Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results
for the third quarter ended October 3, 2021.
“Our record performance for the third quarter was driven by the
improved economics of our business, underpinned by our Back to
Basics model, the operational excellence of our team and the
ongoing recovery in demand, which drove sales volumes which are now
above pre-pandemic levels,” said Glenn J. Chamandy, Gildan
president and CEO. “Further, I feel confident that our team will
continue to navigate through the tight supply chain environment,
manage inflationary pressures and deliver results for our
shareholders as we continue to move forward.”
We generated sales of $802 million for the quarter, up 33% over
the prior year and 8% above the third quarter of 2019. Strong gross
margin expansion drove operating margin of 25.1%, and adjusted
operating margin of 21.5% which was up approximately 930 basis
points versus last year and 500 basis points compared to the third
quarter of 2019. Sales above pre-pandemic levels, combined with a
stronger margin profile, drove record earnings for the quarter with
GAAP diluted EPS of $0.95, and adjusted diluted EPS of $0.80 which
was up 51% compared to the third quarter of 2019. Free cash flow of
$232 million was also a record for a third quarter, bringing our
year-to-date total to $478 million. Following our announcement of
the restart of our normal course issuer bid (NCIB) program in
August, we repurchased over 3.3 million common shares at a total
cost of approximately $127 million during the quarter. Nonetheless,
given the significant free cash flow generation in the quarter, our
net debt1 position declined to $287 million, reducing our net debt
to adjusted EBITDA1 ratio to 0.4 at the end of the quarter, leaving
us with strong ongoing return of capital capability.
Q3 2021 Operating Results Sales for the third
quarter ending October 3, 2021, totaled $802 million, up 33% over
the prior year, consisting of activewear sales of $656 million, up
44%, and sales in the hosiery and underwear category of $146
million, in line with the prior year level. The overall sales
increase was driven primarily by higher unit sales of activewear
and underwear, favourable product mix, as well as lower
imprintables promotional spending and accruals. Activewear
shipments were up in imprintables channels both in North America
and internationally, as well as in North American retail channels,
compared to the third quarter last year. Year-over-year in-line
hosiery and underwear sales reflected higher underwear unit sales
volumes and favourable product-mix, offset by lower unit sales of
socks, which were impacted by supply tightness for certain
products.
We were pleased to see sales in the quarter grow from
pre-pandemic levels, up 8% compared to sales of $740 million in the
third quarter of 2019. The increase was driven primarily by higher
activewear and underwear unit sales volumes and favourable
product-mix. Increased activewear sales volumes reflected higher
POS in North American imprintables, which turned positive compared
to the third quarter of 2019, as well as higher sell through in
retail channels, while international POS continued to trend lower
than the same period in 2019. Sales in the hosiery and underwear
category were up 21%, driven by the strength in underwear sales
volumes which more than doubled over third quarter 2019 levels,
partly offset by lower sales of socks.
We generated gross profit of $282 million in the quarter and
before reflecting a net insurance gain of approximately $30
million, our adjusted gross profit1 totaled $252 million, up 108%
and 86%, respectively, over the prior year, driven by our growth in
sales and strong margin performance. Gross margin of 35.1% in the
quarter was up 1,260 basis points and adjusted gross margin1 of
31.4% was up 890 basis points compared to the third quarter of
2020. The significant improvement in adjusted gross margin was
primarily due to favourable product-mix, lower imprintables
promotional spending and accruals, the impact of the non-recurrence
of COVID-related costs incurred last year when facilities were
running below normal capacity utilization levels, as well as cost
benefits stemming from our Back to Basics initiatives.
Compared to the third quarter of 2019, adjusted gross margin in
the third quarter of 2021 was up 400 basis points primarily due to
Back to Basics cost efficiencies and lower raw material costs,
while net selling prices were essentially in line with third
quarter 2019 levels.
SG&A expenses for the third quarter of $81 million were up
approximately $20 million compared to SG&A expenses of $61
million last year. The year-over-year increase was primarily due to
higher variable compensation expenses, partly offset by cost
savings stemming from our Back to Basics initiatives. SG&A
expenses as a percentage of net sales improved slightly to 10.1%
compared to 10.2% last year, as volume leverage and cost savings
more than offset higher variable compensation.
Compared to the third quarter of 2019, SG&A expenses were up
slightly by $2 million, as higher volume driven distribution
expenses and higher variable compensation expenses were largely
offset by cost savings stemming from our Back to Basics SG&A
rationalization initiatives. Consequently, as a percentage of
sales, SG&A expenses of 10.1% in the quarter improved by 60 bps
compared to 10.7% in the third quarter of 2019.
