o | Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934 |
Or | |
þ | Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 |
Title of each class | Name of each exchange on which registered |
Common Shares | New York Stock Exchange |
Rights to Purchase Common Shares | New York Stock Exchange |
Yes þ | No o |
Yes þ | No o |
Emerging Growth Company o |
GILDAN ACTIVEWEAR INC. 2018 ANNUAL INFORMATION FORM TABLE OF CONTENTS | |
Page | |
CORPORATE STRUCTURE | |
Name, Address and Incorporation | |
Intercorporate Relationships | |
GENERAL DEVELOPMENT OF THE BUSINESS | |
Recent Developments | |
Developments in Fiscal 2018 | |
Developments in Fiscal 2017 | |
Developments in Fiscal 2016 | |
DESCRIPTION OF THE BUSINESS | |
Business Overview | |
Risk Factors | |
Employees | |
DIVIDEND POLICY | |
CAPITAL STRUCTURE | |
MARKET FOR SECURITIES | |
DIRECTORS AND OFFICERS | |
AUDIT AND FINANCE COMMITTEE DISCLOSURE | |
LEGAL PROCEEDINGS | |
TRANSFER AGENT AND REGISTRAR | |
MATERIAL CONTRACTS | |
INTERESTS OF EXPERTS | |
CAUTION REGARDING FORWARD-LOOKING STATEMENTS | |
ADDITIONAL INFORMATION | |
APPENDIX A – MANDATE OF THE AUDIT AND FINANCE COMMITTEE |
- | Audited Consolidated Financial Statements for the fiscal year ended December 30, 2018 (the “2018 Annual Financial Statements”); |
- | Management’s Discussion and Analysis for the fiscal year ended December 30, 2018 (the “2018 Annual MD&A”); and |
- | The latest Notice of Annual Meeting of Shareholders and Management Information Circular filed on SEDAR. |
This Annual Information Form contains certain forward-looking statements that are based on Gildan’s current expectations, estimates, projections and assumptions and that were made by Gildan in light of its experience and its perception of historical trends. Results indicated in forward-looking statements may differ materially from the actual results. Please refer to the cautionary statement on pages 29 to 31 of this Annual Information Form for further explanation. |
Subsidiary | Jurisdiction of Incorporation or Formation | Percentage of Voting Securities or Partnership Interests that Gildan held as at February 22, 2019 |
Gildan Activewear SRL | Barbados | 100% |
Gildan Yarns, LLC | Delaware | 100% |
Gildan Branded Apparel SRL | Barbados | 100% |
Gildan Honduras Properties, S. de R.L. | Honduras | 100% |
Gildan Apparel (Canada) LP | Ontario | 100% |
Gildan Activewear (UK) Limited | United Kingdom | 100% |
Gildan Textiles de Sula, S. de R.L. | Honduras | 100% |
G.A.B. Limited | Bangladesh | 100% |
Gildan Activewear Honduras Textile Company, S. de R.L. | Honduras | 100% |
Gildan Activewear (Eden) Inc. | North Carolina | 100% |
Gildan Hosiery Rio Nance, S. de R.L. | Honduras | 100% |
Gildan Mayan Textiles, S. de R.L. | Honduras | 100% |
• | On February 20, 2019, Gildan’s Board of Directors approved a 20% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.134 per Common Share payable on April 1, 2019 to shareholders of record on March 7, 2019. |
• | On February 20, 2019, the Company received approval from the Toronto Stock Exchange (“TSX”) to renew its normal course issuer bid (“NCIB”) commencing on February 27, 2019 to purchase for cancellation up to 10,337,017 Common Shares, representing approximately 5% of the Company’s issued and outstanding Common Shares. As of February 14, 2019 (the reference date for the NCIB), the Company had 206,740,357 Common Shares issued and outstanding. The Company is authorized to make purchases under the NCIB until February 26, 2020 in accordance with the requirements of the TSX. Purchases will be made by means of open market transactions on both the TSX and the New York Stock Exchange (“NYSE”), or alternative trading systems, if eligible, or by such other means as a securities regulatory authority may permit, including by private agreements under an issuer bid exemption order issued by securities regulatory authorities in Canada. Under the bid, Gildan may purchase up to a maximum of 136,754 Common Shares daily through TSX facilities, which represents 25% of the average daily trading volume on the TSX for the most recently completed six calendar months. The price to be paid by Gildan for any Common Shares will be the market price at the time of the acquisition, plus brokerage fees, and purchases made under an issuer bid exemption order will be at a discount to the prevailing market price in accordance with the terms of the order. |
• | Effective January 1, 2018, the Company implemented executive leadership changes and consolidated its organizational structure to better leverage its go-to-market strategy across its brand portfolio and drive greater operational efficiency across the organization. The Company combined its Printwear and Branded Apparel operating businesses into one consolidated divisional operating structure. Consequently, starting in fiscal 2018 the Company began reporting under one reportable business segment. As part of this organizational consolidation, we centralized marketing, merchandising, sales, and administrative functions and streamlined our distribution network, including the closure of smaller owned and leased warehouse facilities, as well as the start-up of new larger distribution centres in the west and east coasts of the United States. |
• | During 2018, we consolidated and reduced some of our sock manufacturing capacity. In the third quarter of 2018, we closed a smaller sock facility in North Carolina, U.S., which was acquired as part of the acquisition of Peds Legwear Inc. (Peds), and transitioned the production to our Rio Nance 4 sock facility in Honduras. During the fourth quarter, we also began consolidating our sock operations in Honduras into one facility by integrating the majority of our sock production into our Rio Nance 4 facility. The Rio Nance 3 facility, previously our other sock facility, is now largely focusing on our garment dyeing operations. In the fourth quarter of 2018, we also made the decision to close the AKH textile facility in Honduras, which was acquired as part of the Anvil acquisition in 2012, operating in leased premises outside of our large manufacturing complex in Rio Nance. Textile production from AKH was transitioned to our new state-of-the art Rio Nance 6 textile facility which began operations towards the end of the second quarter of 2018. Rio Nance 6 is being ramped up with new equipment geared for more efficient production of fashion basics. All textile production in Honduras will now be contained within our large Rio Nance complex. |
• | On February 21, 2018, Gildan’s Board of Directors approved a 20% increase in the amount of the current quarterly dividend and declared a cash dividend of $0.112 per Common Share payable each quarter of fiscal 2018. |
• | On February 21, 2018, the Company received approval from the TSX to renew its NCIB commencing on February 27, 2018 to purchase for cancellation up to 10,960,391 Common Shares, representing approximately 5% of the Company’s issued and outstanding Common Shares. As of February 15, 2018 (the reference date for the NCIB), the Company had 219,207,838 Common Shares issued and outstanding. The Company was authorized to make purchases under the NCIB until February 26, 2019. On July 31, 2018, the Company received approval from the TSX to amend its NCIB in order to increase the maximum number of Common Shares that may be repurchased to 21,575,761 Common Shares, representing approximately 10% of the Company's public float as at February 15, 2018. No other terms of the NCIB were amended. During the twelve month period ended February 20, 2019, the Company repurchased and cancelled a total of 12,634,692 Common Shares under the NCIB through the facilities of the TSX and the NYSE for a total of cost of $367.5 million. |
• | On February 8, 2017, the Company acquired the American Apparel® brand and certain assets from American Apparel, LLC, (“American Apparel”) which filed for Chapter 11 bankruptcy protection on November 14, 2016. The acquisition was effected through a court supervised auction during which Gildan emerged as the successful bidder with a final cash bid of $88.0 million. The Company also acquired inventory from American Apparel for approximately $10.5 million. The total consideration transferred for this acquisition was therefore $98.5 million (of which $91.9 million was paid in the fiscal year ended December 31, 2017, and $6.6 million was paid in the fourth quarter of fiscal 2016). The acquisition was financed by the utilization of the Company's long-term bank credit facilities. The American Apparel® brand is a highly recognized brand among consumers and within the North American imprintables channel and is a strong complementary addition to Gildan’s growing brand portfolio. The acquisition provides the opportunity to grow American Apparel® sales by leveraging the Company’s extensive imprintables distribution networks in North America and internationally to drive further share in the fashion basics category of these markets. |
• | On February 22, 2017, Gildan’s Board of Directors approved a 20% increase in the amount of the quarterly dividend and declared a cash dividend of $0.0935 per Common Share payable each quarter of fiscal 2017. |
• | On February 22, 2017, the Company received approval from the TSX to renew its NCIB commencing on February 27, 2017 to purchase for cancellation up to 11,512,267 Common Shares representing approximately 5% of the Company’s issued and outstanding Common Shares. As at February 17, 2017 (the reference date for the NCIB), the Company had 230,245,359 Common Shares issued and outstanding. The Company was authorized to make purchases under the NCIB until February 26, 2018. On November 2, 2017, the Company received approval from the TSX to amend its NCIB in order to increase the maximum number of Common Shares that may be repurchased to 16,117,175 Common Shares, representing 7.2% of the Company’s public float or 7% of the issued and outstanding Common Shares as at February 17, 2017. No other terms of the NCIB were then amended. During the twelve months period ended February 21, 2018, the Company repurchased and cancelled a total of 11,512,267 Common Shares under the NCIB through the facilities of the TSX and the NYSE for a total cost of $328.6 million, of which a total of 877,000 Common Shares were repurchased by way of private agreements with arm’s length third party sellers. |
• | On February 22, 2017, the Company's Board of Directors approved a new shareholder rights plan (the “Rights Plan”) which became effective upon confirmation and approval by the shareholders of the Company at the annual general meeting of shareholders held on May 4, 2017. The Rights Plan is designed to ensure that all shareholders of the Company are treated fairly in connection with any take-over offer or other acquisition of control of the Company. The Rights Plan was not adopted in response to any specific proposal to acquire control of the Company, nor is the Board of Directors aware of any pending or threatened take-over bid for the Company. The Rights Plan is similar to plans recently adopted by other Canadian companies and approved by their shareholders, which include amendments to take into consideration the changes to |
• | On July 17, 2017, the Company acquired substantially all of the assets of a ring-spun yarn manufacturer with two facilities located in Columbus, Georgia for cash consideration of $13.5 million. Production from the yarn facilities, which manufacture combed and carded ring spun yarns will be used to support our sales of fashion basics products and to round out our yarn requirement needs, in particular for specialty yarns. The Company expects that focusing production of specialty yarns in these facilities will enable additional efficiencies in the Company’s other larger plants. |
• | On April 4, 2017, the Company acquired a 100% interest in an Australian based activewear distributor for cash consideration of $5.7 million. This business is part of the Company’s international sales strategy. |
• | On February 23, 2016, Gildan’s Board of Directors approved a 20% increase in the amount of the quarterly dividend and declared a cash dividend of $0.078 per Common Share payable each quarter of fiscal 2016. |
• | On February 24, 2016, the Company received approval from the TSX to renew its NCIB, beginning February 26, 2016 and expiring February 25, 2017 to purchase for cancellation up to 12,192,814 outstanding Common Shares, representing approximately 5% of the Company’s 243,856,289 issued and outstanding Common Shares. On July 26, 2016, the Company received approval from the TSX to amend its NCIB in order to increase the maximum number of Common Shares that may be repurchased to 20,727,784 Common Shares, representing 8.5% of the Company’s issued and outstanding Common Shares or 8.6% of the public float as at February 19, 2016. No other terms of the NCIB were amended. During the twelve months ended January 1, 2017, the Company repurchased and cancelled a total of 13,775,248 Common Shares under the NCIB through the facilities of the TSX and the NYSE for a total cost of $394.4 million, of which a total of 4,025,000 Common Shares were repurchased by way of private agreements with arm’s length third party sellers. |
