Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL)
- Record Fourth Quarter Adjusted EPS of U.S. $0.78 in Line with
Prior Guidance
- Guidance for Fiscal 2013 Adjusted EPS Initiated at U.S.
$2.60-$2.70
- 20% Increase in Quarterly Dividend
- New Branded Programs with Retailers and Increased Brand
Advertising
- Increased Vertical Integration in Yarn-Spinning
Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL) today announced
record financial results for the fourth quarter of its 2012 fiscal
year, and initiated earnings guidance for fiscal 2013 which
continues the positive trends from the fourth quarter and reflects
a projected strong recovery in annual net earnings compared to
fiscal 2012. The Company also announced that it has been successful
in securing new Gildan® branded programs with national retail
customers. The Company announced a 20% increase in the amount of
its quarterly dividend.
Fourth Quarter Results
Gildan today reported net earnings of U.S. $89.0 million or U.S.
$0.73 per share on a diluted basis for its fourth fiscal quarter
ended September 30, 2012, compared with net earnings of U.S. $48.5
million or U.S. $0.40 per share in the fourth quarter of fiscal
2011. Results for the fourth quarter of fiscal 2012 include
restructuring and acquisition-related costs amounting to U.S. $5.9
million after-tax, primarily related to the write-down of real
estate assets held for divestiture since the closure of U.S. sock
manufacturing operations, as well as severance costs resulting from
the integration of acquisitions. Before the restructuring and
acquisition-related costs, adjusted net earnings for the fourth
quarter of fiscal 2012 were U.S. $94.9 million or U.S. $0.78 per
share, up 82.5% and 81.4% respectively compared to U.S. $52.0
million or U.S. $0.43 per share in the fourth quarter of last year.
The Company had previously projected adjusted net earnings of close
to U.S. $0.80 per share for the fourth quarter, when it reported
its third quarter results on August 2, 2012. Adjusted net earnings
for the fourth quarter include an after-tax charge of U.S. $0.02
per share related to a product labelling issue disclosed on October
16, 2012. This charge had not been anticipated in the Company's
prior guidance for the fourth quarter.
The growth in the Company's net earnings in the fourth quarter
compared to last year was due to the benefit of significantly lower
cotton costs, higher Printwear unit sales volumes, more favourable
product-mix and higher selling prices for Branded Apparel, and the
initial accretion from the acquisition of Anvil Holdings Inc.
(Anvil). These positive factors were partially offset by lower net
selling prices for Printwear, primarily reflecting the selling
price reductions implemented in the first quarter of fiscal 2012,
unfavourable Printwear product-mix, higher electricity, labour and
other manufacturing input costs, the above-mentioned charge
relating to the labelling issue, and higher income taxes due to the
improved profitability of Branded Apparel.
Net sales in the fourth quarter amounted to U.S. $561.7 million,
up 16.6% from U.S. $481.6 million in the fourth quarter of fiscal
2011, and in line with the Company's previous guidance of
approximately U.S. $560 million. Sales for the Printwear segment
amounted to U.S. $376.8 million, up 7.5% from U.S. $350.5 million
in the fourth quarter of fiscal 2011, and sales for the Branded
Apparel segment were U.S. $184.8 million, up 41% from U.S. $131.1
million from the fourth quarter of last year.
The increase in sales in the Printwear segment compared to the
fourth quarter of fiscal 2011 was due to higher unit sales volumes,
as a result of continuing organic growth in the U.S. market, the
impact of the Anvil acquisition, and continuing penetration in the
Company's target international markets. The impact on Printwear net
sales revenues of higher unit sales volumes was partially offset by
lower net selling prices, unfavourable product-mix, and higher
seasonal inventory destocking in the U.S. distributor channel
compared to the fourth quarter of fiscal 2011. The Company believes
that distributor inventories of Gildan® brand products at the end
of the fourth quarter were in good balance to service screenprinter
demand.
The 41% growth in sales for the Branded Apparel segment was due
primarily to the impact of the acquisition of Anvil, together with
more favourable product-mix and higher net selling prices.
Excluding Anvil, sales revenues for Branded Apparel in the fourth
quarter were up approximately 18% compared to the fourth quarter of
fiscal 2011.
