HanesBrands Reports Second-Quarter 2020 Financial Results

HanesBrands (NYSE: HBI), a leading global marketer of branded everyday basic apparel, today announced second-quarter results with double-digit growth in diluted earnings per share despite market disruption from the COVID-19 pandemic.

The earnings growth resulted from the company’s ability to pivot to production and sales of personal protective garments (face masks and medical gowns) combined with relatively strong apparel performance in pandemic conditions, including 68% sales growth in the online channel.

In the midst of the global pandemic, HanesBrands is focused on: serving channels of trade that remain open; reopening production, distribution and selling operations in a safe and prudent manner; generating and preserving cash; and developing a product line of personal protective garments to meet emerging government, commercial and consumer demand.

Net sales for the second quarter ended June 27, 2020, were $1.74 billion compared with $1.76 billion a year ago. The company sold $752 million in protective garments globally. The year-ago quarter included net sales of $119 million from the now exited C9 Champion mass program and the DKNY intimate apparel license. Excluding the exited programs and foreign exchange rates, total constant-currency net sales for second-quarter 2020 increased 7%.

Second-quarter GAAP operating profit increased 5% to $242 million, and the quarter’s adjusted operating profit excluding actions increased 41% to $305 million.

Second-quarter GAAP EPS increased 12% to $0.46, and adjusted EPS excluding actions increased 58% to $0.60. (See the Note on Reconciliation of Select GAAP Measures to Non-GAAP Measures later in this news release for additional discussion and details of actions, which include pandemic-related charges.)

“The HanesBrands organization did a phenomenal job overcoming significant challenges in order to mitigate the effects of the global pandemic,” said Hanes Chief Executive Officer Gerald W. Evans Jr. “The professionalism, ingenuity and dedication of our worldwide employees was on display in generating double-digit EPS growth, establishing a new protective garments business line from scratch, and starting the reopening of manufacturing, distribution and selling in the most safe and effective manner possible.

“Despite the effects of pandemic-caused disruptions to global economies, our business is in great shape. We performed significantly better than our base-case scenario in both our apparel business and our new protective garment business. Point-of-sale trends are improving for apparel, and in the case of U.S. Innerwear basics and U.S. Champion, point-of-sale trends in May and June were higher than pre-COVID levels.

“Our brands are strong, and we are gaining market share and building momentum. Our liquidity remains strong allowing us to maintain our quarterly cash dividend and have ample operating flexibility. While there is still near-term uncertainty concerning the ongoing economic impact of the COVID-19 pandemic, we believe we are positioned to drive growth and seize opportunities over the next several years.”

As a result of the COVID-19 pandemic and the lack of visibility to business conditions, Hanes withdrew its quarterly and full-year performance guidance on March 25, 2020. The company then modeled several different financial scenarios based on assumptions of when retailer stores and economies would begin to reopen. Under the company’s base-case scenario, stores were assumed to gradually reopen beginning in late May.

Callouts for Results and Ongoing Operations During the Pandemic

Apparel Sales and Protective Garments Contribute to Results. Apparel sales and protective garment sales both exceeded the company’s base-case scenario for the quarter. The company continues to generate significant sales growth through channels of trade that have remained open during the pandemic, including online, mass retail, dollar store, and food and drug.

On a rebased comparison to a year ago, second-quarter global online sales increased more than 70% through company e-commerce websites, retailer websites, large internet pure-plays, and business-to-business customers. Excluding sales of protective garments, approximately 30% of total sales in the quarter were through the online channel.

The company sold $752 million in personal protection garments globally to governments, large organizations, consumers and business-to-business customers. The sales of the face masks and medical gowns significantly exceeded initial expectations for the new business lines. As part of the protective-garment sales in the quarter, the company delivered more than 450 million cloth face coverings and more than 20 million medical gowns to the U.S. government.

The company is selling face masks to consumers under its leading brands globally, including Hanes, Champion, Bonds and Dim, and protective garments represent an ongoing business opportunity. Excluding the potential for additional government contracts, the company estimates that it could sell more than $150 million of protective garments in the second half of 2020.

First-Half Operating Cash Flow Improves, Despite COVID-19 Impact. Operating cash flow of $65 million in the second quarter resulted in a first-half operating cash improvement of approximately $40 million versus a year ago. Working capital discipline, temporary cost reductions, and inventory control and production timeouts contributed to cash generation. Inventory declined 12% versus a year ago.