• | On May 26, 2016, the Company acquired 100% of the equity interest of Alstyle Apparel, LLC and its subsidiaries (“Alstyle”), which constituted the apparel division of Ennis, Inc., for a total cash purchase price of $110 million. The acquisition of Alstyle expanded Gildan's penetration in printwear markets in the U.S., Canada and Mexico and complemented its overall market presence in the Western United States where Alstyle has a strong presence. With the acquisition, Gildan acquired Alstyle’s manufacturing operations in Mexico. |
• | During 2016, the Company raised $600 million of long-term debt in order to support its net debt leverage target of one to two times adjusted EBITDA. Gildan management and the Board of Directors believe that the Company can make effective use of its balance sheet within this targeted net debt leverage range which is expected to allow the Company to continue to pursue complementary acquisitions, as a priority of use for cash, that can enhance its organic growth strategy, while also providing for return of capital to its shareholders through dividends and share repurchase programs. |
• | In August 2016, the Company acquired 100% of the equity interest of Peds, a marketer of foot apparel and legwear products sold under the Peds® and MediPeds® brands, for a total consideration of $51.9 million. The rationale for the acquisition was to target revenue growth opportunities by leveraging Gildan’s and Peds existing channels of distribution and customer base and potentially extending Peds’ brands into Gildan’s other product categories. |
Primary product categories | Product-line details | Brands |
Activewear | T-shirts, fleece tops and bottoms, and sport shirts | Gildan®, Gildan Performance®, Gildan Platinum®(1), Gildan® Hammer™, Comfort Colors®(2), American Apparel®, Anvil®, Alstyle®(2), Gold Toe® |
Hosiery | athletic, dress, casual and workwear socks, liner socks, socks for therapeutic purposes(4), sheer panty hose(5), tights(5), and leggings(5) | Gildan®, Gildan Platinum®(1), Under Armour®(3), Gold Toe®, PowerSox®, GT a Gold Toe Brand®, Silver Toe®, Signature Gold by Goldtoe®, Peds®, MediPeds®, Kushyfoot®(1), Therapy Plus®(1), All Pro®, Secret®(1), Silks®(1), Secret Silky®, American Apparel® |
Underwear | men's and boys' underwear (tops and bottoms) and ladies panties | Gildan®, Gildan Platinum®(1), American Apparel® |
Intimates | ladies shapewear, intimates, and accessories | Secret®(1), American Apparel®, Secret Silky® |
Other | To round out our product offerings for certain brands, we also offer other products, including but not limited to denim, jackets, sweaters, bodysuits, skirts, dresses, accessories, which are mainly sourced through third-party suppliers |
Canada | United States | Central America | Caribbean Basin | Mexico | Asia | |
Yarn-spinning facilities:(1) conversion of cotton, polyester and other fibres into yarn | ■ Clarkton, NC ■ Cedartown, GA ■ Columbus, GA (2 facilities) ■ Salisbury, NC (2 facilities) ■ Mocksville, NC | |||||
Textile facilities: knitting yarn into fabric, dyeing and cutting fabric | ■ Honduras (4 facilities) | ■ Dominican Republic | ■ Agua Prieta | ■ Bangladesh | ||
Sewing facilities(2): assembly and sewing of cut goods | ■ Honduras (4 facilities) ■ Nicaragua (3 facilities) | ■ Dominican Republic (3 facilities) | ■ Ensenada ■ Hermosillo ■ Agua Prieta | ■ Bangladesh | ||
Garment-dyeing:(3) pigment dyeing or reactive dyeing process | ■ Honduras (1 facility) | |||||
Hosiery manufacturing facilities: conversion of yarn into finished socks/sheer hosiery | ■ Montreal, QC | ■ Honduras (1 facility) |
Date of Dividend Declaration | Amount of Dividend per Common Share |
February 24, 2016 | $0.078 |
May 4, 2016 | $0.078 |
July 27, 2016 | $0.078 |
November 3, 2016 | $0.078 |
February 23, 2017 | $0.0935 |
May 3, 2017 | $0.0935 |
August 3, 2017 | $0.0935 |
November 2, 2017 | $0.0935 |
February 22, 2018 | $0.1120 |
May 2, 2018 | $0.1120 |
August 2, 2018 | $0.1120 |
November 1, 2018 | $0.1120 |
COMMON SHARES | |||||||||||
Toronto Stock Exchange (TSX)(1) | New York Stock Exchange (NYSE)(2) | ||||||||||
Month | High (Cdn$) | Low (Cdn$) | Trading Volume | Month | High | Low | Trading Volume | ||||
January | 42.18 | 39.66 | 8,744,468 | January | 34.18 | 31.91 | 1,682,787 | ||||
February | 41.66 | 36.99 | 15,246,364 | February | 33.77 | 28.95 | 2,474,199 | ||||
March | 38.83 | 36.27 | 14,205,660 | March | 29.79 | 28.12 | 1,841,064 | ||||
April | 38.49 | 36.50 | 9,539,556 | April | 29.93 | 28.31 | 1,439,078 | ||||
May | 39.38 | 36.33 | 15,762,140 | May | 30.52 | 28.43 | 1,890,957 | ||||
June | 39.33 | 36.74 | 16,287,336 | June | 29.80 | 27.72 | 1,935,159 | ||||
July | 38.27 | 33.03 | 12,933,695 | July | 28.92 | 25.34 | 3,023,589 | ||||
August | 41.45 | 33.28 | 16,925,464 | August | 31.83 | 25.50 | 4,768,516 | ||||
September | 39.90 | 37.85 | 8,871,122 | September | 30.64 | 28.77 | 1,991,393 | ||||
October | 39.84 | 36.62 | 10,861,834 | October | 31.08 | 28.24 | 2,476,519 | ||||
November | 43.86 | 37.68 | 13,107,097 | November | 32.99 | 28.81 | 2,907,911 | ||||
December | 45.45 | 40.35 | 11,799,794 | December | 34.40 | 29.68 | 2,649,866 |
Name and Municipality of Residence | Principal Occupation | Director Since |
Glenn J. Chamandy Montréal, Québec, Canada | President and Chief Executive Officer of the Company | May 1984 |
William D. Anderson(4) Toronto, Ontario, Canada | Corporate Director | May 2006 |
Donald C. Berg(1)(3) Lakewood Ranch, Florida, United States | President of DCB Advisory Services (consulting services to food and beverage companies) | February 2015 |
Maryse Bertrand(1)(2) Montréal, Québec, Canada | Corporate Director | May 2018 |
Marc Caira(2)(3) Toronto, Ontario, Canada | Vice-Chairman of the Board of Directors of Restaurant Brands International Inc. (multinational quick service restaurant company) | May 2018 |
Shirley E. Cunningham(1)(3) Eagan, Minnesota, United States | Corporate Director | February 2017 |
Russell Goodman(1)(3) Mont Tremblant, Québec, Canada | Corporate Director | December 2010 |
George Heller(1)(2) East York, Ontario, Canada | Corporate Director | December 2009 |
Charles Herington(2)(3) Miami, Florida, United States | Chief Operating Officer, Vice-Chairman and President of Global Operations at Zumba Fitness LCC (worldwide provider of dance fitness classes) | May 2018 |
Craig Leavitt(1)(3) New York, New York, United States | Corporate Director | May 2018 |
Anne Martin-Vachon(2)(3) Mississauga, Ontario, Canada | President of The Shopping Channel (television shopping service) | February 2015 |
Gonzalo F. Valdes-Fauli(1)(2) Key Biscayne, Florida, United States | Chairman of BroadSpan Capital LLC (investment banking firm) | October 2004 |
(1) | Member of the Audit and Finance Committee. |
(2) | Member of the Corporate Governance and Social Responsibility Committee. |
(3) | Member of the Compensation and Human Resources Committee. |
(4) | Chairman of the Board. |
Name and Municipality of Residence | Position Held Within the Company and Principal Occupation |
Glenn J. Chamandy(1) Montréal, Québec, Canada | President, Chief Executive Officer and Director |
Rhodri J. Harries(1) Montréal, Québec, Canada | Executive Vice‑President, Chief Financial and Administrative Officer |
Michael R. Hoffman St. Peter, Barbados | President, Sales, Marketing and Distribution |
Benito A. Masi Panama City, Panama | President, Manufacturing |
Chuck J. Ward Hickory, North Carolina | Senior Vice-President, Yarn Spinning |
• | The Rights Plan approved by the Board of Directors on February 22, 2017, ratified by the Company’s shareholders at the annual shareholders’ meeting on May 4, 2017. This agreement will expire on the date on which the annual meeting of the Company's shareholders will be held in 2020, with one renewal option subject to shareholder approval, and subject to earlier termination or expiration in accordance with the plan's terms. This agreement was filed on SEDAR on February 23, 2017, and is available at www.sedar.com. |
• | our ability to implement our growth strategies and plans; |
• | our ability to successfully integrate acquisitions and realize expected benefits and synergies; |
• | the intensity of competitive activity and our ability to compete effectively; |
• | 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 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 reliance 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; |
• | 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 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; |
• | 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 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. |
• | a minimum of three directors; |
• | only “independent” (as contemplated by Canadian Corporate Governance Standards and US Corporate Governance Standards) directors shall be appointed, the whole as determined by the Board; no affiliate of the Company or any of its subsidiaries (including any person who, directly or indirectly, controls or is controlled by, or is under common control with the Company, or any director, executive officer, partner, member, principal or designee of such affiliate) may serve on the Audit Committee; |
• | a member of the Audit Committee shall receive no compensation from the Company or any of its affiliates other than compensation as a director and committee member of the Company; prohibited compensation includes fees paid, directly or indirectly, for services as a consultant or as legal or financial advisor, regardless of the amount; |
• | each member must be “financially literate” (as contemplated by Canadian Corporate Governance Standards and US Corporate Governance Standards), as determined by the Board; |
• | at least one member must be an “audit committee financial expert” (as contemplated by US Corporate Governance Standards), as determined by the Board; |
• | members of the Audit Committee shall be appointed annually by the Board upon recommendation of the Company’s Corporate Governance Committee; such members may be removed or replaced, and any vacancies on the Audit Committee shall be filled by the Board upon recommendation of the Company’s Corporate Governance Committee; membership on the Audit Committee shall automatically end at such time the Board determines that a member ceases to be “independent” as determined in the manner set forth above; |
• | the chair of the Compensation and Human Resources Committee of the Company is a member of the Audit Committee; |
• | quorum of majority of members. |
(a) | Overseeing financial reporting |
• | monitoring the integrity and quality of the Company’s accounting and financial reporting process, disclosure controls and procedures, and systems of internal control, through independent discussions with management, the external auditors and the internal auditors; |
• | reviewing, with management and the external auditors, the annual audited consolidated financial statements of the Company and accompanying information, including the report of the auditors thereon to be included in the Annual Report of the Company, the Company’s MD&A disclosure and annual earnings press release, prior to their release, filing and distribution; |
• | reviewing, with management and the external auditors, condensed interim consolidated financial statements of the Company and accompanying information, including the Company’s MD&A disclosure and quarterly earnings press release, prior to their release, filing and distribution; |
• | reviewing, with management and where appropriate, the external auditors, the financial information contained in prospectuses, offering memoranda, Annual Information Forms, Management Information Circulars, Forms 6‑K (including Supplemental Disclosure) and 40‑F and any other document required to be disclosed or filed by the Company before their public disclosure or filing with regulatory authorities in Canada or the United States of America; |
• | reviewing, with management, the type, presentation, controls and processes relating to financial information to be included in earnings press releases and other documents required to be filed with regulatory authorities in Canada or the United States of America (including earnings guidance and other material forward-looking information, as well as any use of pro-forma or non-GAAP information); |
• | reviewing, with management, that adequate procedures are in place for the review of the Company’s disclosure of financial information extracted or derived from the Company’s financial statements, such as annual reports and investor presentations, and periodically assessing the adequacy of those procedures; |
