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Gildan: Management?S Discussion And Analysis

The following excerpt is from the company's SEC filing.

mdaa.htm

Shareholder Report

Quarter Ended

Contents

1.0 Preface

2.0 Caution regarding forward-looking statements

3.0 Our business

4.0 Strategy and objectives

5.0 Operating results

6.0 Financial condition

7.0 Cash flows

8.0 Liquidity and capital resources

9.0 Legal proceedings

10.0 Outlook

11.0 Financial risk management

12.0 Critical accounting estimates and judgments

13.0 Accounting policies and new accounting standards not yet

applied

14.0 Internal control over financial reporting

15.0 Risks and uncertainties

16.0 Definition and reconciliation of non-GAAP financial measures

Condensed interim consolidated financial statements

Notes to condensed interim consolidated financial statements

MANAGEMENT’S DISCUSSION AND ANALYSIS

PREFACE

1.1 Definitions

In this Management’s Discussion and Analysis (MD&A), “Gildan”, the “Company”, or the words “we”, “us”, and “our” refer, depending on the context, either to Gildan Activewear Inc. or to Gildan Activewear Inc. together with its subsidiaries.

1.2 Date and approval by the Board of Directors

In preparing this MD&A, we have taken into account all information available to us up to November 11, 2015, the date of this MD&A. The unaudited condensed interim consolidated financial statements as at and for the three and twelve months ended October 4, 2015 and this MD&A were reviewed by Gildan’s Audit and Finance Committee and were approved and authorized for issuance by our Board of Directors on November 11, 2015.

1.3 Accounting framework

All financial information contained in this MD&A and in the unaudited condensed interim consolidated financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS), except for certain information discussed in the section entitled “Definition and reconciliation of non-GAAP financial measures”.

1.4 Additional information

Additional information about Gildan, including our 2014 Annual Information Form, is available on our website at www.gildan.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov.

This MD&A comments on our operations, financial performance, and financial condition as at and for the three and twelve months ended October 4, 2015. All amounts in this MD&A are in U.S. dollars, unless otherwise noted. For a complete understanding of our business environment, trends, risks and uncertainties, and the effect of accounting estimates on our results of operations and financial condition, this MD&A should be read together with the unaudited condensed interim consolidated financial statements as at and for the three and twelve months ended October 4, 2015, and the related notes, and with our MD&A for the year ended October 5, 2014 (2014 Annual MD&A).

All earnings per share and share data in this MD&A are on a post-split basis, reflecting the effect of the two-for-one stock split of the Company’s outstanding common shares by way of a share dividend that took effect on March 27, 2015.

On December 4, 2014, the Company announced that it will be transitioning to a new fiscal year-end in 2015. As a result of this transition, the Company’s year-end will take place on the Sunday closest to December 31, rather than the first Sunday following September 28. The change in year-end recognizes that the seasonality of the overall consolidated sales revenues for the Company is changing due to the increasing importance of the Branded Apparel segment. The Company’s business planning cycle is becoming more aligned with the calendar year, and this change will provide better visibility on retail program placements and cotton fixations. In addition, the change in year-end will be better aligned with Gildan’s industry comparables.

For purposes of its regulatory filings, the Company will report results for the 15-month transition period of October 6, 2014 through January 3, 2016. The Company’s first 12-month fiscal year on a calendar basis will begin on January 4, 2016 and end on January 1, 2017.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.2

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this MD&A 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. In particular, information appearing under the headings “Our Business – Our Operations”, “Strategy and objectives”, “Liquidity and Capital Resources – Long-term debt and net indebtedness”, and “Outlook” contain forward looking statements. 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 the 2014 Annual MD&A 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 this document.