We generated operating income of $201 million, or 25.1% of sales
and adjusted operating income1 of $172 million, or 21.5% of sales,
in the third quarter of 2021 compared to operating income of $69
million, or 11.4% of sales, and $74 million, or 12.2% of sales, on
an adjusted basis last year. The increase in operating and adjusted
operating income was driven by higher sales, strong gross and
adjusted gross margin performance, partly offset by higher SG&A
expenses. Net financial expenses were down $6 million over the
prior year, offsetting higher income taxes. Consequently, we
reported net earnings of $188 million, or $0.95 per share on a
diluted basis, for the three months ended October 3, 2021 and
adjusted net earnings1 of $159 million, or $0.80 per share on a
diluted basis, compared to net earnings of $56 million, or $0.28
per diluted share, and adjusted net earnings of $59 million, or
$0.30 per diluted share in the third quarter last year.
Adjusted operating margin of 21.5% in the third quarter this
year was up 500 basis points compared to 16.5% in the third quarter
of 2019, demonstrating that our Back to Basics strategy which began
prior to and accelerated during the pandemic has allowed us to
emerge as a stronger more profitable Company. Combined with the
return to above pre-pandemic sales levels, we delivered adjusted
diluted EPS growth of 51% in the quarter, compared to adjusted
diluted EPS of $0.53 in the third quarter of 2019.
We generated record third quarter free cash flow of $232
million, bringing our year-to-date total to $478 million driven by
strong earnings, improved working capital management and the timing
of insurance collections related to the 2020 hurricanes. The
Company ended the third quarter of 2021 with net debt of $287
million and a net debt leverage ratio of 0.4 times net debt to
trailing twelve months adjusted EBITDA.
Year-to-date Operating ResultsNet sales for the
nine months ended October 3, 2021, of $2,138 million were up
66% over the same period last year, reflecting increases of 81% in
activewear sales and 21% in the hosiery and underwear category. The
year-over-year increase in activewear sales where we generated
sales of $1,738 million was primarily driven by volume increases in
all channels and favourable product-mix. Higher imprintables sales
volumes were driven by positive POS and the impact of the
non-recurrence of significant destocking by distributors which
occurred last year. Similarly, the increase in the hosiery and
underwear category where we generated sales of $401 million in the
first nine months of 2021 was also driven by higher sales volumes
in both underwear and in sock products compared to last year, as
well as favourable product mix.
On a year-to-date basis, we generated gross profit of $711
million and gross margin of 33.3% compared to a gross profit of $94
million and gross margin of 7.2% in the prior year. Adjusted gross
profit for the first nine months of 2021 totaled $663 million, or
31.0% of sales, up from adjusted gross profit of $128 million and
adjusted gross margin of 9.8% in the same period last year. The
significant year-over-year improvement in gross and adjusted gross
margin was mainly due to the non-recurrence of COVID and certain
Back to Basics related charges incurred primarily in the first half
of 2020, cost benefits from our Back to Basics initiatives,
stronger product mix, lower promotional spending and accruals this
year and lower raw material costs. Gross margin in the first nine
months of 2021 also included the impact of net insurance gains of
$49 million and lower year-over-year SKU rationalization charges
which were taken in the first half of the prior year.
SG&A expenses in the first nine months of 2021 totaled $234
million, up $33 million from last year primarily attributable to
higher variable compensation expenses and higher volume-driven
distribution costs, partly offset by cost savings stemming from our
Back to Basics initiatives. As a percentage of sales, SG&A
expenses improved 460 basis points to 10.9% of sales compared to
15.5% in the same period last year reflecting the benefit of volume
leverage and unit cost efficiencies.
On a year-to-date basis, we generated operating income of $475
million, or 22.2% of sales compared to an operating loss of $260
million last year. Adjusted operating income totaled $431 million,
or 20.2% of sales, compared to an adjusted operating loss of $88
million last year. The improvement in operating and adjusted
operating income was driven by the significant year-over-year sales
recovery, strong gross and adjusted gross margin performance and
SG&A leverage. The increase in operating income also reflected
the non-recurrence of the goodwill impairment charge of
$94 million incurred in the first quarter of 2020 and lower
year-over-year restructuring and acquisition related costs tied
primarily to our Back to Basics initiatives. Consequently, we
reported net earnings of $433 million, or $2.18 per share on a
diluted basis and adjusted net earnings of $390 million or
$1.96 per diluted share, for the first nine months of 2021,
compared to a net loss of $293 million, or $1.48 per diluted share,
and an adjusted net loss of $126 million, or $0.64 per diluted
share, respectively, in the same period last year.
