Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results
for the fourth quarter and year ended January 1, 2023 and
provided an update regarding the Gildan Sustainable Growth Strategy
and its outlook.
“I am extremely proud of our team’s record performance in 2022
with revenue up 11% over 2021 and strong margin delivery in every
fiscal quarter” said Glenn J. Chamandy, President and CEO of
Gildan. “And despite near term headwinds related to the economic
environment, which impacted our performance in the fourth quarter
and which may persist through the first part of 2023, we remain
excited about the Gildan Sustainable Growth strategy, as well as
our strong competitive positioning and ability to support our
customers, as we work towards delivering on our long-term growth
aspirations”.
We generated sales for the fourth quarter of $720 million in a
challenging environment, and while our operating margin was 12.9%
after reflecting a non-cash impairment charge related to our
Hosiery cash-generating unit (CGU), we delivered another quarter of
strong adjusted operating margin1 of 18.8%, well within our target
range, with GAAP diluted EPS of $0.47 and adjusted diluted EPS1 of
$0.65. Cash flow from operating activities increased to
$189 million, up $35 million from the prior year driven
by strong working capital management initiatives in the quarter,
bringing full year cash from operating activities to
$413 million. After capital expenditures, we generated free
cash flow1 of $131 million and $198 million, for the fourth
quarter and the full year respectively. We repurchased 1.2 million
shares under our normal course issuer bid (NCIB) program in the
fourth quarter at a total cost of approximately $37 million,
bringing our total repurchases for the year to 7% of the total
float. Given the strength of our free cash flow and balance sheet,
the Company returned a record $573 million of capital to
shareholders in 2022 through a combination of share repurchases and
dividend payments during the year. We ended 2022 with net debt1 of
$874 million and a net debt to adjusted EBITDA ratio1 of 1.1, at
the low end of our target range. In line with our capital
allocation priorities, we announced a 10% increase in the amount of
our quarterly dividend and we expect to continue with share
repurchases of approximately 5% of the outstanding public float for
2023.
Fourth Quarter 2022 ResultsNet sales for the
fourth quarter ending January 1, 2023, of $720 million were
down 8% over the prior year, consisting of activewear sales of
$595 million, down 5%, and sales of $125 million in the
hosiery and underwear category, down 21% compared to the prior year
quarter. The decline in activewear sales was due to lower volumes
resulting from a combination of lower POS in retail end-markets,
and to a lesser extent, at North American distributors, as well as
the absence of inventory replenishment versus a year ago, partly
offset by higher net selling prices and the favorable impact of
mix. International sales in the quarter were up 16% over the prior
year, benefiting from inventory replenishment and higher net
selling prices. In the hosiery and underwear category, the sales
decline compared to last year was due to weak POS in retail and the
impact of retailers continuing to reduce inventory levels with
these impacts slightly offset by higher net selling prices.
Gross margin of 32.6% in the quarter was up 340 basis points
over 2021 due mainly to the impact of additional hurricane
insurance recoveries recognized in the fourth quarter of 2022.
Before reflecting the net impact of accrued insurance recoveries in
both years, adjusted gross margin1 of 29.1% was down 150 basis
points compared to 30.6% last year. The decline over 2021 was
primarily due to higher raw material costs and manufacturing costs
which more than offset higher net selling prices and favourable
product-mix.
SG&A expenses for the fourth quarter of $76 million were
down $5 million, or 6%, compared to last year due to lower volumes,
lower variable compensation expenses and cost containment efforts,
which more than offset the impact of cost inflation. SG&A
expenses as a percentage of net sales increased slightly by 20
basis points to 10.5% compared to 10.3% last year, as the benefit
of lower expenses was more than offset by sales deleverage.
In the fourth quarter, we recorded a non-cash impairment charge
for our Hosiery CGU of $62 million relating to intangible assets
acquired in previous sock and hosiery business acquisitions with
this charge driven by current market conditions. Under
International Financial Reporting Standards (IFRS) we need to test
for impairment annually and the charge compares to a net reversal
of impairment of $32 million recorded in the fourth quarter of
2021 for the same CGU. After reflecting the net impact of the above
items for both years, operating income in the fourth quarter of
$93 million was down from $177 million last year.
On an adjusted basis, before reflecting the net impact of
intangible asset impairment charges and reversals, accrued
insurance recoveries, and restructuring and acquisition related
costs in both years, we generated adjusted operating income1 of
$136 million, or 18.8% of sales, compared to $160 million, or 20.4%
of sales, in the fourth quarter of 2021. The year-over-year
decrease in adjusted operating income reflected lower sales and
lower adjusted gross margin, partly offset by lower SG&A
expenses, while the 160 basis point decrease in adjusted operating
margin1 was due to the decrease in adjusted gross margin. Net
financial expenses of $13 million were up $8 million over the prior
year. As a result, we reported net earnings of $84 million, or
$0.47 per diluted share, for the fourth quarter of 2022 and
adjusted net earnings1 of $117 million, or $0.65 per diluted share.
This compared to net earnings of $174 million, or $0.89 per diluted
share, and adjusted net earnings of $149 million, or $0.76 per
diluted share, respectively, in the fourth quarter last year.
Driven by strong working capital management in the fourth
quarter, cash flow from operating activities increased to
$189 million, up $35 million from the prior year of
$154 million. Capital expenditures of $245 million for the
full year, which included $80 million in the fourth quarter, came
in line with our target range of 6% to 8% of annual sales and
related to capacity and vertical integration projects, including
the construction of our new large-scale, low cost manufacturing
complex in Bangladesh which is progressing well and planned to
start production ramp-up at the end of the first quarter of 2023.
We generated free cash flow1 in the quarter totaling $131 million,
bringing the total for the year to $198 million in 2022, down from
$594 million last year. The decrease in free cash flow reflected
increases in inventory levels, from below optimal levels in the
fourth quarter of the prior year, which have now put us in a strong
position to service our customers, as well as higher capital
expenditures. The Company ended the fourth quarter of 2022 with net
debt1 of $874 million, up from $530 million at the end of 2021 and
a net debt leverage ratio1 of 1.1 times adjusted EBITDA1.
Full Year 2022 ResultsNet sales for the year
ended January 1, 2023, were $3,240 million in 2022, up 11%
over the same period last year, reflecting a 17% increase in
activewear, partly offset by a decline of 14% in the hosiery and
underwear category. The year-over-year increase in activewear sales
where we generated sales of $2,763 million was primarily
driven by higher net selling prices and favourable product-mix. The
decline in the hosiery and underwear category, where we generated
sales of $478 million, primarily reflected the impact of lower
unit sales volumes due to weaker demand in retail and the continued
impact of tight inventory management at the retailer level.
