Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results
for the third quarter ended September 29, 2024. The Company
also updated its Fiscal 2024 guidance.
"Gildan's Sustainable Growth Strategy (GSG) is clearly driving
results, underscored by our record third quarter sales, including
strong net sales growth of 6% in Activewear. Through the continued
successful execution of our three strategic pillars— capacity
expansion, innovation and ESG —we are not only further
strengthening our competitive position but also driving top line
growth and enhancing profitability. We remain deeply committed to
delivering long-term value for our stakeholders and are excited
about the opportunities that lie ahead," said Glenn J. Chamandy,
Gildan’s President and CEO.
Q3 2024 Operating Results Net sales were $891
million, up 2.4% over the prior year, at the high end of previously
provided guidance of flat to low single-digit growth. Activewear
sales of $788 million, were up 6% driven by higher sales volumes
reflecting positive POS in the Activewear category across channels
in North America. We continue to see market share gains in key
growth categories and a positive market response to our recently
introduced new products which feature key innovations, including
our new soft cotton technology. Furthermore, we observed continued
momentum with National account customers, driven by our strong
overall competitive positioning and as we further benefit from
recent changes in the industry landscape. These factors were
partially offset by unfavorable product mix, partly due to lower
fleece sales compared to last year's strong performance, which was
largely due to timing differences and which we had anticipated.
International sales increased by 20% year over year. In addition to
higher year over year sell-through in certain international
markets, distributors replenished inventory from suboptimal levels
aided by our ability to better service this market as we ramp up
our Bangladesh facility. Separately, Hosiery and underwear sales
were $103 million, down 18% versus the prior year, as expected,
mainly owing to the phase out of the Under Armour business and to a
lesser extent, due to unfavourable mix and continued broader market
weakness in underwear. Excluding the impact of the Under Armour
phase-out, sales for the Hosiery and underwear category would have
been up low double digits year over year, while consolidated sales
would have been up high single digits in the third quarter.
The Company generated gross profit of $278 million, or 31.2% of
net sales, versus $239 million, or 27.5% of net sales, in the
same period last year representing a 370 basis point improvement
which was primarily driven by lower raw material and manufacturing
input costs.
SG&A expenses of $84 million included $6 million in
carry-over charges related to the proxy contest, leadership changes
and related matters. Excluding these charges, adjusted SG&A
expenses1 were down 5% to $78 million, or 8.8% of net sales,
compared to SG&A expenses of $82 million, or 9.5% of net sales
for the same period last year. The year over year reduction
reflected the positive benefit of the jobs credit introduced by
Barbados.
The Company generated operating income of $193 million, or 21.7%
of net sales including the negative impact of the expenses for the
proxy contest, leadership changes and related matters. This
compares to $155 million, or 17.8% of net sales last year. Adjusted
operating income1 was $200 million or 22.4% of net sales, in
line with guidance provided, and up $43 million or 430 basis points
compared to the prior year.
Net financial expenses of $30 million, were up $10 million over
the prior year due to higher interest rates and higher borrowing
levels. Reflecting the impact of the enactment of Global Minimum
Tax (GMT) in Canada and Barbados, the Company's adjusted effective
income tax rate1 for the quarter was 18.7% versus 5.1% last year,
bringing the year to date adjusted effective income tax rate to
approximately 18.5%. Reflecting the positive benefit of a lower
outstanding share base, GAAP diluted EPS were $0.82, up 12% versus
the prior year, while adjusted diluted EPS1 were $0.85 compared to
$0.74 last year, up 15% year over year.
Cash flows from operating activities totaled $178 million and,
after accounting for capital expenditures totaling $30 million, the
Company generated $149 million of free cash flow1. The Company
continued to execute on its capital allocation priorities during
the quarter returning a quarterly record of $404 million to
shareholders, including dividends and repurchasing 8.8 million
shares under our normal course issuer bid (NCIB). We ended the
third quarter with net debt1 of $1,507 million and a leverage ratio
of 1.9 times net debt to trailing twelve months adjusted EBITDA1,
well within our targeted debt levels.
Year-to-date Operating ResultsNet sales for the
first nine months ended September 29, 2024 were $2,449
million, up 1.5% versus the same period last year. In Activewear,
we generated sales of $2,117 million, up $93 million or 5%,
driven by increased shipments, reflecting positive POS trends in
North America and strong momentum observed at National accounts,
slightly offset by lower net selling prices. International sales of
$188 million were up 9% versus the same period last year,
reflecting demand stabilization and some recovery in POS. In the
Hosiery and underwear category, sales were down 15% versus the
prior year mainly reflecting the phase out of the Under Armour
business, less favourable mix and broader market weakness in the
underwear category. Excluding the impact of the Under Armour
phase-out, sales for the Hosiery and underwear category, as well as
consolidated sales, would have increased by mid-single digits year
over year.
The Company generated gross profit of $751 million, up $107
million versus the prior year, driven by the increase in sales and
gross margin. Gross margin of 30.7% was up by 400 basis points year
over year mainly a result of lower raw material and manufacturing
input costs, partly offset by slightly lower net selling
prices.
SG&A expenses were $312 million, $70 million above prior
year levels. The increase is mainly attributable to expenses for
the proxy contest, leadership changes and related matters, totaling
$82 million. Excluding these charges, adjusted SG&A expenses1
were $230 million, or 9.4% of net sales, compared to 10.0% of
net sales last year, reflecting the benefit of the jobs credit
introduced by Barbados during the second quarter.
The Company generated operating income of $439 million, or 17.9%
of net sales, reflecting the negative impact of the expenses for
the proxy contest, leadership changes and other related matters.
This compares to operating income of $466 million or 19.3% of net
sales last year which included the benefit of a $77 million net
insurance gain and a $25 million gain from the sale and leaseback
of one of our U.S. distribution facilities, partly offset by
restructuring costs of $35 million. Excluding these items as well
as the expenses for the proxy contest, leadership changes and other
related matters, adjusted operating income1 was $521 million
or 21.3% of net sales, up $122 million or 480 basis points
compared to the prior year.