Outlook CommentaryThe recovery from the
pandemic continues to progress well in North America driving
positive POS trends compared to pre-COVID 2019 levels. Further,
while supply chain tightness in certain areas and rising
inflationary pressure are creating headwinds across the industry,
we believe our relative positioning is strong given our
vertically-integrated manufacturing platform. This combined with
recent pricing actions implemented in the fourth quarter this year,
gives us confidence that we are well positioned to manage through
current inflationary pressures and to continue to be in a position
to deliver on our operating margin target. More importantly, as our
focus shifts to a capacity, innovation and ESG-driven, sustainable
growth strategy, it gives us confidence that we are well placed to
capitalize on market share opportunities and create long term value
for our shareholders.
Environmental, Social and Governance (ESG)On
October 25th, Investor’s Business Daily published its results of
the Top 100 Best ESG Companies, recognizing companies with superior
ESG ratings in addition to strong fundamental and technical stock
performance. “We are proud of this recognition, ranking Gildan 8th
overall and placing us as the top Company in the Consumer Goods
sector,” said Glenn J. Chamandy, Gildan's President and CEO. “Our
ESG vision is rooted in the Company’s culture and is a key part of
our business strategy and a vital element of our success. We
conduct our business with ESG embedded into our products and
operations, always with responsibility and integrity at our
core.”
Declaration of Quarterly DividendThe Board of
Directors has declared a cash dividend of $0.154 per share, payable
on December 20, 2021 to shareholders of record as of November 24,
2021. 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.
Normal Course Issuer BidFollowing the
reinstatement of the Company's NCIB, effective August 9, 2021,
during the quarter the Company repurchased for cancellation a total
of 3,313,658 common shares at a total cost of approximately $127
million. The Company repurchased an additional 1,299,200 common
shares under its current NCIB pursuant to an automatic share
purchase program between October 1, 2021 and October 31, 2021 at a
total cost of $48 million.
Gildan’s management and the Board of Directors believe the
repurchase of common shares represents an appropriate use of
Gildan’s financial resources and that share repurchases under the
NCIB will not preclude Gildan from continuing to pursue organic
growth and complementary acquisitions.
Disclosure of Outstanding Share DataAs at
October 31, 2021, there were 193,920,733 common shares issued and
outstanding along with 3,435,683 stock options and 23,462 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 predetermined 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.
Conference Call InformationGildan Activewear
Inc. will hold a conference call to discuss the Company's third
quarter 2021 results today at 8:30 AM ET. A live audio webcast
of the conference call, as well as a replay, will be available on
its corporate site or on the following link:
https://gildancorp.com/en/investors/events-and-presentations/. The
conference call can be accessed by dialing (877) 282-2924 (Canada
& U.S.) or (470) 495-9480 (international) and entering passcode
5930699#. A replay will be available for 7 days starting at 11:30
AM ET by dialing (855) 859-2056 (Canada & U.S.) or
(404) 537-3406 (international) and entering the same
passcode.
This release should be read in conjunction with Gildan’s
Management’s Discussion and Analysis and its unaudited condensed
interim consolidated financial statements as at and for the three
and nine months ended October 3, 2021, which will be filed by
Gildan with the Canadian securities regulatory authorities and with
the U.S. Securities and Exchange Commission and which will be
available on Gildan’s corporate website.
Certain minor rounding variances may exist between the unaudited
condensed interim consolidated financial statements and the table
summaries contained in this press release.