Second-Quarter Restructuring Charges Related to Planned Actions and Additional COVID-Related Costs. The company incurred approximately $63 million in both planned restructuring actions and additional COVID-related costs in the second quarter. The previously disclosed planned supply chain restructuring actions accounted for $11 million of second-quarter charges. The remaining $52 million of noncash pandemic-related charges incurred in the second quarter consisted of a $20 million write down of intangible assets, $11 million of bad debt expense, and approximately $21 million related to canceled orders of specialized seasonal inventory. (See the Note on Reconciliation of Select GAAP Measures to Non-GAAP Measures later in this news release for additional discussion and details.)

Second-Quarter 2020 Business Segment Summaries

International Segment. As reported, second-quarter International segment total sales declined 20% while operating profit decreased 2%. On a constant-currency basis, net sales decreased 17% and operating profit decreased 3%.

Apparel performance, excluding protective garments, exceeded the company’s base-case scenario with strong online sales growth and strong point-of-sale trends after closed company and retailer stores began to reopen. Excluding protective garment sales, segment revenue declined 44%.

Innerwear Segment. U.S. Innerwear segment results benefited from better-than-expected apparel performance and significant sales of protective garments. Second-quarter segment revenue increased 61% and operating profit increased 104%. Operating-margin enhancement resulted from fixed-cost leverage and SG&A expense control, including temporary cost reductions.

Apparel performance, excluding protective garments, significantly exceeded the company’s pandemic base-case scenario with revenue decreasing 29%. When year-ago results are rebased to reflect the exit of the C9 Champion mass retail program and DKNY intimates license, segment revenue decreased 27%.

Innerwear point-of-sale trends excluding protective garments accelerated through the quarter, turning significantly positive in May and June. Innerwear basics gained more than 300 basis points of market share in the quarter, and Innerwear intimate apparel point-of-sale trends returned to pre-COVID levels entering July.

Activewear Segment. U.S. Activewear second-quarter performance exceeded the company’s base-case pandemic scenario. Segment sales decreased 62% as a result of the pandemic-related demand impacts and $98 million of C9 Champion sales in mass retail in the year-ago quarter. The segment recorded an operating loss in the quarter.

When the year-ago quarter is rebased for the C9 Champion program exit, sales decreased 52% and operating profit decreased 113%. The company maintained Champion marketing investment consistent with the year-ago quarter.

The COVID pandemic resulted in retailer door closures and lower demand for the segment’s printwear and sports apparel businesses. Point-of-sale trends for Champion accelerated as the quarter progressed, and strong positive trends continued in July. Sales through the enhanced Champion.com website increased nearly 200% in the quarter.

2020 Financial Guidance

Due to the continued uncertainty and unpredictability of the COVID-19 pandemic, HanesBrands will not provide quarterly and full-year performance guidance until visibility of the pandemic’s effect on global economies improves.

The decline in apparel sales in the second quarter was better than the company’s base-case scenario. Absent a slowdown of store reopenings or recurrence of store closures, the company anticipates sequential improvement of sales declines in the third and fourth quarters. U.S. Innerwear sales on the strength of basics could return to rebased year-ago levels by the end of the year.

The company is selling face masks to consumers under its leading brands globally. Excluding the potential for additional government contracts, the company estimates that it could sell more than $150 million of protective garments in the second half of 2020, primarily in the third quarter.

The company expects to generate positive cash flow in the second half.

The fiscal year ending Jan. 2, 2021, includes a 53rd week in the fourth quarter. The company has exited the C9 Champion mass program and DKNY license for intimate apparel. The company expects foreign currency exchange rates to reduce net sales and operating profit in 2020.

The company’s tax rate for the second quarter was 17.3%. The company expects its second-half tax rate to be approximately 17.5%.

The company repurchased approximately 14.5 million shares in the first quarter and has suspended share repurchases for the remainder of the year. The weighted average of diluted shares outstanding for the second quarter was 351 million.

Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.

Note on Adjusted Measures, Rebased Measures and Reconciliation to GAAP Measures

To supplement financial results prepared in accordance with generally accepted accounting principles, the company provides quarterly and full-year results concerning certain non‐GAAP financial measures, including adjusted EPS, adjusted net income, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), adjusted net sales, EBITDA and adjusted EBITDA.

Adjusted EPS is defined as diluted EPS excluding actions and the tax effect on actions. Adjusted net income is defined as net income excluding actions and the tax effect on actions. Adjusted operating profit is defined as operating profit excluding actions.

Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. Adjusted gross profit is defined as gross profit excluding actions. Adjusted net sales are defined as net sales excluding actions.

Charges for actions taken in 2019 primarily represented supply chain network changes, program exit costs, and overhead reduction as well as completion of outstanding acquisition integration. Charges taken in 2020 include supply chain restructuring actions, program exit costs and COVID-19 related non-cash charges. Acquisition and integration costs include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items, facility closures, inventory write-offs, information technology integration costs and similar charges. While these costs are not operational in nature and are not expected to continue for any singular transaction on an ongoing basis, similar types of costs, expenses and charges have occurred in prior periods and may recur in future periods depending upon acquisition activity.

Hanes has chosen to present these non‐GAAP measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating operations absent the effect of acquisitions and other actions. Hanes believes these non-GAAP measures provide management and investors with valuable supplemental information for analyzing the operating performance of the company’s ongoing business during each period presented without giving effect to costs associated with the execution and integration of any of the aforementioned actions taken.

The company has also chosen to present EBITDA and adjusted EBITDA to investors because it considers these measures to be an important supplemental means of evaluating operating performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and stock compensation expense. Hanes believes that EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, and management uses EBITDA and adjusted EBITDA for planning purposes in connection with setting its capital allocation strategy. EBITDA and adjusted EBITDA should not, however, be considered as measures of discretionary cash available to invest in the growth of the business.

In addition, with respect to 2020 financial performance, Hanes has chosen to present certain year-over-year comparisons with respect to the company’s rebased 2019 business, which excludes the exited C9 Champion program at mass retail and DKNY license. Hanes believes this information is useful to management and investors to facilitate a more meaningful comparison of the results of the company’s ongoing business between 2019 and 2020. The company has provided rebased 2019 quarterly income statements in Supplemental Table B dated Feb. 7, 2020, which is available online at www.hanes.com/investors.

Hanes is a global company that reports financial information in U.S. dollars in accordance with GAAP. As a supplement to the company’s reported operating results, Hanes also presents constant-currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. The company uses constant-currency information to provide a framework to assess how the business performed excluding the effects of changes in the rates used to calculate foreign currency translation.

To calculate foreign currency translation on a constant currency basis, operating results for the current-year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

Hanes believes constant-currency information is useful to management and investors to facilitate comparison of operating results and better identify trends in the company’s businesses.

Non‐GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as an alternative to, or substitute for, financial results prepared in accordance with GAAP. Further, the non-GAAP measures presented may be different from non-GAAP measures with similar or identical names presented by other companies.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are presented in the supplemental financial information included with this news release.

Webcast Conference Call

Hanes will host an internet webcast of its second-quarter investor conference call at 8:30 a.m. EDT today, July 30, 2020. The webcast of the call, which will consist of prepared remarks followed by a question-and-answer session, may be accessed at www.Hanes.com/investors. The call is expected to conclude by 9:30 a.m.

An archived replay of the conference call webcast will be available in the investors section of the Hanes corporate website. A telephone playback will be available from approximately noon EDT today through midnight EDT Aug. 6, 2020. The replay will be available by calling toll-free (855) 859-2056 or by toll call at (404) 537-3406. The replay ID is 5907699.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains certain forward-looking statements, as defined under U.S. federal securities laws, with respect to our long-term goals and trends associated with our business, as well as guidance as to future performance. In particular, among others, statements regarding the potential impact of the COVID-19 outbreak on our business and financial performance; guidance and predictions regarding expected operating results, including related to our new business line for cotton face masks and other personal protection garments; our belief that we have sufficient liquidity to fund our ongoing business operations; and statements made in 2020 Financial Guidance section of this news release, are forward-looking statements. These forward-looking statements are based on our current intent, beliefs, plans and expectations. Readers are cautioned not to place any undue reliance on any forward-looking statements. Forward-looking statements necessarily involve risks and uncertainties, many of which are outside of our control, that could cause actual results to differ materially from such statements and from our historical results and experience. These risks and uncertainties include such things as: the potential effects of the COVID-19 outbreak, including on consumer spending, global supply chains and the financial markets; the highly competitive and evolving nature of the industry in which we compete; the rapidly changing retail environment; any inadequacy, interruption, integration failure or security failure with respect to our information technology; the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; our ability to attract and retain a senior management team with the core competencies needed to support growth in global markets; our ability to properly manage strategic projects in order to achieve the desired results; significant fluctuations in foreign exchange rates; our reliance on a relatively small number of customers for a significant portion of our sales; legal, regulatory, political and economic risks related to our international operations; our ability to effectively manage our complex multinational tax structure; the existence of a material weakness in our internal control over financial reporting; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and HanesBrands undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, other than as required by law.

