Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results
for the first quarter ended April 2, 2023.
"We are pleased with our top line results having met our sales
expectations for the quarter” said Glenn J. Chamandy, Gildan’s
President and CEO. “Moreover, even though the economic environment
remains uncertain, we remain comfortable with our full year outlook
given our strong competitive position, which we are reinforcing
with the Gildan Sustainable Growth (GSG) strategy, and POS trends
across our business coming in line with our expectations during the
first quarter".
During the first quarter, we generated net sales of $703
million, down $72 million or 9% year-over-year, reflecting
anticipated headwinds tied to the current demand environment and to
strong comparative periods in the first half of 2022. Our operating
margin came in at 18.2% including a $25 million gain from the sale
and leaseback of one of our U.S. distribution facilities. Excluding
this gain, our adjusted operating margin1 of 14.6% came in slightly
below our expectations largely due to the unfavorable mix impact of
lower fleece shipments to distributors during the quarter. However,
with fleece POS at distributors being strong in the quarter, this
mix impact is expected to reverse as we move through the year.
Consequently, we ended the quarter with GAAP diluted EPS of $0.54;
and adjusted diluted EPS1 of $0.45. Finally, in line with our
capital allocation priorities and our commitment to return of
capital to shareholders, we continued to be active on our share
buyback program during the quarter, repurchasing 1 million shares
at a cost of $32 million.
Q1 2023 Operating Results Net sales for the
first quarter ended April 2, 2023, were in line with our
expectations at $703 million, down $72 million, or 9%, over the
prior year sales. In activewear, we generated sales of $588
million, down $80 million or 12% compared to the same period last
year which benefited from distributor inventory replenishment
following the pandemic and a tight manufacturing environment in
2021. During the first quarter, year-over-year POS trends at North
American distributors came in line with our expectations, showing
sequential quarterly improvement, but were down compared to last
year. Further, while international sales in the quarter were down
17% versus the prior year, we are continuing to maintain a positive
outlook regarding the recovery of international markets for the
full year, supported by positive POS in the quarter. We observed
notable strength in the hosiery and underwear category for the
quarter with sales totaling $115 million, up $8 million or 7%, over
the prior year quarter, mainly driven by sock volume growth. While
industry demand for men’s underwear remained down year-over-year,
POS trends improved sequentially, and we were pleased with our
share gains in men's underwear in the mass retail channel.
Additionally, while our retail customers remain cautious on
replenishment across all product categories, we were encouraged by
improving inventory levels at the retailers in the first quarter
reflecting what we believe is an improving demand environment for
our products.
We generated gross profit of $188 million in the quarter and
adjusted gross profit1 of $184 million, down respectively $53
million and $55 million over the prior year, driven by the decline
in sales and lower gross margins. Gross margin of 26.7% and
adjusted gross margin1 of 26.2% were down year-over year by 430
basis points and 470 basis points, respectively. This is mainly a
result of the flow-through impact on our cost of sales of peak
fiber costs and higher manufacturing input costs, both of which
were anticipated, and due to unfavourable mix. These factors were
partly offset by higher net selling prices.
SG&A expenses for the first quarter of $82 million were
largely in line with prior year levels and SG&A expenses as a
percentage of net sales were 11.6% compared to 10.5% last year,
primarily due to sales deleverage.
We generated operating income of $128 million, or 18.2% of
sales, which included the benefit of the $25 million gain from the
sale and leaseback of one of our U.S. distribution facilities,
compared to operating income of $162 million, or 20.9% of sales in
the first quarter last year. Excluding this gain, adjusted
operating income1 was $103 million, or 14.6% of sales, compared to
$158 million, or 20.4% of sales in the first quarter last year. The
decline in GAAP and adjusted operating margin reflected the gross
margin pressure in the quarter as noted above, and the impact of
SG&A sales deleverage.
After reflecting increased net financial expenses of $17 million
due to higher interest rates and average net borrowing levels,
higher GAAP income taxes tied to the sale and leaseback gain, and
the positive benefit of a lower outstanding share base, we reported
GAAP and adjusted diluted EPS1 for the quarter of $0.54, and $0.45,
respectively, down from $0.77 and $0.76, in the prior year. GAAP
net earnings for the quarter included a $16 million sale and
leaseback after tax gain.