Supplemental Financial Data
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(in $ millions, except per share amounts or otherwise
indicated) |
Q3 2021 |
Q3 2020 |
Variation (%) |
YTD 2021 |
YTD 2020 |
Variation (%) |
Net sales |
801.6 |
|
602.3 |
|
33.1 |
% |
2,138.3 |
|
1,291.1 |
|
65.6 |
% |
Gross profit |
281.7 |
|
135.5 |
|
107.9 |
% |
711.0 |
|
93.6 |
|
n.m. |
Adjusted gross profit(1) |
251.8 |
|
135.5 |
|
85.8 |
% |
663.3 |
|
127.6 |
|
n.m. |
SG&A expenses |
80.6 |
|
61.5 |
|
31.1 |
% |
233.7 |
|
200.4 |
|
16.6 |
% |
(Reversal of impairment)
Impairment of trade accounts receivable |
(1.3 |
) |
0.5 |
|
n.m. |
|
(1.6 |
) |
15.0 |
|
n.m. |
Restructuring and
acquisition-related costs |
1.0 |
|
4.7 |
|
(78.7 |
)% |
4.0 |
|
43.9 |
|
(90.9 |
)% |
Impairment of goodwill and
intangible assets |
— |
|
— |
|
— |
|
— |
|
94.0 |
|
n.m. |
Operating income (loss) |
201.3 |
|
68.8 |
|
192.6 |
% |
474.8 |
|
(259.7 |
) |
n.m. |
Adjusted operating income
(loss)(1) |
172.4 |
|
73.5 |
|
134.6 |
% |
431.1 |
|
(87.8 |
) |
n.m. |
Adjusted EBITDA(1) |
206.7 |
|
106.9 |
|
93.4 |
% |
537.0 |
|
19.9 |
|
n.m. |
Financial expenses |
5.3 |
|
11.4 |
|
(53.5 |
)% |
22.7 |
|
35.4 |
|
(35.9 |
)% |
Income tax expense
(recovery) |
7.7 |
|
1.0 |
|
n.m. |
|
18.9 |
|
(2.4 |
) |
n.m. |
Net earnings (loss) |
188.3 |
|
56.4 |
|
233.9 |
% |
433.3 |
|
(292.6 |
) |
n.m. |
Adjusted net earnings (loss)(1) |
159.4 |
|
59.2 |
|
169.3 |
% |
389.6 |
|
(126.2 |
) |
n.m. |
Basic EPS |
0.95 |
|
0.28 |
|
239.3 |
% |
2.19 |
|
(1.48 |
) |
n.m. |
Diluted EPS |
0.95 |
|
0.28 |
|
239.3 |
% |
2.18 |
|
(1.48 |
) |
n.m. |
Adjusted diluted EPS(1) |
0.80 |
|
0.30 |
|
166.7 |
% |
1.96 |
|
(0.64 |
) |
n.m. |
Gross margin(2) |
35.1 |
% |
22.5 |
% |
12.6 pp |
33.3 |
% |
7.2 |
% |
26.1 pp |
Adjusted gross margin(1) |
31.4 |
% |
22.5 |
% |
8.9 pp |
31.0 |
% |
9.8 |
% |
21.2 pp |
SG&A expenses as a
percentage of net sales |
10.1 |
% |
10.2 |
% |
(0.1) pp |
10.9 |
% |
15.5 |
% |
(4.6) pp |
Operating margin(3) |
25.1 |
% |
11.4 |
% |
13.7 pp |
22.2 |
% |
(20.1 |
)% |
42.3 pp |
Adjusted operating margin(1) |
21.5 |
% |
12.2 |
% |
9.3 pp |
20.2 |
% |
(6.7 |
)% |
26.9 pp |
|
|
|
|
|
|
|
Cash flows from operating
activities |
242.6 |
|
151.0 |
|
60.7 |
% |
463.5 |
|
123.4 |
|
n.m. |
Capital expenditures |
(48.7 |
) |
(14.1 |
) |
n.m. |
(91.8 |
) |
(44.9 |
) |
n.m. |
Free
cash flow(1) |
232.1 |
|
137.2 |
|
69.2 |
% |
478.0 |
|
79.3 |
|
n.m. |
n.m. = not meaningful
As at |
Oct 3,2021 |
Jan 3,2021 |
Inventories |
725.4 |
|
728.0 |
|
Trade accounts receivable |
374.7 |
|
196.5 |
|
Net debt(1) |
286.5 |
|
577.2 |
|
Net
debt leverage ratio(1)(4) |
0.4 |
|
3.5 |
|
(1) Please refer to "Definition and reconciliation of non-GAAP
financial measures" in this press release.(2) Gross margin is
defined as Gross profit divided by net sales. (3) Operating margin
is defined as Operating income (loss) divided by net sales.(4) The
Company's net debt to EBITDA ratio for purposes of its loan and
note agreements was 0.5 at October 3, 2021.