HanesBrands

HanesBrands, based in Winston-Salem, N.C., is a socially responsible leading marketer of everyday basic innerwear and activewear apparel in the Americas, Europe, Australia and Asia-Pacific. The company sells its products under some of the world’s strongest apparel brands, including Hanes, Champion, Bonds, DIM, Maidenform, Bali, Playtex, Lovable, Bras N Things, Nur Die/Nur Der, Alternative, L’eggs, JMS/Just My Size, Wonderbra, Berlei, and Gear for Sports. The company sells T-shirts, bras, panties, shapewear, underwear, socks, hosiery, and activewear produced in the company’s low-cost global supply chain. A Fortune 500 company and member of the S&P 500 stock index (NYSE: HBI), Hanes has approximately 63,000 employees in more than 40 countries. For more information, visit the company’s corporate website at www.Hanes.com/corporate and newsroom at https://newsroom.hanesbrands.com/. Connect with the company via social media: Twitter (@hanesbrands), Facebook (www.facebook.com/hanesbrandsinc), Instagram (@hanesbrands_careers), and LinkedIn (@Hanesbrandsinc).

 

TABLE 1

 

HANESBRANDS INC.

Condensed Consolidated Statements of Income and Supplemental Financial Information

(in thousands, except per-share amounts)

(Unaudited)

 

Quarters Ended

Six Months Ended

June 27,
2020

June 29,
2019

% Change

June 27,
2020

June 29,
2019

% Change

Net sales

$

1,738,779

$

1,760,927

(1.3

)%

$

3,055,241

$

3,348,951

(8.8

)%

Cost of sales

1,105,767

1,085,404

1,948,497

2,053,397

Gross profit

633,012

675,523

(6.3

)%

1,106,744

1,295,554

(14.6

)%

As a % of net sales

36.4

%

38.4

%

36.2

%

38.7

%

Selling, general and administrative expenses

391,476

445,923

831,078

916,310

As a % of net sales

22.5

%

25.3

%

27.2

%

27.4

%

Operating profit

241,536

229,600

5.2

%

275,666

379,244

(27.3

)%

As a % of net sales

13.9

%

13.0

%

9.0

%

11.3

%

Other expenses

5,050

8,249

11,540

15,700

Interest expense, net

41,659

46,522

78,508

94,581

Income before income tax expense

194,827

174,829

185,618

268,963

Income tax expense

33,646

25,274

32,311

38,320

Net income

$

161,181

$

149,555

7.8

%

$

153,307

$

230,643

(33.5

)%

Earnings per share:

Basic

$

0.46

$

0.41

$

0.43

$

0.63

Diluted

$

0.46

$

0.41

$

0.43

$

0.63

Weighted average shares outstanding:

Basic

350,538

364,637

354,778

364,603

Diluted

350,829

365,537

355,133

365,418

 

The following tables present a reconciliation of reported results on a constant currency basis for the quarter and six months ended June 27, 2020 and a comparison to prior year:

Quarter Ended June 27, 2020

As Reported

Impact from
Foreign
Currency1

Constant
Currency

Quarter
Ended
June 29, 2019

% Change,
As Reported

% Change,
Constant
Currency

As reported under GAAP:

Net sales

$

1,738,779

$

(13,653

)

$

1,752,432

$

1,760,927

(1.3

)%

(0.5

)%

Gross profit

633,012

(6,298

)

639,310

675,523

(6.3

)

(5.4

)

Operating profit

241,536

111

241,425

229,600

5.2

5.2

Diluted earnings per share

$

0.46

$

0.00

$

0.46

$

0.41

12.2

%

12.2

%

As adjusted:2

Net sales

$

1,738,779

$

(13,653

)

$

1,752,432

$

1,642,217

5.9

%

6.7

%

Gross profit

659,546

(6,298

)

665,844

652,952

1.0

2.0

Operating profit

304,832

111

304,721

216,752

40.6

40.6

Diluted earnings per share

$

0.60

$

0.00

$

0.60

$

0.38

57.9

%

57.9

%

 