Cash flows used in operating activities in the first quarter
totaled $179 million compared to $51 million used in the prior
year, mainly due to higher working capital investments and lower
net earnings. After accounting for higher capital expenditures of
$74 million and net proceeds of $51 million from the property sale
and leaseback, we consumed approximately $202 million of free cash
flow1 in the first quarter, compared to $86 million consumed in the
first quarter of 2022. Capital expenditures during the quarter
reflected investments in our new manufacturing complex in
Bangladesh, with full year capital expenditures expected to come in
at the lower end of our range of 6% to 8% of annual sales, as
previously stated. The Company ended the first quarter of 2023 with
net debt of $1,154 million and a leverage ratio of 1.6 times net
debt to trailing twelve months adjusted EBITDA1 in line with our
leverage framework.
Outlook We are reconfirming our full year
outlook as we continue to believe we have the ability to drive top
line growth in 2023. While the economic environment remains
uncertain and we are seeing continued cautiousness on inventory
levels with our customer base across channels, our POS trends were
in line with our expectations for the first quarter. Accordingly,
given this performance, and factoring-in the expected roll-out of
new incremental retail programs and assuming continued POS recovery
in international markets, we believe opportunity for growth remains
once first half headwinds abate. These headwinds include difficult
comparative periods driven by post pandemic inventory replenishment
in 2022 and the impact of peak raw material and higher input costs
in our inventories flowing through cost of sales in the first half
of 2023.
Accordingly, for 2023 we reconfirm our prior outlook as
follows:
- Revenue growth for
the full year to be in the low single digit range;
- Full year adjusted operating margin
within our 18% to 20% annual target range;
- Capex to come in at the lower end of our previously stated 6%
to 8% range;
- Strong free cash flow generation as we progress through the
year;
- Adjusted diluted EPS in line with 2022,
which assumes the continuation of share repurchases aligned with
our capital allocation targets of purchasing approximately 5% of
the outstanding public float in 2023.
The above outlook assumes no meaningful deterioration from
current market conditions including the pricing and inflationary
environment, and reflects the assumptions noted above. Further, it
reflects our expectations as of May 3, 2023 and is subject to
significant risks and business uncertainties, including those
factors described under “Forward-Looking Statements” in this press
release and in our annual MD&A for the year ended January 1,
2023. The board may modify, extend or terminate current or future
share repurchase programs at any time.
ESGHighlighting ESG
developments during the quarter, Gildan is pleased to have been
included on S&P Global’s Sustainability Yearbook for the 11th
consecutive year. Furthermore, Gildan received the
Sustainability-Linked Loan of the Year - Americas award as part of
Environmental Finance’s 2023 Bond Awards, which recognizes leading
environmental bond deals.
Declaration of Quarterly
DividendThe Board of Directors has declared a cash
dividend of $0.186 per share, payable on June 19, 2023 to
shareholders of record as of May 24, 2023. This dividend is an
“eligible dividend” for the purposes of the Income Tax Act (Canada)
and any other applicable provincial legislation pertaining to
eligible dividends.
Normal Course Issuer Bid During
the first quarter, the Company completed share repurchases under
its normal course issuer bid program ending August 8, 2023. A total
of 1,000,000 common shares were repurchased for cancellation during
the first quarter at a total cost of approximately $32 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 April 28, 2023, there were 178,247,867
common shares issued and outstanding along with 2,541,773 stock
options and 73,032 dilutive restricted share units (Treasury RSUs)
outstanding. Each stock option entitles the holder to purchase one
common share at the end of the vesting period at a predetermined
exercise price. Each Treasury RSU entitles the holder to receive
one common share from treasury at the end of the vesting period,
without any monetary consideration being paid to the Company.