DISAGGREGATION OF REVENUE
Net
sales by major product group were as follows: |
(in $ millions, or otherwise indicated) |
Q3 2021 |
Q3 2020 |
Variation (%) |
YTD 2021 |
YTD 2020 |
Variation (%) |
Activewear |
655.8 |
|
456.3 |
|
43.7 |
% |
1,737.6 |
|
960.5 |
|
80.9 |
% |
Hosiery
and underwear |
145.8 |
|
146.0 |
|
(0.1) |
% |
400.8 |
|
330.6 |
|
21.2 |
% |
|
801.6 |
|
602.3 |
|
33.1 |
% |
2,138.4 |
|
1,291.1 |
|
65.6 |
% |
Net
sales were derived from customers located in the following
geographic areas: |
(in $ millions, or otherwise indicated) |
Q3 2021 |
Q3 2020 |
Variation (%) |
YTD 2021 |
YTD 2020 |
Variation (%) |
United States |
685.9 |
|
517.1 |
|
32.6 |
% |
1,834.0 |
|
1,092.2 |
|
67.9 |
% |
Canada |
36.1 |
|
25.4 |
|
42.1 |
% |
83.9 |
|
50.3 |
|
66.8 |
% |
International |
79.6 |
|
59.8 |
|
33.1 |
% |
220.5 |
|
148.6 |
|
48.4 |
% |
|
801.6 |
|
602.3 |
|
33.1 |
% |
2,138.4 |
|
1,291.1 |
|
65.6 |
% |
Definition and Reconciliation of Non-GAAP Financial
Measures
This press release includes references to certain non-GAAP
financial measures as described below. 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. The non-GAAP measures
are presented on a consistent basis for all periods presented in
this press release, except as otherwise discussed below.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, income taxes relating to restructuring
and acquisition-related actions, income taxes related to the
re-assessment of the probability of realization of previously
recognized or de-recognized deferred income tax assets, and income
taxes relating to the revaluation of deferred income tax assets and
liabilities as a result of statutory income tax rate changes in the
countries in which we operate. Adjusted net earnings also excludes
impairment of goodwill and intangible assets, net insurance gains
related to the two hurricanes which impacted the Company’s
operations in Central America, the discontinuance of personal
protective equipment (PPE) stock-keeping unit (SKUs), the impact of
the Company's strategic initiative to significantly reduce its
retail product line SKU count which the Company began implementing
in the fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. Adjusted diluted EPS is calculated as adjusted net earnings
divided by the diluted weighted average number of common shares
outstanding. The Company uses adjusted net earnings and adjusted
diluted EPS to measure its performance from one period to the next,
without the variation caused by the impacts of the items described
above. The Company excludes these items because they affect the
comparability of its financial results and could potentially
distort the analysis of trends in its business performance.
Excluding these items does not imply they are necessarily
non-recurring.
(in $ millions, except per share amounts) |
Q3 2021 |
Q3 2020 |
YTD 2021 |
|
YTD 2020 |
Net earnings (loss) |
188.3 |
|
56.4 |
|
433.3 |
|
(292.6 |
) |
|
Adjustments for: |
|
|
|
|
Restructuring and acquisition-related costs |
1.0 |
|
4.7 |
|
4.0 |
|
43.9 |
|
|
Impairment of goodwill and intangible assets |
— |
|
— |
|
— |
|
94.0 |
|
|
Impact of strategic product line initiatives(1) |
— |
|
— |
|
1.2 |
|
34.0 |
|
|
Net insurance gains(2) |
(29.9 |
) |
— |
|
(48.9 |
) |
— |
|
|
Income tax recovery relating to the above-noted adjustments |
— |
|
(1.9 |
) |
— |
|
(5.5 |
) |
|
Adjusted net earnings (loss) |
159.4 |
|
59.2 |
|
389.6 |
|
(126.2 |
) |
|
Basic EPS |
0.95 |
|
0.28 |
|
2.19 |
|
(1.48 |
) |
Diluted EPS |
0.95 |
|
0.28 |
|
2.18 |
|
(1.48 |
) |
Adjusted diluted EPS |
0.80 |
|
0.30 |
|
1.96 |
|
(0.64 |
) |
(1) Includes nil and $1.2 million (2020 - nil and $34.0
million), respectively, for three and nine months ended October 3,
2021, of charges related to the Company’s strategic initiatives to
significantly reduce its product line SKU counts. For the nine
months ended September 27, 2020, includes $29.2 million of
inventory write-downs included in cost of sales and the $4.8
million gross profit impact of a sales return allowance for
anticipated product returns related to discontinued SKUs (which
reduced net sales by $11.2 million and cost of sales by $6.4
million).(2) Net insurance gains are related to the two hurricanes
that occurred in Central America in November 2020, consisting of
the following costs which were more than offset by related accrued
insurance recoveries to date: losses on disposal of unrepairable
equipment, equipment repairs, salary and benefits continuation for
idle employees, and other costs, and unabsorbed salary, benefits,
and overhead costs, that resulted from related production
interruptions.
