ 37
Accelerated depreciation - 218 - 2,488
Asset impairment loss and
write-down of assets held
for sale 1,422 784 1,722 1,826
Employee termination costs
and other benefits 122 71 2,887 744
Other exit costs 1,535 1,335 3,222 3,705
Adjustment for employment
contract - (95) - (95)
--------------------------------------------------
$ 3,554 $ 2,783 $ 8,465 $ 8,705
--------------------------------------------------
--------------------------------------------------
2. Financial expense (income), net:
Three months ended Twelve months ended
----------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
----------------------------------------------------
Interest expense $ 1,701 $ 137 $ 2,856 $ 436
Bank and other financial
charges 810 462 2,216 1,504
Foreign exchange gain (686) (1,738) (1,098) (1,084)
Derivative loss (gain)
on financial
instruments not
designated for hedge
accounting - 7 1,511 (105)
----------------------------------------------------
$ 1,825 $ (1,132)$ 5,485 $ 751
----------------------------------------------------
----------------------------------------------------
3. Adjustments for non-cash items:
Three months ended Twelve months ended
----------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
----------------------------------------------------
Depreciation and
amortization (note 4) $ 21,933 $ 17,617 $ 79,808 $ 66,472
Variation of
depreciation included
in inventories (note 4) (1,383) 58 (3,423) 2,725
Restructuring charges
related to assets held
for sale and property,
plant and equipment 1,897 1,472 2,356 4,351
(Gain) loss on disposal
of long-lived assets (26) (165) 1,877 842
Loss on disposal of
corporate asset - - 3,693 -
Stock-based compensation
costs 1,477 935 4,899 4,081
Future income taxes (6,038) (8,366) (19,118) (11,427)
Non-controlling interest
in consolidated joint
venture 198 2,691 504 3,786
Unrealized net (gain)
loss on foreign
exchange and financial
derivatives not
designated as cash flow
hedges (1,353) (973) 255 846
Adjustments to financial
derivatives included in
other comprehensive
income, net of amounts
reclassified to net
earnings (256) (25) - 684
----------------------------------------------------
$ 16,449 $ 13,244 $ 70,851 $ 72,360
----------------------------------------------------
----------------------------------------------------
4. Depreciation and amortization:
Three months ended Twelve months ended
--------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
--------------------------------------------------
Depreciation and
amortization of property,
plant and equipment and
intangible assets $ 21,933 $ 17,617 $ 79,808 $ 66,472
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 (1,383) 58 (3,423) 2,725
--------------------------------------------------
Depreciation and
amortization included in
the consolidated
statements of earnings
and comprehensive income $ 20,550 $ 17,675 $ 76,385 $ 69,197
--------------------------------------------------
Comprised of:
Depreciation of
property, plant and
equipment $ 16,074 $ 15,462 $ 63,283 $ 60,378
Amortization of
intangible assets 4,468 2,210 13,087 8,797
Amortization of
financing costs and
other 8 3 15 22
--------------------------------------------------
Depreciation and
amortization included
in the consolidated
statements of earnings
and comprehensive
income $ 20,550 $ 17,675 $ 76,385 $ 69,197
--------------------------------------------------
--------------------------------------------------
5. Segmented Sales:
Three months ended Twelve months ended
----------------------------------------------------
October 2, October 3, October 2, October 3,
2011 2010 2011 2010
----------------------------------------------------
The company has two
customers accounting
for at least 10% of
total net sales:
Customer A 17.4% 17.6% 19.4% 21.0%
Customer B 10.4% 16.9% 12.1% 14.3%
----------------------------------------------------
----------------------------------------------------
Net sales were derived
from customers located
in the following
geographic areas:
United States $ 428,674 $ 328,050 $ 1,536,670 $ 1,154,776
Canada 18,622 16,128 63,422 54,160
Europe and other 34,459 24,757 125,949 102,527
----------------------------------------------------
$ 481,755 $ 368,935 $ 1,726,041 $ 1,311,463
----------------------------------------------------
----------------------------------------------------
Net sales by major
product group:
Activewear and
underwear $ 368,897 $ 307,476 $ 1,406,036 $ 1,084,953
Socks 112,858 61,459 320,005 226,510
----------------------------------------------------
$ 481,755 $ 368,935 $ 1,726,041 $ 1,311,463
----------------------------------------------------
----------------------------------------------------
Contacts: Investor Relations Laurence G. Sellyn Executive
Vice-President Chief Financial and Administrative Officer (514)
343-8805lsellyn@gildan.com Sophie Argiriou Director Investor
Communications (514) 343-8815sargiriou@gildan.com Media Relations
Genevieve Gosselin Director Corporate Communications (514)
343-8814ggosselin@gildan.com
Gildan Activewear (TSX:GIL)
Historical Stock Chart
From Jul 2024 to Jul 2024
Gildan Activewear (TSX:GIL)
Historical Stock Chart
From Jul 2023 to Jul 2024