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:

our ability to implement our growth strategies and plans, including achieving market share gains, obtaining and successfully introducing new sales programs, increasing capacity, implementing cost reduction initiatives and completing and successfully integrating acquisitions;

the intensity of competitive activity and our ability to compete effectively;

adverse changes in general economic and financial conditions globally or in one or more of the markets we serve;

our reliance on a small number of significant customers;

the fact that our customers do not commit contractually 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;

our dependence on key suppliers and our ability to maintain an uninterrupted supply of raw materials and finished goods;

the impact of climate, political, social and economic risks in the countries in which we operate 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, bad weather, natural disasters, pandemics and other unforeseen adverse events;

changes to international trade legislation 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;

compliance with applicable environmental, tax, trade, employment, health and safety, anti-corruption, privacy and other laws and regulations in the jurisdictions in which we operate;

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;

adverse changes in third party licensing arrangements and licensed brands;

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.3

our ability to protect our intellectual property rights;

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 labour and environmental laws or international labour standards, or unethical labour or other business practices by the Company or one of its third-party contractors;

our dependence on key management and our ability to attract and/or retain key personnel;

changes to and failure to comply with consumer product safety laws and regulations;

changes in accounting policies and estimates;

exposure to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency risk and interest rate risk, as well as risks arising from commodity prices;

the adverse impact of any current or future legal and regulatory actions; and

an actual or perceived breach of data security.

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.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.4

OUR BUSINESS

3.1 Overview

Gildan is a leading supplier of quality branded basic family apparel, including T-shirts, fleece, sport shirts, underwear, socks, hosiery, and shapewear. We sell our products under a diversified portfolio of company-owned brands, including the Gildan®, Gold Toe®, Anvil® and Comfort Colors® brands and brand extensions, as well as the Secret®, Silks® and Therapy Plus™ brands. The Company also has the U.S. sock license for Under Armour®, and licenses for the Mossy Oak®

and New Balance®

brands. We distribute our products in printwear markets in the U.S. and Canada, as well as in Europe, Asia-Pacific and Latin America. We also market our products to a broad spectrum of retailers primarily in the U.S. and Canada. The Company also manufactures for select leading global athletic and lifestyle consumer brands.

Gildan owns and operates vertically-integrated, large-scale manufacturing facilities which are primarily located in Central America

the Caribbean Basin and the U.S. and are strategically positioned to efficiently service the quick replenishment needs of our customers in the printwear and retail markets. Gildan has over 43,000 employees worldwide and is committed to industry-leading labour and environmental practices at all of its facilities.

3.2 Our operating segments

The Company manages and reports its business under two operating segments, Printwear and Branded Apparel, each of which is a reportable segment for financial reporting purposes. Each segment has its own management that is accountable and responsible for the segment’s operations, results, and financial performance. These segments are principally organized by the major customer markets they serve. The following summary describes the operations of each of the Company’s operating segments:

3.2.1 Printwear segment

The Printwear segment, headquartered in Christ Church, Barbados, designs, manufactures, sources, markets and distributes undecorated activewear products in large quantities primarily to wholesale distributors in printwear markets in over 30 countries across North America, Europe, Asia-Pacific and Latin America. Through our Printwear segment, we sell mainly activewear products consisting of undecorated or “blank” T-shirts, fleece and sport shirts which are marketed primarily under our own brands, Gildan®, Gildan Performance

Anvil® and Comfort Colors®. Through a license arrangement we also sell performance activewear products under the New Balance® brand. Wholesale distributors sell our products to screenprinters and embroiderers, who decorate the products with designs and logos and sell the imprinted activewear to a highly diversified range of end-use markets, including educational institutions, athletic dealers, event merchandisers, promotional product distributors, charitable organizations, entertainment promoters, travel and tourism venues and retailers. Our activewear products are used in a variety of daily activities by individuals and have various applications, including work and school uniforms and athletic team wear, and for various other purposes to convey individual, group and team identity.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.5

3.2.2 Branded Apparel segment

The Branded Apparel segment, headquartered in Charleston, South Carolina, designs, manufactures, sources, markets and distributes branded family apparel, which includes athletic, casual and dress socks, underwear, activewear, sheer hosiery, legwear and shapewear products which are sold to retailers in the United States and Canada. We market our products primarily under our company-owned and licensed brands, and to a lesser extent under select national retailers’ brands. Although the main focus of the Company’s growth strategy is the continued development of its company-owned brands, the Company is also pursuing the opportunity to grow its sales as a supply chain partner to a small number of select targeted global consumer brands, for which we manufacture and decorate products.