• | reviewing, with the external auditors and management, the quality, appropriateness and disclosure of the Company’s accounting principles and policies, underlying assumptions and reporting practices, and any proposed changes thereto; |
• | reviewing any analysis or other written communications prepared by management setting forth significant financial reporting issues, including the method used to account for significant unusual transactions or events and disclosures relating thereto, critical accounting estimates and judgments made in connection with the preparation of the financial statements, the analyses of the effect of alternative acceptable accounting policy choices, and the disclosure of sensitive matters such as related party transactions; |
• | reviewing the external auditors’ quarterly review engagement report; |
• | overseeing the procedures to review management certifications filed with applicable securities regulators; |
• | reviewing the potential impact of any litigation, claim or other contingency and any regulatory or accounting initiatives that could have a material effect upon the financial |
• | overseeing the procedures to monitor the public disclosure of information by the Company; |
• | reviewing the Company’s disclosure policy on a regular basis; |
• | reviewing the results of the external audit, any significant problems encountered in performing the audit, and management's response and/or action plan related to any Management Letter issued by the external auditors and any significant recommendations contained therein. |
(b) | Monitoring risk management and internal controls |
• | receiving periodically management’s report assessing the adequacy and effectiveness of the Company’s disclosure controls and procedures; |
• | receiving periodically management’s reports assessing the adequacy and effectiveness of the Company’s systems of internal control over financial reporting and reviewing the report of the auditors thereon; |
• | reviewing insurance coverage (annually and as may otherwise be appropriate); |
• | reviewing the Company’s policies and parameters regarding hedging activity and derivatives contracts entered into by management in order to address risks associated with foreign exchange fluctuations, commodity prices, interest rates and any other risks where the Company enters into derivatives contracts; |
• | assisting the Board with the oversight of the Company’s compliance with, and reviewing the Company’s processes for complying with, applicable legal and regulatory requirements, including tax compliance; |
• | overseeing the confidential, anonymous procedures for the receipt, retention and treatment of complaints or concerns received by the Company regarding accounting, internal accounting controls or auditing matters or employee concerns regarding accounting or auditing matters; |
• | requesting the performance of any specific audit, as required. |
(c) | Monitoring internal auditors |
• | ensuring that the head of internal audit has a functional reporting relationship with the Audit Committee; |
• | overseeing the access by internal auditors to all levels of management in order to carry out their duties; |
• | regularly monitoring the internal audit function’s performance, its responsibilities, staffing and budget; |
• | approving the appointment and termination of the Company’s chief internal auditor; |
• | ensuring the ongoing accountability of the internal audit function to the Audit Committee and to the Board. |
(a) | Monitoring external auditors |
• | performing annual evaluations and periodic comprehensive evaluations of the performance of the external auditors, including assessing their qualifications and compensation as well as the quality and independence of their audits; |
• | monitoring at least annually the results of the periodic regulatory and professional quality-control examinations of the quality of the external audits; |
• | recommending the retention and, if appropriate, the removal of external auditors (both subject to shareholder approval); |
• | overseeing all relationships between the external auditors and the Company including, determining which non-audit services the external auditors are prohibited from providing, approving or pre-approving policies defining audit and permitted non-audit services provided by the external auditors, overseeing the disclosure of all audit and permitted non-audit services provided by the external auditors, and reviewing the total amount of fees paid by the Company to the external auditors for all audit and non-audit services; |
• | overseeing the direct reporting and accountability of the external auditors to the Audit Committee and to the Board; |
• | directly overseeing the work of the external auditors, including the resolution of any disagreement between them and management regarding accounting and financial reporting; |
• | discussing with the external auditors the quality and not just the acceptability of the Company’s accounting principles, including (i) critical accounting policies and practices used, (ii) critical accounting estimates and matters involving significant uncertainty, (iii) alternative treatments of financial information that have been discussed with management, the ramification of their use and the treatment preferred by the external auditors, as well as (iv) other material written communications between the Company and the external auditors with respect thereto; |
• | reviewing at least annually, representations by the external auditors describing their internal quality-control procedures; |
• | reviewing at least annually, the external auditors’ representations as to independence and holding discussions with the external auditors as to any relationship or services that may impact their objectivity or independence; |
• | reviewing hiring policies for employees or former employees of the Company’s firm of external auditors; |
• | overseeing the rotation of lead, concurring and other partners involved in the audit. |
(b) | Reviewing financings |
• | reviewing the adequacy, terms and conditions, and compliance relating to the Company’s material financing arrangements, including sales of accounts receivable, supplier factoring and hedging. |
(c) | Evaluating the performance of the Audit Committee |
• | overseeing the existence of processes to annually evaluate the performance of the Audit Committee. |
A. | Undertaking |
B. | Consent to Service of Process |
Title: | Vice-President, General Counsel and Corporate Secretary |
Exhibit No. | Description |
99.1 | Management’s Discussion and Analysis of the Registrant for the year ended December 30, 2018 | |
99.2 | Audited comparative consolidated financial statements of the Registrant as at and for the year ended December 30, 2018 | |
99.3 | Consent of KPMG LLP | |
99.4 | Officers’ Certifications Required by Rule 13a-14(a) or Rule 15d-14(a) | |
99.5 | Officers’ Certifications Required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
101 | XBRL Instance Document |
TABLE OF CONTENTS | |||
MANAGEMENT’S DISCUSSION AND ANALYSIS | |||
1.0 | PREFACE | ||
2.0 | CAUTION REGARDING FORWARD-LOOKING STATEMENTS | ||
3.0 | OUR BUSINESS | ||
3.1 | Overview | ||
3.2 | Operating segment reporting | ||
3.3 | Our operations | ||
3.4 | Competitive environment | ||
4.0 | STRATEGY AND OBJECTIVES | P. 9 | |
5.0 | OPERATING RESULTS | ||
5.1 | Overview | ||
5.2 | Non-GAAP financial measures | ||
5.3 | Selected annual information | ||
5.4 | Consolidated operating review | ||
5.5 | Summary of quarterly results | ||
5.6 | Fourth quarter 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 | DISCLOSURE CONTROLS AND PROCEDURES | ||
15.0 | INTERNAL CONTROL OVER FINANCIAL REPORTING | ||
16.0 | RISKS AND UNCERTAINTIES | ||
17.0 | DEFINITION AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING | P. 47 | ||
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS | P. 51 | ||
NOTES TO AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS | P. 55 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
1.0 | PREFACE |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
• | our ability to implement our growth strategies and plans; |
• | our ability to successfully integrate acquisitions and realize expected benefits and synergies; |
• | the intensity of competitive activity and our ability to compete effectively; |
• | 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 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 reliance 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; |
• | 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 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; |
• | 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 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. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Primary product categories | Product-line details | Brands |
Activewear | T-shirts, fleece tops and bottoms, and sport shirts | Gildan®, Gildan Performance®, Gildan Platinum®(1), Gildan® Hammer™, Comfort Colors®(2), American Apparel®, Anvil®, Alstyle®(2), Gold Toe® |
Hosiery | athletic, dress, casual and workwear socks, liner socks, socks for therapeutic purposes(4), sheer panty hose(5), tights(5), and leggings(5) | Gildan®, Gildan Platinum®(1), Under Armour®(3), Gold Toe®, PowerSox®, GT a Gold Toe Brand®, Silver Toe®, Signature Gold by Goldtoe®, Peds®, MediPeds®, Kushyfoot®(1), Therapy Plus®(1), All Pro®, Secret®(1), Silks®(1), Secret Silky®, American Apparel® |
Underwear | men's and boys' underwear (tops and bottoms) and ladies panties | Gildan®, Gildan Platinum®(1), American Apparel® |
Intimates | ladies shapewear, intimates, and accessories | Secret®(1), American Apparel®, Secret Silky® |
Other | To round out our product offerings for certain brands, we also offer other products, including but not limited to denim, jackets, sweaters, bodysuits, skirts, dresses, accessories, which are mainly sourced through third-party suppliers |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Canada | United States | Central America | Caribbean Basin | Mexico | Asia | |
Yarn-spinning facilities:(1) conversion of cotton, polyester and other fibres into yarn | ■ Clarkton, NC ■ Cedartown, GA ■ Columbus, GA (2 facilities) ■ Salisbury, NC (2 facilities) ■ Mocksville, NC | |||||
Textile facilities: knitting yarn into fabric, dyeing and cutting fabric | ■ Honduras (4 facilities) | ■ Dominican Republic | ■ Agua Prieta | ■ Bangladesh | ||
Sewing facilities(2): assembly and sewing of cut goods | ■ Honduras (4 facilities) ■ Nicaragua (3 facilities) | ■ Dominican Republic (3 facilities) | ■ Ensenada ■ Hermosillo ■ Agua Prieta | ■ Bangladesh | ||
Garment-dyeing:(3) pigment dyeing or reactive dyeing process | ■ Honduras (1 facility) | |||||
Hosiery manufacturing facilities: conversion of yarn into finished socks/sheer hosiery | ■ Montreal, QC | ■ Honduras (1 facility) |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions, except per share amounts or otherwise indicated) | Variation 2018-2017 | Variation 2017-2016 | ||||||||||||
2018 | 2017 | 2016 | $ | % | $ | % | ||||||||
Net sales | 2,908.6 | 2,750.8 | 2,585.1 | 157.8 | 5.7 | % | 165.7 | 6.4 | % | |||||
Gross profit | 806.0 | 801.2 | 719.7 | 4.8 | 0.6 | % | 81.5 | 11.3 | % | |||||
SG&A expenses | 368.5 | 377.3 | 336.4 | (8.8 | ) | (2.3 | )% | 40.9 | 12.2 | % | ||||
Restructuring and acquisition-related costs | 34.2 | 22.9 | 11.7 | 11.3 | 49.3 | % | 11.2 | 95.7 | % | |||||
Operating income | 403.2 | 401.0 | 371.5 | 2.2 | 0.5 | % | 29.5 | 7.9 | % | |||||
Adjusted operating income(1) | 437.4 | 423.9 | 383.2 | 13.5 | 3.2 | % | 40.7 | 10.6 | % | |||||
Adjusted EBITDA(1) | 595.5 | 586.1 | 523.8 | 9.4 | 1.6 | % | 62.3 | 11.9 | % | |||||
Financial expenses | 31.0 | 24.2 | 19.7 | 6.8 | 28.1 | % | 4.5 | 22.8 | % | |||||
Income tax expense | 21.4 | 14.5 | 5.2 | 6.9 | 47.6 | % | 9.3 | 178.8 | % | |||||
Net earnings | 350.8 | 362.3 | 346.6 | (11.5 | ) | (3.2 | )% | 15.7 | 4.5 | % | ||||
Adjusted net earnings(1) | 393.1 | 386.9 | 356.3 | 6.2 | 1.6 | % | 30.6 | 8.6 | % | |||||
Basic EPS | 1.66 | 1.62 | 1.47 | 0.04 | 2.5 | % | 0.15 | 10.2 | % | |||||
Diluted EPS | 1.66 | 1.61 | 1.47 | 0.05 | 3.1 | % | 0.14 | 9.5 | % | |||||
Adjusted diluted EPS(1) | 1.86 | 1.72 | 1.51 | 0.14 | 8.1 | % | 0.21 | 13.9 | % | |||||
Gross margin | 27.7 | % | 29.1 | % | 27.8 | % | n/a | (1.4) pp | n/a | 1.3 pp | ||||
SG&A expenses as a percentage of sales | 12.7 | % | 13.7 | % | 13.0 | % | n/a | (1.0) pp | n/a | 0.7 pp | ||||
Operating margin | 13.9 | % | 14.6 | % | 14.4 | % | n/a | (0.7) pp | n/a | 0.2 pp | ||||
Adjusted operating margin (1) | 15.0 | % | 15.4 | % | 14.8 | % | n/a | (0.4) pp | n/a | 0.6 pp | ||||
Total assets | 3,004.6 | 2,980.7 | 2,990.1 | 23.9 | 0.8 | % | (9.4 | ) | (0.3 | )% | ||||