Consolidated gross margins in the fourth quarter were 28.5%
compared to 20.6% last year. The significant increase in gross
margins was due to the impact of lower-cost cotton and more
favourable product-mix and higher selling prices for Branded
Apparel, partially offset by lower selling prices and unfavourable
product-mix for Printwear, together with higher manufacturing input
costs.
Selling, general and administrative (SG&A) expenses in the
fourth quarter were U.S. $64.1 million, or 11.4% of net sales,
compared with U.S. $53.4 million, or 11.1% of net sales, in the
fourth quarter of last year. Excluding the impact of the
acquisition of Anvil, SG&A expenses in the fourth quarter of
fiscal 2012 were approximately U.S. $58.0 million, up approximately
8.6% from fiscal 2011 due largely to increased marketing and
advertising expenses and higher legal and professional fees.
In the fourth quarter, the Printwear segment reported operating
income of U.S. $100.7 million, compared with U.S. $68.4 million in
the fourth quarter of fiscal 2011. The more favourable results for
the Printwear segment were primarily due to the impact of lower
cotton costs, higher unit sales volumes, and the accretive impact
of the Anvil acquisition, partially offset by lower selling prices
and unfavourable product-mix. The Branded Apparel segment reported
quarterly operating income of U.S. $15.1 million, compared with an
operating loss of U.S. $5.7 million in the fourth quarter of fiscal
2011. The improved results for Branded Apparel were due to lower
cotton costs, more favourable product-mix, higher selling prices
and the accretive impact of the Anvil acquisition, partially offset
by the charge for the labelling issue.
Full Year Sales and Earnings
Net sales revenues for fiscal 2012 amounted to U.S. $1,948.3
million, up 12.9% from U.S. $1,725.7 million in fiscal 2011 and in
line with the Company's most recent guidance of approximately U.S.
$1.95 billion provided on August 2, 2012. The increase in net sales
versus fiscal 2011 was due to the acquisitions of Gold Toe Moretz
Holdings Corp. (Gold Toe) and Anvil, as well as higher Printwear
unit sales volumes, and higher selling prices and more favourable
product-mix for Branded Apparel, partially offset by lower
Printwear selling prices.
Net earnings were U.S. $148.5 million or U.S. $1.22 per share in
fiscal 2012, compared to net earnings of U.S. $234.2 million or
U.S. $1.91 per share in fiscal 2011. Adjusted net earnings before
restructuring and acquisition-related costs amounted to U.S. $157.3
million or U.S. $1.29 per share, compared to adjusted net earnings
of U.S. $246.9 million or U.S. $2.02 per share in fiscal 2011, and
were in line with the Company's most recent guidance of
approximately U.S. $1.30 per share. The decline in adjusted EPS in
fiscal 2012 compared to last year was primarily due to the
significant increase in cotton costs in the first half of the
fiscal year, lower Printwear selling prices and higher income
taxes. These factors were partially offset by higher Printwear unit
sales volumes, the accretive impact of the acquisitions of Gold Toe
and Anvil and higher selling prices and favourable product-mix for
Branded Apparel.
Cash Flow and Financial Position
The Company generated free cash flow of U.S. $158.9 million in
the fourth quarter, due to the strong operating earnings and lower
seasonal accounts receivable. Free cash flow for the full fiscal
year amounted to U.S. $145.0 million, after financing capital
expenditures of U.S. $76.8 million, and was utilized to fund the
acquisition of Anvil, the Company's quarterly dividend payment and
to reduce bank indebtedness. Capital expenditures for fiscal 2012
were slightly below the Company's previous projection of
approximately U.S. $90 million, due to the later timing of certain
expenditures which will now be incurred in fiscal 2013. Free cash
flow for fiscal 2012 exceeded the Company's previous estimate of
free cash flow in excess of U.S. $100 million provided on August 2,
2012, primarily as a result of lower than anticipated working
capital requirements and capital expenditures. The Company ended
the fiscal year with bank indebtedness of U.S. $181.0 million and
cash and cash equivalents of U.S. $70.4 million.
New Branded Apparel Programs
The Company announced that it has been successful in securing
important new branded programs for fiscal 2013 with national retail
customers, as well as with regional retail chains, which will
provide significant exposure and visibility for the Gildan® brand.