For the full year 2022, we realized gross margins of 30.6%
compared to 32.2%, in the prior year. On an adjusted basis, gross
margin for 2022 was 29.8% of sales, compared to 30.9% of sales in
the same period last year reflecting higher raw material and other
manufacturing costs, and the impact of the non-recurrence of an $18
million (or 60 basis points) one-time USDA cotton subsidy in
connection to the Pandemic Assistance for Cotton Users program
which was recorded in the first quarter of 2021. These factors were
partly offset by the benefit of higher net selling prices and
product-mix. The year-over-year decline in gross margin on a GAAP
basis also reflected the recognition of higher net hurricane
insurance gains last year of approximately $20 million (or 70 basis
points) and the one-time USDA cotton subsidy described above.
SG&A expenses in 2022 of $324 million were up $10 million
compared to 2021 due to the impact of inflation on overall costs,
partially offset by lower variable compensation expenses and the
benefit of our cost containment measures. As a percentage of sales,
the 80 basis point improvement in SG&A expenses primarily
reflected the benefit of sales leverage.
For the full year 2022, we generated operating income of $603
million or 18.6% of sales, down from $652 million or 22.3% of sales
in the same period last year, reflecting the non-cash impairment
charge for our Hosiery CGU taken in 2022 versus a reversal of
impairment taken in 2021, and lower insurance accounting gains
compared to last year. On an adjusted basis, we generated operating
income1 of $639 million, which translated to an adjusted operating
margin1 of 19.7% compared to $591 million and 20.2%, respectively,
last year. The increase in adjusted operating income for 2022 was
driven primarily by the 11% full year increase in sales, partly
offset by a lower operating margin. The decrease of 50 basis points
on an adjusted basis largely reflected lower gross margins which
offset the benefit of SG&A leverage. As a result, our GAAP net
earnings for 2022 came in at $542 million down 11% compared to last
year, with our adjusted net earnings1 for 2022 at $575 million up
7% compared to last year. After reflecting the impact of share
repurchases made under the Company's NCIB programs, full year GAAP
diluted EPS of $2.93 was down 5%, and adjusted diluted EPS1 of
$3.11 was up 14%, compared to GAAP diluted EPS of $3.07 and
adjusted diluted EPS of $2.72 last year.
Outlook and Update on Gildan Sustainable Growth
Strategy A year ago, we provided an overview
of Gildan's Sustainable Growth strategy (available on Gildan's
company website) focused on capacity driven growth, innovation and
ESG. Our strong results are a testament to the progress we have
made on this strategy. Specifically, with our fiscal 2022 revenue
base of $3,240 million, adjusted operating income of $639 million
and adjusted operating margin of 19.7% coming in at the higher end
of our annual target range of 18% to 20%, our business model is
positioning us well to deliver on our long-term profitability and
return targets. Our leadership in pricing, product availability and
sustainability, combined with our increased manufacturing
flexibility is enabling us to grow our market share in key product
categories. Further, we are well positioned to continue
benefiting from favourable industry trends that are playing out
such as the casualization of apparel, the interest for private
label products, the impact of the creator economy and ongoing
developments in digital printing, as well as the appeal of
nearshoring and sustainable practices, all of which are creating
long-term growth opportunities for Gildan given our competitive
advantages.
Notwithstanding these strong fundamentals, in the first part of
2023 we expect continued headwinds tied to the demand environment
and to strong comparative periods, particularly as we cycle post
pandemic inventory replenishment in the first quarter. We also
expect increased margin pressure in early 2023 as we work through
higher raw material and input costs currently in our inventories.
However, as we move past the first quarter, we expect these
headwinds to abate, enabling us to resume our growth trajectory and
our path towards delivering on our performance targets.
Accordingly, for 2023 we expect the following:
- Revenue growth for
the full year to be in the low single digit range;
- Full year adjusted operating margin to
fall within our 18% to 20% annual target range, despite expected
margin pressure in the first quarter driving us 200 to 300 basis
points below the low end of our target range;
- Capex to come in at the lower end of
our previously stated 6% to 8% range;
- Strong free cash flow1 generation as
significant investments in our inventories, which have put us in a
strong position to service our customers, are now mostly behind
us;
- Adjusted diluted EPS in line with 2022,
which assumes the continuation of share repurchases aligned with
our capital allocation targets of purchasing approximately 5% of
the outstanding public float in 2023.
The above outlook assumes no meaningful deterioration from
current market conditions including the pricing and inflationary
environment. Further, it reflects our expectations as of February
22, 2023 and is subject to significant risks and business
uncertainties, including those factors described under
“Forward-Looking Statements” in this press release and in our
annual MD&A for the year ended January 1, 2023. The board may
modify, extend or terminate current or future share repurchase
programs at any time.
Environmental, Social and Governance (ESG)
HighlightsGildan continues to be recognized for its
sustainability leadership. Recently, the Company was included in
Corporate Knights’ Global 100 list of the world’s most sustainable
corporations for the second consecutive year, moving up the ranking
by 19 positions. Previously announced in the fourth quarter of
2022, Gildan was also included on the Dow Jones Sustainability
Index for the 10th consecutive year and was included in CDP’s
Leadership Band for the third consecutive year for its 2022 climate
change disclosures. “We are proud to be recognized by these leading
organizations, reflecting our continued leadership in ESG and our
strong commitment to making apparel better,” said Glenn J.
Chamandy, Gildan’s President and CEO.
In December 2022, Gildan also published its first stand-alone
Climate Change Disclosure Report structured in accordance with the
Task Force on Climate-Related Financial Disclosures (TCFD)
recommendations. The report highlights how Gildan assesses,
prepares, and integrates climate-related matters into its business
processes and represents a significant step towards aligning with
the TCFD framework by 2025, as part of Gildan’s commitments under
its Next Generation ESG strategy.
Increase in Quarterly Dividend
The Board of Directors has approved a 10% increase in the amount of
the current quarterly dividend and has declared a cash dividend of
$0.186 per share, payable on April 10, 2023, to shareholders of
record on March 14, 2023. 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 Bid Under
its current normal course issuer bid ("NCIB") that commenced on
August 9, 2022 and will end on August 8, 2023, Gildan is authorized
to repurchase for cancellation up to 9,132,337 common shares,
representing approximately 5% of Gildan’s public float as at July
31, 2022. Of this amount, during the period from August 9, 2022 to
February 21, 2023, Gildan purchased for cancellation a total of
3,100,000 common shares at a weighted average price of $30.74.