Conference Call
InformationGildan Activewear Inc. will hold a conference
call to discuss the Company's first quarter 2023 results today at
5:00 PM ET. A live audio webcast of the conference call,
as well as a replay, will be accessible on the investors section of
Gildan’s corporate website at the following link:
https://gildancorp.com/en/investors/events-and-presentations/. The
conference call may be accessed by dialing (800) 715-9871 (Canada
& U.S.) or (646) 307-1963 (international) and entering passcode
6392967#. A replay of the conference call will be available for 7
days starting at 8:00 PM ET, by dialing (800) 770-2030 (Canada
& U.S.) or (609) 800-9909 (international) and entering the same
passcode.
This release should be read in conjunction with
Gildan’s Management’s Discussion and Analysis and its unaudited
condensed interim consolidated financial statements as at and for
the three months ended April 2, 2023, which will be filed by Gildan
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission and which will be available
on Gildan’s corporate website.
Certain minor rounding variances may exist
between the condensed consolidated financial statements and the
table summaries contained in this press release.
Supplemental Financial Data
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(in $ millions, except per share amounts or otherwise
indicated) |
Q1 2023 |
|
Q1 2022 |
|
Variation (%) |
|
Net sales |
702.9 |
|
774.9 |
|
(9.3) |
% |
Gross profit |
187.7 |
|
240.4 |
|
(21.9) |
% |
Adjusted gross profit(1) |
184.4 |
|
239.1 |
|
(22.9) |
% |
SG&A expenses |
81.8 |
|
81.0 |
|
1.0 |
% |
Gain on sale and
leaseback |
(25.0 |
) |
— |
|
n.m. |
|
Restructuring and
acquisition-related costs (recovery) |
2.8 |
|
(2.8 |
) |
n.m. |
|
Operating income |
128.0 |
|
162.2 |
|
(21.1) |
% |
Adjusted operating
income(1) |
102.5 |
|
158.1 |
|
(35.2) |
% |
Adjusted EBITDA(1) |
130.4 |
|
191.6 |
|
(31.9) |
% |
Financial expenses |
17.0 |
|
7.0 |
|
142.9 |
% |
Income tax expense |
13.4 |
|
8.8 |
|
52.3 |
% |
Net earnings |
97.6 |
|
146.4 |
|
(33.3) |
% |
Adjusted net earnings(1) |
81.6 |
|
144.3 |
|
(43.5) |
% |
Basic EPS |
0.54 |
|
0.77 |
|
(29.9) |
% |
Diluted EPS |
0.54 |
|
0.77 |
|
(29.9) |
% |
Adjusted diluted EPS(1) |
0.45 |
|
0.76 |
|
(40.8) |
% |
Gross margin(2) |
26.7 |
% |
31.0 |
% |
(4.3) |
pp |
Adjusted gross margin(1) |
26.2 |
% |
30.9 |
% |
(4.7) |
pp |
SG&A expenses as a
percentage of sales(3) |
11.6 |
% |
10.5 |
% |
1.1 |
pp |
Operating margin(4) |
18.2 |
% |
20.9 |
% |
(2.7) |
pp |
Adjusted operating
margin(1) |
14.6 |
% |
20.4 |
% |
(5.8) |
pp |
Cash flows from (used in) operating activities |
(179.4 |
) |
(51.5 |
) |
n.m. |
|
Capital expenditures |
(73.9 |
) |
(34.0 |
) |
n.m. |
|
Free
cash flow(1) |
(202.2 |
) |
(85.5 |
) |
n.m. |
|
As at (in $ millions, or otherwise indicated) |
Apr 2,2023 |
Jan 1,2023 |
Inventories |
1,314.8 |
1,225.9 |
Trade accounts receivable |
399.1 |
248.8 |
Net debt(1) |
1,153.7 |
873.6 |
Net
debt leverage ratio(1) |
1.6 |
1.1 |
(1) |
This is a non-GAAP financial measure or ratio. Please refer to
"Non-GAAP Financial Measures" in this press release. |
(2) |
Gross margin is defined as gross profit divided by net sales. |
(3) |
SG&A as a percentage of sales is defined as SG&A divided by
net sales. |
(4) |
Operating margin is defined as operating income divided by net
sales. |
n.m. |
= not meaningful |
DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
(in $ millions, or otherwise indicated) |
Q1 2023 |
Q1 2022 |
Variation (%) |