Net financial expenses of $77 million were up $19 million
over the prior year due to higher interest rates and higher
borrowing levels. As communicated in the second quarter, income tax
expenses were significantly higher than the prior year, due to the
enactment of GMT in Canada and Barbados. Cash flows from operating
activities totaled $291 million, compared to $308 million in the
prior year. After accounting for capital expenditures totaling $110
million, the Company generated approximately $182 million of free
cash flow1 compared to $188 million in the prior year. Executing on
capital allocation priorities, capital returned to shareholders
totaled $643 million including dividends and share repurchases.
Reflecting the benefit of a lower outstanding share base, GAAP
diluted EPS and adjusted diluted EPS1 were $1.62 and $2.18
respectively, compared to GAAP diluted EPS and adjusted diluted
EPS1 of $2.14 and $1.82 respectively, in the prior year.
2024 Outlook The strength of our vertically
integrated model, our proven operational excellence and our
unwavering focus on executing our Gildan Sustainable Growth (GSG)
strategy give us confidence in our ability to deliver our full year
2024 guidance and more broadly, our three-year targets outlined
earlier this year. More specifically, we remain pleased with our
performance thus far this year despite a somewhat mixed
macroeconomic backdrop as reflected by weakness in certain retail
end markets. As we move into the final quarter of the year, we are
further narrowing our full year 2024 outlook range.
Consequently, for 2024, we expect the following:
- Revenue growth for the full year to be up low-single digits,
compared to our previous guidance of flat to up low-single digits.
Our revenue guidance reflects the expiration of the Under Armour
sock license agreement on March 31, 2024, which has had minimal
impact on our profitability. Excluding the impact of this
agreement, full year revenue growth in 2024 would be in the
mid-single digit range;
- Adjusted operating margin1 to be slightly above 21%, compared
to our previous guidance of slightly above the high end of our 18%
to 20% target range for 2024;
- Capex to come in at approximately 5% of net sales, maintaining
previous guidance;
- Adjusted diluted EPS1 in the range of $2.97 to $3.02, up
significantly between 15.5% and 17.5% year over year, compared to
our previous guidance of $2.92 to $3.07; and
- Free cash flow1 still expected to be above 2023 levels, driven
by increased profitability, lower working capital investments and
lower capital expenditures than in 2023.
The assumptions underpinning our 2024 guidance include the
following:
- Ongoing improvement in POS through the final quarter of 2024 as
well as growth opportunities in all our channels.
- The continued benefit of the refundable jobs credit recently
introduced by Barbados, where our Sales and Marketing operations
are headquartered. This credit, which became applicable in the
second quarter, was retroactive to January 1, 2024, and flows
through SG&A.
- The estimated impact of the recently enacted GMT legislation in
Canada and Barbados on our effective tax rate, retroactive to
January 1, 2024. The Company's adjusted effective income tax1 rate
is expected to be approximately 18% for the full year.
- Continued share repurchases under our NCIB program, given the
strength of our balance sheet, our expected strong free cash flow
and our leverage framework target of 1.5x to 2.5x net debt to
adjusted EBITDA1.
ESGThe Company was recently recognized as one
of Canada’s Most Responsible Companies by Newsweek. In its
inaugural year, Newsweek, in partnership with Statista, recognized
150 companies selected from Canada’s 700 largest private and public
companies, and across 13 industries, for their commitment to
responsible practices. Gildan ranked 14th overall and secured the
top spot in the Retail and Consumer Goods industry, an achievement
which is a testament to our fundamental commitment to ESG.
Declaration of Quarterly DividendThe Board of
Directors has declared a cash dividend of $0.205 per share, payable
on December 16, 2024 to shareholders of record as of November 21,
2024. 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.
Renewal of Normal Course Issuer Bid
(NCIB)During the third quarter, the Company completed
share repurchases under its NCIB ending August 8, 2024 and
following the renewal of the Company's NCIB, effective August 9,
2024, the Company continued to repurchase shares under the NCIB. A
total of 8,830,265 common shares were repurchased for cancellation
during the third quarter at a total cost of approximately $372
million.
Gildan’s management and the Board of Directors believe the
repurchase of common shares represents an appropriate use of
Gildan’s financial resources and that share repurchases under the
NCIB will not preclude Gildan from continuing to pursue organic
growth and complementary acquisitions.
Disclosure of Outstanding Share DataAs at
October 25, 2024, there were 154,422,137 common shares issued
and outstanding along with 282,737 stock options and 42,289
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
will hold a conference call to discuss the Company's third quarter
2024 results today at 8:30 AM ET. The conference call can be
accessed by dialing (800) 715-9871 (Canada & U.S.) or (646)
307-1963 (international) and entering passcode 7966565#. A replay
will be available for 7 days starting at 12:30 PM EST by dialing
(800) 770-2030 (Canada & U.S.) or (609) 800-9909
(international) and entering the same passcode. A live audio
webcast of the conference call, as well as the replay, will be
available at the following link: Gildan Q3 2024 audio webcast.