These new programs include underwear, socks and activewear and are
largely expected to begin shipment in the second half of fiscal
2013. The Company is continuing to pursue other branded programs
including further development of the Gildan® brand and the Gold
Toe® portfolio of brands. In addition, the Company is continuing to
pursue opportunities to continue to grow its sales of Under Armour®
and New Balance® branded programs. In order to maximize the
opportunity provided by the new branded programs, the Company is
making a significant investment in advertising in support of its
Gildan® and Gold Toe® brands in fiscal 2013.
Yarn-Spinning Integration Strategy
During the first quarter of fiscal 2013, the Company completed
the acquisition of the remaining 50% of CanAm Yarns LLC (CanAm),
its 50%-owned yarn-spinning joint venture. Gildan is currently
planning to modernize and expand the two CanAm yarn-spinning
facilities and is also planning a new yarn-spinning facility in the
U.S.
The strategic rationale for the Company's investment in
vertically-integrated yarn-spinning is to support its projected
sales growth and to continue to pursue its business model of
investing in global low-cost manufacturing technology and in
product technology which will provide consistent superior product
quality. The Company is investing in ring-spun yarn technology
which will provide enhanced quality features as well as qualify for
duty-free access to U.S. markets under CAFTA-DR, which requires the
use of U.S. yarn or yarn spun in other CAFTA-DR member countries.
Ring-spun products will be utilized as part of the Company's
branded product offering in Branded Apparel.
Fiscal 2013 Guidance
The Company is initiating its guidance for fiscal 2013 with
projected adjusted EPS of U.S. $2.60-$2.70, on projected net sales
revenues of approximately U.S. $2.1 billion. Net sales for
Printwear are projected to be approximately U.S. $1.4 billion and
net sales for Branded Apparel are projected to be approximately
U.S. $0.7 billion.
The projected increase in adjusted EPS in fiscal 2013 is based
on the assumptions of significantly lower cotton costs, compared
with an average of U.S. $1.33 per pound in fiscal 2012, higher unit
sales volumes and more favourable product-mix in Printwear and
Branded Apparel, increased manufacturing efficiencies, and further
accretion from the acquisitions of Gold Toe and Anvil. These
positive factors are assumed to be partially offset by lower
selling prices and increased promotional discounting, inflation in
labour, energy and other manufacturing cost inputs, a projected
increase in SG&A expenses to approximately 13% of sales and a
higher consolidated effective tax rate of approximately 4%. The
projected increase in SG&A expenses is mainly due to an
approximate U.S. $15 million increase in advertising expenses in
support of the Gildan® and Gold Toe® brands in fiscal 2013 and
higher variable compensation expenses.
The ramp-up of Rio Nance V has been largely completed and Rio
Nance I is projected to begin to come back on stream in the third
quarter of fiscal 2013.
The Company is projecting adjusted EPS of U.S. $0.28-$0.31 in
the first quarter of fiscal 2013, on projected net sales revenues
in excess of U.S. $400 million, compared to a net loss of U.S.
$0.38 per share in the first quarter of fiscal 2012. The projected
growth in EPS in the first quarter compared to the first quarter of
fiscal 2012 is based on the assumptions of significantly lower
cotton costs, the non-recurrence of the special distributor
inventory devaluation discount in the first quarter of fiscal 2012,
higher unit sales volumes, more favourable product-mix in Branded
Apparel, manufacturing efficiencies and the accretive impact of the
Anvil acquisition. These positive factors are assumed to be
partially offset by higher SG&A expenses and lower selling
prices.
Fiscal 2013 Cash Flow
The Company is currently projecting free cash flow in excess of
U.S. $200 million in fiscal 2013. Capital expenditures are
projected to be approximately U.S. $200 million, including a total
of approximately U.S. $85 million for yarn-spinning investments.
The balance of the fiscal 2013 capital expenditure program is
primarily for expansion of textile capacity in Honduras, including
the carry over of expenditures from fiscal 2012 for Rio Nance V and
the refurbishment of Rio Nance I, as well as for expansion of
distribution capacity, including the construction of a new
distribution centre in Honduras and continued investments in
biomass projects. The Company will continue to seek selective
acquisition opportunities which complement its organic growth
strategies.
Increase in Quarterly Dividend
Due to the Company's strong cash flows and balance-sheet, the
Board of Directors has approved a 20% increase in the amount of the
current quarterly dividend and has declared a cash dividend of U.S.