Common shares were purchased through the facilities of the TSX and
the NYSE, and through alternative Canadian trading systems.
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.
Gildan Renews Shareholder Rights
Plan The Company also announced today that its Board of
Directors has approved the renewal and adoption of a shareholder
rights plan (the “Rights Plan”), which will become effective upon
confirmation and approval by the shareholders of the Company at the
annual meeting of shareholders to be held on May 4, 2023. The
Rights Plan will ensure that the Company and its shareholders
continue to receive the benefits associated with the Company’s
current shareholder rights plan, which is due to expire at the
close of business on the date of the Company’s upcoming annual
meeting of shareholders. The Rights Plan is designed to ensure that
all shareholders of the Company are treated fairly in connection
with any take-over offer or other acquisition of control of the
Company. The Rights Plan was not adopted in response to any
specific proposal to acquire control of the Company, nor is the
Board of Directors aware of any pending or threatened take-over bid
for the Company. The Rights Plan is similar to plans recently
adopted by other Canadian companies and approved by their
shareholders. If approved by the shareholders, the Rights Plan will
remain in effect until the close of business on the date of the
Company’s annual meeting of shareholders in 2026, with one renewal
option subject to shareholder approval, and subject to earlier
termination or expiration of the Rights Plan in accordance with its
terms. A complete copy of the Rights Plan will be filed on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
Disclosure of Outstanding Share
Data As at February 21, 2023, there were 179,721,939
common shares issued and outstanding along with 2,734,343 stock
options and 72,601 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 fourth quarter and full year 2022 results and its
business outlook today at 8:30 AM ET. A live audio webcast of the
conference call, as well as a replay, will be available on Gildan's
company website at the following link:
http://www.gildancorp.com/events. The conference call can be
accessed by dialing toll-free (800) 715-9871 (Canada & U.S.) or
(646) 307-1963 (international) and entering passcode 3451530. A
replay will be available for 7 days starting at 11:30 AM ET by
dialing toll-free (800) 770-2030 (Canada & U.S.) or (609)
800-9909 (international) and entering the same passcode.
NotesThis release should be
read in conjunction with the attached unaudited condensed financial
statements as at and for the three and twelve months ended
January 1, 2023. Gildan’s Management’s Discussion and Analysis
and its audited consolidated financial statements for the fiscal
year ended January 1, 2023 are expected to be filed by Gildan
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission on or before
February 23, 2023, and will also be provided on Gildan's
website at that time.
Certain minor rounding variances may exist
between the condensed consolidated financial statements and the
table summaries contained in this press release.
Supplemental Financial
Data |
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CONSOLIDATED FINANCIAL DATA (UNAUDITED) |
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|
|
(in $
millions, except per share amounts or otherwise indicated) |
Three months ended |
|
Twelve months ended |
January 1, 2023 |
|
January 2, 2022 |
|
Variation (%) |
|
|
January 1, 2023 |
|
January 2, 2022 |
|
Variation (%) |
|
Net sales |
720.0 |
|
784.3 |
|
(8.2 |
)% |
|
3,240.5 |
|
2,922.6 |
|
10.9 |
% |
Gross profit |
234.8 |
|
229.3 |
|
2.4 |
% |
|
992.4 |
|
940.2 |
|
5.6 |
% |
Adjusted gross profit(1) |
209.2 |
|
239.8 |
|
(12.8 |
)% |
|
965.5 |
|
903.0 |
|
6.9 |
% |
SG&A expenses |
75.8 |
|
80.5 |
|
(5.8 |
)% |
|
324.1 |
|
314.2 |
|
3.2 |
% |
(Reversal of impairment)
Impairment of trade accounts receivable |
(2.2 |
) |
(1.0 |
) |
n.m. |
|
|
2.2 |
|
(2.6 |
) |
n.m. |
|
Restructuring and
acquisition-related costs |
6.3 |
|
4.2 |
|
50.0 |
% |
|
0.5 |
|
8.2 |
|
(93.9 |
)% |
Impairment of intangible
assets (Impairment reversal of intangible assets, net of
write-downs) |
62.3 |
|
(31.5 |
) |
n.m. |
|
|
62.3 |
|
(31.5 |
) |
n.m. |
|
Operating income |
92.6 |
|
177.1 |
|
(47.7 |
)% |
|
603.4 |
|
651.9 |
|
(7.4 |
)% |
Adjusted operating
income(1) |
135.6 |
|
160.3 |
|
(15.4 |
)% |
|
639.3 |
|
591.4 |
|
8.1 |
% |
Adjusted EBITDA(1) |
163.6 |
|
189.9 |
|
(13.8 |
)% |
|
764.2 |
|
726.8 |
|
5.1 |
% |
Financial expenses |
13.3 |
|
4.7 |
|
n.m. |
|
|
37.0 |
|
27.3 |
|
35.5 |
% |
Income tax (recovery)
expense |
(4.6 |
) |
(1.5 |
) |
n.m. |
|
|
24.9 |
|
17.4 |
|
43.1 |
% |
Net earnings |
83.9 |
|
173.9 |
|
(51.8 |
)% |
|
541.5 |
|
607.2 |
|
(10.8 |
)% |
Adjusted net earnings(1) |
117.2 |
|
148.5 |
|
(21.1 |
)% |
|
574.7 |
|
538.1 |
|
6.8 |
% |
Basic EPS |
0.47 |
|
0.90 |
|
(47.8 |
)% |
|
2.94 |
|
3.08 |
|
(4.5 |
)% |
Diluted EPS |
0.47 |
|
0.89 |
|
(47.2 |
)% |
|
2.93 |
|
3.07 |
|
(4.6 |
)% |
Adjusted diluted EPS(1) |
0.65 |
|
0.76 |
|
(14.5 |
)% |
|
3.11 |
|
2.72 |
|
14.3 |
% |
Gross margin(2) |
32.6 |
% |
29.2 |
% |
3.4 |
pp |
|
30.6 |
% |
32.2 |
% |
(1.6) pp |
Adjusted gross margin(1) |
29.1 |
% |
30.6 |
% |
(1.5 |
)pp |
|
29.8 |
% |
30.9 |
% |
(1.1) pp |
SG&A expenses as a
percentage of sales(3) |
10.5 |
% |
10.3 |
% |
0.2 |
pp |
|
10.0 |
% |
10.8 |
% |
(0.8) pp |
Operating margin(4) |
12.9 |
% |
22.6 |
% |
(9.7 |
)pp |
|
18.6 |
% |
22.3 |
% |
(3.7) pp |
Adjusted operating margin(1) |