This release should be read in conjunction with Gildan’s
Management’s Discussion and Analysis and its unaudited condensed
interim consolidated financial statements as at and for the three
and nine months ended September 29, 2024, 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) |
Q3 2024 |
|
Q3 2023 |
|
Variation (%) |
|
|
YTD 2024 |
|
YTD 2023 |
|
Variation (%) |
|
|
Net sales |
891.1 |
|
869.9 |
|
2.4 % |
|
|
2,449.1 |
|
2,413.2 |
|
1.5 % |
|
| Gross profit |
277.6 |
|
239.2 |
|
16.1 % |
|
|
750.7 |
|
643.5 |
|
16.7 % |
|
| Adjusted gross profit(1) |
277.6 |
|
239.2 |
|
16.1 % |
|
|
750.7 |
|
640.4 |
|
17.2 % |
|
| SG&A expenses |
83.6 |
|
82.2 |
|
1.7 % |
|
|
312.5 |
|
242.1 |
|
29.1 % |
|
| Adjusted SG&A
expenses(1) |
78.1 |
|
82.2 |
|
(5.0) % |
|
|
230.2 |
|
242.1 |
|
(4.9)% |
|
| Gain on sale and
leaseback |
— |
|
— |
|
n.m. |
|
|
— |
|
(25.0 |
) |
n.m. |
|
| Net insurance gains |
— |
|
— |
|
n.m. |
|
|
— |
|
(74.2 |
) |
n.m. |
|
| Restructuring and
acquisition-related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(recovery) |
1.1 |
|
2.0 |
|
(45.0) % |
|
|
(1.0 |
) |
34.9 |
|
n.m. |
|
| Operating income |
192.9 |
|
155.0 |
|
24.5 % |
|
|
439.3 |
|
465.7 |
|
(5.7)% |
|
| Adjusted operating
income(1) |
199.5 |
|
157.0 |
|
27.1 % |
|
|
520.6 |
|
398.3 |
|
30.7 % |
|
| Adjusted EBITDA(1) |
236.1 |
|
188.3 |
|
25.4 % |
|
|
625.4 |
|
489.2 |
|
27.8 % |
|
| Financial expenses |
30.2 |
|
20.7 |
|
45.6 % |
|
|
77.2 |
|
58.4 |
|
32.1 % |
|
| Income tax expense |
31.3 |
|
6.9 |
|
n.m. |
|
|
93.5 |
|
27.0 |
|
n.m. |
|
| Adjusted income tax
expense(1) |
31.6 |
|
6.9 |
|
n.m. |
|
|
81.8 |
|
16.5 |
|
n.m. |
|
| Net earnings |
131.5 |
|
127.4 |
|
3.2 % |
|
|
268.5 |
|
380.3 |
|
(29.4)% |
|
| Adjusted net earnings(1) |
137.8 |
|
129.4 |
|
6.5 % |
|
|
361.5 |
|
323.4 |
|
11.8% |
|
|
Basic EPS |
0.82 |
|
0.73 |
|
12.3 % |
|
|
1.62 |
|
2.14 |
|
(24.3)% |
|
| Diluted EPS |
0.82 |
|
0.73 |
|
12.3 % |
|
|
1.62 |
|
2.14 |
|
(24.3)% |
|
| Adjusted diluted EPS(1) |
0.85 |
|
0.74 |
|
14.9 % |
|
|
2.18 |
|
1.82 |
|
19.8 % |
|
|
Gross margin(2) |
31.2 % |
|
27.5 % |
|
3.7 pp |
|
|
30.7 % |
|
26.7 % |
|
4.0 pp |
|
| Adjusted gross margin(1) |
31.2 % |
|
27.5 % |
|
3.7 pp |
|
|
30.7 % |
|
26.5 % |
|
4.2 pp |
|
| SG&A expenses as a
percentage of net sales(3) |
9.4 % |
|
9.5 % |
|
(0.1) pp |
|
|
12.8 % |
|
10.0 % |
|
2.8 pp |
|
| Adjusted SG&A expenses as
a percentage of net sales(1) |
8.8 % |
|
9.5 % |
|
(0.7) pp |
|
|
9.4 % |
|
10.0 % |
|
(0.6) pp |
|
| Operating margin(4) |
21.7 % |
|
17.8 % |
|
3.9 pp |
|
|
17.9 % |
|
19.3 % |
|
(1.4) pp |
|
| Adjusted operating
margin(1) |
22.4 % |
|
18.1 % |
|
4.3 pp |
|
|
21.3 % |
|
16.5 % |
|
4.8 pp |
|
|
Cash flows from (used in) operating activities |
178.2 |
|
305.1 |
|
(41.6) % |
|
|
290.9 |
|
307.5 |
|
(5.4)% |
|
| Capital expenditures |
(29.5 |
) |
(42.5 |
) |
(30.5) % |
|
|
(109.8 |
) |
(172.4 |
) |
(36.3)% |
|
| Free
cash flow(1) |
148.9 |
|
264.6 |
|
(43.7) % |
|
|
181.6 |
|
188.4 |
|
(3.6)% |
|
|
As at (in $ millions, or otherwise indicated) |
Sep 29,2024 |
Dec 31,2023 |
|
Inventories |
1,096.7 |
1,089.4 |
| Trade accounts receivable |
612.9 |
412.5 |
| Net debt(1) |
1,506.9 |
993.5 |
| Net
debt leverage ratio(1) |
1.9 |
1.5 |
(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 expenses as a percentage of net sales is defined as
SG&A expenses divided by net sales.(4) Operating margin is
defined as operating income divided by net sales.n.m. = not
meaningfulDISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
|
(in $ millions, or otherwise indicated) |
Q3 2024 |
Q3 2023 |
Variation (%) |
|
YTD 2024 |
YTD 2023 |
Variation (%) |
|
|
Activewear |
788.3 |
744.4 |
5.9 % |
|
2,117.0 |
2,024.0 |
4.6 % |
|
| Hosiery
and underwear |
102.8 |
125.5 |
(18.1)% |
|
332.1 |
389.2 |
(14.7)% |
|
|
|
891.1 |
869.9 |
2.4 % |
|
2,449.1 |
2,413.2 |
1.5 % |
|
Net sales were derived from customers located in the following
geographic areas:
|
(in $ millions, or otherwise indicated) |
Q3 2024 |
Q3 2023 |
Variation (%) |
|
YTD 2024 |
YTD 2023 |
Variation (%) |
|
|
United States |
798.8 |
787.7 |
1.4 % |
|
2,180.4 |
2,158.7 |
1.0 % |
|
| Canada |
28.2 |
28.9 |
(2.4)% |
|
81.1 |
82.7 |
(2.0)% |
|
|
International |
64.1 |
53.3 |
20.4 % |
|
187.6 |
171.8 |
9.2 % |
|
|
|
891.1 |
869.9 |
2.4 % |
|
2,449.1 |
2,413.2 |
1.5 % |
|
INCOME TAX EXPENSE AND IMPACT OF GLOBAL MINIMUM TAX
(GMT)
|
(in $ millions, or otherwise indicated) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
| Income tax expense: |
|
|
|
|
|
Tax expense excluding impact of GMT and other items below |
7.4 |
|
6.9 |
|
18.6 |
|
16.5 |
|
|
Impact of GMT |
24.2 |
|
— |
|
63.3 |
|
— |
|
|
Income tax (recovery) expense relating to restructuring charges and
other adjustments |
(0.3 |
) |
— |
|
0.2 |
|
10.5 |
|
|
Tax rate changes resulting in the revaluation of deferred income
tax assets and liabilities |
— |
|
— |
|
11.5 |
|
— |
|
|
Total income tax expense |
31.3 |
|
6.9 |
|
93.6 |
|
27.0 |
|
|
Adjustments for: |
|
|
|
|
|
Income tax recovery (expense) relating to restructuring charges and
other adjustments |
0.3 |
|
— |
|
(0.2 |
) |
(10.5 |
) |
|
