Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results
for the first quarter ended April 3, 2022.
“Record results in the first quarter and a strong start to 2022
reflect the impact of Gildan's Sustainable Growth (GSG) strategy,”
said Glenn J. Chamandy, Gildan president and CEO. “Our team’s clear
focus on capacity driven growth, innovation and ESG, leveraging our
world class, vertically-integrated manufacturing platform, is
putting us in a strong position to service customer demand while
effectively managing inflationary cost pressures."
During the first quarter, we generated sales of $775 million, up
31% over the prior year. We maintained strong gross margins and
combined with strong SG&A performance delivered operating
margin of 20.9%, and adjusted operating margin of 20.4% which was
up 170 basis points versus last year. This was achieved despite the
non-recurrence of a one-time COVID-related cotton subsidy which
benefited gross margin in the first quarter last year by 300 basis
points. Record sales, together with strong operating margin
expansion, translated to GAAP diluted EPS of $0.77, and adjusted
diluted EPS of $0.76, up 54% and 58%, respectively, compared to
last year. During the first quarter, we consumed $86 million of
free cash flow1, reflecting higher working capital investments,
including seasonal increases. Consistent with our capital
allocation priorities, we continued to be active on our share
buyback program, repurchasing approximately 5.1 million shares in
the quarter or 3% of float. Our net debt1 position at the end of
the quarter increased to $829 million and our net debt leverage
ratio1 of 1.0 was at the low end of the Company's target range.
Q1 2022 Operating ResultsSales for the first
quarter ending April 3, 2022, totaled $775 million, up 31%
over the prior year, consisting of activewear sales of $667
million, up 38% over the prior year, and sales in the hosiery and
underwear category of $108 million, up 3% over last year. The
activewear sales increase was largely driven by volume growth and
net selling price increases, as well as favorable product-mix.
Activewear volume growth reflected strong demand in North American
markets, particularly in the distributor channel, partly offset by
lower international shipments due to ongoing demand weakness in
Europe and Asia. The overall increase in North American distributor
activewear shipments in the quarter was due to higher sell-through
driven by continued recovery of large events, travel and other end
use markets. Volume growth with distributors also reflected our
improved production levels compared to last year which allowed us
to better service seasonal inventory requirements and support
growth. In the hosiery and underwear category, higher sales were
primarily driven by higher selling prices.
We generated gross profit of $240 million in the quarter and
adjusted gross profit1 of $239 million, up 28% and 30%,
respectively, over the prior year, driven by the strong growth in
sales. Gross margin of 31.0% and adjusted gross margin1 of 30.9%
were down year-over year by 100 and 20 basis points, respectively.
Excluding the 300 basis point impact related to the non-recurrence
of the one-time cotton subsidy benefit in the prior year, adjusted
gross margin improved by 280 basis points due to higher net selling
prices and favourable product mix which more than offset the impact
of higher fiber costs, as well as inflationary pressures on other
manufacturing costs.
SG&A expenses for the first quarter of $81 million were up
approximately $8 million compared to $73 million last year
primarily due to higher volume-driven distribution expenses and the
impact of inflation on overall costs. SG&A expenses as a
percentage of net sales improved 200 basis points to 10.4% compared
to 12.4% last year, as the benefit of volume leverage and our
continued focus on cost management more than offset inflationary
cost pressures.
We generated operating income of $162 million, or 20.9% of sales
and adjusted operating income1 of $158 million, or 20.4% of sales,
in the first quarter of 2022 compared to operating income of $114
million, or 19.3% of sales, and $110 million, or 18.7% of sales, on
an adjusted basis last year. The increase in operating and adjusted
operating income was due to higher sales, and improved operating
margins driven by SG&A leverage. Net financial expenses were
down $4 million over the prior year, largely offsetting higher
income taxes. Consequently, we reported net earnings of $146
million, or $0.77 per share on a diluted basis, for the three
months ended April 3, 2022 and adjusted net earnings1 of $144
million, or $0.76 per share on a diluted basis, compared to net
earnings of $99 million, or $0.50 per diluted share and adjusted
net earnings of $95 million, or $0.48 per diluted share in the
first quarter last year.