18.8 |
% |
20.4 |
% |
(1.6 |
)pp |
|
19.7 |
% |
20.2 |
% |
(0.5) pp |
Cash flows from operating activities |
189.4 |
|
154.0 |
|
23.0 |
% |
|
413.5 |
|
617.5 |
|
(33.0 |
)% |
Capital expenditures |
80.5 |
|
38.4 |
|
n.m. |
|
|
244.6 |
|
130.2 |
|
87.9 |
% |
Free cash flow(1) |
130.8 |
|
115.6 |
|
13.1 |
% |
|
197.6 |
|
593.7 |
|
(66.7 |
)% |
Diluted
weighted average number of common shares outstanding (in
‘000s) |
179,897 |
|
194,760 |
|
n/a |
|
|
184,532 |
|
197,595 |
|
n/a |
|
|
|
|
|
|
|
|
|
As at (in $ millions, or otherwise indicated) |
|
|
|
|
|
January 1, 2023 |
|
January 2, 2022 |
|
Inventories |
|
|
|
|
|
1,225.9 |
|
774.4 |
|
Trade accounts receivable |
|
|
|
|
|
248.8 |
|
330.0 |
|
Net debt(1) |
|
|
|
|
|
873.6 |
|
529.9 |
|
Net
debt leverage ratio(1) |
|
|
|
|
|
1.1 |
|
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
(loss) divided by net sales.n.m. = not meaningfuln/a = not
applicable
DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
(in $ millions, or otherwise indicated) |
Q4 2022 |
Q4 2021 |
Variation (%) |
|
YTD 2022 |
YTD 2021 |
Variation (%) |
Activewear |
595.4 |
627.2 |
(5.1)% |
|
2,762.5 |
2,364.7 |
16.8 |
% |
Hosiery
and underwear |
124.6 |
157.1 |
(20.7)% |
|
478.0 |
557.8 |
(14.3 |
)% |
|
720.0 |
784.3 |
(8.2)% |
|
3,240.5 |
2,922.5 |
10.9 |
% |
|
|
|
|
|
|
|
|
Net sales were derived from customers located in the following
geographic areas:
(in $ millions, or otherwise indicated) |
Q4 2022 |
Q4 2021 |
Variation (%) |
|
YTD 2022 |
YTD 2021 |
Variation (%) |
United States |
626.6 |
692.6 |
(9.5 |
)% |
|
2,846.8 |
2,526.6 |
12.7 |
% |
Canada |
22.7 |
30.9 |
(26.5 |
)% |
|
122.5 |
114.8 |
6.7 |
% |
International |
70.7 |
60.7 |
16.5 |
% |
|
271.2 |
281.2 |
(3.6 |
)% |
|
720.0 |
784.2 |
(8.2 |
)% |
|
3,240.5 |
2,922.6 |
10.9 |
% |
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
costsRestructuring and acquisition-related costs are comprised of
costs directly related to significant exit activities, including
the closure of business locations and sale 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 costs were $0.5 million
for the fiscal year ended January 1, 2023 (2021 - $8 million, 2020
- $48 million).
Impairment of goodwill and intangible assets or
impairment reversal of intangible assets, net of write-downsDuring
the first quarter of fiscal 2020 we recorded an impairment charge
for our Hosiery cash-generating unit (CGU) of $94 million, relating
to goodwill and intangible assets acquired during previous sock and
hosiery business acquisitions. During the fourth quarter of fiscal
2021 we reported a $32 million credit to income, as a result of an
impairment reversal of $56 million and a $24 million write-off of
certain intangible assets relating to the Company's Hosiery CGU.
During the fourth quarter of fiscal 2022 we reported an impairment
charge of $62 million relating to the Company's Hosiery CGU. These
impairment charges and impairment reversals are included as
adjustments in arriving at adjusted operating income, adjusted
operating margin, adjusted net earnings, adjusted diluted EPS, and
adjusted EBITDA.
Net insurance losses (gains)Net insurance gains
of $26 million (2021 - $46 million, 2020 - $10 million) for the
fiscal year ended January 1, 2023, related to the two hurricanes
which impacted the Company’s operations in Central America in
November 2020. The net insurance gains reflected costs of $7
million (2021 - $55 million, 2020 - $101 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 $33 million
(2021 - $101 million, 2020 - $111 million) during 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.
Discontinuance of personal protective equipment
(PPE) stock keeping units (SKUs)A charge of $6 million for the
three and twelve months ended January 3, 2021 (included in cost of
sales) reflects the discontinuance of these PPE SKUs given that
they are not in the Company’s normal product line and that these
shortages have now been addressed. Discontinuance of PPE SKUs 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 the fourth
quarter of fiscal 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 charges related to this initiative in fiscal 2020, 2021 and
2022, were as follows:
- Fiscal 2020 includes a charge of
$26 million of inventory write-downs included in cost of sales
related to retail product line discontinued SKUs. Fiscal 2020 also
includes $29 million of inventory write-downs included in cost of
sales and the $5 million gross profit impact of a sales return
allowance for anticipated product returns related to imprintables
product line discontinued SKUs (the sales return allowance reduced
net sales by $11 million and cost of sales by $6 million).
- Fiscal 2021 includes $9 million of
charges included in cost of sales, consisting of $4 million in
inventory write-downs related primarily to the Company's plan to
discontinue its legwear and intimates product line, and the
write-down of production equipment and other assets relating to
discontinued SKUs of $5 million in the fourth quarter of 2021.
- Fiscal 2022 includes $1 million
gain related to the reversal of a reserve relating to 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 net earnings
performance from one period to the next, and in making decisions
regarding the ongoing operations of its business, without the
variation caused by the impacts of the items described above. The
Company excludes these items because they affect the comparability
of its net earnings and diluted EPS and could potentially distort
the analysis of net earnings 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.