Tax rate changes resulting in the revaluation of deferred income
tax assets and liabilities |
— |
|
— |
|
(11.5 |
) |
— |
|
|
Adjusted income tax expense(3) |
31.6 |
|
6.9 |
|
81.9 |
|
16.5 |
|
| Earnings before income
taxes |
162.7 |
|
134.3 |
|
362.0 |
|
407.3 |
|
|
Adjustments(1)(4) |
6.6 |
|
2.0 |
|
81.3 |
|
(67.4 |
) |
|
Adjusted earnings before income taxes(3) |
169.3 |
|
136.3 |
|
443.3 |
|
339.9 |
|
| Average effective income tax
rate(2) |
19.2 % |
|
5.1 % |
|
25.8 % |
|
6.6 % |
|
|
Adjusted effective income tax rate(3) |
18.7 % |
|
5.1 % |
|
18.5 % |
|
4.9 % |
|
(1) Adjustments are detailed in section entitled "Certain
adjustments to non-GAAP measures" in this press release. (2)
Average effective income tax rate is calculated as income tax
expense divided by earnings before income taxes. (3) Adjusted
income tax expense and adjusted earnings before income taxes are
non-GAAP financial measures, and adjusted effective income tax rate
is a non-GAAP ratio calculated as adjusted income tax expense
divided by adjusted earnings before income taxes. Refer to the
section "Non-GAAP financial measures and related ratios" in this
press release. (4) Adjustments for the three and nine months ended
September 29, 2024 of $6.6 million and $81.3 million,
respectively, include costs relating to proxy contest and
leadership changes and related matters and restructuring and
acquisition-related costs (recoveries). Adjustments for the three
months ended October 1, 2023 include $2.0 million (loss) for
restructuring and acquisition related costs, and for the nine
months ended October 1, 2023, includes $67.4 million (gain),
consisting of $77.3 million of net insurance gains and a $25
million pretax gain on sale and leaseback, partially offset by
$34.9 million for restructuring and acquisition-related costs.
The increase in the income tax expense and effective tax rate
for the three and nine months ended September 29, 2024, compared to
the same period last year, is mainly due to the impact of the
enactment of the Global Minimum Tax Act in Canada and the enactment
of legislation in Barbados introducing certain tax measures in
response to the Global implementation of the Pillar Two global
minimum Tax regime. More specifically, during the second quarter of
fiscal 2024, the Government of Barbados increased its domestic
corporate tax rate applicable to the Company from a sliding scale
of 5.5% to 1% to a flat rate of 9%, effective January 1, 2024. In
addition, the Company also became subject to the OECD’s Pillar Two
global minimum tax regime, effective January 1, 2024, which results
in an additional top-up tax levied on the Company’s subsidiaries in
Barbados under Barbados’ domestic top-up tax legislation. These
events combined to result in an effective tax rate of 15% in
Barbados. For the three and nine months ended September 29, 2024,
the Company recognized a current tax expense of $24.2 million
and $63.3 million, respectively related to the increase in the
Barbados corporate tax rate and the top-up tax on the Company’s
earnings in Barbados. In addition the Company recorded a deferred
income tax charge of nil and $11.5 million for the three and nine
months ended September 29, 2024, for the revaluation of deferred
tax assets and liabilities in Barbados as a result of the increase
in the Barbados corporate tax rate to 9%.
The Company's adjusted effective income tax rate for the nine
months ended September 29, 2024 was 18.5%, as noted in the above
table, which is in line with the Company's expected adjusted
effective income tax rate for the full year.
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 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 are included as an adjustment in arriving
at adjusted operating income, adjusted operating margin, adjusted
net earnings, adjusted earnings before income taxes, adjusted
diluted EPS, and adjusted EBITDA. For the three and nine months
ended September 29, 2024, restructuring and acquisition-related
costs of $1.1 million and recoveries of $1.0 million were
recognized, respectively (2023 - $2.0 million costs and $34.9
million costs). Refer to subsection 5.5.5 entitled “Restructuring
and acquisition-related costs (recovery)” in our interim MD&A
for a detailed discussion of these costs.
Net insurance gainsDuring fiscal year 2023, the Company
recognized net insurance gains of nil and $77.3 million for the
three and nine months ended October 1, 2023, respectively, which
related to the two hurricanes which impacted the Company’s
operations in Central America in November 2020. Net insurance gains
related to the recognition of insurance recoveries for business
interruption losses and insurance recoveries for damaged equipment
as follows:
- Insurance gains relating to recoveries for business
interruption losses for the three and nine months ended October 1,
2023 were nil and $74.2 million, respectively, and were recorded in
insurance gains, and included as an adjustment in arriving at
adjusted operating income, adjusted operating margin, adjusted
earnings before income taxes, adjusted net earnings, adjusted
diluted EPS, and adjusted EBITDA.