During the first quarter, we consumed $86 million of free cash
flow compared to $38 million of free cash flow generated in the
first quarter of 2021. The decrease reflected higher working
capital investments to support growth and seasonal increases, as
well as increased capital expenditures primarily for capacity
expansions which more than offset the benefit of higher earnings.
With respect to our capacity expansions, we are continuing to make
good progress with our projects in Central America, the Caribbean
and Bangladesh. The Company ended the first quarter of 2022 with
net debt of $829 million and a leverage ratio of 1.0 times net debt
to trailing twelve months adjusted EBITDA1.
Current Market EnvironmentThroughout the first
quarter we saw strong demand for our activewear products in North
America. More recently, while we have seen some deceleration in
sell-through over the last few weeks tied to broader economic
considerations, overall demand for activewear remains healthy.
Similarly, we have also started to see some sell-through slowing
for certain products in the hosiery and underwear category that
could be related to broader economic factors, including the impact
of the non-recurrence of stimulus and other support payments which
consumers received last year. Nevertheless, we are pleased with the
start to the year and the progress we can make in 2022 as we move
forward with the GSG strategy and our previously communicated
outlook for sales and margin performance over the 2022 to 2024
three-year period. For further details, we refer you to the section
"Gildan Sustainable Growth Strategy" in the Company's press release
of February 23, 2022 which is available on the Company's
website.
Environmental, Social and Governance
(ESG)During the first quarter of 2022, the Company amended
the terms of its existing $1 billion revolving credit facility to
incorporate sustainability-linked terms that reduce or increase the
related borrowing costs based on the Company's annual performance
against three of its recently announced ESG targets in the areas of
climate change, circularity, and diversity, equity, and inclusion.
Gildan is the first Canadian apparel manufacturing company to tie
financing costs to the achievement of important ESG targets. With
sustainability as one of the key pillars of the Company’s GSG
strategy, this sustainability linked loan underscores the Company’s
commitment towards its ESG targets and its pledge to make
meaningful advancements by 2030 in this regard. For further
details, we refer you to the Company’s press release of March 28,
2022 which is available on the Company's website.
Declaration of Quarterly DividendThe Board of
Directors has declared a cash dividend of $0.169 per share, payable
on June 20, 2022 to shareholders of record as of May 26, 2022. 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 BidDuring the first
quarter of 2022, the Company repurchased for cancellation a total
of 5,134,613 common shares under its NCIB program for a total cost
of approximately $201 million.
Disclosure of Outstanding Share DataAs at April
30, 2022, there were 186,771,703 common shares issued and
outstanding along with 3,181,527 stock options and 49,398 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 exercise 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 first
quarter 2022 results today at 5:00 PM 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
6590665#. A replay will be available for 7 days starting at 8:00 PM
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
months ended April 3, 2022, 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 condensed
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) |
Q1 2022 |
|
Q1 2021 |
|
Variation (%) |
Net sales |
774.9 |
|
589.6 |
|
31.4 % |
Gross profit |
240.4 |
|
188.5 |
|
27.5 % |
Adjusted gross profit(1) |
239.1 |
|
183.5 |
|
30.3% |
SG&A expenses |
80.5 |
|
73.4 |
|
9.7 % |
Impairment (Reversal of
impairment) of trade accounts receivable |
0.5 |
|
(0.2 |
) |
n.m. |
Restructuring and
acquisition-related (recovery) costs |
(2.8 |
) |
1.5 |
|
n.m. |
Operating income |
162.2 |
|
113.8 |
|
42.5 % |
Adjusted operating
income(1) |
158.1 |
|
110.3 |
|
43.3 % |
Adjusted EBITDA(1) |
191.6 |
|
145.8 |
|
31.4 % |
Financial expenses |
7.0 |
|
10.8 |
|
(35.2)% |
Income tax expense |
8.8 |
|
4.4 |
|
100.0% |
Net earnings |