Adjusted gross profit and adjusted gross marginAdjusted gross
profit is calculated as gross profit excluding the impact of net
insurance gains related to the two hurricanes which impacted the
Company’s operations in Central America, the discontinuance of PPE
SKUs, the impact of the Company's strategic initiative to
significantly reduce its retail product line SKU count which the
Company began implementing in the fourth quarter of fiscal 2020,
and the impact of adjustments related to the Company’s decision in
the fourth quarter of fiscal 2019 to implement a strategic
initiative to significantly reduce its imprintables product line
SKU count, by exiting all ship to-the-piece activities and
discontinuing overlapping and less productive styles and SKUs
between brands. These product line initiatives are aimed at
simplifying the Company's product portfolio and reducing complexity
in its manufacturing and warehouse distribution activities. The
impact of the strategic initiatives includes inventory write-downs
and a sales return allowance for anticipated product returns
related to discontinued SKUs. Adjusted gross margin is calculated
as adjusted gross profit divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. The Company uses adjusted gross profit and
adjusted gross margin to measure its performance from one period to
the next, without the variation caused by the impacts of the items
described above. The Company excludes these items because they
affect the comparability of its financial results and could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
(in $ millions, or otherwise indicated) |
Q3 2021 |
Q3 2020 |
YTD 2021 |
|
YTD 2020 |
Gross profit |
281.7 |
|
135.5 |
|
711.0 |
|
93.6 |
Adjustments for: |
|
|
|
|
Impact of strategic product line initiatives(1) |
— |
|
— |
|
1.2 |
|
34.0 |
Net insurance gains(1) |
(29.9 |
) |
— |
|
(48.9 |
) |
— |
Adjusted gross profit |
251.8 |
|
135.5 |
|
663.3 |
|
127.6 |
Gross margin |
35.1 |
% |
22.5 |
% |
33.3 |
% |
7.2 |
% |
Adjusted gross margin(2) |
31.4 |
% |
22.5 |
% |
31.0 |
% |
9.8 |
% |
(1) See footnotes to table "Adjusted net earnings and adjusted
diluted EPS" in this press release.(2) Calculated as adjusted gross
profit divided by net sales excluding the sales return allowance
for anticipated product returns related to discontinued SKUs.
Adjusted operating income and adjusted operating marginAdjusted
operating income is calculated as operating income before
restructuring and acquisition-related costs. Adjusted operating
income also excludes impairment of goodwill and intangible assets,
net insurance gains related to the two hurricanes which impacted
the Company’s operations in Central America, the discontinuance of
PPE SKUs, the impact of the Company's strategic initiative to
significantly reduce its retail product line SKU count which the
Company began implementing in the fourth quarter of fiscal 2020,
and the impact of adjustments related to the Company’s decision in
the fourth quarter of fiscal 2019 to implement a strategic
initiative to significantly reduce its imprintables product line
SKU count, by exiting all ship to-the-piece activities and
discontinuing overlapping and less productive styles and SKUs
between brands. These product line initiatives are aimed at
simplifying the Company's product portfolio and reducing complexity
in its manufacturing and warehouse distribution activities. The
impact of the strategic initiatives includes inventory write-downs
and a sales return allowance for anticipated product returns
related to discontinued SKUs. Adjusted operating margin is
calculated as adjusted operating income divided by net sales
excluding the sales return allowance for anticipated product
returns related to discontinued SKUs. Management uses adjusted
operating income and adjusted operating margin to measure its
performance from one period to the next, without the variation
caused by the impacts of the items described above. The Company
excludes these items because they affect the comparability of its
financial results and could potentially distort the analysis of
trends in its business performance. Excluding these items does not
imply they are necessarily non-recurring.
(in $ millions, or otherwise indicated) |
Q3 2021 |
|
Q3 2020 |
|
YTD 2021 |
|
YTD 2020 |
|
Operating income (loss) |
201.3 |
|
68.8 |
|
474.8 |
|
(259.7 |
) |
Adjustment for: |
|
|
|
|
|
|
|
|
Restructuring and acquisition-related costs |
1.0 |
|
4.7 |
|
4.0 |
|
43.9 |
|
Impairment of goodwill and intangible assets |
— |
|
— |
|
— |
|
94.0 |
|
Impact of strategic product line initiatives(1) |
— |
|
— |
|
1.2 |
|
34.0 |
|
Net insurance gains(1) |
(29.9 |
) |
— |
|
(48.9 |
) |
— |
|
Adjusted operating income (loss) |
172.4 |
|
73.5 |
|
431.1 |
|
(87.8 |
) |
Operating margin |
25.1 |
% |
11.4 |
% |
22.2 |
% |
(20.1 |
)% |
Adjusted operating margin(2) |
21.5 |
% |
12.2 |
% |
20.2 |
% |
(6.7 |
)% |
(1) See footnotes to table "Adjusted net
earnings and adjusted diluted EPS" in this press release.(2)
Calculated as adjusted operating income divided by net sales
excluding the sales return allowance for anticipated product
returns related to discontinued SKUs.