$0.09 per share, payable on January 7, 2013 to shareholders of
record on December 13, 2012. This dividend is an "eligible
dividend" for the purposes of the Income Tax Act (Canada) and any
other applicable provincial legislation pertaining to eligible
dividends.
Disclosure of Outstanding Share Data
As of October 31, 2012, there were 121,605,705 common shares
issued and outstanding along with 1,238,036 stock options and
871,514 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 (800) 447-0521 (Canada & U.S.) or (847)
413-3238 (international) and entering passcode 33706648, or by live
sound webcast on Gildan's website ("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 11:00 AM ET by dialing (888)
843-7419 (Canada & U.S.) or (630) 652-3042 (international) and
entering passcode 33706639#, until Thursday, December 6, 2012 at
midnight, or by sound webcast on Gildan's website for 30 days
following the live webcast.
The Company expects to file its 2012 Management's Discussion and
Analysis and its 2012 audited Consolidated Financial Statements
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission during the week of December
3, 2012.
About Gildan
Gildan is a marketer and vertically-integrated manufacturer of
quality branded basic family apparel, including T-shirts, fleece,
sport shirts, socks and underwear. The Company sells its products
under a diversified portfolio of Company-owned brands, including
the Gildan®, Gold Toe® and Anvil® brands and brand extensions, as
well as under licensing arrangements for the Under Armour® and New
Balance® brands. The Company distributes its products in printwear
markets in the U.S. and Canada, where Gildan® is the
industry-leading brand, and the Company is increasing its
penetration in international markets. Gildan also continues to
develop its presence as a consumer brand distributed through U.S.
retailers. The Company is one of the largest suppliers of athletic,
casual and dress socks for a broad spectrum of retailers in the
U.S., and is increasing its penetration as an underwear and
activewear brand.
With over 30,000 employees worldwide, Gildan owns and operates
highly efficient, large-scale, environmentally and socially
responsible manufacturing facilities primarily located in Central
America and the Caribbean Basin, which are strategically located to
serve the replenishment needs of its customers in North America.
More information about the Company and its corporate citizenship
practices and initiatives can be found at its corporate websites
www.gildan.com and www.genuinegildan.com, respectively.
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, accretion from acquisitions, product-mix, selling,
general and administrative expenses, earnings per share, capital
expenditures, manufacturing efficiencies, selling prices, cotton
costs and other manufacturing cost inputs, 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 Judgments" 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, obtaining and successfully introducing new
sales programs, 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 production;
-- disruption to manufacturing and distribution activities due to such
factors as operational issues, disruptions in transportation logistic
functions, labour disruptions, political or social 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, anti-corruption, privacy and other laws and regulations in
the jurisdictions in which we operate;
-- our significant reliance on computerized information systems for our
business operations, including our JD Edwards Enterprise Resource
Planning (ERP) system which is currently being upgraded to the latest
system release, Enterprise One;
-- 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;
-- 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; and
-- the adverse impact of any current or future legal and regulatory
actions.
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 future financial performance and may not be appropriate
for other purposes. Furthermore, unless otherwise stated, the
forward-looking statements contained in this press release are made
as of the date of this press release, and we do not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise unless required by applicable
legislation or regulation. The forward-looking statements contained
in this press release are expressly qualified by this cautionary
statement.
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. These non-GAAP measures do not have any standardized
meanings prescribed by International Financial Reporting Standards
(IFRS) and are therefore unlikely to be comparable to similar
measures presented by other companies. Accordingly, they should not
be considered in isolation. The terms and definitions of the
non-GAAP measures used in this press release and a reconciliation
of each non-GAAP measure to the most directly comparable IFRS
measure are provided below.