|
Activewear |
587.8 |
667.3 |
(11.9 |
)% |
Hosiery
and underwear |
115.1 |
107.6 |
7.0 |
% |
|
702.9 |
774.9 |
(9.3 |
)% |
Net sales were derived from customers located in the following
geographic areas:
(in $ millions, or otherwise indicated) |
Q1 2023 |
Q1 2022 |
Variation (%) |
|
United States |
625.1 |
681.8 |
(8.3 |
)% |
Canada |
25.7 |
30.2 |
(14.9 |
)% |
International |
52.1 |
62.9 |
(17.2 |
)% |
|
702.9 |
774.9 |
(9.3 |
)% |
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 and sale of business locations or the
relocation of business activities, significant changes in
management structure, as well as transaction, exit, and integration
costs incurred pursuant to business acquisitions. Restructuring and
acquisition-related costs is included as an adjustment in arriving
at adjusted operating income, adjusted operating margin, adjusted
net earnings, adjusted diluted EPS, and adjusted EBITDA. For the
three months ended April 2, 2023 restructuring and
acquisition-related costs of $3 million (2022 - $3 million
recovery) were recognized. Refer to subsection 5.4.6 entitled
“Restructuring and acquisition-related costs (recovery)” in our
interim MD&A for a detailed discussion of these costs and
recoveries.
Impact of strategic product line initiativesIn
the fourth quarter of fiscal 2019, the Company launched a strategic
initiative to significantly reduce its imprintables product line
SKU count. In the fourth quarter of fiscal 2020 the Company
expanded this strategic initiative to include a significant
reduction in its retail product line SKU count. The objectives of
this strategic initiative included exiting all ship to-the-piece
activities, discontinuing overlapping and less productive styles
and SKUs between brands, simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of this initiative
included inventory write-downs to reduce the carrying value of
discontinued SKUs to liquidation values, sales return allowances
for product returns related to discontinued SKUs, and the
write-down of production equipment relating to discontinued SKUs.
The impact of strategic product line initiatives is included as an
adjustment in arriving at adjusted gross profit and adjusted gross
margin, adjusted operating income, adjusted operating margin,
adjusted net earnings, adjusted diluted EPS, and adjusted EBITDA.
The gains and charges related to this initiative were nil for the
three months ended April 2, 2023, and $1 million of gains for the
three months ended April 3, 2022, which were included in cost of
sales.
Net insurance gainsFor the three months ended
April 2, 2023, net insurance gains were $3.3 million (2022 - $0.3
million), related to the two hurricanes which impacted the
Company’s operations in Central America in November 2020. Net
insurance gains primarily relate to accrued insurance recoveries at
replacement cost value for damaged equipment in excess of the
write-off of the net book value of property plant and equipment, as
well as the recognition of insurance recoveries for business
interruption, when applicable. Net insurance gains are included as
an adjustment in arriving at adjusted gross profit and adjusted
gross margin, adjusted operating income, adjusted operating margin,
adjusted net earnings, adjusted diluted EPS, and adjusted
EBITDA.
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 is included as
an adjustment in arriving at adjusted operating income, adjusted
operating margin, adjusted net earnings, adjusted diluted EPS, and
adjusted EBITDA.