Six Months Ended June 27, 2020

As Reported

Impact from
Foreign
Currency1

Constant
Currency

Six Months
Ended

June 29, 2019

% Change,
As Reported

% Change,
Constant
Currency

As reported under GAAP:

Net sales

$

3,055,241

$

(33,854

)

$

3,089,095

$

3,348,951

(8.8

)%

(7.8

)%

Gross profit

1,106,744

(16,560

)

1,123,304

1,295,554

(14.6

)

(13.3

)

Operating profit

275,666

(774

)

276,440

379,244

(27.3

)

(27.1

)

Diluted earnings per share

$

0.43

$

0.00

$

0.43

$

0.63

(31.7

)%

(31.7

)%

As adjusted:2

Net sales

$

3,055,241

$

(33,854

)

$

3,089,095

$

3,136,137

(2.6

)%

(1.5

)%

Gross profit

1,155,091

(16,560

)

1,171,651

1,260,787

(8.4

)

(7.1

)

Operating profit

368,161

(774

)

368,935

366,846

0.4

0.6

Diluted earnings per share

$

0.65

$

0.00

$

0.65

$

0.60

8.3

%

8.3

%

1

Effect of the change in foreign currency exchange rates year-over-year. Calculated by applying prior period exchange rates to the current year financial results. 

2

Results for the quarters and six months ended June 27, 2020 and June 29, 2019 reflect adjustments for restructuring and other action-related charges. Results for the quarter and six months ended June 29, 2019 also reflect adjustments for the exited C9 Champion program at Target and DKNY Intimates license. See “Reconciliation of Select GAAP Measures to Non-GAAP Measures” in Table 5. 

 
 

TABLE 2

 

HANESBRANDS INC.

Supplemental Financial Information

(in thousands, except per-share amounts)

(Unaudited)

 

Quarters Ended

Six Months Ended

June 27,
2020

June 29, 2019
Rebased1

% Change

June 27,
2020

June 29, 2019
Rebased1

% Change

Segment net sales:

Innerwear

$

1,094,814

$

657,477

66.5

%

$

1,517,216

$

1,123,891

35.0

%

Activewear

168,379

350,694

(52.0

)

456,379

671,461

(32.0

)

International

456,875

568,863

(19.7

)

1,012,776

1,215,043

(16.6

)

Other

18,711

65,183

(71.3

)

68,870

125,742

(45.2

)

Total net sales

$

1,738,779

$

1,642,217

5.9

%

$

3,055,241

$

3,136,137

(2.6

)%

Segment operating profit:

Innerwear

$

304,524

$

146,997

107.2

%

$

386,075

$

250,123

54.4

%

Activewear

(5,751

)

45,855

(112.5

)

2,357

70,025

(96.6

)

International

79,124

81,078

(2.4

)

131,142

180,851

(27.5

)

Other

(12,270

)

6,032

(303.4

)

(18,395

)

6,786

(371.1

)

General corporate expenses/other

(60,795

)

(63,210

)

(3.8

)

(133,018

)

(140,939

)

(5.6

)

Total operating profit before restructuring and other action-related charges

304,832

216,752

40.6

368,161

366,846

0.4

Restructuring and other action-related charges

(63,296

)

(12,609

)

402.0

(92,495

)

(33,982

)

172.2

Total operating profit

$

241,536

$

204,143

18.3

%

$

275,666

$

332,864

(17.2

)%

 

1

Results for the quarter and six months ended June 29, 2019 reflect adjustments for the exited C9 Champion program at Target and DKNY Intimates license. See “Reconciliation of Select GAAP Measures to Non-GAAP Measures” in Table 5.

The following table presents a reconciliation of reported net sales adjusted for personal protective equipment (“PPE”) sales for the quarter and six months ended June 27, 2020 and a comparison to prior year.

 

Quarter Ended June 27, 2020

As Reported

% Change1

PPE

Adjusted for
PPE

% Change1

Segment net sales:

Innerwear

$

1,094,814

66.5

%

$

613,516

$

481,298

(26.8

)%

Activewear

168,379

(52.0

)

168,379

(52.0

)

International

456,875

(19.7

)

138,707

318,168

(44.1

)

Other

18,711

(71.3

)

18,711

(71.3

)

Net sales

$

1,738,779

5.9

%

$

752,223

$

986,556

(39.9

)%

 

Six Months Ended June 27, 2020

As Reported

% Change1

PPE

Adjusted for
PPE

% Change1

Segment net sales:

Innerwear

$

1,517,216

35.0

%

$

613,516

$

903,700

(19.6

)%

Activewear

456,379

(32.0

)

456,379

(32.0

)

International

1,012,776

(16.6

)

138,707

874,069

(28.1

)

Other

68,870

(45.2

)

68,870

(45.2

)

Net sales

$

3,055,241

(2.6

)%

$

752,223

$

2,303,018

(26.6

)%

 

1

The comparison to the quarter and six months ended June 29, 2019 reflects adjustments for the exited C9 Champion program at Target and DKNY Intimates license. See “Reconciliation of Select GAAP Measures to Non-GAAP Measures” in Table 5.