EBITDA
EBITDA is calculated as earnings before financial expenses,
income taxes and depreciation and amortization and excludes the
impact of restructuring and acquisition-related costs, as well as
the equity earnings in investment in 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 2012 Q4 2011 YTD 2012 YTD 2011
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Net earnings 89.0 48.5 148.5 234.2
Restructuring and
acquisition-related
costs 9.4 5.6 15.0 18.2
Depreciation and
amortization 25.9 19.9 94.6 74.1
Financial expenses, net 3.1 2.0 11.6 6.1
Income tax recovery (4.7) (9.9) (4.3) (19.2)
Equity earnings in
investment in joint
venture (0.8) (0.2) (0.6) (0.5)
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EBITDA 121.9 65.9 264.8 312.9
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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, net of related income
tax recoveries. 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, net of related income tax recoveries,
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 2012 Q4 2011 YTD 2012 YTD 2011
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Net earnings 89.0 48.5 148.5 234.2
Adjustments for:
Restructuring and
acquisition-related
costs 9.4 5.6 15.0 18.2
Income tax recovery on
restructuring and
acquisition-related
costs (3.5) (2.1) (6.2) (5.5)
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Adjusted net earnings 94.9 52.0 157.3 246.9
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Basic EPS(i) 0.73 0.40 1.22 1.93
Diluted EPS(i) 0.73 0.40 1.22 1.91
Adjusted diluted EPS(i) 0.78 0.43 1.29 2.02
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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.
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,
and/or to redistribute to its shareholders. The Company believes
this measure is commonly used by investors and analysts when
valuing a business and its underlying assets.
(in U.S.$ millions) Q4 2012 Q4 2011 YTD 2012 YTD 2011
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Cash flows from operating
activities 170.7 111.8 219.6 163.6
Cash flows used in investing
activities (11.8) (46.3) (162.0) (488.0)
Adjustments for:
Business acquisitions - (2.9) 87.4 342.4
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Free cash flow 158.9 62.6 145.0 18.0
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Certain minor rounding variances exist between the financial statements and
this summary.
Total indebtedness and Net indebtedness
Total indebtedness is comprised of bank indebtedness and
long-term debt (including any current portion), and net
indebtedness is calculated as total indebtedness net of cash and
cash equivalents. The Company considers total indebtedness and net
indebtedness to be important indicators of the financial leverage
of the Company.
(in U.S.$ millions) September 30, 2012 October 2, 2011
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Long-term debt and total indebtedness 181.0 209.0
Cash and cash equivalents (70.4) (82.0)
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Net indebtedness 110.6 127.0
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Certain minor rounding variances exist between the financial statements and
this summary.
Gildan Activewear Inc.
Consolidated Statements of Financial Position
(in thousands of U.S. dollars) - unaudited
September 30, October 2,
2012 2011
----------------------------
Current assets:
Cash and cash equivalents $ 70,410 $ 82,025
Trade accounts receivable 260,595 191,594
Income taxes receivable 353 515
Inventories 553,068 568,311
Prepaid expenses and deposits 14,451 10,827
Assets held for sale 8,029 13,142
Other current assets 8,694 9,228
----------------------------
Total current assets 915,600 875,642
----------------------------
Non-current assets:
Property, plant and equipment 552,437 550,324
Investment in joint venture 12,126 13,038
Intangible assets 259,981 261,653
Goodwill 141,933 141,933
Deferred income taxes 3,371 -
Other non-current assets 10,989 15,909
----------------------------
Total non-current assets 980,837 982,857
----------------------------
Total assets $ 1,896,437 $ 1,858,499
----------------------------
----------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 256,442 $ 297,960
----------------------------
Total current liabilities 256,442 297,960
----------------------------
Non-current liabilities:
Long-term debt 181,000 209,000
Deferred income taxes - 11,977
Employee benefit obligations 19,612 20,246
Provisions 13,042 8,226
----------------------------
Total non-current liabilities 213,654 249,449
----------------------------
Total liabilities 470,096 547,409
----------------------------
Equity:
Share capital 101,113 100,436
Contributed surplus 25,579 16,526
Retained earnings 1,306,724 1,194,804
Accumulated other comprehensive income (7,075) (676)
----------------------------
Total equity attributable to shareholders of the
Company 1,426,341 1,311,090
----------------------------
Total liabilities and equity $ 1,896,437 $ 1,858,499
----------------------------