The following table summarizes the current retail distribution of various product categories under Company-owned and licensed brands:

Primary products

Retail distribution channels

Socks, underwear, activewear

Mass-market, regional department stores, craft channel, food and drug

Gildan Platinum™

Department stores, major national chain

Smart Basics™

Dollar store channel, food and drug

Socks, activewear

Department stores, national chains, price clubs

PowerSox®

Athletic socks

Sports specialty, national chains, department stores

GT a Gold Toe brand®

Silvertoe®

National chains

Signature Gold by Goldtoe™

All Pro®

Under Armour®

Sports specialty, department stores

Mossy Oak®

Socks, activewear, underwear, loungewear, thermals, fleece

Sports specialty, national chain, mass-market, price clubs, dollar store channel, department stores

Sheer/pantyhose, tights/leggings, shapewear, underwear, intimate accessories, socks

Mass-market, department stores, food and drug

Therapy Plus™

Legwear, foot solutions/socks

Kushyfoot®

Food and drug

Secret Silky®

Under license agreement for socks only – with exclusive distribution rights in the U.S.

Under license agreement – with worldwide distribution rights and exclusivity for certain product categories.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.6

3.3 Our operations

3.3.1 Manufacturing

The vast majority of our products are manufactured in facilities that we own and operate. Our vertically-integrated manufacturing operations include capital-intensive yarn-spinning, textile, sock, and sheer hosiery manufacturing facilities, as well as labour-intensive sewing plants. At our yarn-spinning facilities, we convert cotton and other fibres into yarn. In our textile plants, we convert yarn into dyed and cut fabric, which is subsequently assembled into activewear and underwear garments at sewing facilities which we operate in owned or leased premises.

integrated sock manufacturing facilities

into finished socks

. The majority of our sock production does not require sewing as the equipment used in our facilities knit the entire sock with a seamless toe closing operation.

Our manufacturing facility for sheer hosiery includes knitting, dyeing, and packaging capabilities.

Our textile, sock, and sewing operations are primarily based out of our largest manufacturing hub in Central America and a second large hub in the Caribbean Basin, which are strategically located to efficiently service the quick replenishment requirements of our markets. In addition, we own a small vertically-integrated manufacturing facility in Bangladesh for the production of activewear, which mainly serves our international markets. We also have a small garment dyeing facility in the U.S. as a result of the acquisition of Comfort Colors. Our sheer hosiery manufacturing is located in a facility in Canada. Yarn used to manufacture our products is produced in our own yarn-spinning operations in the U.S., and we also source yarn from third-party U.S. yarn suppliers with which we have supply agreements. A small portion of our yarn requirements is sourced outside of the U.S. We also have screenprinting and decorating capabilities in Central America to support our sales to leading global athletic and lifestyle consumer brands. While we internally produce the majority of the products we sell, we also have sourcing capabilities to complement our large scale, vertically-integrated manufacturing

The following table provides a summary of our primary manufacturing operations by geographic area:

Yarn-spinning facilities

Clarkton, NC

Cedartown, GA

Salisbury, NC

(2 facilities)

Mocksville, NC

Textile

Honduras

Rio Nance 1

Rio Nance 2

Rio Nance 5

Anvil Knitwear Honduras

Dominican Republic

Garment dyeing facility

New Bedford, MA

Sewing facilities

Honduras (4 facilities)

Nicaragua (3 facilities)

Dominican Republic (3 facilities)

Sock / Sheer manufacturing facilities

Montreal, QC

Rio Nance 3

Rio Nance 4

(1) We also use the services of third-party sewing contractors, primarily in Haiti, to support textile production from the Dominican Republic

Yarn-spinning capacity expansion

During 2013, we began to execute a significant yarn-spinning manufacturing initiative in order to support our projected sales growth and planned capacity expansion, and to continue to pursue our business model of investing in global vertically-integrated low-cost manufacturing technology and in product technology, which we believe will provide consistent superior product quality. We operate two open-end yarn-spinning