Including the unfavorable foreign currency impact of $0.7 million, global Champion sales outside the mass channel decreased approximately 46% in the second quarter of 2020 compared to the second quarter of 2019. On a constant currency basis, the global Champion sales decrease remained the same at approximately 46%.

 
 

TABLE 3

 

HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

 

June 27,
2020

December 28,
2019

Assets

Cash and cash equivalents

$

683,114

$

328,876

Trade accounts receivable, net

1,196,826

815,210

Inventories

1,958,443

1,905,845

Other current assets

193,422

174,634

Total current assets

4,031,805

3,224,565

Property, net

565,849

587,896

Right-of-use assets

479,677

487,787

Trademarks and other identifiable intangibles, net

1,478,721

1,520,800

Goodwill

1,233,184

1,235,711

Deferred tax assets

200,047

203,331

Other noncurrent assets

123,677

93,896

Total assets

$

8,112,960

$

7,353,986

Liabilities

Accounts payable

$

1,152,273

$

959,006

Accrued liabilities

568,228

531,184

Lease liabilities

160,432

166,091

Notes payable

8,803

4,244

Accounts Receivable Securitization Facility

Current portion of long-term debt

112,512

110,914

Total current liabilities

2,002,248

1,771,439

Long-term debt

3,985,631

3,256,870

Lease liabilities - noncurrent

362,570

358,281

Pension and postretirement benefits

374,052

403,458

Other noncurrent liabilities

309,139

327,343

Total liabilities

7,033,640

6,117,391

Stockholders’ equity

Preferred stock

Common stock

3,481

3,624

Additional paid-in capital

302,522

304,395

Retained earnings

1,404,326

1,546,224

Accumulated other comprehensive loss

(631,009

)

(617,648

)

Total stockholders’ equity

1,079,320

1,236,595

Total liabilities and stockholders’ equity

$

8,112,960

$

7,353,986

 
 

TABLE 4

 

HANESBRANDS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

Quarters Ended

Six Months Ended

June 27,
2020

June 29,
2019

June 27,
2020

June 29,
2019

Operating Activities:

Net income

$

161,181

$

149,555

$

153,307

$

230,643

Adjustments to reconcile net income to net cash from operating activities:

Depreciation

22,618

24,035

45,399

46,889

Amortization of acquisition intangibles

6,086

6,247

12,199

12,537

Other amortization

2,630

1,973

5,107

5,063

Impairment of intangible assets

20,319

20,319

Amortization of debt issuance costs

2,996

2,318

5,119

4,758

Stock compensation expense

4,466

2,069

9,189

7,247

Deferred taxes

(1,740

)

1,272

(2,201

)

(2,582

)

Other

18,779

1,228

9,259

5,475

Changes in assets and liabilities:

Accounts receivable

(465,828

)

(75,167

)

(392,134

)

(137,445

)

Inventories

25,376

12,893

(61,409

)

(165,512

)

Other assets

(58,360

)

3,793

(31,570

)

(28,579

)

Accounts payable

223,943

25,912

210,338

7,699

Accrued pension and postretirement benefits

2,163

3,657

(19,318

)

(18,321

)

Accrued liabilities and other

100,794

(22,857

)

18,603

(25,235

)

Net cash from operating activities

65,423

136,928

(17,793

)

(57,363

)

Investing Activities:

Capital expenditures

(20,753

)

(33,016

)

(46,512

)

(58,285

)

Proceeds from sales of assets

382

66

518

Other

4,607

5,823

Net cash from investing activities

(16,146

)

(32,634

)

(40,623

)

(57,767

)

Financing Activities:

Borrowings on notes payable

54,357

79,818

116,669

162,592

Repayments on notes payable

(48,021

)

(80,944

)

(112,373

)

(163,703

)