|
Three months ended |
Twelve months ended |
(in $ millions, except per share amounts) |
January 1, 2023 |
|
January 2, 2022 |
|
January 1, 2023 |
|
January 2, 2022 |
|
January 3, 2021 |
|
|
|
|
|
|
|
Net earnings (loss) |
83.9 |
|
173.9 |
|
541.5 |
|
607.2 |
|
(225.3 |
) |
Adjustments for: |
|
|
|
|
|
Restructuring and acquisition-related costs |
6.3 |
|
4.2 |
|
0.5 |
|
8.2 |
|
48.2 |
|
Impairment of goodwill and intangible assets (Impairment reversal
of intangible assets, net of write-downs) |
62.3 |
|
(31.5 |
) |
62.3 |
|
(31.5 |
) |
94.0 |
|
Impact of strategic product line initiatives |
— |
|
7.6 |
|
(1.0 |
) |
8.8 |
|
60.0 |
|
Discontinuance of PPE SKUs |
— |
|
— |
|
— |
|
— |
|
6.2 |
|
Net insurance (gains) losses |
(25.6 |
) |
2.9 |
|
(25.9 |
) |
(46.0 |
) |
(9.6 |
) |
Income tax expense (recovery) relating to the above-noted
adjustments |
0.2 |
|
— |
|
7.2 |
|
— |
|
(4.6 |
) |
Income tax recovery related to the revaluation of deferred income
tax assets and liabilities(1) |
(9.9 |
) |
(8.6 |
) |
(9.9 |
) |
(8.6 |
) |
(5.2 |
) |
Adjusted net earnings (loss) |
117.2 |
|
148.5 |
|
574.7 |
|
538.1 |
|
(36.3 |
) |
Basic EPS |
0.47 |
|
0.90 |
|
2.94 |
|
3.08 |
|
(1.14 |
) |
Diluted EPS |
0.47 |
|
0.89 |
|
2.93 |
|
3.07 |
|
(1.14 |
) |
Adjusted diluted EPS(2) |
0.65 |
|
0.76 |
|
3.11 |
|
2.72 |
|
(0.18 |
) |
(1) Includes an income tax recovery of $9.9 million (2021 - $8.6
million, 2020 - $5.2 million) pursuant to the recognition of
previously de-recognized (in fiscal 2018 and fiscal 2017 pursuant
to the organizational realignment plan) deferred income tax assets
as a result of a re-assessment of the probability of realization of
such deferred income tax assets.(2) This is a non-GAAP ratio. It is
calculated as adjusted net earnings (loss) 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 at the gross margin level 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 management and
investors because they help identify underlying trends in our
business in how efficiently the Company uses labor and materials
for manufacturing goods to our customers, that could otherwise be
masked by the impact of our strategic product line initiatives and
net insurance gains 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.
|
Three months ended |
Twelve months ended |
(in $ millions, or otherwise indicated) |
January 1,2023 |
|
January 2,2022 |
|
January 1,2023 |
|
January 2,2022 |
|
January 3,2021 |
|
|
|
|
|
|
|
Gross profit |
234.8 |
|
229.3 |
|
992.4 |
|
940.2 |
|
249.1 |
|
Adjustments for: |
|
|
|
|
|
Impact of strategic product line initiatives |
— |
|
7.6 |
|
(1.0 |
) |
8.8 |
|
60.0 |
|
Discontinuance of PPE SKUs |
— |
|
— |
|
— |
|
— |
|
6.2 |
|
Net insurance (gains) losses |
(25.6 |
) |
2.9 |
|
(25.9 |
) |
(46.0 |
) |
(9.6 |
) |
Adjusted gross profit |
209.2 |
|
239.8 |
|
965.5 |
|
903.0 |
|
305.7 |
|
|
|
|
|
|
|
Net sales |
720.0 |
|
784.3 |
|
3,240.5 |
|
2,922.6 |
|
1,981.3 |
|
Sales
return allowance for anticipated product returns |
— |
|
— |
|
— |
|
— |
|
11.2 |
|
Net sales excluding the allowance for anticipated product returns
related to discontinued SKUs |
720.0 |
|
784.3 |
|
3,240.5 |
|
2,922.6 |
|
1,992.5 |
|
Gross margin |
32.6 |
% |
29.2 |
% |
30.6 |
% |
32.2 |
% |
12.6 |
% |
Adjusted gross margin(1) |
29.1 |
% |
30.6 |
% |
29.8 |
% |
30.9 |
% |
15.3 |
% |
(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.
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. 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 at the operating income
level as we believe it provides a better indication of our
operating performance and facilitates the comparison across
reporting periods, 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 operating income
and operating margin performance. The Company believes adjusted
operating income and adjusted operating margin are useful to
investors because they help identify underlying trends in our
business in how efficiently the Company generates profit from its
primary operations that could otherwise be masked by the impact of
restructuring and acquisition-related costs, our strategic product
line initiatives and net insurance gains 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.
|
Three months ended |
Twelve months ended |
(in $ millions, or otherwise indicated) |
January 1,2023 |
|
January 2,2022 |
|
January 1,2023 |
|
January 2,2022 |
|
January 3,2021 |
|
|
|
|
|
|
|
Operating income (loss) |
92.6 |
|
177.1 |
|
603.4 |
|
651.9 |
|
(180.8 |
) |
Adjustments for: |
|
|
|
|
|
Restructuring and acquisition-related costs |
6.3 |
|
4.2 |
|
0.5 |
|
8.2 |
|
48.2 |
|
Impairment of goodwill and intangible assets (Impairment reversal
of intangible assets, net of write-downs) |
62.3 |
|
(31.5 |
) |
62.3 |
|
(31.5 |
) |
94.0 |
|
Impact of strategic product line initiatives |
— |
|
7.6 |
|
(1.0 |
) |
8.8 |
|
60.0 |
|
Discontinuance of PPE SKUs |
— |
|
— |
|
— |
|
— |
|
6.2 |
|
Net insurance (gains) losses |
(25.6 |
) |
2.9 |
|
(25.9 |
) |
(46.0 |
) |
(9.6 |
) |
Adjusted operating income |
135.6 |
|
160.3 |
|
639.3 |
|
591.4 |
|
18.0 |
|
|
|
|
|
|
|
Operating margin |
12.9 |
% |
22.6 |
% |
18.6 |
% |
22.3 |
% |
(9.1 |
)% |
Adjusted operating margin(1) |
18.8 |
% |
20.4 |
% |
19.7 |
% |
20.2 |
% |
0.9 |
% |
(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.