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.7

facilities located in Clarkton, NC and Cedartown, GA, which were refurbished and modernized during 2014. During 2014, we also developed two new yarn-spinning facilities in Salisbury, NC. The first yarn-spinning facility in Salisbury, NC, which produces ring-spun yarn, was ramped up by the end of 2014. The second yarn-spinning facility in Salisbury, NC, which is producing open-end yarn, began commercial operations during the fourth calendar quarter of 2014 and is expected to be fully ramped up before the end of 2015. We also developed a new greenfield yarn-spinning facility in Mocksville, NC for the production of ring-spun yarn, which began operations at the end of the second calendar quarter of 2015 and is expected to be fully ramped-up during 2016.

Textile manufacturing expansion

The Company has announced plans for further textile capacity expansion. We plan to construct a new textile facility, Rio Nance 6, which will be located at our Rio Nance complex in Honduras. Development of the site for Rio Nance 6 is currently underway and the facility is expected to begin production in the fourth quarter of 2016. We are also planning to construct our first facility in Costa Rica, which is strategically located for duty-free and quota-free access to our major markets in the U.S. The facility will be located in the province of Guanacaste in north-western Costa Rica, close to our sewing plants in Nicaragua and accessible to ports on both the eastern and western coasts of the country. The Costa Rica facility is expected to begin production in the fourth quarter of 2017

The Company is also investing in the further expansion of its Bangladesh facility to support its growth in international markets.

3.3.2 Sales, marketing and distribution

Our sales and marketing offices are responsible for customer-related functions, including sales management, marketing, customer service, credit management, sales forecasting and production planning, as well as inventory control and logistics for each of their respective operating segments. Our two primary distribution centres out of which we service our printwear and retail markets are located in the U.S. In addition, during 2014, the Company completed the construction of a new distribution centre in Honduras.

Our sales and marketing office servicing our global printwear markets is located in Christ Church, Barbados. We distribute our activewear products for the printwear markets primarily out of our main distribution centre in Eden, NC. We also use third-party warehouses in the western United States, Canada, Mexico, Colombia, Europe, and Asia to service our customers in these markets.

Our primary sales and marketing office for our Branded Apparel segment is located in Charleston, SC at the same location as our primary distribution centre servicing our retail customers. In addition, we service retail customers from smaller distribution centres in North Carolina, South Carolina, and Canada. We also operate 52

retail stores located in outlet malls throughout the United States.

3.3.3 Employees and corporate office

We currently employ over 43,000 employees worldwide. Our corporate head office is located in Montreal, Canada.

3.4 Competitive environment

The markets for our products are highly competitive and are served by domestic and international manufacturers or suppliers. Competition is generally based upon price, with reliable quality and service also being critical requirements for success. Our competitive strengths include our expertise in building and operating large-scale, vertically-integrated, strategically-located manufacturing hubs. Our capital investments in manufacturing allow us to operate efficiently and reduce costs, offer competitive pricing, maintain consistent product quality, and a reliable supply chain, which efficiently services replenishment programs with short production/delivery cycle times. Continued investment and innovations in our manufacturing processes have also allowed us to deliver enhanced product features, further improving the value proposition of our product offering to our customers. Consumer brand recognition and appeal are also important factors in the retail market. The Company is focused on further developing its brands and is continuing to make significant investments in advertising to support the Gildan® and Gold Toe® brands.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.8

Our commitment to leading environmental and social responsibility practices is also an area of investment for the Company and an important factor for our customers.

3.4.1 Printwear segment

Our primary competitors in North America include major apparel manufacturers such as Fruit of the Loom, Inc. (Fruit of the Loom) and Russell Corporation (Russell), both subsidiaries of Berkshire Hathaway Inc. (Berkshire), as well as Hanesbrands Inc. (Hanesbrands). We also compete with smaller U.S.-based competitors, including Alstyle Apparel, a division of Ennis Corp., Delta Apparel Inc., American Apparel, Inc., Color Image Apparel, Inc., Next Level Apparel, Bella + Canvas, as well as Central American and Latin American manufacturers. In addition, we compete with private label brands sold by some of our customers. Competitors in the European printwear market include Fruit of the Loom and Russell, as well as competitors that do not have integrated manufacturing operations and source products from suppliers in Asia.