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses, income taxes, and depreciation
and amortization, and excludes the impact of restructuring and
acquisition-related costs. Adjusted EBITDA also excludes impairment
of goodwill and intangible assets, net insurance gains related to
the two hurricanes which impacted the Company’s operations in
Central America, the discontinuance of PPE SKUs, the impact of the
Company's strategic initiative to significantly reduce its retail
product line SKU count which the Company began implementing in the
fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. The Company uses adjusted 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. Excluding these items
does not imply they are necessarily non-recurring.
(in $ millions) |
Q3 2021 |
|
|
Q3 2020 |
|
|
YTD 2021 |
|
|
YTD 2020 |
|
|
Net earnings (loss) |
188.3 |
|
|
56.4 |
|
|
433.3 |
|
|
(292.6 |
) |
|
Restructuring and
acquisition-related costs |
1.0 |
|
|
4.7 |
|
|
4.0 |
|
|
43.9 |
|
|
Impairment of goodwill and
intangible assets |
— |
|
|
— |
|
|
— |
|
|
94.0 |
|
|
Impact of strategic product
line initiatives(1) |
— |
|
|
— |
|
|
1.2 |
|
|
34.0 |
|
|
Net insurance gains(1) |
(29.9 |
) |
|
— |
|
|
(48.9 |
) |
|
— |
|
|
Depreciation and
amortization |
34.3 |
|
|
33.4 |
|
|
105.8 |
|
|
107.6 |
|
|
Financial expenses, net |
5.3 |
|
|
11.4 |
|
|
22.7 |
|
|
35.4 |
|
|
Income
tax expense (recovery) |
7.7 |
|
|
1.0 |
|
|
18.9 |
|
|
(2.4 |
) |
|
Adjusted EBITDA |
206.7 |
|
|
106.9 |
|
|
537.0 |
|
|
19.9 |
|
|
(1) See footnotes to table "Adjusted net
earnings and adjusted diluted EPS" in this press release.
Free cash flow Free cash flow is defined as cash from operating
activities, 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 liquidity of
its business, and it is a key metric which indicates how much cash
is available after capital expenditures to repay debt, to pursue
business acquisitions, 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 $ millions) |
Q3 2021 |
|
|
Q3 2020 |
|
|
YTD 2021 |
|
YTD 2020 |
|
|
Cash flows from operating activities |
242.6 |
|
|
151.0 |
|
|
463.5 |
|
123.4 |
|
|
Cash flows (used in) from
investing activities |
(10.5 |
) |
|
(13.8 |
) |
|
14.5 |
|
(44.1 |
) |
|
Adjustment for: |
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions |
— |
|
|
— |
|
|
— |
|
— |
|
|
Free cash flow |
232.1 |
|
|
137.2 |
|
|
478.0 |
|
79.3 |
|
|
Total debt and net debtTotal debt is defined as
the total bank indebtedness, long-term debt (including any current
portion), and lease obligations (including any current portion),
and net debt is calculated as total debt net of cash and cash
equivalents. The Company considers total debt and net debt to be
important indicators of the financial leverage of the Company.
(in $ millions) |
Oct 3, 2021 |
|
Jan 3, 2021 |
|
Long-term debt and total bank indebtedness |
600.0 |
|
|
1,000.0 |
|
|
Lease
obligations |
75.8 |
|
|
82.5 |
|
|
Total debt |
675.8 |
|
|
1,082.5 |
|
|
Cash
and cash equivalents |
(389.3 |
) |
|
(505.3 |
) |
|
Net debt |
286.5 |
|
|
577.2 |
|
|
Net debt leverage ratio The net debt leverage ratio is defined
as the ratio of net debt to pro-forma adjusted EBITDA for the
trailing twelve months. The pro-forma adjusted EBITDA for the
trailing twelve months reflects business acquisitions made during
the period, as if they had occurred at the beginning of the
trailing twelve month period. The Company has set a fiscal year-end
net debt leverage target ratio of one to two times pro-forma
adjusted EBITDA for the trailing twelve months. The Company uses
and believes that certain investors and analysts use the net debt
leverage ratio to measure the financial leverage of the
Company.
(in $ millions, or otherwise indicated) |
Oct 3, 2021 |
Jan 3, 2021 |
Adjusted EBITDA for the trailing twelve months |
682.2 |
|
165.1 |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
682.2 |
|
165.1 |
|
Net debt |
286.5 |
|
577.2 |
|
Net
debt leverage ratio(1) |
0.4 |
|
3.5 |
|
(1) The Company's net debt to EBITDA ratio for purposes of its
loan and note agreements was 0.5 at October 3, 2021.