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 facilitate a comparison of the
profitability of its business on a consistent basis from
period-to-period and to provide a more complete understanding of
factors and trends affecting our business. The Company also
believes this measure is commonly used by investors and analysts to
assess profitability and the cost structure of companies within the
industry, as well as 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.
|
Three months ended |
Twelve months ended |
(in $ millions) |
January 1, 2023 |
|
January 2, 2022 |
|
January 1, 2023 |
|
January 2, 2022 |
|
January 3, 2021 |
|
Net earnings (loss) |
83.9 |
|
173.9 |
|
541.5 |
|
607.2 |
|
(225.3 |
) |
Restructuring and
acquisition-related costs |
6.3 |
|
4.2 |
|
0.5 |
|
8.2 |
|
48.2 |
|
Impairment of goodwill and
intangible assets (Impairment reversal of intangible assets, net of
write-downs) |
62.3 |
|
(31.5 |
) |
62.3 |
|
(31.5 |
) |
94.0 |
|
Impact of strategic product
line initiative |
— |
|
7.6 |
|
(1.0 |
) |
8.8 |
|
60.0 |
|
Discontinuance of PPE
SKUs |
— |
|
— |
|
— |
|
— |
|
6.2 |
|
Net insurance (gains)
losses |
(25.6 |
) |
2.9 |
|
(25.9 |
) |
(46.0 |
) |
(9.6 |
) |
Depreciation and
amortization |
28.0 |
|
29.6 |
|
124.9 |
|
135.4 |
|
147.2 |
|
Financial expenses, net |
13.3 |
|
4.7 |
|
37.0 |
|
27.3 |
|
48.5 |
|
Income
tax (recovery) expense |
(4.6 |
) |
(1.5 |
) |
24.9 |
|
17.4 |
|
(4.1 |
) |
Adjusted EBITDA |
163.6 |
|
189.9 |
|
764.2 |
|
726.8 |
|
165.1 |
|
Free cash flow Free cash flow is defined as cash
from operating activities, less cash flow used in investing
activities excluding cash flows relating to business
acquisitions/dispositions. 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 used by management in
managing capital as it 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 also 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.
|
Three months ended |
Twelve months ended |
(in $ millions) |
January 1, 2023 |
|
January 2, 2022 |
|
January 1, 2023 |
|
January 2, 2022 |
|
January 3, 2021 |
|
Cash flows from operating
activities |
189.4 |
|
154.0 |
|
413.5 |
|
617.5 |
|
415.0 |
|
Cash flows used in investing
activities |
(52.9 |
) |
(202.4 |
) |
(182.4 |
) |
(187.8 |
) |
(57.5 |
) |
Adjustment for: |
|
|
|
|
|
Business (dispositions) acquisitions |
(5.7 |
) |
164.0 |
|
(33.5 |
) |
164.0 |
|
— |
|
Free cash flow |
130.8 |
|
115.6 |
|
197.6 |
|
593.7 |
|
357.5 |
|
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 for management and investors to assess the
financial position and liquidity of the Company, and measure its
financial leverage. 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) |
January 1, 2023 |
|
January 2, 2022 |
|
January 3, 2021 |
|
Long-term debt (including
current portion) |
930.0 |
|
600.0 |
|
1,000.0 |
|
Bank indebtedness |
— |
|
— |
|
— |
|
Lease
obligations (including current portion) |
94.0 |
|
109.1 |
|
82.5 |
|
Total debt |
1,024.0 |
|
709.1 |
|
1,082.5 |
|
Cash
and cash equivalents |
(150.4 |
) |
(179.2 |
) |
(505.3 |
) |
Net debt |
873.6 |
|
529.9 |
|
577.2 |
|
Net debt leverage ratioThe 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 net debt leverage ratio serves to
evaluate the Company's financial leverage and is used by management
in its decisions on the Company's capital structure, including
financing strategy. The Company believes that certain investors and
analysts use the net debt leverage ratio to measure the financial
leverage of the Company, including our ability to pay off our
incurred debt. The Company's net debt leverage ratio differs from
the net debt to EBITDA ratio that is a covenant in our loan and
note agreements due primarily to adjustments in the latter related
to lease accounting, and therefore the Company believes it is a
useful additional measure. 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) |
January 1,2023 |
January 2,2022 |
January 3, 2021 |
Adjusted EBITDA for the trailing twelve months |
764.2 |
726.8 |
165.1 |
Adjustment for: |
|
|
|
Business acquisitions |
— |
22.8 |
— |
Pro-forma adjusted EBITDA for the trailing twelve months |
764.2 |
749.6 |
165.1 |
|
|
|
|
Net debt |
873.6 |
529.9 |
577.2 |
Net
debt leverage ratio(1) |
1.1 |
0.7 |
3.5 |
(1) The Company's total net debt to EBITDA ratio for purposes of
its loan and note agreements was 1.3 at January 1, 2023.
Return on adjusted average net assetsReturn on
adjusted average net assets (Adjusted RONA) is defined as the ratio
of return to adjusted average net assets for the last five
quarters. Return is defined as adjusted net earnings, excluding net
financial expenses and the amortization of intangible assets
(excluding software), net of income tax recoveries related thereto.
Average is computed as the sum of the five quarters divided by
five. Adjusted average net assets are defined as the sum
of average total assets, excluding average cash and cash
equivalents, average net deferred income taxes, and the average
accumulated amortization of intangible assets excluding software,
less average total current liabilities excluding the current
portion of lease obligations. Adjusted average net assets and
return are non-GAAP measures used as components of Adjusted RONA.
The Company uses Adjusted RONA as a performance indicator to
measure the efficiency of its invested capital. Management believes
Adjusted RONA is useful to investors as a measure of performance
and the effectiveness of our use of capital. Adjusted RONA is not a
measure of financial performance under IFRS and may not be defined
and calculated by other companies in the same manner.
(in $ millions) |
January 1,2023 |
|
January 2,2022 |
|
January 3,2021 |
|
Average total assets |
3,344.4 |
|
3,050.8 |
|
3,226.9 |
|
Average cash and cash
equivalents |
(118.8 |
) |
(384.1 |
) |
(354.7 |
) |
Average net deferred income
taxes |
(12.9 |
) |
(15.6 |
) |
(13.1 |
) |
Average accumulated amortization
of intangible assets, excluding software |
254.9 |
|
254.8 |
|
233.2 |
|
Average total current liabilities, excluding the current portion of
lease obligations and debt |
(485.3 |
) |
(400.1 |
) |
(364.5 |
) |
Adjusted average net assets |
2,982.3 |
|
2,505.8 |
|
2,727.8 |
|
|
|
|
|
|
Twelve months ended |
(in $
millions, or otherwise indicated) |
January 1,2023 |
|
January 2,2022 |
|
January 3,2021 |
|
Adjusted net earnings |
574.7 |
|
538.1 |
|
(36.3 |
) |
Financial expenses, net (nil
income taxes in all years) |
37.0 |
|
27.3 |
|
48.5 |
|
Amortization of intangible assets, excluding software, net (nil
income taxes in all three years) |
13.8 |
|
12.8 |
|
14.3 |
|
Return |
625.5 |
|
578.2 |
|
26.5 |
|
Return on adjusted average net assets (Adjusted RONA) |
21.0 |
% |
23.1 |
% |
1.0 |
% |
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 short-term liquidity and financial
position of the Company, including its ability to discharge its
short-term liabilities as they come due. This measure is not
necessarily comparable to similarly titled measures used by other
public companies.