- Net insurance gains relating to recoveries for damaged
equipment for the three and nine months ended October 1, 2023, were
nil and $3.1 million, respectively, were recorded in cost of sales
and included as an adjustment in arriving at adjusted gross profit
and adjusted gross margin, adjusted operating income, adjusted
operating margin, adjusted earnings before income taxes, adjusted
net earnings, adjusted diluted EPS, and adjusted EBITDA.
Gain on sale and leasebackDuring the first quarter of 2023, the
Company recognized a gain of $25.0 million ($15.5 million after
reflecting $9.5 million of income tax expense) on the sale and
leaseback of one of our distribution centres located in the U.S.
The impact of this gain was included as an adjustment in arriving
at adjusted operating income, adjusted operating margin, adjusted
earnings before income taxes, adjusted income tax expense, adjusted
net earnings, adjusted diluted EPS, and adjusted EBITDA.
Costs relating to proxy contest and leadership
changes and related mattersOn December 11, 2023, the Company’s then
Board of Directors (the “Previous Board”) terminated the Company’s
President and Chief Executive Officer, Glenn Chamandy. On such
date, the Previous Board appointed Vince Tyra as President and
Chief Executive Officer, and Mr. Tyra took office in the first
quarter of fiscal 2024, effective on January 15, 2024. Following
the termination of Mr. Chamandy, dissenting shareholder Browning
West and others initiated an activist campaign and proxy contest
against the Previous Board, proposing a new slate of Directors and
requesting the reinstatement of Mr. Chamandy as President and Chief
Executive Officer. In the second quarter of 2024, on April 28,
2024, in advance of the May 28, 2024 Annual General Meeting of
Shareholders (“Annual Meeting”), the Previous Board announced a
refreshed Board of Directors (“Refreshed Board”) that resulted in
the immediate replacement of five Directors, with two additional
Directors staying on temporarily but not standing for re-election
at the Annual Meeting. On May 23, 2024, five days prior to the
Annual Meeting, the Refreshed Board and Mr. Tyra resigned, along
with Arun Bajaj, the Company’s Executive Vice-President, Chief
Human Resources Officer (CHRO) and Legal Affairs. The Refreshed
Board appointed Browning West's nominees to the Board of Directors
(the “New Board”), effective as of that date. On May 24, 2024, the
New Board reinstated Mr. Chamandy as President and Chief Executive
Officer. On May 28, 2024, the New Board was elected by shareholders
at the Annual Meeting. During the past 10 months, the Company
incurred significant expenses primarily at the direction of the
Previous Board and the Refreshed Board, including: (i) legal,
communication, proxy advisory, financial and other advisory fees
relating to the proxy contest and related matters and the
termination and subsequent reinstatement of Mr. Chamandy; (ii)
legal, financial and other advisory fees with respect to a review
process initiated by the Previous Board following receipt of a
confidential non-binding expression of interest to acquire the
Company; (iii) special senior management retention awards; (iv)
severance and termination benefits relating to outgoing executives;
and (v) incremental director meeting fees and insurance premiums.
In addition, subsequent to the Annual Meeting, the Corporate
Governance and Social Responsibility Committee (the "CGSRC")
recommended to the New Board, and the New Board approved, back-pay
compensation for Mr. Chamandy (who did not receive any severance
payment following his termination on December 11, 2023), relating
to his reinstatement, including the reinstatement of share-based
awards that were canceled by the Previous Board. In light of the
strong shareholder support received for its successful campaign and
the fact that the Refreshed Board resigned in advance of the Annual
Meeting, the CGSRC also recommended to the New Board, and the New
Board approved, the reimbursement of Browning West’s legal and
other advisory expenses relating to the proxy contest, in the
amount of $9.4 million in the second quarter of 2024.
The total costs relating to these non-recurring events (“Costs
relating to proxy contest and leadership changes and related
matters”) amounted to $5.5 million and $82.3 million, respectively,
for the three and nine months ended September 29, 2024, as itemized
in the table below with corresponding footnotes. Such costs are
included in selling, general and administrative expenses. The
impact of the below charges are included as adjustments in arriving
at adjusted SG&A expenses, adjusted SG&A expenses as a
percentage of net sales, adjusted operating income, adjusted
operating margin, adjusted earnings before income taxes, adjusted
net earnings, adjusted diluted EPS, and adjusted EBITDA.
|
(in $ millions) |
Q3 2024 |
Q3 2023 |
|
YTD 2024 |
YTD 2023 |
| Advisory fees on shareholder
matters(1) |
2.5 |
— |
|
35.8 |
— |
| Severance and other
termination benefits(2) |
— |
— |
|
21.6 |
— |
| Compensation expenses relating
to Glenn Chamandy’s termination and subsequent reinstatement as
President and Chief Executive Officer(3) |
— |
— |
|
8.9 |
— |
| Incremental costs relating to
the previous Board and refreshed Board(4) |
1.4 |
— |
|
8.8 |
— |
| Costs relating to assessing
external interests in acquiring the Company(5) |
— |
— |
|
3.0 |
— |
| Special
retention awards(6) |
1.6 |
— |
|
4.2 |
— |
|
Costs relating to proxy contest and leadership changes and related
matters |
5.5 |
— |
|
82.3 |
— |
(1) Relates to advisory, legal and other expenses for the proxy
contest and shareholder matters. Charges incurred during the three
and nine months ended September 29, 2024 of $2.5 million and $35.8
million, respectively, include:
- $2.5 million and $26.4 million for the three and nine months
ended September 29, 2024 respectively, of advisory, legal and other
fees and expenses related to the proxy contest and related matters;
and
- nil and $9.4 million of expenses, respectively, for the
reimbursement of advisory, legal and other fees and expenses
incurred by Browning West in relation to the proxy contest (refer
to note 8(c)) of the condensed interim consolidated financial
statements for additional information).