3.4.2 Branded Apparel segment

In the retail channel, we compete primarily with Hanesbrands, Berkshire subsidiaries, Fruit of the Loom, Russell and Garan Incorporated, as well as Renfro Corporation, Jockey International, Inc., Kayser Roth Corporation, and Spanx, Inc. In addition, we compete with brands of well-established U.S. fashion apparel and sportswear companies, as well as private label brands sold by our customers that source primarily from Asian manufacturers.

STRATEGY AND OBJECTIVES

Our growth strategy comprises the following four initiatives:

Continue to pursue additional printwear market penetration and opportunities

While we have achieved a leadership position in the U.S. and Canadian printwear channels, particularly within the basics category servicing wholesale distributors, we believe we can broaden our market opportunity by pursuing deeper penetration in the fashion basics and sports performance product categories in the North American printwear market, where our participation has not been as extensive as in the basics category. We intend to continue to leverage our vertical manufacturing platform, cost advantage and distributor reach to grow in all product categories, including basics, through brand diversification and product expansion. We are introducing new products made of softer fabrics and blends, and expanding our global product offering in performance garments, ladies styles, sport shirts and workwear. We also intend to continue to expand our presence in international printwear markets such as Europe, Asia-Pacific and Latin America, which currently represent less than 10% of the Company’s total consolidated net sales, through product extensions, expanded distribution and by leveraging our brands.

We are pursuing further market penetration in North America and internationally with our expanded portfolio of brands, each with a different brand positioning. In addition to our leading Gildan® brand, our printwear brand portfolio includes the Anvil® brand which competes in the fashion basics segment with more contemporary ring-spun products featuring fashion oriented styles. In March 2015, we added the Comfort Colors® brand to our portfolio to enhance our penetration of the fashion basics segment of the printwear channel. Comfort Colors® garments feature a trendy distressed or vintage look and a soft and comfortable feel. In the sports performance category, we market our products under our Gildan Performance™ brand and the licensed New Balance® brand. Both performance brand offerings feature moisture wicking and anti-microbial properties for long-lasting comfort and performance.

We have historically followed a strategy to continue to invest in low-cost manufacturing capacity and cost reduction projects and pass through a portion of the resulting cost reductions into lower selling prices in order to drive further growth and market penetration. In December 2014, we implemented major strategic pricing actions for our Printwear business to reinforce our leadership position in the industry. We lowered base selling prices significantly and simplified our discount structure, in order to be responsive to distributors and enhance their ability and visibility to plan their business, and position Gildan to drive unit sales volume and earnings growth in calendar 2015 and beyond. The selling price reductions reflect the

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.9

pass through of a portion of the expected cost savings from the Company’s investments in new yarn-spinning facilities and other capital investment projects, which are expected to be generated over the next three years. The selling price reductions also reflected the reduction in the price of cotton that occurred in the latter half of calendar 2014, although the Company only began consuming year-over-year lower cost cotton in its cost of sales in the quarter ended July 5, 2015.

Continue penetration of retail market as a full-line supplier of branded family apparel

We continue to leverage our existing core competencies, successful business model and competitive strengths to grow our sales to North American retailers. As in the printwear channel, success factors in penetrating the retail channel include consistent quality, competitive pricing and fast and flexible replenishment, together with a commitment to sound practices in corporate social responsibility and environmental sustainability. We intend to leverage our current distribution with retailers, our manufacturing scale and expertise, and our ongoing marketing investment to support the further development of Company-owned and licensed brands to create additional sales growth opportunities in activewear, underwear, socks and sheer hosiery. The Company is making significant investments in advertising for the further development of its Gildan® and Gold Toe® portfolio of consumer brands.

Although we are primarily focused on further developing our Company-owned brands, we are also focused on building our relationships and growing our sales as a supply chain partner to a small number of select global athletic and lifestyle brands.