----------------------------
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) - unaudited
Three months ended Twelve months ended
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September 30, October 2, September 30, October 2,
2012 2011 2012 2011
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Net sales $ 561,652 $ 481,630 $ 1,948,253 $ 1,725,712
Cost of sales 401,457 382,197 1,552,128 1,288,106
-----------------------------------------------------------
Gross profit 160,195 99,433 396,125 437,606
Selling, general
and
administrative
expenses 64,058 53,440 226,035 198,858
Restructuring and
acquisition-
related costs
(note 1) 9,447 5,600 14,962 18,177
-----------------------------------------------------------
Operating income 86,690 40,393 155,128 220,571
Financial
expenses, net
(note 2) 3,133 2,029 11,598 6,142
Equity earnings
in investment in
joint venture (805) (198) (597) (504)
-----------------------------------------------------------
Earnings before
income taxes 84,362 38,562 144,127 214,933
Income tax
recovery (4,654) (9,895) (4,337) (19,223)
-----------------------------------------------------------
Net earnings 89,016 48,457 148,464 234,156
Other
comprehensive
(loss) income,
net of related
income taxes
Cash flow
hedges (3,536) (330) (6,399) 1,034
Actuarial gain
(loss) on
employee
benefit
obligations 323 (3,786) 323 (3,952)
-----------------------------------------------------------
(3,213) (4,116) (6,076) (2,918)
-----------------------------------------------------------
Comprehensive
income $ 85,803 $ 44,341 $ 142,388 $ 231,238
-----------------------------------------------------------
-----------------------------------------------------------
Earnings per
share:
Basic $ 0.73 $ 0.40 $ 1.22 $ 1.93
Diluted $ 0.73 $ 0.40 $ 1.22 $ 1.91
Weighted average
number of common
shares
outstanding (in
thousands):
Basic 121,473 121,548 121,488 121,526
Diluted 122,322 122,143 122,068 122,283
See accompanying condensed notes to consolidated financial statements
Gildan Activewear Inc.
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars) - unaudited
Three months ended Twelve months ended
--------------------------------------------------------
September 30, October 2, September 30, October 2,
2012 2011 2012 2011
--------------------------------------------------------
Cash flows from
(used in) operating
activities:
Net earnings $ 89,016 $ 48,457 $ 148,464 $ 234,156
Adjustments to
reconcile net
earnings to cash
flows from
operating
activities (note
3) 25,765 8,659 94,221 47,917
--------------------------------------------------------
114,781 57,116 242,685 282,073
Changes in non-
cash working
capital balances:
Trade accounts
receivable 44,038 81,230 (36,660) (18,861)
Income taxes
receivable 1,759 (5,992) 2,440 (5,341)
Inventories 102 (52,210) 77,111 (177,821)
Prepaid expenses
and deposits 657 1,510 (1,828) (569)
Other current
assets 1,385 1,381 (2,368) 1,553
Accounts payable
and accrued
liabilities 7,931 28,773 (61,798) 82,605
--------------------------------------------------------
Cash flows from
operating
activities 170,653 111,808 219,582 163,639
Cash flows from
(used in) financing
activities:
(Decrease)
increase in
amounts drawn
under revolving
long-term credit
facility (125,000) (43,000) (28,000) 209,000
Dividends paid (9,124) (9,154) (36,615) (27,496)
Repayment of other
long-term debt - - - (17,233)
Proceeds from the
issuance of
shares 736 326 1,501 4,017
Repurchase and
cancellation of
shares - (10,537) - (10,537)
Repurchase of
shares (4,312) (2,152) (5,990) (2,152)
--------------------------------------------------------
Cash flows from
(used in) financing
activities (137,700) (64,517) (69,104) 155,599
Cash flows from
(used in) investing
activities:
Purchase of
property, plant
and equipment (11,768) (47,992) (71,316) (155,178)
Purchase of
intangible assets (289) (1,776) (5,439) (4,776)
Business
acquisitions - 2,856 (87,373) (342,368)
Proceeds on
disposal of
corporate asset - - - 13,226
Proceeds on
disposal of
assets held for
sale 222 657 600 1,125
Dividend received
from investment
in joint venture - - 1,509 -
--------------------------------------------------------
Cash flows used in
investing
activities (11,835) (46,255) (162,019) (487,971)
Effect of exchange
rate changes on
cash and cash
equivalents
denominated in
foreign currencies 782 (373) (74) (85)
--------------------------------------------------------
Net increase
(decrease) in cash
and cash
equivalents during
the period 21,900 663 (11,615) (168,818)
Cash and cash
equivalents,
beginning of period 48,510 81,362 82,025 250,843
--------------------------------------------------------
Cash and cash
equivalents, end of
period $ 70,410 $ 82,025 $ 70,410 $ 82,025
--------------------------------------------------------
--------------------------------------------------------
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 3, 2012. The Company's consolidated financial statements
have been prepared in accordance with IFRS as issued by the
International Accounting Standards Board (IASB). The Company
adopted IFRS effective October 4, 2010.