Adjusted net earnings and adjusted diluted
EPSAdjusted net earnings are calculated as net earnings before
restructuring and acquisition-related costs, impairment of goodwill
and intangible assets (and reversal of impairments on intangible
assets), the impact of the Company's strategic product line
initiatives, net insurance gains, gain on sale and leaseback, 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) |
Q1 2023 |
|
Q1 2022 |
|
Net earnings |
97.6 |
|
146.4 |
|
Adjustments for: |
|
|
Restructuring and acquisition-related costs (recovery) |
2.8 |
|
(2.8 |
) |
Impact of strategic product line initiatives |
— |
|
(1.0 |
) |
Net insurance gains |
(3.3 |
) |
(0.3 |
) |
Gain on sale and leaseback |
(25.0 |
) |
— |
|
Income tax expense relating to the above-noted adjustments |
9.5 |
|
2.0 |
|
Adjusted net earnings |
81.6 |
|
144.3 |
|
Basic EPS |
0.54 |
|
0.77 |
|
Diluted EPS |
0.54 |
|
0.77 |
|
Adjusted diluted EPS(1) |
0.45 |
|
0.76 |
|
(1) |
This is a non-GAAP ratio. It is calculated as adjusted net earnings
divided by the diluted weighted average number of common shares
outstanding. |
Adjusted gross profit and adjusted gross
marginAdjusted gross profit is calculated as gross profit excluding
the impact of the Company's strategic product line initiatives, and
net insurance gains. The Company uses adjusted gross profit and
adjusted gross margin to measure its performance at the gross
margin level from one period to the next, without the variation
caused by the impacts of the items described above. The Company
excludes these items because they affect the comparability of its
financial results and could potentially distort the analysis of
trends in its business performance. Excluding these items does not
imply they are necessarily non-recurring. The Company believes
adjusted gross profit and adjusted gross margin are useful to
management and investors because they help identify underlying
trends in our business in how efficiently the Company uses labor
and materials for manufacturing goods to our customers, that could
otherwise be masked by the impact of our strategic product line
initiatives and net insurance gains that can vary from period to
period. These measures do not have any standardized meanings
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other companies.
(in $ millions, or otherwise indicated) |
Q1 2023 |
|
Q1 2022 |
|
Gross profit |
187.7 |
|
240.4 |
|
Adjustments for: |
|
|
Impact of strategic product line initiatives |
— |
|
(1.0 |
) |
Net insurance gains |
(3.3 |
) |
(0.3 |
) |
Adjusted gross profit |
184.4 |
|
239.1 |
|
Gross margin |
26.7 |
% |
31.0 |
% |
Adjusted gross margin(1) |
26.2 |
% |
30.9 |
% |
(1) |
This is a non-GAAP ratio. It is calculated as adjusted gross profit
divided by net sales excluding the sales return allowance for
anticipated product returns related to discontinued SKUs. Net sales
excluding the sales return allowance for anticipated product
returns related to discontinued SKUs is a non-GAAP measure used in
the denominator of the adjusted margin ratios to reverse the full
effect of the SKU rationalization adjustments. The sales return
allowance was nil for both periods. |
Adjusted operating income and adjusted operating
marginAdjusted operating income is calculated as operating income
before restructuring and acquisition-related costs. Adjusted
operating income also excludes impairment of goodwill and
intangible assets (and reversal of impairments on intangible
assets), the impact of the Company's strategic product line
initiatives, net insurance gains, and gain on sale and leaseback.
Adjusted operating margin is calculated as adjusted operating
income divided by net sales, excluding the sales return allowance
for anticipated product returns related to discontinued SKUs.
Management uses adjusted operating income and adjusted operating
margin to measure its performance at the operating income level as
we believe it provides a better indication of our operating
performance and facilitates the comparison across reporting
periods, without the variation caused by the impacts of the items
described above. The Company excludes these items because they
affect the comparability of its financial results and could
potentially distort the analysis of trends in its operating income
and operating margin performance. The Company believes adjusted
operating income and adjusted operating margin are useful to
investors because they help identify underlying trends in our
business in how efficiently the Company generates profit from its
primary operations that could otherwise be masked by the impact of
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) |
Q1 2023 |
|
Q1 2022 |
|
Operating income |
128.0 |
|
162.2 |
|
Adjustments for: |
|
|
Restructuring and acquisition-related costs (recovery) |
2.8 |
|
(2.8 |
) |
Impact of strategic product line initiatives |
— |
|
(1.0 |
) |
Net insurance gains |
(3.3 |
) |
(0.3 |
) |
Gain on sale and leaseback |
(25.0 |
) |
— |
|
Adjusted operating income |
102.5 |
|
158.1 |
|
Operating margin |
18.2 |
% |
20.9 |
% |
Adjusted operating margin(1) |
14.6 |
% |
20.4 |
% |
(1) |
This is a non-GAAP ratio. It is calculated as adjusted operating
income divided by net sales excluding the sales return allowance
for anticipated product returns related to discontinued SKUs. Net
sales excluding the sales return allowance for anticipated product
returns related to discontinued SKUs is a non-GAAP measure used in
the denominator of the adjusted margin ratios to reverse the full
effect of the SKU rationalization adjustments. The sales return
allowance was nil for both periods. |
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses net, income taxes, and
depreciation and amortization, and excludes the impact of
restructuring and acquisition-related costs. Adjusted EBITDA also
excludes impairment of goodwill and intangible assets (and reversal
of impairments on intangible assets), net insurance gains, the gain
on sale and leaseback, and the impact of the Company's strategic
product line initiative. Management uses adjusted EBITDA,
among other measures, to facilitate a comparison of the
profitability of its business on a consistent basis from
period-to-period and to provide a more complete understanding of
factors and trends affecting our business. The Company also
believes this measure is commonly used by investors and analysts to
assess profitability and the cost structure of companies within the
industry, as well as measure a company’s ability to service debt
and to meet other payment obligations, or as a common valuation
measurement. The Company excludes depreciation and amortization
expenses, which are non-cash in nature and can vary significantly
depending upon accounting methods or non-operating factors.
