HanesBrands, the parent of Champion and Hanes, reported sales in the fourth quarter increased 12 percent to $1.29 billion compared with the year-ago quarter. The acquisition of Maidenform Brands, Inc., contributed 9 percentage points of sales growth in the quarter, while strong results for the remainder of the company contributed 3 percentage points of growth.
The company closed the year with a strong fourth quarter and has substantially raised its 2014 full-year EPS guidance.
the full year, net sales increased 2 percent to $4.63 billion, while on
a constant-currency basis, net sales increased 3 percent.
EPS for the year increased 49 percent to $3.91 from $2.62 in 2012. For
the fourth quarter, adjusted EPS of $0.98 beat company guidance. Planned
increases in advertising and debt-reduction costs muted fourth-quarter
performance compared with the year-ago quarter’s adjusted EPS of $1.07.
On a GAAP basis, diluted EPS was $0.32 in the quarter versus $0.78 a
year ago and was $3.25 for the year, up from $2.32 a year ago.
performance measures and comparisons exclude fourth-quarter 2013
charges related to the acquisition of Maidenform Brands, other
action-related charges in the fourth quarter of 2013, debt actions in
the fourth quarter of 2012, and reflect continuing operations for 2012.
See sections on discontinued operations and GAAP reconciliation.)
company earned record adjusted operating profit of $596 million in 2013
for an adjusted operating margin of 12.9 percent, up 320 basis points.
Improved profitability resulted from lower cotton costs and benefits of
the company’s Innovate-to-Elevate initiatives. On a GAAP basis,
operating profit for the quarter was $72 million, compared with $153
million a year ago, and for full-year 2013 was $515 million, up from
$440 million, for an operating margin of 11.1 percent compared with 9.7
For 2014, Hanes has increased its full-year guidance to
expected net sales of slightly less than $5.1 billion; adjusted
operating profit of $640 million to $660 million; adjusted EPS of $4.60
to $4.80; and net cash from operating activities of $450 million to $550
“We had an outstanding year in 2013 with four
consecutive quarters of strong performance. We achieved record results
and reached significant milestones, including generating nearly $600
million of cash from operations,” Hanes Chairman and Chief Executive
Officer Richard A. Noll said. “We are raising our 2014 earnings guidance
because we are increasingly confident that the momentum of our
Innovate-to-Elevate strategy will deliver even better results. The
combination of our brand power, low-cost supply chain and innovation
platforms is generating value and growth opportunities.”
Fourth-Quarter and Full-Year 2013 Financial Highlights and Business Segment Summary
Key accomplishments for 2013 include:
Expansion through Innovate-to-Elevate Success. For the year, Hanes’ two
largest business segments – Innerwear and Activewear – delivered
double-digit and triple-digit operating profit growth, respectively, and
double-digit operating profit margin, benefiting from
Innovate-to-Elevate success. The company’s brands are gaining share,
supply chain initiatives are creating efficiencies, and innovative
product platforms are performing well.
Strong Balance Sheet, Working
Capital Improvement and Cash from Operations. Hanes generated a record
$591 million of net cash from operating activities in 2013. Inventory
excluding Maidenform decreased by $100 million, on 13 percent fewer
units. The company used cash to complete its multiyear bond debt
reduction plan, instituted a regular quarterly cash dividend for
stockholders, and acquired Maidenform Brands.
Acquisition Completed and Integration Under Way. Hanes closed its
acquisition of Maidenform on Oct. 7, 2013, for approximately $581
million and incurred acquisition- and other action-related charges of
approximately $80 million in the fourth quarter. Hanes is in the process
of integrating Maidenform’s front-end, supply chain, and
distribution/logistics operations into its existing organization.
the fourth quarter, Maidenform contributed net sales of approximately
$100 million and operating profit of approximately $1 million.
Key segment highlights include:
Segment. Innerwear net sales increased 20 percent in the fourth quarter
and 5 percent for the full year. While Maidenform sales significantly
contributed to growth, non-Maidenform sales also increased in each
period. Operating profit declined $5 million as a result of $17 million
of increased advertising investment.
Strong Fourth-Quarter Sales.
Excluding Maidenform contributions, sales increased 6 percent in the
fourth quarter. Sales of socks and panties were up double digits, men’s
underwear up high single digits, and bras up mid-single digits. For the
year, excluding Maidenform, net sales increased 1 percent with socks and
men’s underwear driving growth.
Market Share Increases and
Innovate-to-Elevate Success. The company’s brands gained market share
during the fourth quarter, and Innovate-to-Elevate product platforms
continue to succeed. Hanes ComfortBlend socks and men’s underwear, Hanes
X-Temp underwear, and Smart Size bras across several brands, including
Bali, are all outperforming their respective categories.
Activewear Segment. The
Activewear segment, previously known as Outerwear, ended a successful
year with strong fourth-quarter results – net sales up 1 percent and
operating profit up 9 percent. For the year, operating profit increased
by $98 million on a net sales decline of 1 percent.
Strong Profitability. The
segment delivered record profitability with an operating margin of 13.1
percent for the full year. Champion activewear, Hanes activewear and
Gear for Sports all had double-digit operating margins in the fourth
quarter and full year.
Higher Quality of Sales. For the
year, Activewear net sales increased 1 percent, excluding the $25
million decline in sales for the branded printwear business, which
de-emphasized commodity sales. Sales for Champion activewear and Gear
for Sports each increased by mid-single digits for the year.
Segment. Currency had a significant impact on International net sales
and profits. On a constant-currency basis, International net sales
increased 10 percent in the fourth quarter and 7 percent for the full
year. Maidenform sales contributed to sales growth. Operating profit on a
constant-currency basis increased 1 percent in the fourth quarter and
was comparable to last year for the full year.