(in $ millions) |
January 1,2023 |
|
January 2,2022 |
|
January 3,2021 |
|
Cash and cash equivalents |
150.4 |
|
179.2 |
|
505.3 |
|
Trade accounts receivable |
248.8 |
|
330.0 |
|
196.5 |
|
Income taxes receivable |
— |
|
— |
|
4.6 |
|
Inventories |
1,225.9 |
|
774.4 |
|
728.0 |
|
Prepaid expenses, deposits and
other current assets |
101.8 |
|
163.7 |
|
110.1 |
|
Accounts payable and accrued
liabilities |
(471.2 |
) |
(440.4 |
) |
(343.7 |
) |
Income taxes payable |
(6.6 |
) |
(7.9 |
) |
— |
|
Current portion of lease
obligations |
(13.8 |
) |
(15.3 |
) |
(15.9 |
) |
Current
portion of long-term debt |
(150.0 |
) |
— |
|
— |
|
Working capital |
1,085.3 |
|
983.7 |
|
1,184.9 |
) |
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 and revenue growth, 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 adjusted average net assets, net debt to
adjusted EBITDA leverage ratios, capital return and capital
investments or expenditures, including our financial outlook set
forth in this press release under the section “Outlook and update
on Gildan Sustainable Growth Strategy”. 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 financial outlook described in this press release under the
section “Outlook and update on 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 reintroduction, scope and duration of
government mandated general, partial, or targeted private sector
shutdowns, travel restrictions, and social distancing
measures;
- 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 appearance of COVID variants;
- 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
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,
including the implementation of a global minimum tax rate;
- 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 Gildan
Gildan is a leading manufacturer of everyday
basic apparel which markets its products in North America, Europe,
Asia Pacific, and Latin America under a strong 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, the United States, 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 https://gildancorp.com/en/.
Investor
inquiries:Elisabeth HamaouiDirector, Investor
Communications(514) 744-8515ehamaoui@gildan.com |
Media
inquiries:Genevieve GosselinDirector, Global
Communications and Corporate Marketing(514)
343-8814ggosselin@gildan.com |
GILDAN ACTIVEWEAR
INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION(in thousands of U.S. dollars) -
unaudited
|
January 1,2023 |
|
January 2,2022 |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
150,417 |
|
$ |
179,246 |
Trade accounts receivable |
|
248,785 |
|
|
329,967 |
Inventories |
|
1,225,940 |
|
|
774,358 |
Prepaid expenses, deposits, and other current assets |
|
101,810 |
|
|
163,662 |
Total current assets |
|
1,726,952 |
|
|
1,447,233 |
Non-current assets: |
|
|
|
Property, plant and equipment |
|
1,115,169 |
|
|
985,073 |
Right-of-use assets |
|
77,958 |
|
|
92,447 |
Intangible assets |
|
229,951 |
|
|
306,630 |
Goodwill |
|
271,677 |
|
|
283,815 |
Deferred income taxes |
|
16,000 |
|
|
17,726 |
Other non-current assets |
|
2,507 |
|
|
3,758 |
Total non-current assets |
|
1,713,262 |
|
|
1,689,449 |
Total assets |
$ |
3,440,214 |
|
$ |
3,136,682 |
Current liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
471,208 |
|
$ |
440,401 |
Income taxes payable |
|
6,637 |
|
|
7,912 |
Current portion of lease obligations |
|
13,828 |
|
|
15,290 |
Current portion of long term debt |
|
150,000 |
|
|
— |
Total current liabilities |
|
641,673 |
|
|
463,603 |
Non-current liabilities: |
|
|
|
Long-term debt |
|
780,000 |
|
|
600,000 |
Lease obligations |
|
80,162 |
|
|
93,812 |
Other non-current liabilities |
|
56,217 |
|
|
59,862 |
Total non-current liabilities |
|
916,379 |
|
|
753,674 |
Total liabilities |
|
1,558,052 |
|
|
1,217,277 |
Equity: |
|
|
|
Share capital |
|
202,329 |
|
|
191,732 |
Contributed surplus |
|
79,489 |
|
|
58,128 |
Retained earnings |
|
1,590,499 |
|
|
1,604,736 |
Accumulated other comprehensive income |
|
9,845 |
|
|
64,809 |
Total equity attributable to shareholders of the Company |
|
1,882,162 |
|
|
1,919,405 |
Total liabilities and equity |
$ |
3,440,214 |
|
$ |
3,136,682 |
GILDAN ACTIVEWEAR
INC.CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME(in thousands of U.S.