(2) Relates to the payout of severance and other termination
benefits to Mr. Tyra and Mr. Bajaj pursuant to existing severance
arrangements approved and made by the Refreshed Board in the
context of the proxy contest, just prior to its conclusion in May
2024. The cash payouts in the second quarter of 2024 for severance
and termination benefits totaled $24.4 million, of which $15.3
million was for Mr. Tyra and $9.1 million was for Mr. Bajaj. The
respective charges included in selling, general and administrative
expenses during the second quarter of 2024 totaled
$21.6 million (of which $14.1 million was for Mr. Tyra and
$7.5 million was for Mr. Bajaj), and include $12.3 million for
accelerated vesting of share-based awards as well $9.3 million in
other termination benefits for these executives.
(3) Compensation expenses relating to Mr. Chamandy include
back-pay as part of his reinstatement by the New Board, and the
reinstatement of share-based awards which had been canceled by the
Previous Board. Net charges incurred during three and nine months
ended September 29, 2024 of nil and $8.9 million, respectively,
include:
- nil and $1.7 million, respectively, for backpay and accruals
for short-term incentive plan benefits;
- nil and $14.6 million, respectively, of stock-based
compensation expense for past service costs related to the
reinstatement of Mr. Chamandy’s 2022 and 2023 long-term
incentive program (LTIP) grants (for which a reversal of
compensation expense of approximately $6 million was recorded in
the fourth quarter of fiscal 2023);
- nil and $2.4 million, respectively, of stock-based compensation
expense adjustments relating to Mr. Chamandy’s 2021 LTIP
share-based grant which vested in 2024; and
- The reversal of a $9.8 million accrual for severance in the
second quarter of 2024 (which had been accrued for in the fourth
quarter of 2023), as Mr. Chamandy forfeited any termination benefit
entitlement in connection with the award of back-pay and
reinstatement of canceled share-based awards as noted above.
(4) The Company incurred $1.4 million in the third quarter of
fiscal 2024 ($8.8 million year-to-date), of incremental costs
relating to the Previous Board and Refreshed Board. These charges
include nil and $4.8 million, respectively, for a Directors and
Officers run off insurance policy, $0.2 million and $0.6 million,
respectively, for special board meeting fee payments, and $1.2
million and $3.4 million, respectively, for the increase in value
of the deferred share units (DSU) liability.
(5) Relates to advisory, legal and other expenses with respect
to the announced review process initiated by the Previous Board
following receipt of a confidential non-binding expression of
interest to acquire the Company. The Company incurred nil and $3.0
million for the three and nine months ended September 29, 2024,
respectively, of expenses related to this matter.
(6) Stock-based compensation expenses relating to special
retention awards, granted in the first quarter of fiscal 2024,
includes $1.6 million in the third quarter of fiscal 2024, and $4.2
million for fiscal 2024 year-to-date. At the grant date, these
special retention awards had a total fair value of $8.6 million.
The stock-based compensation expense relating to these awards is
being recognized over the respective vesting periods, with most of
the awards originally vesting at the end of 2024. In connection
with the departure of Mr. Bajaj, $2.5 million of these awards
were fully paid out in cash to him during the second quarter of
2024, as part of the $9.1 million payout in note 2 above.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, impairment (impairment reversal) of
intangible assets, net insurance gains, gain on sale and leaseback,
costs relating to proxy contest and leadership changes and related
matters, 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 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) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
|
Net earnings |
131.5 |
|
127.4 |
|
268.5 |
|
380.3 |
|
| Adjustments for: |
|
|
|
|
|
|
Restructuring and acquisition-related costs (recovery) |
1.1 |
|
2.0 |
|
(1.0 |
) |
34.9 |
|
|
Net insurance gains |
— |
|
— |
|
— |
|
(77.3 |
) |
|
Gain on sale and leaseback |
— |
|
— |
|
— |
|
(25.0 |
) |
|
Costs relating to proxy contest and leadership changes and related
matters |
5.5 |
|
— |
|
82.3 |
|
— |
|
|
Income tax (recovery) expense relating to restructuring charges and
other items above |
(0.3 |
) |
— |
|
0.2 |
|
10.5 |
|
|
Income tax expense related to the revaluation of deferred income
tax assets and liabilities |
— |
|
— |
|
11.5 |
|
— |
|
|
Adjusted net earnings |
137.8 |
|
129.4 |
|
361.5 |
|
323.4 |
|
|
Basic EPS |
0.82 |
|
0.73 |
|
1.62 |
|
2.14 |
|
| Diluted EPS |
0.82 |
|
0.73 |
|
1.62 |
|
2.14 |
|
|
Adjusted diluted EPS(1) |
0.85 |
|
0.74 |
|
2.18 |
|
1.82 |
|
(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 earnings before income taxes, adjusted income tax
expense, and adjusted effective income tax rateAdjusted effective
income tax rate is defined as adjusted income tax expense divided
by adjusted earnings before income taxes. Adjusted earnings before
income taxes excludes restructuring and acquisition-related costs,
impairment (impairment reversal) of intangible assets, net
insurance gains, gain on sale and leaseback, and costs relating to
proxy contest and leadership changes and related matters. Adjusted
income tax expense is defined as income tax expense excluding tax
rate changes resulting in the revaluation of deferred income tax
assets and liabilities, income taxes relating to the re-assessment
of the probability of realization of previously recognized or
de-recognized deferred income tax assets, and income tax expense
relating to restructuring charges and other pretax adjustments
noted above. The Company excludes these adjustments because they
affect the comparability of its effective income tax rate. The
Company believes the adjusted effective income tax rate provides a
clearer understanding of our normalized effective tax rate and
financial performance for the current period and for purposes of
developing its annual financial budgets. The Company believes that
adjusted effective income tax rate is useful to investors in
assessing the Company's future effective income tax rate as it
identifies certain pre-tax expenses and gains and income tax
charges and recoveries which are not expected to recur on a regular
basis (in particular, non-recurring costs such as proxy contest and
leadership changes and related matters incurred in the Company’s
Canadian legal entity which do not result in tax recoveries, and
tax rate changes resulting in the revaluation of deferred income
tax assets and liabilities).