Total non-current financial liabilities | 669.0 | 630.0 | 600.0 | 39.0 | 6.2 | % | 30.0 | 5.0 | % | |||||
Net indebtedness(1) | 622.3 | 577.2 | 561.8 | 45.1 | 7.8 | % | 15.4 | 2.7 | % | |||||
Return on net assets (RONA)(1) | 15.6 | % | 14.9 | % | 14.0 | % | n/a | 0.7 pp | n/a | 0.9 pp | ||||
Annual cash dividends declared per common share | 0.448 | 0.374 | 0.312 | 0.074 | 19.8 | % | 0.062 | 19.9 | % | |||||
Net debt leverage ratio(1) | 1.0 | 1.0 | 1.0 | n/a | n/a | n/a | n/a | |||||||
n/a = not applicable | ||||||||||||||
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | ||||||||||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions, or otherwise indicated) | Variation 2018-2017 | Variation 2017-2016 | |||||||||||||
2018 | 2017 | 2016 | $ | % | $ | % | |||||||||
Activewear | 2,321.4 | 2,043.1 | 1,888.9 | 278.3 | 13.6 | % | 154.2 | 8.2 | % | ||||||
Hosiery and underwear(1) | 587.2 | 707.7 | 696.2 | (120.5 | ) | (17.0 | )% | 11.5 | 1.7 | % | |||||
Total net sales | 2,908.6 | 2,750.8 | 2,585.1 | 157.8 | 5.7 | % | 165.7 | 6.4 | % | ||||||
(1) Also includes intimates and other fringe products. | |||||||||||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
Variation 2018-2017 | Variation 2017-2016 | |||||||
(in $ millions, or otherwise indicated) | 2018 | 2017 | 2016 | |||||
Gross profit | 806.0 | 801.2 | 719.7 | 4.8 | 81.5 | |||
Gross margin | 27.7 | % | 29.1 | % | 27.8 | % | (1.4) pp | 1.3 pp |
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Variation 2018-2017 | Variation 2017-2016 | |||||||
(in $ millions, or otherwise indicated) | 2018 | 2017 | 2016 | |||||
SG&A expenses | 368.5 | 377.3 | 336.4 | (8.8) | 40.9 | |||
SG&A expenses as a percentage of sales | 12.7 | % | 13.7 | % | 13.0 | % | (1.0) pp | 0.7 pp |
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
Variation 2018-2017 | Variation 2017-2016 | |||||||||
(in $ millions) | 2018 | 2017 | 2016 | |||||||
Employee termination and benefit costs | 7.8 | 4.0 | 5.0 | 3.8 | (1.0 | ) | ||||
Exit, relocation and other costs | 13.6 | 13.8 | 7.9 | (0.2 | ) | 5.9 | ||||
Net loss on disposal of property, plant and equipment related to exit activities | 12.4 | 0.9 | 1.1 | 11.5 | (0.2 | ) | ||||
Loss on disposal or transfer of assets held for sale | — | — | 0.6 | — | (0.6 | ) | ||||
Remeasurement of contingent consideration in connection with a business acquisition | — | — | (6.2 | ) | — | 6.2 | ||||
Acquisition-related transaction costs | 0.4 | 4.2 | 3.3 | (3.8 | ) | 0.9 | ||||
Restructuring and acquisition-related costs | 34.2 | 22.9 | 11.7 | 11.3 | 11.2 | |||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Variation 2018-2017 | Variation 2017-2016 | ||||||||
(in $ millions, or otherwise indicated) | 2018 | 2017 | 2016 | ||||||
Operating income | 403.2 | 401.0 | 371.5 | 2.2 | 29.5 | ||||
Adjustment for: | |||||||||
Restructuring and acquisition-related costs | 34.2 | 22.9 | 11.7 | 11.3 | 11.2 | ||||
Adjusted operating income(1) | 437.4 | 423.9 | 383.2 | 13.5 | 40.7 | ||||
Operating margin | 13.9 | % | 14.6 | % | 14.4 | % | (0.7) pp | 0.2 pp | |
Adjusted operating margin(1) | 15.0 | % | 15.4 | % | 14.8 | % | (0.4) pp | 0.6 pp |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Variation 2018-2017 | Variation 2017-2016 | |||||||||
(in $ millions) | 2018 | 2017 | 2016 | |||||||
Interest expense on financial liabilities recorded at amortized cost | 24.8 | 17.1 | 12.6 | 7.7 | 4.5 | |||||
Bank and other financial charges | 7.5 | 8.0 | 6.3 | (0.5 | ) | 1.7 | ||||
Interest accretion on discounted provisions | 0.3 | 0.3 | 0.3 | — | — | |||||
Foreign exchange loss (gain) | (1.5 | ) | (1.3 | ) | 0.4 | (0.2 | ) | (1.7 | ) | |
Financial expenses, net | 31.1 | 24.1 | 19.6 | 7.0 | 4.5 | |||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
Variation 2018-2017 | Variation 2017-2016 | |||||||
(in $ millions, or otherwise indicated) | 2018 | 2017 | 2016 | |||||
Earnings before income taxes | 372.1 | 376.8 | 351.8 | (4.7) | 25.0 | |||
Income tax expense | 21.4 | 14.5 | 5.2 | 6.9 | 9.3 | |||
Average effective income tax rate | 5.8 | % | 3.8 | % | 1.5 | % | 2.0 pp | 2.3 pp |
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Variation 2018-2017 | Variation 2017-2016 | |||||||||
(in $ millions, except per share amounts) | 2018 | 2017 | 2016 | |||||||
Net earnings | 350.8 | 362.3 | 346.6 | (11.5 | ) | 15.7 | ||||
Adjustments for: | ||||||||||
Restructuring and acquisition-related costs | 34.2 | 22.9 | 11.7 | 11.3 | 11.2 | |||||
Income tax expense relating to restructuring and acquisition-related actions(1) | 6.1 | 3.3 | (2.0 | ) | 2.8 | 5.3 | ||||
Income tax expense (recovery) related to the revaluation of deferred income tax assets and liabilities due to statutory income tax rate changes(2) | 2.0 | (1.6 | ) | — | 3.6 | (1.6 | ) | |||
Adjusted net earnings(3) | 393.1 | 386.9 | 356.3 | 6.2 | 30.6 | |||||
Basic EPS | 1.66 | 1.62 | 1.47 | 0.04 | 0.15 | |||||
Diluted EPS | 1.66 | 1.61 | 1.47 | 0.05 | 0.14 | |||||
Adjusted diluted EPS(3) | 1.86 | 1.72 | 1.51 | 0.14 | 0.21 | |||||
(1) These income tax expenses relate to the Company’s internal organizational realignment. Pursuant to the initiation and completion of this organizational realignment plan, the Company reassessed the recoverability of its deferred income tax assets and the valuation of its deferred tax liabilities in the respective jurisdictions affected, resulting in an increase to deferred income tax expense in fiscal 2018 and 2017 of $6.1 million and $3.3 million, respectively. (2) The income tax expense for the impact of income tax rate changes are primarily related to the impact of U.S. tax reform, reflecting the reduction in the U.S. statutory federal tax rate that took effect in 2018. | ||||||||||
(3) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | ||||||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
For the three months ended (in $ millions, except share and per share amounts or otherwise indicated) | Dec 30, 2018 | Sep 30, 2018 | Jul 1, 2018 | Apr 1, 2018 | Dec 31, 2017 | Oct 1, 2017 | Jul 2, 2017 | Apr 2, 2017 | (1) | ||||||||
Net sales | 742.7 | 754.4 | 764.2 | 647.3 | 653.7 | 716.4 | 715.4 | 665.4 | |||||||||
Net earnings | 59.6 | 114.3 | 109.0 | 67.9 | 54.9 | 116.1 | 107.7 | 83.5 | |||||||||
Net earnings per share | |||||||||||||||||
Basic(2) | 0.29 | 0.55 | 0.51 | 0.31 | 0.25 | 0.52 | 0.48 | 0.36 | |||||||||
Diluted(2) | 0.29 | 0.55 | 0.51 | 0.31 | 0.25 | 0.52 | 0.48 | 0.36 | |||||||||
Weighted average number of shares outstanding (in ‘000s) | |||||||||||||||||
Basic | 206,796 | 207,926 | 212,477 | 218,541 | 219,387 | 223,017 | 224,859 | 229,474 | |||||||||
Diluted | 207,122 | 208,161 | 212,722 | 218,850 | 219,758 | 223,481 | 225,389 | 229,943 | |||||||||
(1) Reflects the acquisition of American Apparel from February 8, 2017. | |||||||||||||||||
(2) Quarterly EPS may not add to year-to-date EPS due to rounding. | |||||||||||||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
For the three months ended | December 30, 2018 | December 31, 2017 | |||||
(in $ millions, except per share amounts or otherwise indicated) | Variation $ | Variation % | |||||
Net sales | 742.7 | 653.7 | 89.0 | 13.6 | % | ||
Gross profit | 195.4 | 177.0 | 18.4 | 10.4 | % | ||
SG&A expenses | 95.5 | 103.9 | (8.4) | (8.1 | )% | ||
Restructuring and acquisition-related costs | 21.7 | 11.0 | 10.7 | n.m. | |||
Operating income | 78.2 | 62.0 | 16.2 | 26.1 | % | ||
Adjusted operating income(1) | 99.9 | 73.0 | 26.9 | 36.8 | % | ||
Adjusted EBITDA(1) | 138.0 | 114.0 | 24.0 | 21.1 | % | ||
Financial expenses | 8.7 | 5.9 | 2.8 | 47.5 | % | ||
Income tax expense | 10.0 | 1.2 | 8.8 | n.m. | |||
Net earnings | 59.6 | 54.9 | 4.7 | 8.6 | % | ||
Adjusted net earnings(1) | 88.9 | 67.6 | 21.3 | 31.5 | % | ||
Basic EPS | 0.29 | 0.25 | 0.04 | 16.0 | % | ||
Diluted EPS | 0.29 | 0.25 | 0.04 | 16.0 | % | ||
Adjusted diluted EPS(1) | 0.43 | 0.31 | 0.12 | 38.7 | % | ||
Gross margin | 26.3 | % | 27.1 | % | n/a | (0.8) pp | |
SG&A expenses as a percentage of sales | 12.9 | % | 15.9 | % | n/a | (3.0) pp | |
Operating margin | 10.5 | % | 9.5 | % | n/a | 1.0 pp | |
Adjusted operating margin(1) | 13.5 | % | 11.2 | % | n/a | 2.3 pp | |
n.m. = not meaningful | |||||||
n/a - not applicable | |||||||
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | |||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
December 30, 2018 | December 31, 2017 | |||||
(in $ millions) | Variation | |||||
Cash and cash equivalents | 46.7 | 52.8 | (6.1 | ) | ||
Trade accounts receivable | 317.2 | 243.4 | 73.8 | |||
Income taxes receivable | 1.7 | 3.9 | (2.2 | ) | ||
Inventories | 940.0 | 945.7 | (5.7 | ) | ||
Prepaid expenses, deposits and other current assets | 77.4 | 62.1 | 15.3 | |||
Accounts payable and accrued liabilities | (347.0 | ) | (258.5 | ) | (88.5 | ) |
Total working capital | 1,036.0 | 1,049.4 | (13.4 | ) | ||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | The increase in trade accounts receivable (which are net of accrued sales discounts) was mainly due to the impact of higher sales in the fourth quarter of fiscal 2018 compared to the fourth quarter of fiscal 2017. The impact of higher days sales outstanding (DSO), net of the impact of an increase in trade accounts receivables sold to a financial institution under a receivables purchase agreement (as disclosed in note 7 of the audited consolidated financial statements for the year ended December 30, 2018), was offset by higher accrued sales discounts mainly due to the higher sales in fiscal 2018. |
• | The slight decrease in inventories was mainly due to lower unit inventories of activewear, sock, and underwear, partially offset by higher average unit costs resulting from a combination of higher raw material costs and other input costs, as well as higher raw materials and work in progress inventories. |
• | The increase in prepaid expenses, deposits and other current assets was mainly due to an increase in miscellaneous receivables, including an increase in supplier rebates relating to raw material purchases and higher receivables for value added taxes and duty drawbacks. |
• | The increase in accounts payable and accrued liabilities was mainly due to higher payables related to higher raw material costs, a higher derivative financial instrument liability, and the impact of an increase of days payable outstanding, including the benefit of the new supply-chain financing program implemented during the fourth quarter of fiscal 2018. |
• | Working capital was $1,036.0 million as at December 30, 2018, compared to $1,049.4 million as at December 31, 2017. The current ratio at the end of fiscal 2018 was 4.0, compared to 5.1 at the end of fiscal 2017, mainly due to the impact of higher accounts payable and accrued liabilities. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Property, plant | Intangible | |||||
(in $ millions) | and equipment | assets | Goodwill | |||
Balance, December 31, 2017 | 1,035.8 | 401.6 | 226.6 | |||
Net capital additions | 110.7 | 19.5 | 0.1 | |||
Disposals | (30.3 | ) | (0.2 | ) | — | |
Additions through business acquisitions | — | — | 0.7 | |||
Depreciation and amortization | (125.8 | ) | (27.3 | ) | — | |
Balance, December 30, 2018 | 990.4 | 393.6 | 227.4 | |||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | Additions to property, plant and equipment were primarily for investments in textile and sewing capacity expansion, and distribution, and were partially offset by the sale of the Company's corporate aircraft and the write-down of fixed assets incurred in connection with restructuring activities. |
• | Intangible assets are comprised of customer contracts and relationships, trademarks, license agreements, non-compete agreements, and computer software. The decrease in intangible assets reflects amortization of $27.3 million, offset by additions of $19.5 million for software expenditures and the renewal of a brand license agreement. |
December 30, 2018 | December 31, 2017 | |||||
(in $ millions) | Variation | |||||
Other non-current assets | 10.3 | 8.8 | 1.5 | |||
Long-term debt | 669.0 | 630.0 | 39.0 | |||
Deferred income taxes | 12.6 | 3.7 | 8.9 | |||
Other non-current liabilities | 39.9 | 37.1 | 2.8 | |||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | The increase in deferred tax liabilities relates to the deferred portion of the tax provision in fiscal 2018. |
• | Other non-current liabilities include provisions and employee benefit obligations. The increase is mainly due to the statutory severance benefits earned by employees located in the Caribbean Basin and Central America during fiscal 2018, and a new lease exit provision for a U.S. distribution centre, partially offset by the reversal of the environmental liability for a facility previously acquired through a business acquisition and sold in fiscal 2018. |
• | See section 8.0 entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions) | 2018 | 2017 | Variation | |||