146.4 |
|
98.5 |
|
48.6% |
Adjusted net earnings (1) |
144.3 |
|
95.0 |
|
51.9% |
Basic EPS |
0.77 |
|
0.50 |
|
54.0% |
Diluted EPS |
0.77 |
|
0.50 |
|
54.0% |
Adjusted diluted EPS(1) |
0.76 |
|
0.48 |
|
58.3% |
Gross margin(2) |
31.0 |
% |
32.0 |
% |
(1.0) pp |
Adjusted gross margin(1) |
30.9 |
% |
31.1 |
% |
(0.2) pp |
SG&A expenses as a
percentage of sales(3) |
10.4 |
% |
12.4 |
% |
(2.0) pp |
Operating margin(4) |
20.9 |
% |
19.3 |
% |
1.6 pp |
Adjusted operating
margin(1) |
20.4 |
% |
18.7 |
% |
1.7 pp |
Cash flows (used in) from operating activities |
(51.5 |
) |
20.6 |
|
n.m. |
Capital expenditures |
(34.0 |
) |
(13.1 |
) |
n.m. |
Free
cash flow(1) |
(85.5 |
) |
37.6 |
|
n.m. |
|
As at
(in $ millions, or otherwise indicated) |
|
|
Apr 3,2022 |
|
Jan 2,2022 |
Inventories |
|
|
889.5 |
|
774.4 |
Trade accounts receivable |
|
|
460.7 |
|
330.0 |
Net debt(1) |
|
|
829.3 |
|
529.9 |
Net
debt leverage ratio(1) |
|
|
1.0 |
|
0.7 |
(1) This is a non-GAAP financial measure or ratio. Please refer
to "Non-GAAP Financial Measures" in this press release.(2) Gross
margin is defined as gross profit divided by net sales.(3) SG&A
as a percentage of sales is defined as SG&A divided by net
sales.(4) Operating margin is defined as operating income divided
by net sales.n.m. = not meaningful
DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
(in $ millions, or otherwise indicated) |
Q1 2022 |
Q1 2021 |
Variation (%) |
|
Activewear |
667.3 |
484.6 |
37.7 |
% |
Hosiery
and underwear |
107.6 |
105.0 |
2.5 |
% |
|
774.9 |
589.6 |
31.4 |
% |
Net sales were derived from customers located in the following
geographic areas:
(in $ millions, or otherwise indicated) |
Q1 2022 |
Q1 2021 |
Variation (%) |
United States |
681.8 |
506.8 |
34.5 |
% |
Canada |
30.2 |
22.6 |
33.6 |
% |
International |
62.9 |
60.2 |
4.5 |
% |
|
774.9 |
589.6 |
31.4 |
% |
Non-GAAP financial measures and related
ratiosThis press release includes references to certain
non-GAAP financial measures, as well as non-GAAP ratios 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 or as a
substitute for measures of performance prepared in accordance with
IFRS. 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.
Certain adjustments to non-GAAP measuresAs
noted above certain of our non-GAAP financial measures and ratios
exclude the variation caused by certain adjustments that affect the
comparability of the Company's financial results and could
potentially distort the analysis of trends in its business
performance. Adjustments which impact more than one non-GAAP
financial measure and ratio are explained below:
Restructuring and acquisition-related costs
(recovery)Restructuring and acquisition-related costs are comprised
of costs directly related to significant exit activities, including
the closure of business locations or the relocation of business
activities, significant changes in management structure, as well as
transaction, exit, and integration costs incurred pursuant to
business acquisitions. Restructuring and acquisition-related costs
is included as an adjustment in arriving at adjusted operating
income, adjusted operating margin, adjusted net earnings, adjusted
diluted EPS, and adjusted EBITDA. Restructuring and
acquisition-related recovery was $2.8 million (2021 - $1.5 million
in costs) for the three months ended April 3, 2022. Refer to
subsection 5.4.5 entitled “Restructuring and acquisition-related
(recovery) costs” in our interim MD&A for a detailed discussion
of these costs.
Net insurance losses (gains)Net insurance gains of $0.3 million
(2021 - $6.2 million) for the three months ended April 3, 2022,
related to the two hurricanes which impacted the Company’s
operations in Central America in November 2020. The net insurance
gains reflected costs of $4.4 million (2021 - $24.3 million)
(mainly attributable to equipment repairs, salary and benefits
continuation for idle employees, and other costs and charges),
which were more than offset by related accrued insurance recoveries
of $4.7 million (2021 - $30.5 million) during the first quarter of
fiscal 2022. The insurance gains primarily relate to accrued
insurance recoveries at replacement cost value for damaged
equipment in excess of the write-off of the net book value of
property plant and equipment, as well as the recognition of
insurance recoveries for business interruption, when applicable.