Borrowings on Accounts Receivable Securitization Facility

16,870

227,061

123,812

Repayments on Accounts Receivable Securitization Facility

(152,152

)

(26,560

)

(227,061

)

(95,110

)

Borrowings on Revolving Loan Facilities

830,000

1,638,000

1,602,500

Repayments on Revolving Loan Facilities

(950,000

)

(742,000

)

(1,638,000

)

(1,422,500

)

Borrowings on Senior Notes

700,000

700,000

Repayments on Term Loan Facilities

(130,998

)

(141,623

)

Borrowings on International Debt

31,222

7,141

Repayments on International Debt

(27,941

)

(27,941

)

Share repurchases

(200,269

)

Cash dividends paid

(52,213

)

(54,228

)

(105,896

)

(108,449

)

Payments of debt issuance costs

(14,602

)

(106

)

(14,834

)

(768

)

Taxes paid related to net shares settlement of equity awards

(18

)

(251

)

(80

)

(1,157

)

Other

453

412

879

985

Net cash from financing activities

(462,196

)

(135,928

)

415,318

(64,221

)

Effect of changes in foreign exchange rates on cash

12,392

2,178

(2,669

)

4,282

Change in cash, cash equivalents and restricted cash

(400,527

)

(29,456

)

354,233

(175,069

)

Cash, cash equivalents and restricted cash at beginning of period

1,084,683

310,119

329,923

455,732

Cash, cash equivalents and restricted cash at end of period

684,156

280,663

684,156

280,663

Less restricted cash at end of period

1,042

22,722

1,042

22,722

Cash and cash equivalents per balance sheet at end of period

$

683,114

$

257,941

$

683,114

$

257,941

 

TABLE 5

 

HANESBRANDS INC.

Supplemental Financial Information

Reconciliation of Select GAAP Measures to Non-GAAP Measures

(in thousands, except per-share amounts)

(Unaudited)

 

Quarters Ended

Six Months Ended

June 27,
2020

June 29,
2019

June 27,
2020

June 29,
2019

Net sales, as reported under GAAP

$

1,738,779

$

1,760,927

$

3,055,241

$

3,348,951

Net sales from exited programs

(118,710

)

(212,814

)

Net sales, rebased

$

1,738,779

$

1,642,217

$

3,055,241

$

3,136,137

Gross profit, as reported under GAAP

$

633,012

$

675,523

$

1,106,744

$

1,295,554

Restructuring and other action-related charges

26,534

12,598

48,347

30,290

Gross profit on exited programs

(35,169

)

(65,057

)

Adjusted gross profit, rebased

$

659,546

$

652,952

$

1,155,091

$

1,260,787

As a % of net sales, rebased

37.9

%

39.8

%

37.8

%

40.2

%

Selling, general and administrative expenses, as reported under GAAP

$

391,476

$

445,923

$

831,078

$

916,310

Restructuring and other action-related charges

(36,762

)

(11

)

(44,148

)

(3,692

)

Selling, general and administrative expenses related to exited programs

(9,712

)

(18,677

)

Adjusted selling, general and administrative expenses, rebased

$

354,714

$

436,200

$

786,930

$

893,941

As a % of net sales, rebased

20.4

%

26.6

%

25.8

%

28.5

%

Operating profit, as reported under GAAP

$

241,536

$

229,600

$

275,666

$

379,244

Restructuring and other action-related charges included in gross profit

26,534

12,598

48,347

30,290

Restructuring and other action-related charges included in SG&A

36,762

11

44,148

3,692

Gross profit on exited programs

(35,169

)

(65,057

)

Selling, general and administrative expenses related to exited programs

9,712

18,677

Adjusted operating profit, rebased

$

304,832

$

216,752

$

368,161

$

366,846

As a % of net sales, rebased

17.5

%

13.2

%

12.1

%

11.7

%

Net income, as reported under GAAP

$

161,181

$

149,555

$

153,307

$

230,643

Restructuring and other action-related charges included in gross profit

26,534

12,598

48,347

30,290

Restructuring and other action-related charges included in SG&A

36,762

11

44,148

3,692

Gross profit on exited programs

(35,169

)

(65,057

)

Selling, general and administrative expenses related to exited programs

9,712

18,677

Tax effect on actions

(12,415

)

1,812

(16,649

)

1,749

Adjusted net income, rebased

$

212,062

$

138,519

$

229,153

$

219,994

Diluted earnings per share, as reported under GAAP

$

0.46

$

0.41

$

0.43

$

0.63

Restructuring and other action-related charges

0.15

0.03

0.21

0.08

Exited programs

(0.06

)