Net earnings | 350.8 | 362.3 | (11.5 | ) | ||
Adjustments to reconcile net earnings to cash flows from operating activities(1) | 202.3 | 175.2 | 27.1 | |||
Changes in non-cash working capital balances | (14.5 | ) | 75.8 | (90.3 | ) | |
Cash flows from operating activities | 538.6 | 613.3 | (74.7 | ) |
• | The year-over-year decrease in operating cash flows of $74.7 million was mainly due to an increase in non-cash working capital in fiscal 2018 compared to a decrease in the prior year, as explained below. |
• | Non-cash working capital increased by $14.5 million during fiscal 2018, compared to a decrease of $75.8 million during fiscal 2017, mainly due to an increase in trade accounts receivable during fiscal 2018 compared to a decrease in fiscal 2017, partially offset by a higher increase in accounts payable and accrued liabilities in fiscal 2018 compared to fiscal 2017. |
(in $ millions) | 2018 | 2017 | Variation | |||
Purchase of property, plant and equipment | (107.7 | ) | (92.0 | ) | (15.7 | ) |
Purchase of intangible assets | (17.6 | ) | (2.8 | ) | (14.8 | ) |
Business acquisitions | (1.3 | ) | (115.8 | ) | 114.5 | |
Proceeds on disposal of property, plant and equipment | 15.6 | 0.5 | 15.1 | |||
Cash flows used in investing activities | (111.0 | ) | (210.1 | ) | 99.1 | |
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | Cash used in investing activities during fiscal 2018 was lower compared to fiscal 2017 primarily due to cash used in fiscal 2017 for business acquisitions including American Apparel, and the sales of the Company's corporate aircraft and a U.S. distribution facility in fiscal 2018, partially offset by higher capital spending in fiscal 2018. |
• | Capital expenditures during fiscal 2018 are described in section 6.2 of this MD&A, and our projected capital expenditures for the next fiscal year are discussed in section 8.0 entitled “Liquidity and capital resources” in this MD&A. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions) | 2018 | 2017 | Variation | |||
Cash flows from operating activities | 538.5 | 613.4 | (74.9 | ) | ||
Cash flows used in investing activities | (110.9 | ) | (210.0 | ) | 99.1 | |
Adjustment for: | ||||||
Business acquisitions | 1.3 | 115.8 | (114.5 | ) | ||
Free cash flow(1) | 428.9 | 519.2 | (90.3 | ) | ||
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | ||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | For fiscal 2018, the year-over-year decrease in free cash flow of $90.3 million was mainly due to the decrease in operating cash flows and increased capital spending excluding business acquisitions, as noted above. |
(in $ millions) | 2018 | 2017 | Variation | |||
Increase in amounts drawn under revolving long-term bank credit facilities | 39.0 | 30.0 | 9.0 | |||
Dividends paid | (94.6 | ) | (84.8 | ) | (9.8 | ) |
Proceeds from the issuance of shares | 3.2 | 4.9 | (1.7 | ) | ||
Repurchase and cancellation of shares | (367.5 | ) | (328.6 | ) | (38.9 | ) |
Share repurchases for settlement of non-Treasury RSUs | (7.2 | ) | (6.3 | ) | (0.9 | ) |
Withholding taxes paid pursuant to the settlement of non-Treasury RSUs | (6.1 | ) | (4.5 | ) | (1.6 | ) |
Cash flows used in financing activities | (433.2 | ) | (389.3 | ) | (43.9 | ) |
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
• | Cash flows used in financing activities during fiscal 2018 and 2017 reflected the repurchase and cancellation of common shares under NCIB programs as discussed in section 8.5 of this MD&A, and the payments of dividends, slightly offset by cash inflows from funds drawn on our long-term bank credit facilities. The year-over year increase in cash flows used in financing activities was mainly due to higher share repurchases and higher dividend payments as noted below. See section 8.0 entitled “Liquidity and capital resources” in this MD&A for the discussion on long-term debt and share repurchases under NCIB programs. |
• | The Company paid $94.6 million of dividends during fiscal 2018 compared to $84.8 million of dividends during fiscal 2017. The year-over-year increase is due to the 20% increase in the amount of the quarterly dividend approved by the Board of Directors on February 21, 2018, partially offset by the impact of lower common shares outstanding as a result of the repurchase and cancellation of common shares executed since last year under NCIB programs. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Effective interest rate (1) | Principal amount | Maturity date | ||||||
(in $ millions, or otherwise indicated) | December 30, 2018 | December 31, 2017 | ||||||
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2% (2) | 3.4% | $ | 69 | $ | 30 | April 2023 | ||
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2% (3) | 2.8% | 300 | 300 | April 2023 | ||||
Notes payable, interest at fixed rate of 2.70%, payable semi-annually (4) | 2.7% | 100 | 100 | August 2023 | ||||
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53% payable quarterly (4) | 2.7% | 50 | 50 | August 2023 | ||||
Notes payable, interest at fixed rate of 2.91%, payable semi-annually (4) | 2.9% | 100 | 100 | August 2026 | ||||
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57% payable quarterly (4) | 2.9% | 50 | 50 | August 2026 | ||||
$ | 669 | $ | 630 |
(1) | Represents the effective interest rate for the year ended December 30, 2018, including the cash impact of interest rate swaps, where applicable. |
(2) | The Company’s committed unsecured revolving long-term bank credit facility of $1 billion provides for an annual extension which is subject to the approval of the lenders. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the credit facility agreement). In addition, an amount of $13.4 million (December 31, 2017 - $14.6 million) has been committed against this facility to cover various letters of credit. |
(3) | The unsecured term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreement). |
(4) | The unsecured notes issued for a total aggregate principal amount of $300 million to accredited investors in the U.S. private placement market can be prepaid in whole or in part at any time, subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions) | December 30, 2018 | December 31, 2017 | ||
Long-term debt and total indebtedness(1) | 669.0 | 630.0 | ||
Cash and cash equivalents | (46.7 | ) | (52.8 | ) |
Net indebtedness(1) | 622.3 | 577.2 | ||
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | ||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
December 30, 2018 | December 31, 2017 | |||
(in $ millions, or otherwise indicated) | ||||
Adjusted EBITDA for the trailing twelve months | 595.5 | 586.1 | ||
Adjustment for: | ||||
Business acquisitions | — | 0.3 | ||
Pro-forma adjusted EBITDA for the trailing twelve months | 595.5 | 586.4 | ||
Net indebtedness(1) | 622.3 | 577.2 | ||
Net debt leverage ratio(1) | 1.0 | 1.0 | ||
(1) See section 17.0 "Definition and reconciliation of non-GAAP financial measures" in this MD&A. | ||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
(in $ millions) | December 30, 2018 | December 31, 2017 | ||
Trade accounts receivable by geographic area: | ||||
United States | 270.5 | 208.2 | ||
Canada | 16.9 | 14.7 | ||
Europe and other | 29.8 | 20.5 | ||
Total trade accounts receivable | 317.2 | 243.4 |
The aging of trade accounts receivable balances was as follows as at: | ||||
(in $ millions) | December 30, 2018 | December 31, 2017 | ||
Not past due | 257.8 | 197.6 | ||
Past due 0-30 days | 21.0 | 31.7 | ||
Past due 31-60 days | 16.3 | 9.8 | ||
Past due 61-120 days | 14.8 | 2.0 | ||
Past due over 121 days | 14.8 | 7.4 | ||
Trade accounts receivable | 324.7 | 248.5 | ||
Less allowance for expected credit losses | (7.5 | ) | (5.1 | ) |
Total trade accounts receivable | 317.2 | 243.4 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Carrying | Contractual | Less than 1 | 1 to 3 | 4 to 5 | More than 5 | ||||||||
(in $ millions) | amount | cash flows | fiscal year | fiscal years | fiscal years | fiscal years | |||||||
Accounts payable and accrued | |||||||||||||
liabilities | 347.0 | 347.0 | 347.0 | — | — | — | |||||||
Long-term debt(1) | 669.0 | 669.0 | — | — | 519.0 | 150.0 | |||||||
Purchase obligations | — | 200.1 | 198.3 | 1.8 | — | — | |||||||
Operating leases and other obligations | 4.6 | 318.9 | 65.3 | 109.8 | 103.9 | 39.9 | |||||||
Total contractual obligations | 1,020.6 | 1,535.0 | 610.6 | 111.6 | 622.9 | 189.9 | |||||||
(1) Excluding interest |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
December 30, 2018 | ||||||||||||||||
(in U.S. $ millions) | CAD | EUR | GBP | MXN | CNY | AUD | BDT | COP | ||||||||
Cash and cash equivalents | 1.0 | 1.1 | 1.7 | 3.1 | 3.6 | 0.6 | 1.7 | 0.6 | ||||||||
Trade accounts receivable | 16.1 | 6.9 | 4.7 | 3.8 | 2.8 | 2.6 | — | 3.2 | ||||||||
Prepaid expenses, deposits and other current assets | — | 1.7 | — | 0.6 | 1.8 | — | 2.6 | 1.7 | ||||||||
Accounts payable and accrued liabilities | (14.6 | ) | (6.5 | ) | (0.5 | ) | (4.6 | ) | (1.3 | ) | (0.1 | ) | (2.3 | ) | (0.2 | ) |
For the year ended December 30, 2018 | ||||||||||||||||
(in U.S. $ millions) | CAD | EUR | GBP | MXN | CNY | AUD | BDT | COP | ||||||||
Impact on earnings before income taxes | (0.1 | ) | (0.2 | ) | (0.3 | ) | (0.1 | ) | (0.3 | ) | (0.2 | ) | (0.1 | ) | (0.3 | ) |
Impact on other comprehensive income before income taxes | (0.8 | ) | 1.5 | 1.7 | (0.2 | ) | — | 0.3 | — | — |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
• | a significant customer substantially reduces its purchases or ceases to buy from us, or we elect to reduce its volume of business with or cease to sell to a significant customer, and we cannot replace that business with sales to other customers on similar terms; |
• | a large customer exercises its purchasing power to negotiate lower prices or higher price discounts or requires us to incur additional service and other costs; |
• | further industry consolidation leads to greater customer concentration and competition; and |
• | a customer encounters financial difficulties and is unable to meet its financial obligations. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
• | fires, pandemics, extraordinary weather conditions, or natural disasters, such as hurricanes, tornadoes, floods, tsunamis, typhoons, and earthquakes; |
• | political instability, social and labour unrest, war, or terrorism; |
• | disruptions in port activities, shipping and freight forwarding services; and |
• | interruptions in the availability of basic services and infrastructure, including power and water shortages. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Three months ended | Twelve months ended | |||||||
(in $ millions, except per share amounts) | December 30, 2018 | December 31, 2017 | December 30, 2018 | December 31, 2017 | ||||
Net earnings | 59.6 | 54.9 | 350.8 | 362.3 | ||||
Adjustments for: | ||||||||
Restructuring and acquisition-related costs | 21.7 | 11.0 | 34.2 | 22.9 | ||||
Income tax expense relating to restructuring and acquisition-related actions(1) | 6.6 | 3.3 | 6.1 | 3.3 | ||||
Income tax expense (recovery) related to the revaluation of deferred income tax assets and liabilities due to statutory income tax rate changes(2) | 1.0 | (1.6 | ) | 2.0 | (1.6 | ) | ||
Adjusted net earnings | 88.9 | 67.6 | 393.1 | 386.9 | ||||
Basic EPS | 0.29 | 0.25 | 1.66 | 1.62 | ||||
Diluted EPS | 0.29 | 0.25 | 1.66 | 1.61 | ||||
Adjusted diluted EPS | 0.43 | 0.31 | 1.86 | 1.72 | ||||
(1) These income tax expenses relate to the Company’s internal organizational realignment. Pursuant to the initiation and completion of this organizational realignment plan, the Company reassessed the recoverability of its deferred income tax assets and the valuation of its deferred tax liabilities in the respective jurisdictions affected, resulting in an increase to deferred income tax expense in fiscal 2018 and 2017 of $6.1 million and $3.3 million, respectively. (2) The income tax expense for the impact of income tax rate changes are primarily related to the impact of U.S. tax reform, reflecting the reduction in the U.S. statutory federal tax rate that took effect in 2018. | ||||||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
Three months ended | Twelve months ended | |||||||
(in $ millions, or otherwise indicated) | December 30, 2018 | December 31, 2017 | December 30, 2018 | December 31, 2017 | ||||
Operating income | 78.2 | 62.0 | 403.2 | 401.0 | ||||
Adjustment for: | ||||||||
Restructuring and acquisition-related costs | 21.7 | 11.0 | 34.2 | 22.9 | ||||
Adjusted operating income | 99.9 | 73.0 | 437.4 | 423.9 | ||||
Operating margin | 10.5 | % | 9.5 | % | 13.9 | % | 14.6 | % |
Adjusted operating margin | 13.5 | % | 11.2 | % | 15.0 | % | 15.4 | % |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
Three months ended | Twelve months ended | |||||||