Net insurance gains is included as an adjustment in arriving at
adjusted gross profit and adjusted gross margin, adjusted operating
income, adjusted operating margin, adjusted net earnings, adjusted
diluted EPS, and adjusted EBITDA.
Impact of strategic product line initiativesIn the fourth
quarter of fiscal 2019, the Company launched a strategic initiative
to significantly reduce its imprintables product line SKU count. In
the fourth quarter of fiscal 2020 the Company expanded this
strategic initiative to include a significant reduction in its
retail product line SKU count. The objectives of this strategic
initiative include exiting all ship to-the-piece activities,
discontinuing overlapping and less productive styles and SKUs
between brands, simplifying the Company's product portfolio and
reducing complexity in its manufacturing and warehouse distribution
activities. The impact of this initiative has included inventory
write-downs to reduce the carrying value of discontinued SKUs to
liquidation values, sales return allowances for product returns
related to discontinued SKUs, and in Q4 2021, the write-down of
production equipment and other assets relating to discontinued
SKUs. The impact of strategic product line initiatives is included
as an adjustment in arriving at adjusted gross profit and adjusted
gross margin, adjusted operating income, adjusted operating margin,
adjusted net earnings, adjusted diluted EPS, and adjusted
EBITDA.
The gains and charges related to this initiative for three
months ended April 3, 2022 and April 4, 2021, were as follows:
- The three months ended April 3, 2022 includes $1 million of
gains included in cost of sales, related to the reversal of a
reserve relating to Company's strategic initiatives to
significantly reduce its product line stock-keeping unit (SKU)
counts.
- The three months ended April 4, 2021 includes $1.2 million of
charges included in cost of sales, related to the Company’s
strategic initiatives to significantly reduce its product line SKU
counts.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, impairment of goodwill and intangible
assets (and reversal of impairments on intangible assets), net
insurance gains, the discontinuance of PPE SKUs, the impact of the
Company's strategic product line initiatives, and income tax
expense or recovery relating to these items. Adjusted net earnings
also excludes 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 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. The Company believes adjusted net earnings and
adjusted diluted EPS are useful to investors because they help
identify underlying trends in our business that could otherwise be
masked by certain expenses, write-offs, charges, income or
recoveries that can vary from period to period. Excluding these
items does not imply they are necessarily non-recurring. These
measures do not have any standardized meanings prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other companies.
(in $ millions, except per share amounts) |
Q1 2022 |
|
Q1 2021 |
|
Net earnings |
146.4 |
|
98.5 |
|
Adjustments for: |
|
|
Restructuring and acquisition-related (recovery) costs |
(2.8 |
) |
1.5 |
|
Impact of strategic product line initiatives |
(1.0 |
) |
1.2 |
|
Net insurance gains |
(0.3 |
) |
(6.2 |
) |
Income tax expense relating to the above-noted adjustments |
2.0 |
|
— |
|
Adjusted net earnings |
144.3 |
|
95.0 |
|
Basic EPS |
0.77 |
|
0.50 |
|
Diluted EPS |
0.77 |
|
0.50 |
|
Adjusted diluted EPS(1) |
0.76 |
|
0.48 |
|
(1) This is a non-GAAP ratio. It is calculated as
adjusted net earnings divided by the diluted weighted average
number of common shares outstanding.
Adjusted gross profit and adjusted gross
marginAdjusted gross profit is calculated as gross profit excluding
the impact of net insurance gains, the discontinuance of PPE SKUs,
and the impact of the Company's strategic product line initiatives.
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. The Company believes
adjusted gross profit and adjusted gross margin are useful to
investors because they help identify underlying trends in our
business that could otherwise be masked by certain expenses,
write-offs, charges, income or recoveries that can vary from period
to period. These measures do not have any standardized meanings
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other companies.