Excluding these items does not imply they are necessarily
non-recurring. This measure does not have any standardized meanings
prescribed by IFRS and is therefore unlikely to be comparable to
similar measures presented by other companies.
(in $ millions) |
Q1 2023 |
|
Q1 2022 |
|
Net earnings |
97.6 |
|
146.4 |
|
Restructuring and
acquisition-related costs (recovery) |
2.8 |
|
(2.8 |
) |
Impact of strategic product
line initiatives |
— |
|
(1.0 |
) |
Net insurance gains |
(3.3 |
) |
(0.3 |
) |
Gain on sale and
leaseback |
(25.0 |
) |
— |
|
Depreciation and
amortization |
27.9 |
|
33.5 |
|
Financial expenses, net |
17.0 |
|
7.0 |
|
Income
tax expense |
13.4 |
|
8.8 |
|
Adjusted EBITDA |
130.4 |
|
191.6 |
|
Free cash flow Free cash flow is defined as cash
from operating activities, less cash flow used in investing
activities excluding cash flows relating to business
acquisitions/dispositions. The Company considers free cash flow to
be an important indicator of the financial strength and liquidity
of its business, and it is a key metric used by management in
managing capital as it indicates how much cash is available after
capital expenditures to repay debt, to pursue business
acquisitions, and/or to redistribute to its shareholders.
Management believes that free cash flow also provides investors
with an important perspective on the cash available to us to
service debt, fund acquisitions, and pay dividends. In addition,
free cash flow is commonly used by investors and analysts when
valuing a business and its underlying assets. This measure does not
have any standardized meanings prescribed by IFRS and is therefore
unlikely to be comparable to similar measures presented by other
companies.
(in $ millions) |
Q1 2023 |
|
Q1 2022 |
|
Cash flows from (used in) operating activities |
(179.4 |
) |
(51.5 |
) |
Cash flows from (used in)
investing activities |
(22.8 |
) |
(34.0 |
) |
Adjustment for: |
|
|
Business (dispositions) acquisitions |
— |
|
— |
|
Free cash flow |
(202.2 |
) |
(85.5 |
) |
Total debt and net debtTotal debt is defined as
the total bank indebtedness, long-term debt (including any current
portion), and lease obligations (including any current portion),
and net debt is calculated as total debt net of cash and cash
equivalents. The Company considers total debt and net debt to be
important indicators for management and investors to assess the
financial position and liquidity of the Company, and measure its
financial leverage. These measures do not have any standardized
meanings prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other companies.