(in $ millions) | December 30, 2018 | December 31, 2017 | December 30, 2018 | December 31, 2017 | ||||
Net earnings | 59.6 | 54.9 | 350.8 | 362.3 | ||||
Restructuring and acquisition-related costs | 21.7 | 11.0 | 34.2 | 22.9 | ||||
Depreciation and amortization | 38.0 | 41.0 | 158.1 | 162.2 | ||||
Financial expenses, net | 8.7 | 5.9 | 31.0 | 24.2 | ||||
Income tax expense | 10.0 | 1.2 | 21.4 | 14.5 | ||||
Adjusted EBITDA | 138.0 | 114.0 | 595.5 | 586.1 | ||||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
(in $ millions) | 2018 | 2017 | ||
Cash flows from operating activities | 538.5 | 613.4 | ||
Cash flows used in investing activities | (110.9 | ) | (210.0 | ) |
Adjustment for: | ||||
Business acquisitions | 1.3 | 115.8 | ||
Free cash flow | 428.9 | 519.2 | ||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
December 30, 2018 | December 31, 2017 | |||
(in $ millions) | ||||
Long-term debt and total indebtedness | 669.0 | 630.0 | ||
Cash and cash equivalents | (46.7 | ) | (52.8 | ) |
Net indebtedness | 622.3 | 577.2 | ||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
December 30, 2018 | December 31, 2017 | |||
(in $ millions, or otherwise indicated) | ||||
Adjusted EBITDA for the trailing twelve months | 595.5 | 586.1 | ||
Adjustment for: | ||||
Business acquisitions | — | 0.3 | ||
Pro-forma adjusted EBITDA for the trailing twelve months | 595.5 | 586.4 | ||
Net indebtedness | 622.3 | 577.2 | ||
Net debt leverage ratio | 1.0 | 1.0 | ||
Certain minor rounding variances exist between the consolidated financial statements and this summary. |
December 30, 2018 | December 31, 2017 | |||
(in $ millions) | ||||
Average total assets | 3,084.0 | 3,060.8 | ||
Average cash and cash equivalents | (48.9) | (48.6) | ||
Average deferred income taxes | — | (0.5) | ||
Average accumulated amortization of intangible assets, excluding software | 138.6 | 117.1 | ||
Average total current liabilities | (299.5) | (254.7) | ||
Average net assets | 2,874.2 | 2,874.1 | ||
(in $ millions, or otherwise indicated) | 2018 | 2017 | ||
Adjusted net earnings | 393.1 | 386.9 | ||
Financial expenses, net (nil income taxes in both years) | 31.0 | 24.2 | ||
Amortization of intangible assets, excluding software (net of income tax recovery of nil in 2018 and $5.0 million in 2017) | 22.9 | 15.8 | ||
Return | 447.0 | 426.9 | ||
RONA | 15.6 | % | 14.9 | % |
CONSOLIDATED FINANCIAL STATEMENTS |
(Signed: Glenn J. Chamandy) | (Signed: Rhodri J. Harries) | |||
Glenn J. Chamandy | Rhodri J. Harries | |||
President and Chief Executive Officer | Executive Vice-President, Chief Financial and Administrative Officer | |||
February 20, 2019 | ||||
CONSOLIDATED FINANCIAL STATEMENTS |
GILDAN ACTIVEWEAR INC. | |||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||||
(in thousands of U.S. dollars) | |||||||||
December 30, 2018 | December 31, 2017 | ||||||||
Current assets: | |||||||||
Cash and cash equivalents (note 6) | $ | 46,657 | $ | 52,795 | |||||
Trade accounts receivable (note 7) | 317,159 | 243,365 | |||||||
Income taxes receivable | 1,689 | 3,891 | |||||||
Inventories (note 8) | 940,029 | 945,738 | |||||||
Prepaid expenses, deposits and other current assets | 77,377 | 62,092 | |||||||
Total current assets | 1,382,911 | 1,307,881 | |||||||
Non-current assets: | |||||||||
Property, plant and equipment (note 9) | 990,475 | 1,035,818 | |||||||
Intangible assets (note 10) | 393,573 | 401,605 | |||||||
Goodwill (note 10) | 227,362 | 226,571 | |||||||
Other non-current assets | 10,275 | 8,830 | |||||||
Total non-current assets | 1,621,685 | 1,672,824 | |||||||
Total assets | $ | 3,004,596 | $ | 2,980,705 | |||||
Current liabilities: | |||||||||
Accounts payable and accrued liabilities | $ | 346,985 | $ | 258,476 | |||||
Total current liabilities | 346,985 | 258,476 | |||||||
Non-current liabilities: | |||||||||
Long-term debt (note 11) | 669,000 | 630,000 | |||||||
Deferred income taxes (note 18) | 12,623 | 3,713 | |||||||
Other non-current liabilities (note 12) | 39,916 | 37,141 | |||||||
Total non-current liabilities | 721,539 | 670,854 | |||||||
Total liabilities | 1,068,524 | 929,330 | |||||||
Commitments, guarantees and contingent liabilities (note 23) | |||||||||
Equity (note 13): | |||||||||
Share capital | 159,858 | 159,170 | |||||||
Contributed surplus | 32,490 | 25,208 | |||||||
Retained earnings | 1,740,342 | 1,853,457 | |||||||
Accumulated other comprehensive income | 3,382 | 13,540 | |||||||
Total equity attributable to shareholders of the Company | 1,936,072 | 2,051,375 | |||||||
Total liabilities and equity | $ | 3,004,596 | $ | 2,980,705 | |||||
See accompanying notes to consolidated financial statements. | |||||||||
On behalf of the Board of Directors: | |||||||||
(Signed: Glenn J. Chamandy) | (Signed: Russell Goodman) | ||||||||
Glenn J. Chamandy | Russell Goodman | ||||||||
Director | Director |
CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | |||||||
Net sales (note 25) | $ | 2,908,565 | $ | 2,750,816 | ||||
Cost of sales | 2,102,612 | 1,949,597 | ||||||
Gross profit | 805,953 | 801,219 | ||||||
Selling, general and administrative expenses (note 16(a)) | 368,546 | 377,323 | ||||||
Restructuring and acquisition-related costs (note 17) | 34,228 | 22,894 | ||||||
Operating income | 403,179 | 401,002 | ||||||
Financial expenses, net (note 14(c)) | 31,045 | 24,186 | ||||||
Earnings before income taxes | 372,134 | 376,816 | ||||||
Income tax expense (note 18) | 21,360 | 14,482 | ||||||
Net earnings | 350,774 | 362,334 | ||||||
Other comprehensive income (loss), net of related income taxes: | ||||||||
Cash flow hedges (note 14(d)) | (10,158 | ) | (27,071 | ) | ||||
Actuarial loss on employee benefit obligations (note 12(a)) | (1,694 | ) | (64 | ) | ||||
(11,852 | ) | (27,135 | ) | |||||
Comprehensive income | $ | 338,922 | $ | 335,199 | ||||
Earnings per share (note 19): | ||||||||
Basic | $ | 1.66 | $ | 1.62 | ||||
Diluted | $ | 1.66 | $ | 1.61 | ||||
See accompanying notes to consolidated financial statements. |
CONSOLIDATED FINANCIAL STATEMENTS |
Share capital | Contributed surplus | Accumulated other comprehensive income (loss) | Retained earnings | Total equity | ||||||||||||||||||
Number | Amount | |||||||||||||||||||||
Balance, January 1, 2017 | 230,218 | $ | 152,313 | $ | 23,198 | $ | 40,611 | $ | 1,903,525 | $ | 2,119,647 | |||||||||||
Share-based compensation | — | — | 15,706 | — | — | 15,706 | ||||||||||||||||
Shares issued under employee share purchase plan | 58 | 1,671 | — | — | — | 1,671 | ||||||||||||||||
Shares issued pursuant to exercise of stock options | 269 | 5,304 | (1,914 | ) | — | — | 3,390 | |||||||||||||||
Shares issued or distributed pursuant to vesting of restricted share units | 364 | 7,709 | (12,229 | ) | — | — | (4,520 | ) | ||||||||||||||
Shares repurchased for cancellation (note 13(d)) | (11,512 | ) | (7,692 | ) | — | — | (320,924 | ) | (328,616 | ) | ||||||||||||
Share repurchases for settlement of non-Treasury RSUs (note 13(e)) | (198 | ) | (135 | ) | — | — | (6,145 | ) | (6,280 | ) | ||||||||||||
Dividends declared | — | — | 447 | — | (85,269 | ) | (84,822 | ) | ||||||||||||||
Transactions with shareholders of the Company recognized directly in equity | (11,019 | ) | 6,857 | 2,010 | — | (412,338 | ) | (403,471 | ) | |||||||||||||
Cash flow hedges (note 14(d)) | — | — | — | (27,071 | ) | — | (27,071 | ) | ||||||||||||||
Actuarial loss on employee benefit obligations (note 12(a)) | — | — | — | — | (64 | ) | (64 | ) | ||||||||||||||
Net earnings | — | — | — | — | 362,334 | 362,334 | ||||||||||||||||
Comprehensive income | — | — | — | (27,071 | ) | 362,270 | 335,199 | |||||||||||||||
Balance, December 31, 2017 | 219,199 | $ | 159,170 | $ | 25,208 | $ | 13,540 | $ | 1,853,457 | $ | 2,051,375 | |||||||||||
Adjustments relating to adoption of new accounting standards (note 2(d)) | — | — | — | — | (1,515 | ) | (1,515 | ) | ||||||||||||||
Adjusted balance, January 1, 2018 | 219,199 | 159,170 | 25,208 | 13,540 | 1,851,942 | 2,049,860 | ||||||||||||||||
Share-based compensation | — | — | 19,351 | — | — | 19,351 | ||||||||||||||||
Shares issued under employee share purchase plan | 57 | 1,722 | — | — | — | 1,722 | ||||||||||||||||
Shares issued pursuant to exercise of stock options | 110 | 2,412 | (729 | ) | — | — | 1,683 | |||||||||||||||
Shares issued or distributed pursuant to vesting of restricted share units | 226 | 5,952 | (12,094 | ) | — | — | (6,142 | ) | ||||||||||||||
Shares repurchased for cancellation (note 13(d)) | (12,635 | ) | (9,231 | ) | — | — | (358,298 | ) | (367,529 | ) | ||||||||||||
Share repurchases for settlement of non-Treasury RSUs (note 13(e)) | (225 | ) | (167 | ) | — | — | (7,062 | ) | (7,229 | ) | ||||||||||||
Dividends declared | — | — | 754 | — | (95,320 | ) | (94,566 | ) | ||||||||||||||
Transactions with shareholders of the Company recognized directly in equity | (12,467 | ) | 688 | 7,282 | — | (460,680 | ) | (452,710 | ) | |||||||||||||
Cash flow hedges (note 14(d)) | — | — | — | (10,158 | ) | — | (10,158 | ) | ||||||||||||||
Actuarial loss on employee benefit obligations (note 12(a)) | — | — | — | — | (1,694 | ) | (1,694 | ) | ||||||||||||||
Net earnings | — | — | — | — | 350,774 | 350,774 | ||||||||||||||||
Comprehensive income | — | — | — | (10,158 | ) | 349,080 | 338,922 | |||||||||||||||
Balance, December 30, 2018 | 206,732 | $ | 159,858 | $ | 32,490 | $ | 3,382 | $ | 1,740,342 | $ | 1,936,072 | |||||||||||
See accompanying notes to consolidated financial statements. |
CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | |||||||
Cash flows from (used in) operating activities: | ||||||||
Net earnings | $ | 350,774 | $ | 362,334 | ||||
Adjustments to reconcile net earnings to cash flows from operating activities (note 21(a)) | 202,255 | 175,199 | ||||||
553,029 | 537,533 | |||||||
Changes in non-cash working capital balances: | ||||||||
Trade accounts receivable | (79,707 | ) | 38,924 | |||||
Income taxes | 2,115 | (5,424 | ) | |||||
Inventories | 2,182 | 27,102 | ||||||
Prepaid expenses, deposits and other current assets | (13,807 | ) | (5,227 | ) | ||||
Accounts payable and accrued liabilities | 74,732 | 20,452 | ||||||
Cash flows from operating activities | 538,544 | 613,360 | ||||||
Cash flows from (used in) investing activities: | ||||||||
Purchase of property, plant and equipment | (107,654 | ) | (91,951 | ) | ||||
Purchase of intangible assets | (17,566 | ) | (2,845 | ) | ||||
Business acquisitions (note 5) | (1,303 | ) | (115,776 | ) | ||||
Proceeds on disposal of property, plant and equipment | 15,649 | 542 | ||||||
Cash flows used in investing activities | (110,874 | ) | (210,030 | ) | ||||
Cash flows from (used in) financing activities: | ||||||||
Increase in amounts drawn under revolving long-term bank credit facility | 39,000 | 30,000 | ||||||
Dividends paid | (94,566 | ) | (84,822 | ) | ||||
Proceeds from the issuance of shares | 3,243 | 4,900 | ||||||
Repurchase and cancellation of shares (note 13(d)) | (367,529 | ) | (328,616 | ) | ||||
Share repurchases for settlement of non-Treasury RSUs (note 13(e)) | (7,229 | ) | (6,280 | ) | ||||
Withholding taxes paid pursuant to the settlement of non-Treasury RSUs | (6,142 | ) | (4,520 | ) | ||||
Cash flows used in financing activities | (433,223 | ) | (389,338 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies | (585 | ) | 606 | |||||
Net increase (decrease) in cash and cash equivalents during the fiscal year | (6,138 | ) | 14,598 | |||||
Cash and cash equivalents, beginning of fiscal year | 52,795 | 38,197 | ||||||
Cash and cash equivalents, end of fiscal year | $ | 46,657 | $ | 52,795 | ||||
Cash paid (included in cash flows from operating activities): | ||||||||
Interest | $ | 25,530 | $ | 16,658 | ||||
Income taxes, net of refunds | 9,688 | 15,209 | ||||||
Supplemental disclosure of cash flow information (note 21) | ||||||||
See accompanying notes to consolidated financial statements. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
• | Derivative financial instruments which are measured at fair value; |
• | Employee benefit obligations related to defined benefit plans which are measured at the present value of the defined benefit obligations, net of advance payments made to employees thereon; |
• | Liabilities for cash-settled share-based payment arrangements which are measured at fair value, and equity-classified share-based payment arrangements which are measured at fair value at grant date pursuant to IFRS 2, Share-based payment; |
• | Provisions for decommissioning, site restoration costs, and onerous contracts which are measured at the present value of the expenditures expected to be required to settle the obligation; and |
• | Identifiable assets acquired and liabilities assumed in connection with a business combination which are initially measured at fair value. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(a) | Basis of consolidation: |
Subsidiary | Jurisdiction of Incorporation | Ownership percentage | |