dollars, except per share data) - unaudited
|
Three months ended |
|
|
Twelve months ended |
|
|
January 1,2023 |
|
|
January 2,2022 |
|
|
January 1,2023 |
|
|
January 2,2022 |
|
Net sales |
$ |
720,022 |
|
|
$ |
784,251 |
|
|
$ |
3,240,482 |
|
|
$ |
2,922,570 |
|
Cost of
sales |
|
485,197 |
|
|
|
554,995 |
|
|
|
2,248,070 |
|
|
|
1,982,361 |
|
Gross profit |
|
234,825 |
|
|
|
229,256 |
|
|
|
992,412 |
|
|
|
940,209 |
|
Selling, general and
administrative expenses |
|
75,806 |
|
|
|
80,466 |
|
|
|
324,108 |
|
|
|
314,171 |
|
(Reversal of impairment)
Impairment of trade accounts receivable |
|
(2,218 |
) |
|
|
(998 |
) |
|
|
2,150 |
|
|
|
(2,617 |
) |
Restructuring and
acquisition-related costs |
|
6,316 |
|
|
|
4,181 |
|
|
|
479 |
|
|
|
8,225 |
|
Impairment of intangible assets (Impairment reversal of intangible
assets, net of write-downs) |
|
62,290 |
|
|
|
(31,459 |
) |
|
|
62,290 |
|
|
|
(31,459 |
) |
Operating income |
|
92,631 |
|
|
|
177,066 |
|
|
|
603,385 |
|
|
|
651,889 |
|
Financial expenses, net |
|
13,282 |
|
|
|
4,665 |
|
|
|
36,957 |
|
|
|
27,331 |
|
Earnings before income taxes |
|
79,349 |
|
|
|
172,401 |
|
|
|
566,428 |
|
|
|
624,558 |
|
Income
tax (recovery) expense |
|
(4,551 |
) |
|
|
(1,495 |
) |
|
|
24,888 |
|
|
|
17,375 |
|
Net earnings |
|
83,900 |
|
|
|
173,896 |
|
|
|
541,540 |
|
|
|
607,183 |
|
Other comprehensive (loss)
income, net of related income taxes: |
|
|
|
|
|
|
|
Cash flow hedges |
|
(18,303 |
) |
|
|
20,344 |
|
|
|
(54,964 |
) |
|
|
73,847 |
|
Actuarial gain (loss) on employee benefit obligations |
|
8,094 |
|
|
|
(21,678 |
) |
|
|
8,094 |
|
|
|
(21,678 |
) |
|
|
(10,209 |
) |
|
|
(1,334 |
) |
|
|
(46,870 |
) |
|
|
52,169 |
|
Comprehensive income |
$ |
73,691 |
|
|
$ |
172,562 |
|
|
$ |
494,670 |
|
|
$ |
659,352 |
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.47 |
|
|
$ |
0.90 |
|
|
$ |
2.94 |
|
|
$ |
3.08 |
|
Diluted |
$ |
0.47 |
|
|
$ |
0.89 |
|
|
$ |
2.93 |
|
|
$ |
3.07 |
|
GILDAN ACTIVEWEAR
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(in thousands of U.S. dollars) -
unaudited
|
Three months ended |
|
|
Twelve months ended |
|
|
January 1,2023 |
|
|
January 2,2022 |
|
|
January 1,2023 |
|
|
January 2,2022 |
|
Cash flows from (used in) operating activities: |
|
|
|
|
|
|
|
Net earnings |
$ |
83,900 |
|
|
$ |
173,896 |
|
|
$ |
541,540 |
|
|
$ |
607,183 |
|
Adjustments for: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
28,037 |
|
|
|
29,649 |
|
|
|
124,926 |
|
|
|
135,402 |
|
Non-cash restructuring charges related to property, plant and
equipment, right-of-use assets, and computer software |
|
4,916 |
|
|
|
2,688 |
|
|
|
(3,259 |
) |
|
|
3,136 |
|
Impairment of intangible assets (Impairment reversal of intangible
assets, net of write-downs) |
|
62,290 |
|
|
|
(31,459 |
) |
|
|
62,290 |
|
|
|
(31,459 |
) |
Timing differences between settlement of financial derivatives and
transfer of deferred gains or losses in accumulated OCI to
inventory and net earnings |
|
(19,194 |
) |
|
|
13,009 |
|
|
|
(11,253 |
) |
|
|
8,012 |
|
(Gain) Loss on disposal of property, plant and equipment, including
insurance recoveries |
|
(28,003 |
) |
|
|
4,664 |
|
|
|
(34,195 |
) |
|
|
(43,660 |
) |
Share-based compensation |
|
8,314 |
|
|
|
8,475 |
|
|
|
32,393 |
|
|
|
37,659 |
|
Other |
|
(8,811 |
) |
|
|
(5,748 |
) |
|
|
8,140 |
|
|
|
(2,024 |
) |
Changes in non-cash working capital balances |
|
57,923 |
|
|
|
(41,154 |
) |
|
|
(307,094 |
) |
|
|
(96,739 |
) |
Cash flows from operating activities |
|
189,372 |
|
|
|
154,020 |
|
|
|
413,488 |
|
|
|
617,510 |
|
|
|
|
|
|
|
|
|
Cash flows from (used in)
investing activities: |
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(79,086 |
) |
|
|
(37,390 |
) |
|
|
(239,128 |
) |
|
|
(127,457 |
) |
Purchase of intangible assets |
|
(1,378 |
) |
|
|
(1,016 |
) |
|
|
(5,426 |
) |
|
|
(2,766 |
) |
Business dispositions (acquisitions) |
|
5,663 |
|
|
|
(163,968 |
) |
|
|
33,543 |
|
|
|
(163,968 |
) |
Proceeds from insurance related to property, plant and equipment
(PP&E) and other disposals of PP&E |
|
21,935 |
|
|
|
— |
|
|
|
28,607 |
|
|
|
106,358 |
|
Cash flows used in investing activities |
|
(52,866 |
) |
|
|
(202,374 |
) |
|
|
(182,404 |
) |
|
|
(187,833 |
) |
|
|
|
|
|
|
|
|
Cash flows from (used in)
financing activities: |
|
|
|
|
|
|
|
Increase in amounts drawn under long-term bank credit
facilities |
|
10,000 |
|
|
|
— |
|
|
|
330,000 |
|
|
|
— |
|
Payment of term loan |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(400,000 |
) |
Payment of lease obligations |
|
(3,410 |
) |
|
|
(8,993 |
) |
|
|
(16,559 |
) |
|
|
(21,474 |
) |
Dividends paid |
|
(30,505 |
) |
|
|
(29,714 |
) |
|
|
(123,769 |
) |
|
|
(90,462 |
) |
Proceeds from the issuance of shares |
|
12,943 |
|
|
|
6,410 |
|
|
|
14,968 |
|
|
|
9,427 |
|
Repurchase and cancellation of shares |
|
(40,938 |
) |
|
|
(125,425 |
) |
|
|
(449,158 |
) |
|
|
(245,140 |
) |
Share repurchases for settlement of non-Treasury RSUs |
|
(2,549 |
) |
|
|
(2,510 |
) |
|
|
(8,258 |
) |
|
|
(4,267 |
) |
Withholding taxes paid pursuant to the settlement of non-Treasury
RSUs |
|
(1,434 |
) |
|
|
(1,266 |
) |
|
|
(5,498 |
) |
|
|
(2,837 |
) |
Cash flows used in financing activities |
|
(55,893 |
) |
|
|
(161,498 |
) |
|
|
(258,274 |
) |
|
|
(754,753 |
) |
Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies |
|
555 |
|
|
|
(234 |
) |
|
|
(1,639 |
) |
|
|
(942 |
) |
Net increase (decrease) in cash and cash equivalents during the
period |
|
81,168 |
|
|
|
(210,086 |
) |
|
|
(28,829 |
) |
|
|
(326,018 |
) |
Cash
and cash equivalents, beginning of period |
|
69,249 |
|
|
|
389,332 |
|
|
|
179,246 |
|
|
|
505,264 |
|
Cash and cash equivalents, end of period |
$ |
150,417 |
|
|
$ |
179,246 |
|
|
$ |
150,417 |
|
|
$ |
179,246 |
|
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