|
(in $ millions, or otherwise indicated) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
| Earnings before income
taxes |
162.7 |
|
134.3 |
|
362.0 |
|
407.3 |
|
| Adjustments for: |
|
|
|
|
|
Restructuring and acquisition-related costs (recovery) |
1.1 |
|
2.0 |
|
(1.0 |
) |
34.9 |
|
|
Net insurance gains |
— |
|
— |
|
— |
|
(77.3 |
) |
|
Gain on sale and leaseback |
— |
|
— |
|
— |
|
(25.0 |
) |
|
Costs relating to proxy contest and leadership changes and related
matters |
5.5 |
|
— |
|
82.3 |
|
— |
|
|
Adjusted earnings before income taxes |
169.3 |
|
136.3 |
|
443.3 |
|
339.9 |
|
| Income tax expense |
31.3 |
|
6.9 |
|
93.5 |
|
27.0 |
|
| Adjustments for: |
|
|
|
|
|
Income tax expense relating to restructuring charges and other
adjustments above |
0.3 |
|
— |
|
(0.2 |
) |
(10.5 |
) |
|
Tax rate changes resulting in the revaluation of deferred income
tax assets and liabilities |
— |
|
— |
|
(11.5 |
) |
— |
|
|
Adjusted income tax expense |
31.6 |
|
6.9 |
|
81.8 |
|
16.5 |
|
|
Average effective income tax rate(1) |
19.2 |
% |
5.1 |
% |
25.8 |
% |
6.6 |
% |
|
Adjusted effective income tax rate(2) |
18.7 |
% |
5.1 |
% |
18.5 |
% |
4.9 |
% |
(1) Average effective income tax rate is calculated as income
tax expense divided by earnings before income taxes.(2) This is a
non-GAAP ratio. It is calculated as adjusted income tax expense
divided by adjusted earnings before income taxes.
Adjusted gross profit and adjusted gross marginAdjusted gross
profit is calculated as gross profit excluding the impact of net
insurance gains in fiscal 2023. 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 item described above. The
Company excludes this item because it affects the comparability of
its financial results and could potentially distort the analysis of
trends in its business performance. Excluding this item does not
imply that it is 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 net insurance gains in prior years. 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) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
|
Gross profit |
277.6 |
|
239.2 |
|
750.7 |
|
643.5 |
|
| Adjustment for: |
|
|
|
|
|
Net insurance gains |
— |
|
— |
|
— |
|
(3.1 |
) |
|
Adjusted gross profit |
277.6 |
|
239.2 |
|
750.7 |
|
640.4 |
|
|
Gross margin |
31.2 % |
|
27.5 % |
|
30.7 % |
|
26.7 % |
|
|
Adjusted gross margin(1) |
31.2 % |
|
27.5 % |
|
30.7 % |
|
26.5 % |
|
(1) This is a non-GAAP ratio. It is calculated
as adjusted gross profit divided by net sales.
Adjusted SG&A expenses and adjusted SG&A expenses as a
percentage of net salesAdjusted SG&A expenses is calculated as
selling, general and administrative expenses excluding the impact
of costs relating to proxy contest and leadership changes and
related matters. The Company uses adjusted SG&A expenses and
adjusted SG&A expenses as a percentage of net sales to measure
its performance from one period to the next, without the variation
caused by the impact of the items described above. Excluding these
items does not imply they are non-recurring. The Company believes
adjusted SG&A expenses and adjusted SG&A expenses as a
percentage of net sales are useful to investors because they help
identify underlying trends in our business that could otherwise be
masked by costs relating to the proxy contest and leadership
changes and related matters, which the Company believes are unusual
and non-recurring in nature. 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) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
| SG&A expenses |
83.6 |
|
82.2 |
|
312.5 |
|
242.1 |
|
| Adjustment for: |
|
|
|
|
|
Costs relating to proxy contest and leadership changes and related
matters |
5.5 |
|
— |
|
82.3 |
|
— |
|
|
Adjusted SG&A expenses |
78.1 |
|
82.2 |
|
230.2 |
|
242.1 |
|
|
SG&A expenses as a percentage of net sales |
9.4 % |
|
9.5 % |
|
12.8 % |
|
10.0 % |
|
|
Adjusted SG&A expenses as a percentage of net sales(1) |
8.8 % |
|
9.5 % |
|
9.4 % |
|
10.0 % |
|
(1) This is a non-GAAP ratio. It is calculated as adjusted
SG&A expenses divided by net sales.
Adjusted operating income and adjusted operating marginAdjusted
operating income is calculated as operating income before
restructuring and acquisition-related costs, and also excludes
impairment (impairment reversal) of intangible assets, net
insurance gains, gain on sale and leaseback, and costs relating to
proxy contest and leadership changes and related matters.
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 operating 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
the items noted above that can vary from period to period.
Excluding these items does not imply they are 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) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
|
Operating income |
192.9 |
|
155.0 |
|
439.3 |
|
465.7 |
|
| Adjustments for: |
|
|
|
|
|
Restructuring and acquisition-related costs (recovery) |
1.1 |
|
2.0 |
|
(1.0 |
) |
34.9 |
|
|
Net insurance gains |
— |
|
— |
|
— |
|
(77.3 |
) |
|
Gain on sale and leaseback |
— |
|
— |
|
— |
|
(25.0 |
) |
|
Costs relating to proxy contest and leadership changes and related
matters |
5.5 |
|
— |
|
82.3 |
|
— |
|
|
Adjusted operating income |
199.5 |
|
157.0 |
|
520.6 |
|
398.3 |
|
|
Operating margin |
21.7 % |
|
17.8 % |
|
17.9 % |
|
19.3 % |
|
|
Adjusted operating margin(1) |
22.4 % |
|
18.1 % |
|
21.3 % |
|
16.5 % |
|
(1) This is a non-GAAP ratio. It is calculated
as adjusted operating income divided by net sales.