Gildan Activewear SRL | Barbados | 100 | % |
Gildan Yarns, LLC | Delaware | 100 | % |
Gildan Branded Apparel SRL | Barbados | 100 | % |
Gildan Honduras Properties, S. de R.L. | Honduras | 100 | % |
Gildan Apparel (Canada) LP | Ontario | 100 | % |
Gildan Activewear (UK) Limited | United Kingdom | 100 | % |
Gildan Textiles de Sula, S. de R.L. | Honduras | 100 | % |
G.A.B. Limited | Bangladesh | 100 | % |
Gildan Activewear Honduras Textile Company, S. de R.L. | Honduras | 100 | % |
Gildan Activewear (Eden) Inc. | North Carolina | 100 | % |
Gildan Hosiery Rio Nance, S. de R.L. | Honduras | 100 | % |
Gildan Mayan Textiles, S. de R.L. | Honduras | 100 | % |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(b) | Foreign currency translation: |
(c) | Cash and cash equivalents: |
(d) | Trade accounts receivable: |
(e) | Inventories: |
(f) | Assets held for sale: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(g) | Property, plant and equipment: |
Asset | Useful life |
Buildings and improvements | 5 to 40 years |
Manufacturing equipment | 2 to 10 years |
Other equipment | 3 to 10 years |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(h) | Intangible assets: |
Asset | Useful life |
Customer contracts and customer relationships | 7 to 20 years |
License agreements | 3 to 10 years |
Computer software | 4 to 7 years |
Trademarks with a finite life | 5 years |
Non-compete agreements | 2 years |
• | it is technically feasible to complete the software product so that it will be available for use; |
• | management intends to complete the software product and use it; |
• | there is an ability to use the software product; |
• | it can be demonstrated how the software product will generate probable future economic benefits; |
• | adequate technical, financial, and other resources to complete the development and to use the software product are available; and |
• | the expenditures attributable to the software product during its development can be reliably measured. |
(i) | Goodwill: |
(j) | Impairment of non-financial assets: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(j) | Impairment of non-financial assets (continued): |
(k) | Financial instruments: |
• | The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and |
• | The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and/or interest. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(k) | Financial instruments (continued): |
• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
• | Level 3: inputs for the asset or liability that are not based on observable market data. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(l) | Derivative financial instruments and hedging relationships: |
(m) | Accounts payable and accrued liabilities: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(n) | Long-term debt: |
(o) | Employee benefits: |
(p) | Provisions: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(q) | Share capital: |
(r) | Dividends declared: |
(s) | Revenue recognition: |
(t) | Cost of sales and gross profit: |
(u) | Selling, general and administrative expenses: |
(v) | Restructuring and acquisition-related costs: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(w) | Cotton and cotton-based yarn procurements: |
(x) | Government assistance: |
(y) | Financial expenses (income): |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
American Apparel | Other | Total | ||||||||||
Assets acquired: | ||||||||||||
Trade accounts receivable | $ | — | $ | 1,893 | $ | 1,893 | ||||||
Income taxes receivable | — | 235 | 235 | |||||||||
Inventories | 11,052 | 7,235 | 18,287 | |||||||||
Prepaid expenses, deposits and other current assets | — | 4,100 | 4,100 | |||||||||
Property, plant and equipment | 1,527 | 3,011 | 4,538 | |||||||||
Intangible assets (1) | 67,400 | 2,958 | 70,358 | |||||||||
79,979 | 19,432 | 99,411 | ||||||||||
Liabilities assumed: | ||||||||||||
Accounts payable and accrued liabilities | — | (3,822 | ) | (3,822 | ) | |||||||
Goodwill | 18,562 | 5,525 | 24,087 | |||||||||
Net assets acquired at fair value | $ | 98,541 | $ | 21,135 | $ | 119,676 | ||||||
Cash consideration paid at closing, net of cash acquired | 98,541 | 18,069 | 116,610 | |||||||||
Settlement of pre-existing relationships | — | 1,766 | 1,766 | |||||||||
Balance due | — | 1,300 | 1,300 | |||||||||
$ | 98,541 | $ | 21,135 | $ | 119,676 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
December 30, 2018 | December 31, 2017 | ||||||
Trade accounts receivable | $ | 324,706 | $ | 248,419 | |||
Allowance for expected credit losses | (7,547 | ) | (5,054 | ) | |||
$ | 317,159 | $ | 243,365 |
December 30, 2018 | December 31, 2017 | ||||||
Balance, beginning of fiscal year | $ | (5,054 | ) | $ | (5,589 | ) | |
Adjustment relating to adoption of new accounting standard (note 2(d)) | (791 | ) | — | ||||
Adjusted balance, beginning of fiscal year | (5,845 | ) | (5,589 | ) | |||
Bad debt expense | (3,634 | ) | (3,689 | ) | |||
Write-off of trade accounts receivable | 1,932 | 4,224 | |||||
Balance, end of fiscal year | $ | (7,547 | ) | $ | (5,054 | ) |
December 30, 2018 | December 31, 2017 | ||||||
Raw materials and spare parts inventories | $ | 151,600 | $ | 128,414 | |||
Work in progress | 67,903 | 60,743 | |||||
Finished goods | 720,526 | 756,581 | |||||
$ | 940,029 | $ | 945,738 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Land | Buildings and improvements | Manufacturing equipment | Other equipment | Assets not yet utilized in operations | Total | |||||||||||||||||||
2018 | ||||||||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance, December 31, 2017 | $ | 70,003 | $ | 512,398 | $ | 1,039,974 | $ | 175,640 | $ | 77,389 | $ | 1,875,404 | ||||||||||||
Additions | 1,051 | 9,650 | 49,560 | 3,065 | 47,406 | 110,732 | ||||||||||||||||||
Transfers | — | 33,932 | 31,735 | 1,498 | (67,165 | ) | — | |||||||||||||||||
Disposals | (97 | ) | (5,095 | ) | (35,924 | ) | (21,002 | ) | — | (62,118 | ) | |||||||||||||
Balance, December 30, 2018 | $ | 70,957 | $ | 550,885 | $ | 1,085,345 | $ | 159,201 | $ | 57,630 | $ | 1,924,018 | ||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
Balance, December 31, 2017 | $ | — | $ | 157,040 | $ | 571,847 | $ | 110,699 | $ | — | $ | 839,586 | ||||||||||||
Depreciation | — | 24,781 | 91,081 | 9,935 | — | 125,797 | ||||||||||||||||||
Disposals | — | — | (22,510 | ) | (9,330 | ) | — | (31,840 | ) | |||||||||||||||
Balance, December 30, 2018 | $ | — | $ | 181,821 | $ | 640,418 | $ | 111,304 | $ | — | $ | 933,543 | ||||||||||||
Carrying amount, December 30, 2018 | $ | 70,957 | $ | 369,064 | $ | 444,927 | $ | 47,897 | $ | 57,630 | $ | 990,475 |
Land | Buildings and improvements | Manufacturing equipment | Other equipment | Assets not yet utilized in operations | Total | |||||||||||||||||||
2017 | ||||||||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance, January 1, 2017 | $ | 69,373 | $ | 504,186 | $ | 997,993 | $ | 167,651 | $ | 50,607 | $ | 1,789,810 | ||||||||||||
Additions | 630 | 7,515 | 17,565 | 10,852 | 55,640 | 92,202 | ||||||||||||||||||
Additions through business acquisitions | — | 29 | 4,153 | 356 | — | 4,538 | ||||||||||||||||||
Transfers | — | 2,601 | 25,062 | 1,195 | (28,858 | ) | — | |||||||||||||||||
Disposals | — | (1,933 | ) | (4,799 | ) | (4,414 | ) | — | (11,146 | ) | ||||||||||||||
Balance, December 31, 2017 | $ | 70,003 | $ | 512,398 | $ | 1,039,974 | $ | 175,640 | $ | 77,389 | $ | 1,875,404 | ||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
Balance, January 1, 2017 | $ | — | $ | 132,976 | $ | 483,742 | $ | 96,209 | $ | — | $ | 712,927 | ||||||||||||
Depreciation | — | 24,719 | 92,904 | 18,610 | — | 136,233 | ||||||||||||||||||
Disposals | — | (655 | ) | (4,799 | ) | (4,120 | ) | — | (9,574 | ) | ||||||||||||||
Balance, December 31, 2017 | $ | — | $ | 157,040 | $ | 571,847 | $ | 110,699 | $ | — | $ | 839,586 | ||||||||||||
Carrying amount, December 31, 2017 | $ | 70,003 | $ | 355,358 | $ | 468,127 | $ | 64,941 | $ | 77,389 | $ | 1,035,818 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | Customer contracts and customer relationships | Trademarks | License agreements | Computer software | Non-compete agreements | Total | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance, December 31, 2017 | $ | 224,489 | $ | 226,172 | $ | 59,498 | $ | 49,771 | $ | 1,880 | $ | 561,810 | ||||||||||||
Additions | — | — | 10,102 | 9,363 | — | 19,465 | ||||||||||||||||||
Disposals | — | — | — | (879 | ) | (90 | ) | (969 | ) | |||||||||||||||
Balance, December 30, 2018 | $ | 224,489 | $ | 226,172 | $ | 69,600 | $ | 58,255 | $ | 1,790 | $ | 580,306 | ||||||||||||
Accumulated amortization | ||||||||||||||||||||||||
Balance, December 31, 2017 | $ | 75,472 | $ | 1,108 | $ | 49,034 | $ | 32,711 | $ | 1,880 | $ | 160,205 | ||||||||||||
Amortization | 13,592 | 700 | 8,572 | 4,475 | — | 27,339 | ||||||||||||||||||
Disposals | — | — | — | (721 | ) | (90 | ) | (811 | ) | |||||||||||||||
Balance, December 30, 2018 | $ | 89,064 | $ | 1,808 | $ | 57,606 | $ | 36,465 | $ | 1,790 | $ | 186,733 | ||||||||||||
Carrying amount, December 30, 2018 | $ | 135,425 | $ | 224,364 | $ | 11,994 | $ | 21,790 | $ | — | $ | 393,573 |
2017 | Customer contracts and customer relationships | Trademarks | License agreements | Computer software | Non-compete agreements | Total | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance, January 1, 2017 | $ | 205,531 | $ | 174,772 | $ | 59,498 | $ | 48,776 | $ | 1,880 | $ | 490,457 | ||||||||||||
Additions | — | — | — | 2,852 | — | 2,852 | ||||||||||||||||||
Additions through business acquisitions | 18,958 | 51,400 | — | — | — | 70,358 | ||||||||||||||||||
Disposals | — | — | — | (1,857 | ) | — | (1,857 | ) | ||||||||||||||||
Balance, December 31, 2017 | $ | 224,489 | $ | 226,172 | $ | 59,498 | $ | 49,771 | $ | 1,880 | $ | 561,810 | ||||||||||||
Accumulated amortization | ||||||||||||||||||||||||
Balance, January 1, 2017 | $ | 62,185 | $ | 125 | $ | 42,586 | $ | 29,528 | $ | 1,812 | $ | 136,236 | ||||||||||||
Amortization | 13,287 | 983 | 6,448 | 4,808 | 68 | 25,594 | ||||||||||||||||||
Disposals | — | — | — | (1,625 | ) | — | (1,625 | ) | ||||||||||||||||
Balance, December 31, 2017 | $ | 75,472 | $ | 1,108 | $ | 49,034 | $ | 32,711 | $ | 1,880 | $ | 160,205 | ||||||||||||
Carrying amount, December 31, 2017 | $ | 149,017 | $ | 225,064 | $ | 10,464 | $ | 17,060 | $ | — | $ | 401,605 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
December 30, 2018 | December 31, 2017 | ||||||
Balance, beginning of fiscal year | $ | 226,571 | $ | 202,108 | |||
Goodwill acquired | 692 | 24,087 | |||||
Other | 99 | 376 | |||||
Balance, end of fiscal year | $ | 227,362 | $ | 226,571 |
December 30, 2018 | ||||
Textile & Sewing: | ||||
Goodwill | $ | 206,134 | ||
Indefinite life intangible assets | 93,400 | |||
$ | 299,534 | |||
Hosiery: | ||||
Goodwill | $ | 21,228 | ||
Indefinite life intangible assets | 129,272 | |||
$ | 150,500 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Effective interest rate (1) | Principal amount | Maturity date | ||||||
December 30, 2018 | December 31, 2017 | |||||||
Revolving long-term bank credit facility, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2% (2) | 3.4% | $ | 69,000 | $ | 30,000 | April 2023 | ||
Term loan, interest at variable U.S. LIBOR-based interest rate plus a spread ranging from 1% to 2%, payable monthly(3) | 2.8% | 300,000 | 300,000 | April 2023 | ||||
Notes payable, interest at fixed rate of 2.70%, payable semi-annually (4) | 2.7% | 100,000 | 100,000 | August 2023 | ||||
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.53% payable quarterly (4) | 2.7% | 50,000 | 50,000 | August 2023 | ||||
Notes payable, interest at fixed rate of 2.91%, payable semi-annually (4) | 2.9% | 100,000 | 100,000 | August 2026 | ||||
Notes payable, interest at variable U.S. LIBOR-based interest rate plus a spread of 1.57% payable quarterly (4) | 2.9% | 50,000 | 50,000 | August 2026 | ||||
$ | 669,000 | $ | 630,000 |
(1) | Represents the annualized effective interest rate for the year ended December 30, 2018, including the cash impact of interest rate swaps, where applicable. |
(2) | The Company’s unsecured revolving long-term bank credit facility of $1 billion provides for an annual extension which is subject to the approval of the lenders. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the credit facility agreement). In addition, an amount of $13.4 million (December 31, 2017 - $14.6 million) has been committed against this facility to cover various letters of credit. |
(3) | The unsecured term loan is non-revolving and can be prepaid in whole or in part at any time with no penalties. The spread added to the U.S. LIBOR-based variable interest rate is a function of the total net debt to EBITDA ratio (as defined in the term loan agreement). |