(in $ millions) |
Apr 2, 2023 |
|
Jan 1, 2023 |
|
Long-term debt (including current portion) |
1,130.0 |
|
930.0 |
|
Bank indebtedness |
— |
|
— |
|
Lease
obligations (including current portion) |
97.5 |
|
94.0 |
|
Total debt |
1,227.5 |
|
1,024.0 |
|
Cash
and cash equivalents |
(73.8 |
) |
(150.4 |
) |
Net debt |
1,153.7 |
|
873.6 |
|
Net debt leverage ratio The net debt leverage
ratio is defined as the ratio of net debt to pro-forma adjusted
EBITDA for the trailing twelve months, all of which are non-GAAP
measures. The pro-forma adjusted EBITDA for the trailing twelve
months reflects business acquisitions made during the period, as if
they had occurred at the beginning of the trailing twelve month
period. The Company has set a fiscal year-end net debt leverage
target ratio of one to two times pro-forma adjusted EBITDA for the
trailing twelve months. The net debt leverage ratio serves to
evaluate the Company's financial leverage and is used by management
in its decisions on the Company's capital structure, including
financing strategy. The Company believes that certain investors and
analysts use the net debt leverage ratio to measure the financial
leverage of the Company, including our ability to pay off our
incurred debt. The Company's net debt leverage ratio differs from
the net debt to EBITDA ratio that is a covenant in our loan and
note agreements due primarily to adjustments in the latter related
to lease accounting, and therefore the Company believes it is a
useful additional measure. This measure does not have any
standardized meanings prescribed by IFRS and is therefore unlikely
to be comparable to similar measures presented by other
companies.
(in $ millions, or otherwise indicated) |
Apr 2, 2023 |
Jan 1, 2023 |
Adjusted EBITDA for the trailing twelve months |
702.9 |
764.2 |
Adjustment for: |
|
|
Business (dispositions) acquisitions |
— |
— |
Pro-forma adjusted EBITDA for the trailing twelve months |
702.9 |
764.2 |
Net debt |
1,153.7 |
873.6 |
Net
debt leverage ratio(1) |
1.6 |
1.1 |
(1) |
The Company's total net debt to EBITDA ratio for purposes of its
loan and note agreements was 1.8 at April 2, 2023. |
Working capitalWorking capital is a non-GAAP
financial measure and is defined as current assets less current
liabilities. Management believes that working capital, in addition
to other conventional financial measures prepared in accordance
with IFRS, provides information that is helpful to understand the
financial condition of the Company. The objective of using working
capital is to present readers with a view of the Company from
management’s perspective by interpreting the material trends and
activities that affect the short-term liquidity and financial
position of the Company, including its ability to discharge its
short-term liabilities as they come due. This measure is not
necessarily comparable to similarly titled measures used by other
public companies.
(in $ millions) |
Apr 2, 2023 |
|
Jan 1, 2023 |
|
Cash and cash equivalents |
73.8 |
|
150.4 |
|
Trade accounts receivable |
399.1 |
|
248.8 |
|
Inventories |
1,314.8 |
|
1,225.9 |
|
Prepaid expenses, deposits and
other current assets |
102.4 |
|
101.8 |
|
Accounts payable and accrued
liabilities |
(408.4 |
) |
(471.2 |
) |
Income taxes payable |
(6.9 |
) |
(6.6 |
) |
Current portion of lease
obligations |
(15.4 |
) |
(13.8 |
) |
Current portion of long-term
debt |
(150.0 |
) |
(150.0 |
) |
Dividends payable |
(33.6 |
) |
— |
|
Working capital |
1,275.8 |
|
1,085.3 |
|
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 “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 and
financial conditions globally or in one or more of the markets we
serve, including those resulting from the impact of the COVID-19
pandemic and the appearance of COVID variants;
- our ability to implement our growth
strategies and plans, including our ability to bring projected
capacity expansion online;
- our ability to successfully
integrate acquisitions and realize expected benefits and
synergies;
- the intensity of competitive
activity and our ability to compete effectively;
- our reliance on a small number of
significant customers;
- the fact that our customers do not
commit to minimum quantity purchases;
- our ability to anticipate,
identify, or react to changes in consumer preferences and
trends;
- our ability to manage production
and inventory levels effectively in relation to changes in customer
demand;
- fluctuations and volatility in the
price of raw materials used to manufacture our products, such as
cotton, polyester fibres, dyes and other chemicals from current
levels;
- our reliance on key suppliers and
our ability to maintain an uninterrupted supply of raw materials,
intermediate materials and finished goods;
- the impact of climate, political,
social, and economic risks, natural disasters, epidemics, pandemics
and endemics, such as the COVID-19 pandemic, in the countries in
which we operate or sell to, or from which we source
production;
- disruption to manufacturing and
distribution activities due to such factors as operational issues,
disruptions in transportation logistic functions, labour
disruptions, political or social instability, weather-related