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
(impairment reversal) of intangible assets, net insurance gains,
gain on sale and leaseback, and costs relating to proxy contest and
leadership changes and related matters. 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 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) |
Q3 2024 |
Q3 2023 |
YTD 2024 |
|
YTD 2023 |
|
|
Net earnings |
131.5 |
127.4 |
268.5 |
|
380.3 |
|
| Restructuring and
acquisition-related costs (recovery) |
1.1 |
2.0 |
(1.0 |
) |
34.9 |
|
| Net insurance gains |
— |
— |
— |
|
(77.3 |
) |
| Gain on sale and
leaseback |
— |
— |
— |
|
(25.0 |
) |
| Costs relating to proxy
contest and leadership changes and related matters |
5.5 |
— |
82.3 |
|
— |
|
| Depreciation and
amortization |
36.5 |
31.3 |
104.9 |
|
90.9 |
|
| Financial expenses, net |
30.2 |
20.7 |
77.2 |
|
58.4 |
|
| Income
tax expense |
31.3 |
6.9 |
93.5 |
|
27.0 |
|
|
Adjusted EBITDA |
236.1 |
188.3 |
625.4 |
|
489.2 |
|
Free cash flow Free cash flow is defined as cash flow from
operating activities, less cash flow used in investing activities
excluding cash flows relating to 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 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.
|
(in $ millions) |
Q3 2024 |
|
Q3 2023 |
|
YTD 2024 |
|
YTD 2023 |
|
|
Cash flows from (used in) operating activities |
178.2 |
|
305.1 |
|
290.9 |
|
307.5 |
|
| Cash flows from (used in)
investing activities |
(29.3 |
) |
(40.5 |
) |
(109.3 |
) |
(119.1 |
) |
| Adjustment for: |
|
|
|
|
|
Business acquisitions |
— |
|
— |
|
— |
|
— |
|
|
Free cash flow |
148.9 |
|
264.6 |
|
181.6 |
|
188.4 |
|
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) |
Sep 29, 2024 |
|
Dec 31, 2023 |
|
|
Long-term debt (including current portion) |
1,479.0 |
|
985.0 |
|
| Bank indebtedness |
— |
|
— |
|
| Lease
obligations (including current portion) |
106.4 |
|
98.1 |
|
|
Total debt |
1,585.4 |
|
1,083.1 |
|
| Cash
and cash equivalents |
(78.5 |
) |
(89.6 |
) |
|
Net debt |
1,506.9 |
|
993.5 |
|
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 currently set a net debt leverage target ratio of 1.5
to 2.5 times pro-forma adjusted EBITDA for the trailing twelve
months (previously 1.5 to 2.0 times). 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, 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) |
Sep 29, 2024 |
Dec 31, 2023 |
|
Adjusted EBITDA for the trailing twelve months |
810.9 |
674.5 |
| Adjustment for: |
|
|
|
Business acquisitions |
— |
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
810.9 |
674.5 |
|
Net debt |
1,506.9 |
993.5 |
| Net
debt leverage ratio(1) |
1.9 |
1.5 |
(1) The Company's total net debt to EBITDA ratio for purposes of
its loan and note agreements was 2.0 at September 29,
2024.
Caution Concerning Forward-Looking
Statements
Certain statements included in this press release constitute
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations and are subject to important risks,
uncertainties, and assumptions. This forward-looking information
includes, amongst others, information with respect to our
objectives and the strategies to achieve these objectives, as well
as information with respect to our beliefs, plans, expectations,
anticipations, estimates, and intentions, 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 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
“2024 Outlook”. Forward-looking statements generally can be
identified by the use of conditional or forward-looking terminology
such as “may”, “will”, “expect”, “intend”, “estimate”, “project”,
“assume”, “anticipate”, “plan”, “foresee”, “believe”, or
“continue”, or the negatives of these terms or variations of them
or similar terminology.
We refer you to the Company’s filings with the Canadian
securities regulatory authorities and the U.S. Securities and
Exchange Commission, as well as the risks described under the
“Financial risk management”, “Critical accounting estimates and
judgments”, and “Risks and uncertainties” sections of our most
recent Management’s Discussion and Analysis for a discussion of the
various factors that may affect the Company’s future results.
Material factors and assumptions that were applied in drawing a
conclusion or making a forecast or projection are also set out
throughout such document and this press release.
Forward-looking information is inherently uncertain and the
results or events predicted in such forward-looking information may
differ materially from actual results or events. Material factors,
which could cause actual results or events to differ materially
from a conclusion, forecast, or projection in such forward-looking
information, include, but are not limited to:
- changes in general economic, financial or geopolitical
conditions globally or in one or more of the markets we serve;
- our ability to implement our growth strategies and plans,
including our ability to bring projected capacity expansion
online;
- the intensity of competitive activity and our ability to
compete effectively;
- our reliance on a small number of significant customers,
including our largest distributor;
- 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 prices of raw materials and
energy related inputs, from current levels, used to manufacture and
transport our products;
- 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;
- 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, compliance with 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;
- elimination of government subsidies and credits that we
currently benefit from, and the non-realization of anticipated new
subsidies and credits;
- 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;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- 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;
- our ability to protect our intellectual property rights;
- operational problems with our information systems or those of
our service providers 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;
- rapid developments in artificial intelligence;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- 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 press release 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 press
release, including our updated financial outlook for the 2024
fiscal year under the section "2024 Outlook", are expressly
qualified by this cautionary statement.
About Gildan
Gildan is a leading manufacturer of everyday basic apparel. The
Company’s product offering includes activewear, underwear and
socks, sold to a broad range of customers, including wholesale
distributors, screenprinters or embellishers, as well as to
retailers that sell to consumers through their physical stores
and/or e-commerce platforms and to global lifestyle brand
companies. The Company markets its products in North America,
Europe, Asia Pacific, and Latin America, under a diversified
portfolio of Company-owned brands including Gildan®, American
Apparel®, Comfort Colors®, GOLDTOE® and Peds®.
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: Jessy Hayem, CFA Senior
Vice-President, Head of Investor Relations and Global
Communications(514) 744-8511 jhayem@gildan.com
|
Media inquiries:Genevieve GosselinDirector, Global
Communications and Corporate Marketing(514)
343-8814communications@gildan.com |
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