1. Restructuring and acquisition-related costs:
Three months ended Twelve months ended
--------------------------------------------------------
September 30, October 2, September 30, October 2,
2012 2011 2012 2011
--------------------------------------------------------
(Gain) loss on
disposal of assets
held for sale $ (53)$ 476 $ (130)$ 634
Impairment and
write-down of
assets held for
sale 4,895 1,421 4,981 1,722
Employee termination
and benefit costs 3,757 122 7,857 2,887
Net pension
(recovery) expense (403) 4,684 (403) 4,684
Exit, relocation and
other costs (1,820) 357 7,587 2,438
Re-measurement of
contingent
consideration in
connection with a
business
acquisition 911 (1,460) 532 (1,460)
Purchase gain on
business
acquisition 2,188 - (6,679) -
Acquisition-related
transaction costs (28) - 1,217 7,272
--------------------------------------------------------
$ 9,447 $ 5,600 $ 14,962 $ 18,177
--------------------------------------------------------
--------------------------------------------------------
Restructuring and acquisition-related costs of $15.0 million in
fiscal 2012 and $18.2 million in fiscal 2011 are comprised of costs
relating to the closure of business facilities or the relocation of
business activities, changes in management structure, and
transaction, exit and certain integration costs incurred pursuant
to business acquisitions. Purchase gains on business acquisitions
are included as a reduction of restructuring and
acquisition-related costs, including a $6.7 million purchase gain
on the acquisition of Anvil during fiscal 2012. During fiscal 2012
and fiscal 2011, the Company wrote down the carrying value of
assets held for sale by $5.0 million and $1.7 million respectively,
which relates to facility closures that occurred primarily between
fiscal 2009 and fiscal 2011. During fiscal 2012 and fiscal 2011,
the Company also incurred transaction costs of $1.2 million and
$7.3 million respectively relating to the acquisition of Anvil in
fiscal 2012 and the acquisition of Gold Toe in fiscal 2011. The
Company also incurred other restructuring and acquisition-related
costs in fiscal 2012 and fiscal 2011, primarily costs pursuant to
the integration of Gold Toe in both years and the integration of
Anvil during fiscal 2012, including employee termination costs,
costs in connection with the wind-up of a pension plan, and exit,
relocation and other costs.
2. Financial expenses, net:
Three months ended Twelve months ended
-------------------------------------------------------
September 30, October 2, September 30, October 2,
2012 2011 2012 2011
-------------------------------------------------------
Interest expense on
financial
liabilities recorded
at amortized cost $ 1,732 $ 1,630 $ 7,315 $ 3,238
Bank and other
financial charges 983 810 3,676 2,216
Interest accretion on
discounted provision - 275 324 275
Foreign exchange loss
(gain) 418 (686) 283 (1,098)
Derivative loss on
financial
instruments not
designated for hedge
accounting - - - 1,511
-------------------------------------------------------
$ 3,133 $ 2,029 $ 11,598 $ 6,142
-------------------------------------------------------
-------------------------------------------------------
3. Adjustments to reconcile net earnings to cash flows from
operating activities:
Three months ended Twelve months ended
--------------------------------------------------------
September 30, October 2, September 30, October 2,
2012 2011 2012 2011
--------------------------------------------------------
Depreciation and
amortization (note
4) $ 25,910 $ 19,889 $ 94,573 $ 74,136
Purchase gain on
business
acquisition 2,188 - (6,679) -
Loss (gain) on re-
measurement of
contingent
consideration in
connection with a
business
acquisition 911 (1,460) 532 (1,460)
Restructuring
charges related to
assets held for
sale and property,
plant and equipment 4,928 1,897 4,851 2,356
Loss (gain) on
disposal of
property, plant and
equipment 1,033 (26) 1,619 1,877
Loss on disposal of
corporate asset - - - 3,693
Share-based
compensation costs 1,166 1,477 4,606 4,899
Deferred income
taxes (7,602) (6,982) (10,342) (22,599)
Equity earnings in
investment in joint
venture (805) (197) (597) (504)
Unrealized net
(gain) loss on
foreign exchange
and financial
derivatives (358) (1,353) 160 255
Adjustments for the
termination of
financial
derivatives
included in other
comprehensive
income - (256) - -
Other non-current
assets 988 1,816 6,634 (701)
Employee benefit
obligations (2,586) (6,421) (1,452) (14,310)
Provisions (8) 275 316 275