events, natural disasters, epidemics and pandemics, such as the
COVID-19 pandemic, and other unforeseen adverse events;
- compliance with applicable trade,
competition, taxation, environmental, health and safety, product
liability, employment, patent and trademark, corporate and
securities, licensing and permits, data privacy, bankruptcy,
anti-corruption, and other laws and regulations in the
jurisdictions in which we operate;
- the imposition of trade remedies,
or changes to duties and tariffs, international trade legislation,
bilateral and multilateral trade agreements and trade preference
programs that the Company is currently relying on in conducting its
manufacturing operations or the application of safeguards
thereunder;
- factors or circumstances that could
increase our effective income tax rate, including the outcome of
any tax audits or changes to applicable tax laws or treaties,
including the implementation of a global minimum tax rate;
- changes to and failure to comply
with consumer product safety laws and regulations;
- changes in our relationship with
our employees or changes to domestic and foreign employment laws
and regulations;
- negative publicity as a result of
actual, alleged, or perceived violations of human rights, labour
and environmental laws or international labour standards, or
unethical labour or other business practices by the Company or one
of its third-party contractors;
- changes in third-party licensing
arrangements and licensed brands;
- our ability to protect our
intellectual property rights;
- operational problems with our
information systems as a result of system failures, viruses,
security and cyber security breaches, disasters, and disruptions
due to system upgrades or the integration of systems;
- an actual or perceived breach of
data security;
- our reliance on key management and
our ability to attract and/or retain key personnel;
- changes in accounting policies and
estimates; and
- exposure to risks arising from
financial instruments, including credit risk on trade accounts
receivables and other financial instruments, liquidity risk,
foreign currency risk, and interest rate risk, as well as risks
arising from commodity prices.
These factors may cause the Company’s actual
performance and financial results in future periods to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward-looking statements.
Forward-looking statements do not take into account the effect that
transactions or non-recurring or other special items announced or
occurring after the statements are made may have on the Company’s
business. For example, they do not include the effect of business
dispositions, acquisitions, other business transactions, asset
write-downs, asset impairment losses, or other charges announced or
occurring after forward-looking statements are made. The financial
impact of such transactions and non-recurring and other special
items can be complex and necessarily depends on the facts
particular to each of them.
There can be no assurance that the expectations
represented by our forward-looking statements will prove to be
correct. The purpose of the forward-looking statements is to
provide the reader with a description of management’s expectations
regarding the Company’s future financial performance and may not be
appropriate for other purposes. Furthermore, unless otherwise
stated, the forward-looking statements contained in this report are
made as of the date hereof, and we do not undertake any obligation
to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events,
or otherwise unless required by applicable legislation or
regulation. The forward-looking statements contained in this report
are expressly qualified by this cautionary statement.
About Gildan
Gildan is a leading manufacturer of everyday
basic apparel which markets its products in North America, Europe,
Asia Pacific, and Latin America under a strong portfolio of
Company-owned brands, primarily including Gildan®, American
Apparel®, Comfort Colors®, GOLDTOE®, Peds® and under the Under
Armour® brand through a sock licensing agreement for exclusive
distribution in the United States and Canada. The Company’s product
offerings include activewear, underwear and socks sold to wholesale
imprintables distributors and national accounts which include large
screenprinters or embellishers, retailers and global lifestyle
brand companies.
Gildan owns and operates vertically integrated,
large-scale manufacturing facilities which are primarily located in
Central America, the Caribbean, the United States, and Bangladesh.
Gildan operates with a strong commitment to industry-leading
labour, environmental and governance practices throughout its
supply chain in accordance with its comprehensive ESG program
embedded in the Company's long-term business strategy. More
information about the Company and its ESG practices and initiatives
can be found at https://gildancorp.com/en/.
Investor
inquiries:Elisabeth HamaouiDirector, Investor
Relations(514) 744-8515ehamaoui@gildan.com |
Media
inquiries:Genevieve GosselinDirector, Global
Communications and Corporate Marketing(514)
343-8814ggosselin@gildan.com |
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