(in $ millions, or otherwise indicated) |
Q1 2022 |
|
Q1 2021 |
|
Gross profit |
240.4 |
|
188.5 |
|
Adjustments for: |
|
|
Impact of strategic product line initiatives |
(1.0 |
) |
1.2 |
|
Net insurance gains |
(0.3 |
) |
(6.2 |
) |
Adjusted gross profit |
239.1 |
|
183.5 |
|
Gross margin |
31.0 |
% |
32.0 |
% |
Adjusted gross margin(1) |
30.9 |
% |
31.1 |
% |
(1) This is a non-GAAP ratio. It is calculated as
adjusted gross profit divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. Net sales excluding the sales return allowance
for anticipated product returns related to discontinued SKUs is a
non-GAAP measure used in the denominator of the adjusted margin
ratios to reverse the full effect of the SKU rationalization
adjustments. The sales return allowance was nil for both
periods.
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, the discontinuance of PPE
SKUs, and the impact of the Company's strategic product line
initiatives. 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. The Company believes adjusted operating income and
adjusted operating margin are useful to investors because they help
identify underlying trends in our business that could otherwise be
masked by certain expenses, write-offs, charges, income or
recoveries that can vary from period to period. Excluding these
items does not imply they are necessarily non-recurring. These
measures do not have any standardized meanings prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other companies.
(in $ millions, or otherwise indicated) |
Q1 2022 |
|
Q1 2021 |
|
Operating income |
162.2 |
|
113.8 |
|
Adjustments for: |
|
|
Restructuring and acquisition-related (recovery) costs |
(2.8 |
) |
1.5 |
|
Impact of strategic product line initiatives |
(1.0 |
) |
1.2 |
|
Net insurance gains |
(0.3 |
) |
(6.2 |
) |
Adjusted operating income |
158.1 |
|
110.3 |
|
Operating margin |
20.9 |
% |
19.3 |
% |
Adjusted operating margin(1) |
20.4 |
% |
18.7 |
% |
(1) This is a non-GAAP ratio. It is calculated as
adjusted operating income divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. Net sales excluding the sales return allowance
for anticipated product returns related to discontinued SKUs is a
non-GAAP measure used in the denominator of the adjusted margin
ratios to reverse the full effect of the SKU rationalization
adjustments. The sales return allowance was nil for both
periods.
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses net, 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 and reversal
of impairments on intangible assets, net insurance gains, the
discontinuance of PPE SKUs, and the impact of the Company's
strategic product line initiative. Management 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. This measure does not have any standardized meanings
prescribed by IFRS and is therefore unlikely to be comparable to
similar measures presented by other companies.
(in $ millions) |
Q1 2022 |
|
Q1 2021 |
|
Net earnings |
146.4 |
|
98.5 |
|
Restructuring and
acquisition-related (recovery) costs |
(2.8 |
) |
1.5 |
|
Impact of strategic product
line initiative |
(1.0 |
) |
1.2 |
|
Net insurance gains |
(0.3 |
) |
(6.2 |
) |
Depreciation and
amortization |
33.5 |
|
35.6 |
|
Financial expenses, net |
7.0 |
|
10.8 |
|
Income
tax expense |
8.8 |
|
4.4 |
|
Adjusted EBITDA |
191.6 |
|
145.8 |
|
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.
Management believes that free cash flow provides investors with an
important perspective on the cash available to us to service debt,
fund acquisitions, and pay dividends. In addition, free cash flow
is commonly used by investors and analysts when valuing a business
and its underlying assets. This measure does not have any
standardized meanings prescribed by IFRS and is therefore unlikely
to be comparable to similar measures presented by other
companies.
(in $ millions) |
Q1 2022 |
|
Q1 2021 |
Cash flows (used in) from operating activities |
(51.5 |
) |
20.6 |
Cash flows (used in) from
investing activities |
(34.0 |
) |
17.0 |
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
Free cash flow |
(85.5 |
) |
37.6 |
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. The
Company believes that certain investors and analysts use the total
debt and net debt to measure the financial leverage of the Company.
These measures do not have any standardized meanings prescribed by
IFRS and are therefore unlikely to be comparable to similar
measures presented by other companies.