--------------------------------------------------------
$ 25,765 $ 8,659 $ 94,221 $ 47,917
--------------------------------------------------------
--------------------------------------------------------
4. Depreciation and amortization:
Three months ended Twelve months ended
-----------------------------------------------------
September
September 30, October 2, 30, October 2,
2012 2011 2012 2011
-----------------------------------------------------
Depreciation of
property, plant and
equipment $ 21,124 $ 16,728 $ 80,625 $ 64,168
Adjustment for the
variation of
depreciation of
property, plant and
equipment included in
inventories at the
beginning and end of
the period 446 (1,383) (2,863) (3,423)
-----------------------------------------------------
Depreciation of
property, plant and
equipment included in
net earnings 21,570 15,345 77,762 60,745
Amortization of
intangible assets
(excluding software) 4,013 3,668 15,152 8,658
Amortization of
software 327 876 1,659 4,733
-----------------------------------------------------
Depreciation and
amortization included
in net earnings $ 25,910 $ 19,889 $ 94,573 $ 74,136
-----------------------------------------------------
-----------------------------------------------------
5. Segment information:
Three months ended Twelve months ended
--------------------------------------------------------
September 30, October 2, September 30, October 2,
2012 2011 2012 2011
--------------------------------------------------------
Segmented net sales:
Printwear $ 376,845 $ 350,537 $ 1,334,252 $ 1,327,682
Branded Apparel 184,807 131,093 614,001 398,030
--------------------------------------------------------
Total net sales $ 561,652 $ 481,630 $ 1,948,253 $ 1,725,712
--------------------------------------------------------
--------------------------------------------------------
Segment operating
income (loss):
Printwear $ 100,698 $ 68,374 $ 209,426 $ 330,220
Branded Apparel 15,089 (5,706) 32,827 (16,180)
--------------------------------------------------------
Total segment
operating income $ 115,787 $ 62,668 $ 242,253 $ 314,040
--------------------------------------------------------
--------------------------------------------------------
Reconciliation to consolidated earnings before
income taxes:
Total segment
operating income $ 115,787 $ 62,668 $ 242,253 $ 314,040
Amortization of
intangible
assets, excluding
software (4,013) (3,668) (15,152) (8,658)
Corporate expenses (15,637) (13,007) (57,011) (66,634)
Restructuring and
acquisition-
related costs (9,447) (5,600) (14,962) (18,177)
Financial
expenses, net (3,133) (2,029) (11,598) (6,142)
Equity earnings in
investment in
joint venture 805 198 597 504
--------------------------------------------------------
Earnings before
income taxes $ 84,362 $ 38,562 $ 144,127 $ 214,933
--------------------------------------------------------
--------------------------------------------------------
6. Events after the reporting period:
On October 29, 2012, the Company acquired the remaining 50%
ownership interest of CanAm, its jointly-controlled entity, for
cash consideration of $2.5 million, net of cash acquired of $8.8
million. The purpose of the acquisition of the remaining 50%
ownership, combined with the Company's plans to modernize and
expand CanAm's two yarn-spinning facilities, is to support the
Company's projected sales growth and also to continue to pursue the
Company's business model of investing in global low-cost
manufacturing technology and in product technology which will
provide consistent superior product quality. The acquisition will
be financed by the utilization of the Company's revolving long-term
bank credit facility. The Company will account for this acquisition
using the acquisition method in accordance with IFRS 3, Business
Combinations, and the results of CanAm will be consolidated with
those of the Company from the date of acquisition. The Company has
not yet completed the accounting for the business acquisition
including the determination of the fair values of the identifiable
net assets acquired.
Contacts: Investor Relations Laurence G. Sellyn, Executive
Vice-President, Chief Financial and Administrative Officer Tel:
(514) 343-8805 Email: lsellyn@gildan.com Sophie Argiriou, Director,
Investor Communications Tel: (514) 343-8815 Email:
sargiriou@gildan.com Media Relations Genevieve Gosselin, Director,
Corporate Communications Tel: (514) 343-8814 Email:
ggosselin@gildan.com
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