Direct to Consumer Segment.
The Direct to Consumer segment achieved significantly improved
profitability for the year. The segment’s operating profit increased 31
percent and 34 percent for the fourth quarter and full year,
respectively. Direct to Consumer net sales for the fourth quarter
increased 14 percent and for the full year increased 2 percent, with
Maidenform sales contributing to growth.
has significantly increased its earnings outlook for 2014 and has
established guidance for other financial performance measures.
2014, Hanes expects net sales of slightly less than $5.1 billion;
adjusted operating profit excluding actions of $640 million to $660
million; adjusted EPS excluding actions of $4.60 to $4.80; and net cash
from operating activities of $450 million to $550 million.
company expects its acquisition of Maidenform to contribute
approximately $500 million in sales and approximately $25 million of
operating profit in 2014.
Interest expense and other expense are
expected to be approximately $85 million combined. The full-year tax
rate is expected to be in the low teens. As is typical, Hanes expects
its tax rate will fluctuate by quarter, with the rate being slightly
higher in the first half of the year.
The company expects to make
pension contributions of approximately $60 million and net capital
expenditures of approximately $60 million to $70 million.
The company expects slightly more than 103 million weighted average shares outstanding in 2014.
expects to achieve full synergies from the integration of its
Maidenform acquisition within three years. After full synergies, the
acquisition is expected to annually contribute more than $500 million in
net sales, $80 million in operating profit, and $0.60 of EPS.
are expected from selling, general and administrative savings as a
result of the elimination of duplicative corporate and operational
costs; cost of goods sold savings as a result of the integration of
Maidenform’s 100 percent sourced production model into Hanes’
predominately self-owned manufacturing operations, supplemented by
sourcing; and complementary revenue, driven by the application of Hanes’
Innovate-to-Elevate strategy to Maidenform’s products.
integrating Maidenform’s sales and marketing, supply chain, and
distribution/logistics operations into its existing organization. The
company anticipates closing the Maidenform New Jersey headquarters and
Fayetteville, N.C., distribution center by the end of 2014.
majority of the corporate SG&A savings are anticipated to begin by
mid-2014. Benefits of supply chain actions to cost of goods sold are
expected to start in 2015 and be fully realized in 2016. Complementary
revenue opportunities are expected to deliver benefits in late 2015,
with the majority of the benefits coming in 2016.
Hanes has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/faq.
2012, the company announced it was exiting certain international and
domestic imagewear businesses that are now classified as discontinued
operations. Discontinued operations have no effect on 2013 results.
May 30, 2012, Hanes sold its European imagewear business, and the
company subsequently completed in 2012 the discontinuation of its
private-label and Outer Banks domestic imagewear operations serving
wholesalers that sell to the screen-print industry. In accordance with
generally accepted accounting principles, the company reported results
for the second, third and fourth quarters of 2012 on a
continuing-operations basis and revised prior-period results, including
the first quarter of 2012, to reflect continuing operations. The
company’s branded printwear operations continue to operate and serve the
domestic screen-print market with Hanes and Champion brand products.
2012, discontinued operations reported a loss per diluted share of
$0.68 – a loss of $0.03 in the first quarter, a loss of $0.66 in the
second quarter, a loss of $0.01 in the third quarter, and earnings of
$0.02 in the fourth quarter.
Charges for Actions and Reconciliation to GAAP Measures
EPS, adjusted operating profit (and margin), free cash flow, and
adjusted EBITDA are not generally accepted accounting principle
measures. Hanes has chosen to provide these non-GAAP measures to
investors to enable additional analyses of past, present and future
operating performance and as a supplemental means of evaluating company
operations. Non-GAAP measures should not be considered a substitute for
financial information presented in accordance with GAAP and may be
different from non-GAAP or other pro forma measures used by other
Adjusted EPS is defined as diluted EPS excluding
actions and the tax effect on actions. The company believes that
adjusted EPS provides investors with an additional means of analyzing
the company’s performance absent the effect of acquisition-related
expenses and other actions.
Adjusted operating profit is defined
as operating profit excluding actions, and the company believes that
the measure provides investors with an additional means of analyzing the
company’s performance absent the effect of acquisition-related expenses
and other actions.
Free cash flow is defined as net cash from
operating activities less net capital expenditures. Free cash flow may
not be representative of the amount of residual cash flow that is
available to the company for discretionary expenditures since it may not
include deductions for mandatory debt-service requirements and other
nondiscretionary expenditures. The company believes, however, that free
cash flow is a useful measure of the cash-generating ability of the
business relative to capital expenditures and financial performance. See
Table 4 and its footnotes attached to this press release to reconcile
free cash flow with the GAAP measure of net cash provided by operating
Adjusted EBITDA is defined as earnings from
continuing operations before interest, taxes, depreciation,
amortization, and debt-prepayment expenses. Although the company does
not use EBITDA to manage its business, it believes that EBITDA is
another way that investors measure financial performance.
2014 guidance, adjusted EPS is defined as diluted EPS excluding actions
and the tax effect on actions, and adjusted operating profit is defined
as operating profit excluding actions. Hanes’ current estimate for
pretax charges in 2014 for acquisition and other actions is
approximately $70 million to $100 million or more, but actual charges
could vary significantly. The company believes guidance for adjusted EPS
and adjusted operating profit provides investors with an additional
means of analyzing the company’s performance absent the effect of
acquisition-related expenses and other actions.
On a GAAP basis,
full-year 2014 diluted EPS will vary depending on actual performance,
charges and tax rate. GAAP diluted EPS could be in the range of $3.80 to
$4.30. GAAP operating profit for 2014 could be in the range of $540
million to $590 million.
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