(0.11

)

Adjusted diluted earnings per share, rebased

$

0.60

$

0.38

$

0.65

$

0.60

 
 

Quarter Ended June 29, 2019

As Reported

Less: Exited
Programs

Adjusted for
Exited
Programs

Less:
Restructuring
and other
action-related
charges

Rebased

Segment net sales:

Innerwear

$

678,604

$

21,127

$

657,477

$

$

657,477

Activewear

448,277

97,583

350,694

350,694

International

568,863

568,863

568,863

Other

65,183

65,183

65,183

Total net sales

$

1,760,927

$

118,710

$

1,642,217

$

$

1,642,217

Segment operating profit:

Innerwear

$

149,530

$

2,533

$

146,997

$

$

146,997

Activewear

68,779

22,924

45,855

45,855

International

81,078

81,078

81,078

Other

6,032

6,032

6,032

General corporate expenses/other

(63,210

)

(63,210

)

(63,210

)

Restructuring and other action-related charges

(12,609

)

(12,609

)

(12,609

)

Total operating profit

$

229,600

$

25,457

$

204,143

$

(12,609

)

$

216,752

 
 

Six Months Ended June 29, 2019

As Reported

Less: Exited
Programs

Adjusted for
Exited Programs

Less:
Restructuring
and other
action-related
charges

Rebased

Segment net sales:

Innerwear

$

1,154,549

$

30,658

$

1,123,891

$

$

1,123,891

Activewear

853,617

182,156

671,461

671,461

International

1,215,043

1,215,043

1,215,043

Other

125,742

125,742

125,742

Total net sales

$

3,348,951

$

212,814

$

3,136,137

$

$

3,136,137

Segment operating profit:

Innerwear

$

254,156

$

4,033

$

250,123

$

$

250,123

Activewear

112,372

42,347

70,025

70,025

International

180,851

180,851

180,851

Other

6,786

6,786

6,786

General corporate expenses/other

(140,939

)

(140,939

)

(140,939

)

Restructuring and other action-related charges

(33,982

)

(33,982

)

(33,982

)

Total operating profit

$

379,244

$

46,380

$

332,864

$

(33,982

)

$

366,846

 
 

Quarters Ended

Six Months Ended

June 27,
2020

June 29,
2019

June 27,
2020

June 29,
2019

Restructuring and other action-related charges by category:

Supply chain actions - 2019

$

1,896

$

12,598

$

5,698

$

30,290

Supply chain actions - 2020

3,241

13,504

Program exit costs

1,285

9,500

Other restructuring costs

4,695

11

11,614

3,692

COVID-19 related charges:

Bad debt

11,375

11,375

Inventory

20,485

20,485

Intangible assets

20,319

20,319

Tax effect on actions

(12,415

)

(1,778

)

(16,649

)

(4,791

)

Total restructuring and other action-related charges

$

50,881

$

10,831

$

75,846

$

29,191

 
 

Last Twelve Months

June 27,
2020

June 29,
2019

EBITDA1:

Net income

$

523,384

$

551,480

Interest expense, net

162,506

195,063

Income tax expense

72,998

103,117

Depreciation and amortization

129,183

130,792

Total EBITDA

888,071

980,452

Total restructuring and other action-related charges (excluding tax effect on actions)

121,999

69,398

Stock compensation expense

11,219

25,630

Total EBITDA, as adjusted

$

1,021,289

$

1,075,480

Net debt:

Debt (current and long-term debt and Accounts Receivable Securitization Facility)

$

4,098,143

$

4,017,566

Notes payable

8,803

4,695

(Less) Cash and cash equivalents

(683,114

)

(257,941

)

Net debt

$

3,423,832

$

3,764,320

Net debt/EBITDA, as adjusted

3.4

3.5

 

1

Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure.

Quarters Ended

Six Months Ended

June 27,
2020

June 29,
2019

June 27,
2020

June 29,
2019

Free cash flow:

Net cash from operating activities

$

65,423

$

136,928

$

(17,793

)

$

(57,363

)

Capital expenditures

(20,753

)

(33,016

)

(46,512

)

(58,285

)

Free cash flow

$

44,670

$

103,912

$

(64,305

)

$

(115,648

)

Contacts:

News Media, contact:
Matt Hall, (336) 519-3386

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