Continue to invest in vertical capacity expansion and manufacturing and distribution cost reduction projects

We plan to continue to increase capacity to support our planned sales growth. We are continuing to seek to optimize our cost structure by adding new low-cost capacity, investing in projects for cost-reduction and further vertical-integration, as well as for additional product quality enhancement. A more detailed description of the Company’s capacity expansion and cost reduction initiatives is contained in Section 3.3.1 entitled “Manufacturing” in this MD&A.

Pursue complementary acquisitions

In order to enhance our organic growth, we will continue to seek complementary strategic acquisition opportunities which meet our return on investment criteria, based on our risk-adjusted cost of capital.

We are subject to a variety of business risks that may affect our ability to maintain our current market share and profitability, as well as our ability to achieve our short and long-term strategic objectives. These risks are described under the “Financial risk management” and “Risks and uncertainties” sections of our 2014 Annual MD&A.

OPERATING RESULTS

5.1 Non-GAAP financial measures

We use non-GAAP financial measures (non-GAAP measures) to assess our operating performance. Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, they should not be considered in isolation. We use non-GAAP measures including adjusted net earnings, adjusted diluted EPS, adjusted EBITDA, free cash flow, total indebtedness, and net indebtedness to measure our performance from one period to the next without the variation caused by certain adjustments that could potentially distort the analysis of trends in our operating performance, and because we believe such measures provide meaningful information on the Company’s financial condition and financial performance.

QUARTERLY REPORT – QUARTER ENDED OCTOBER 4, 2015 P.10

We refer the reader to the section 16.0 entitled “Definition and reconciliation of non-GAAP financial measures” in this MD&A for the definition and complete reconciliation of all non-GAAP measures used and presented by the Company to the most directly comparable IFRS measures.

5.2 Business acquisition

On March 2, 2015, the Company acquired substantially all of the operating assets of a company operating under the Comfort Colors trade name for cash consideration of $103.3 million. The transaction also resulted in the effective settlement of $8.4 million of trade accounts receivable from Comfort Colors prior to the acquisition. The acquisition was financed by the utilization of the Company’s revolving long-term bank credit facility. Comfort Colors is the leading supplier of garment-dyed undecorated basic T-shirts and sweatshirts for the North American printwear market. The Comfort Colors® brand is highly recognized among consumers purchasing from college bookstores, specialty retail stores, and destination and resort shops. The acquisition of Comfort Colors reinforces Gildan’s strategy to increase its penetration of the growing fashion basics segment of the North American printwear market.

The Company accounted for the acquisition of Comfort Colors using the acquisition method in accordance with IFRS 3, Business Combinations, and the condensed interim consolidated financial statements for the twelve months ended October 4, 2015 include the results of Comfort Colors from March 2, 2015 to October 4, 2015. The results of Comfort Colors are included in the Printwear segment. The Company has determined the preliminary fair value of the assets acquired and liabilities assumed based on management's best estimate of their fair values and taking into account all relevant information available at that time. Please refer to note 4 of the condensed interim consolidated financial statements as at and for the three and twelve months ended October 4, 2015 for a summary of the preliminary amounts recognized for the assets acquired and liabilities assumed at the date of acquisition, and for post-acquisition and pro-forma net sales and net earnings disclosures.

5.3 Summary of quarterly results

The table below sets forth certain summarized unaudited quarterly financial data for the eight most recently completed quarters. This quarterly information is unaudited and has been prepared in accordance with IFRS. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.

For the three months ended

Oct 4,

Jul 5,

Apr 5,

Jan 4,

Oct 5,

Jul 6,

Mar 30,

Dec 29

(in $ millions, except per share amounts)

Net sales

674.5

714.2

636.2

390.6

666.0

693.8

548.8

451.4

Net earnings (loss)

123.1

(41.2)

122.7

116.0

Net earnings (loss) per share

Basic

(0.17)

Diluted

Weighted average

shares outstanding

(in ‘000s)

242,257

241,856

241,360

243,852

243,968

243,584

243,220

243,344

244,063

243,809

243,513

246,558

246,428

246,314

246,092

(1) Reflects the acquisition of Comfort Colors from...


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