Caution Concerning Forward-Looking Statements
Certain statements included in this press release constitute
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations and are subject to important risks,
uncertainties, and assumptions. This forward-looking information
includes, amongst others, information with respect to our
objectives and the strategies to achieve these objectives, as well
as information with respect to our beliefs, plans, expectations,
anticipations, estimates, and intentions. Forward-looking
statements generally can be identified by the use of conditional or
forward-looking terminology such as “may”, “will”, “expect”,
“intend”, “estimate”, “project”, “assume”, “anticipate”, “plan”,
“foresee”, “believe”, or “continue”, or the negatives of these
terms or variations of them or similar terminology. We refer you to
the Company’s filings with the Canadian securities regulatory
authorities and the U.S. Securities and Exchange Commission, as
well as the risks described under the “Financial risk management”,
“Critical accounting estimates and judgments”, and “Risks and
uncertainties” sections of 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 such document
and this press release.
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:
- the magnitude and length of
economic disruption as a result of the worldwide coronavirus
(COVID-19) pandemic and the more recent appearance of COVID
variants, including the scope and duration of government mandated
general, partial, or targeted private sector shutdowns, travel
restrictions, social distancing measures, and the pace of mass
vaccination campaigns;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve, including those
resulting from the impact of the COVID-19 pandemic and the more
recent appearance of COVID variants;
- our ability to implement our growth strategies and plans;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- the intensity of competitive activity and our ability to
compete effectively;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit to minimum quantity
purchases;
- our ability to anticipate, identify, or react to 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, polyester fibres, dyes
and other chemicals;
- our reliance 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,
natural disasters, epidemics, pandemics and endemics, such as the
COVID-19 pandemic, in the countries in which we operate or sell to,
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 shortages or disruptions, political or
social instability, weather-related events, natural disasters,
epidemics and pandemics, such as the COVID-19 pandemic, and other
unforeseen adverse events;
- the impacts of the COVID-19 pandemic on our business and
financial performance and consequently on our ability to comply
with the financial covenants under our debt agreements;
- compliance with applicable trade, competition, taxation,
environmental, health and safety, product liability, employment,
patent and trademark, corporate and securities, licensing and
permits, data privacy, bankruptcy, anti-corruption, and other laws
and regulations in the jurisdictions in which we operate;
- the imposition of trade remedies, or changes to duties and
tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs 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;
- changes to and failure to comply with consumer product safety
laws and regulations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of actual, alleged, or perceived
violations of human rights, labour and environmental laws or
international labour standards, or unethical labour or other
business practices by the Company or one of its third-party
contractors;
- changes in third-party licensing arrangements and licensed
brands;
- our ability to protect our intellectual property rights;
- operational problems with our information systems as a result
of system failures, viruses, security and cyber security breaches,
disasters, and disruptions due to system upgrades or the
integration of systems;
- an actual or perceived breach of data security;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments, including
credit risk on trade accounts receivables and other financial
instruments, 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 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.
About GildanGildan is a leading
manufacturer of everyday basic apparel which markets its products
in North America, Europe, Asia-Pacific, and Latin America, under a
diversified portfolio of Company-owned brands, including Gildan®,
American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®,
GoldToe®, Anvil® by Gildan®, Alstyle®, Secret®, Silks®, Secret
Silky®, Therapy Plus®, Peds® and MediPeds®, and under the Under
Armour® brand through a sock licensing agreement providing
exclusive distribution rights in the United States and Canada. Our
product offering includes activewear, underwear, socks, hosiery,
and legwear products sold to a broad range of customers, including
wholesale distributors, screenprinters or embellishers, as well as
to retailers that sell to consumers through their physical stores
and/or e-commerce platforms, and to global lifestyle brand
companies.
Gildan owns and operates vertically-integrated, large-scale
manufacturing facilities which are primarily located in Central
America, the Caribbean, North America, and Bangladesh. With
approximately 46,000 employees worldwide, Gildan operates with a
strong commitment to industry-leading labour, environmental and
governance practices throughout its supply chain in accordance with
its comprehensive ESG program embedded in the Company's long-term
business strategy. More information about the Company and its ESG
practices and initiatives can be found at www.gildancorp.com and
www.genuineresponsibility.com, respectively.
Investor
inquiries:Sophie ArgiriouVice President, Investor
Communications(514) 343-8815sargiriou@gildan.com |
Media
inquiries:Genevieve GosselinDirector, Corporate
Communications & Marketing(514)
343-8814ggosselin@gildan.com |
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