(in $ millions) |
Apr 3, 2022 |
|
Jan 2, 2022 |
|
Long-term debt |
845.0 |
|
600.0 |
|
Bank indebtedness |
— |
|
— |
|
Lease
obligations |
105.9 |
|
109.1 |
|
Total debt |
950.9 |
|
709.1 |
|
Cash
and cash equivalents |
(121.6 |
) |
(179.2 |
) |
Net debt |
829.3 |
|
529.9 |
|
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, all of which are non-GAAP measures. 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. This measure does not have any
standardized meanings prescribed by IFRS and is therefore unlikely
to be comparable to similar measures presented by other
companies.
(in $ millions, or otherwise indicated) |
Apr 3, 2022 |
Jan 2, 2022 |
Adjusted EBITDA for the trailing twelve months |
772.6 |
726.8 |
Adjustment for: |
|
|
Business acquisitions |
18.5 |
22.8 |
Pro-forma adjusted EBITDA for the trailing twelve months |
791.1 |
749.6 |
Net debt |
829.3 |
529.9 |
Net
debt leverage ratio(1) |
1.0 |
0.7 |
(1) The Company's total net debt to EBITDA ratio for purposes of
its loan and note agreements was 1.2 at April 3, 2022.
Working capitalWorking capital is a non-GAAP financial measure
and is defined as current assets less current liabilities.
Management believes that working capital, in addition to other
conventional financial measures prepared in accordance with IFRS,
provides information that is helpful to understand the financial
condition of the Company. The objective of using working capital is
to present readers with a view of the Company from management’s
perspective by interpreting the material trends and activities that
affect the liquidity and financial position of the Company. This
measure is not necessarily comparable to similarly titled measures
used by other public companies.
(in $ millions) |
Apr 3, 2022 |
|
Jan 2, 2022 |
|
Cash and cash equivalents |
121.6 |
|
179.2 |
|
Trade accounts receivable |
460.7 |
|
330.0 |
|
Inventories |
889.5 |
|
774.4 |
|
Prepaid expenses, deposits and
other current assets |
181.7 |
|
163.7 |
|
Accounts payable and accrued
liabilities |
(439.4 |
) |
(440.4 |
) |
Current portion of lease
obligations |
(14.6 |
) |
(15.3 |
) |
Income taxes payable |
(11.2 |
) |
(7.9 |
) |
Dividends payable |
(32.0 |
) |
— |
|
Working capital |
1,156.3 |
|
983.7 |
|
Caution Concerning Forward-Looking
StatementsCertain 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 net
sales, gross margin, SG&A expenses, restructuring and
acquisition-related costs, operating margin, adjusted operating
margin, adjusted EBITDA, diluted earnings per share, adjusted
diluted earnings per share, income tax rate, free cash flow, return
on net assets, net debt to adjusted EBITDA leverage ratios, capital
return and capital investments or expenditures, including our
three-year financial outlook referenced in this press release under
the section “Current market environment”. 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, including certain assumptions relating to
the three-year financial outlook referenced in this press release
under the section “Current market environment" which were described
in the Company's press release dated February 23, 2022 under the
section "Gildan Sustainable Growth Strategy”.
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 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 impacts of the COVID-19 pandemic and the
appearance of COVID variants, the current high inflationary
environment and the ongoing Russia-Ukraine conflict and war;
- our ability to implement our growth strategies and plans,
including our ability to bring projected capacity expansion
online;
- 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 from current levels;
- our reliance on key suppliers and our ability to maintain an
uninterrupted supply of raw materials, intermediate 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 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 report are made as of
the date hereof, and we do not undertake any obligation to update
publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events,
or otherwise unless required by applicable legislation or
regulation. The forward-looking statements contained in this report
are expressly qualified by this cautionary statement.
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, primarily including
Gildan®, American Apparel®, Comfort Colors®, GOLDTOE®, Peds®, and
under the Under Armour® brand through a sock licensing agreement
for exclusive distribution in the United States and Canada. The
Company’s product offerings include activewear, underwear and
socks, sold to wholesale imprintables distributors and national
accounts which include large screenprinters or embellishers,
retailers and 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. 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.
Investor inquiries: |
Media inquiries: |
Sophie Argiriou |
Genevieve Gosselin |
Vice President, Investor
Communications |
Director, Global
Communications and Corporate Marketing |
(514) 343-8815 |
(514) 343-8814 |
sargiriou@gildan.com |
ggosselin@gildan.com |
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