(4) | The unsecured notes issued for a total aggregate principal amount of $300 million to accredited investors in the U.S. private placement market can be prepaid in whole or in part at any time, subject to the payment of a prepayment penalty as provided for in the Note Purchase Agreement. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
December 30, 2018 | December 31, 2017 | ||||||
Employee benefit obligation - Statutory severance and pre-notice | $ | 22,075 | $ | 16,096 | |||
Employee benefit obligation - Defined contribution plan | 3,498 | 3,216 | |||||
Provisions | 14,343 | 17,829 | |||||
$ | 39,916 | $ | 37,141 |
December 30, 2018 | December 31, 2017 | ||||||
Obligation, beginning of fiscal year | $ | 16,096 | $ | 14,579 | |||
Service cost | 13,500 | 12,424 | |||||
Interest cost | 6,478 | 6,171 | |||||
Actuarial loss(1) | 1,694 | 64 | |||||
Foreign exchange gain | (537 | ) | (389 | ) | |||
Benefits paid | (15,156 | ) | (16,753 | ) | |||
Obligation, end of fiscal year | $ | 22,075 | $ | 16,096 | |||
(1) The actuarial loss is due to changes in the actuarial assumptions used to determine the statutory severance obligations. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Decommissioning | ||||||||||||
and site | Lease exit | |||||||||||
restoration costs | costs | Total | ||||||||||
Balance, December 31, 2017 | $ | 16,572 | $ | 1,257 | $ | 17,829 | ||||||
Provisions made during the fiscal year | — | 3,509 | 3,509 | |||||||||
Changes in estimates made during the fiscal year | (2,147 | ) | — | (2,147 | ) | |||||||
Provisions utilized during the fiscal year | — | (147 | ) | (147 | ) | |||||||
Accretion of interest | 299 | — | 299 | |||||||||
Other(1) (note 17) | (5,000 | ) | — | (5,000 | ) | |||||||
Balance, December 30, 2018 | $ | 9,724 | $ | 4,619 | $ | 14,343 |
(a) | Shareholder rights plan: |
(b) | Accumulated other comprehensive income (“AOCI”): |
(c) | Share capital: |
(d) | Normal course issuer bid: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(d) | Normal course issuer bid (continued): |
(e) | Common shares purchased as settlement for non-Treasury RSUs: |
(f) | Contributed surplus: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(a) | Financial instruments - carrying amounts and fair values: |
December 30, 2018 | December 31, 2017 | ||||||
Financial assets | |||||||
Amortized cost: | |||||||
Cash and cash equivalents | $ | 46,657 | $ | 52,795 | |||
Trade accounts receivable | 317,159 | 243,365 | |||||
Financial assets included in prepaid expenses, deposits and other current assets | 39,789 | 28,711 | |||||
Long-term non-trade receivables included in other non-current assets | 2,771 | 2,781 | |||||
Derivative financial assets included in prepaid expenses, deposits and other current assets | 17,792 | 16,920 | |||||
Financial liabilities | |||||||
Amortized cost: | |||||||
Accounts payable and accrued liabilities (1) | $ | 332,543 | $ | 255,832 | |||
Long-term debt - bearing interest at variable rates | 469,000 | 430,000 | |||||
Long-term debt - bearing interest at fixed rates (2) | 200,000 | 200,000 | |||||
Derivative financial liabilities included in accounts payable and accrued liabilities | 14,442 | 2,644 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(a) | Financial instruments - carrying amounts and fair values (continued): |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Carrying and fair value | Maturity | ||||||||||||||||||||||
Notional foreign | Average | Notional | Prepaid expenses, | Accounts | |||||||||||||||||||
currency amount | exchange | U.S. $ | deposits and other | payable and | 0 to 12 | ||||||||||||||||||
equivalent | rate | equivalent | current assets | accrued liabilities | months | ||||||||||||||||||
Cash flow hedges: | |||||||||||||||||||||||
Forward foreign exchange contracts: | |||||||||||||||||||||||
Sell GBP/Buy USD | 28,510 | 1.3224 | $ | 37,703 | $ | 1,366 | $ | — | $ | 1,366 | |||||||||||||
Sell EUR/Buy USD | 31,578 | 1.1892 | 37,551 | 1,004 | (19 | ) | 985 | ||||||||||||||||
Sell CAD/Buy USD | 33,114 | 0.7784 | 25,776 | 1,369 | — | 1,369 | |||||||||||||||||
Buy CAD/Sell USD | 62,921 | 0.7583 | 47,712 | — | (1,180 | ) | (1,180 | ) | |||||||||||||||
Sell AUD/Buy USD | 7,941 | 0.7304 | 5,800 | 198 | — | 198 | |||||||||||||||||
Buy MXN/Sell USD | 79,275 | 0.0475 | 3,766 | 162 | — | 162 | |||||||||||||||||
$ | 158,308 | $ | 4,099 | $ | (1,199 | ) | $ | 2,900 |
Carrying and fair value | Maturity | |||||||||||||||
Prepaid expenses, | Accounts | |||||||||||||||
Type of | deposits and other | payable and | 0 to 12 | |||||||||||||
commodity | Notional amount (1) | current assets | accrued liabilities | months | ||||||||||||
Cash flow hedges: | ||||||||||||||||
Forward contracts | Cotton | 76.0 million pounds | $ | 336 | $ | (3,173 | ) | $ | (2,837 | ) | ||||||
Swap contracts | Synthetic fibres | 147.7 million pounds | — | (5,516 | ) | (5,516 | ) | |||||||||
Swap & option contracts | Energy | 290,000 barrels | 145 | (2,469 | ) | (2,324 | ) | |||||||||
$ | 481 | $ | (11,158 | ) | $ | (10,677 | ) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Carrying and fair value | ||||||||||||||||
Notional | Prepaid expenses, | Accounts | ||||||||||||||
amount of | Maturity | Fixed | Floating | deposits and other | payable and | |||||||||||
borrowings | date | Pay / Receive | rate | rate | current assets | accrued liabilities | ||||||||||
Cash flow hedges: | ||||||||||||||||
$ | 150,000 | June 17, 2021 | Pay fixed rate / receive floating rate | 0.96 | % | US LIBOR | $ | 5,500 | $ | — | ||||||
75,000 | April 30, 2023 | Pay fixed rate / receive floating rate | 2.85 | % | US LIBOR | — | (521 | ) | ||||||||
50,000 | August 25, 2023 | Pay fixed rate / receive floating rate | 1.18 | % | US LIBOR | 3,070 | — | |||||||||
50,000 | August 25, 2026 | Pay fixed rate / receive floating rate | 1.34 | % | US LIBOR | 4,382 | — | |||||||||
$ | 12,952 | $ | (521 | ) |
Change in | |||||||||||||||||
Carrying amount of | value used for | Cash flow | |||||||||||||||
the hedged item | calculating hedge | hedge reserve | |||||||||||||||
Assets | Liabilities | ineffectiveness | (AOCI) | ||||||||||||||
Cash flow hedges: | |||||||||||||||||
Foreign currency risk: | |||||||||||||||||
Forecast sales | $ | — | $ | — | $ | 2,752 | $ | (2,752 | ) | ||||||||
Forecast expenses | — | — | (897 | ) | 897 | ||||||||||||
Commodity risk: | |||||||||||||||||
Forecast purchases | — | — | (10,677 | ) | 10,677 | ||||||||||||
Interest rate risk: | |||||||||||||||||
Forecast interest payments | — | — | 12,204 | (12,204 | ) | ||||||||||||
$ | — | $ | — | $ | 3,382 | $ | (3,382 | ) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(c) | Financial expenses, net: |
2018 | 2017 | ||||||
Interest expense on financial liabilities recorded at amortized cost (1) | $ | 24,757 | $ | 17,126 | |||
Bank and other financial charges | 7,472 | 8,025 | |||||
Interest accretion on discounted provisions | 299 | 311 | |||||
Foreign exchange gain | (1,483 | ) | (1,276 | ) | |||
$ | 31,045 | $ | 24,186 |
(d) | Hedging components of other comprehensive income (“OCI”): |
2018 | 2017 | ||||||
Net gain (loss) on derivatives designated as cash flow hedges: | |||||||
Foreign currency risk | $ | 6,740 | $ | (6,076 | ) | ||
Commodity price risk | 698 | 11,087 | |||||
Interest rate risk | 102 | 425 | |||||
Income taxes | (67 | ) | 60 | ||||
Amounts reclassified from OCI to inventory, related to commodity price risk | (13,303 | ) | (33,294 | ) | |||
Amounts reclassified from OCI to net earnings, related to foreign currency risk, and included in: | |||||||
Net sales | (1,864 | ) | 1,626 | ||||
Cost of sales | (307 | ) | (1,042 | ) | |||
Selling, general and administrative expenses | 51 | (2,087 | ) | ||||
Financial expenses, net | (2,224 | ) | 2,234 | ||||
Income taxes | 16 | (4 | ) | ||||
Cash flow hedging loss | $ | (10,158 | ) | $ | (27,071 | ) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(a) | Employee share purchase plans: |
(b) | Stock options and restricted share units: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(b) | Stock options and restricted share units (continued): |
Stock options issued in Canadian dollars and to be exercised on the TSX: | |||||||
Number | Weighted exercise price (CA$) | ||||||
Stock options outstanding, January 1, 2017 | 2,532 | $ | 31.18 | ||||
Changes in outstanding stock options: | |||||||
Exercised | (269 | ) | 16.43 | ||||
Stock options outstanding, December 31, 2017 | 2,263 | 32.94 | |||||
Changes in outstanding stock options: | |||||||
Exercised | (110 | ) | 19.98 | ||||
Forfeited | (160 | ) | 33.58 | ||||
Stock options outstanding, December 30, 2018 | 1,993 | $ | 33.60 | ||||
Stock options issued in U.S. dollars and to be exercised on the NYSE: | |||||||
Number | Weighted exercise price (US$) | ||||||
Stock options outstanding, January 1, 2017 | — | $ | — | ||||
Changes in outstanding stock options: | |||||||
Granted | 759 | 29.01 | |||||
Stock options outstanding, December 31, 2017 | 759 | 29.01 | |||||
Changes in outstanding stock options: | |||||||
Forfeited | (90 | ) | 29.01 | ||||
Stock options outstanding, December 30, 2018 | 669 | $ | 29.01 |
2017 | |||
Exercise price | US$29.01 | ||
Risk-free interest rate | 1.90% | ||
Expected volatility | 20.78% | ||
Expected life | 4.63 years | ||
Expected dividend yield | 1.29% |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(b) | Stock options and restricted share units (continued): |
Options issued and outstanding | Options exercisable | ||||||
Exercise prices | Number | Remaining contractual life (yrs) | Number | ||||
CA$15.59 | 71 | 1 | 71 | ||||
CA$24.22 | 239 | 2 | 239 | ||||
CA$30.46 | 254 | 3 | 191 | ||||
CA$33.01 | 635 | 5 | 159 | ||||
CA$38.01 | 511 | 4 | 256 | ||||
CA$42.27 | 283 | 7 | — | ||||
1,993 | 916 | ||||||
US$29.01 | 669 | 6 | — | ||||
2,662 | 916 |
Number | Weighted average fair value per unit | ||||||
Treasury RSUs outstanding, January 1, 2017 | 249 | $ | 20.70 | ||||
Changes in outstanding Treasury RSUs: | |||||||
Granted for dividends declared | 2 | 29.04 | |||||
Settled through the issuance of common shares | (149 | ) | 14.12 | ||||
Treasury RSUs outstanding, December 31, 2017 | 102 | 30.46 | |||||
Changes in outstanding Treasury RSUs: | |||||||
Granted | 20 | 30.10 | |||||
Granted for dividends declared | 2 | 29.94 | |||||
Forfeited | (18 | ) | 27.93 | ||||
Treasury RSUs outstanding, December 30, 2018 | 106 | $ | 30.82 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(b) | Stock options and restricted share units (continued): |
Number | Weighted average fair value per unit | ||||||
Non-Treasury RSUs outstanding, January 1, 2017 | 1,047 | $ | 27.18 | ||||
Changes in outstanding non-Treasury RSUs: | |||||||
Granted | 471 | 29.38 | |||||
Granted for performance | 88 | 28.42 | |||||
Granted for dividends declared | 13 | 29.86 | |||||
Settled - common shares | (215 | ) | 28.34 | ||||
Settled - payment of withholding taxes | (142 | ) | 28.42 | ||||
Forfeited | (62 | ) | 27.66 | ||||
Non-Treasury RSUs outstanding, December 31, 2017 | 1,200 | 27.79 | |||||
Changes in outstanding non-Treasury RSUs: | |||||||
Granted | 573 | 29.82 | |||||
Granted for performance | 109 | 28.46 | |||||
Granted for dividends declared | 24 | 29.81 | |||||
Settled - common shares | (226 | ) | 28.47 | ||||
Settled - payment of withholding taxes | (151 | ) | 28.47 | ||||
Forfeited | (155 | ) | 27.99 | ||||
Non-Treasury RSUs outstanding, December 30, 2018 | 1,374 | $ | 28.52 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | ||||
DSUs outstanding, beginning of fiscal year | 293 | 255 | |||
Granted | 54 | 35 | |||
Granted for dividends declared | 4 | 3 | |||
Redeemed | (76 | ) | — | ||
DSUs outstanding, end of fiscal year | 275 | 293 |
(a) | Selling, general and administrative expenses: |
2018 | 2017 | ||||||
Selling expenses | $ | 108,363 | $ | 118,560 | |||
Administrative expenses | 135,735 | 141,325 | |||||
Distribution expenses | 124,448 | 117,438 | |||||
$ | 368,546 | $ | 377,323 |
(b) | Employee benefit expenses: |
2018 | 2017 | ||||||
Salaries, wages and other short-term employee benefits | $ | 541,769 | $ | 504,366 | |||
Share-based payments | 19,974 | 16,065 | |||||
Post-employment benefits | 31,922 | 30,376 | |||||
$ | 593,665 | $ | 550,807 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(c) | Lease expenses: |
Within 1 year | $ | 21,795 | |
Between 1 and 5 years | 51,723 | ||
More than 5 years | 39,769 | ||
$ | 113,287 |
(d) | Government assistance: |
2018 | 2017 | ||||||
Employee termination and benefit costs | $ | 7,767 | $ | 3,958 | |||
Exit, relocation and other costs | 13,620 | 13,805 | |||||
Net loss on disposal of property, plant and equipment related to exit activities | 12,394 | 930 | |||||
Acquisition-related transaction costs | 447 | 4,201 | |||||
$ | 34,228 | $ | 22,894 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | |||||||
Earnings before income taxes | $ | 372,134 | $ | 376,816 | ||||
Applicable tax rate | 26.6 | % | 26.8 | % | ||||
Income taxes at applicable statutory rate | 98,913 | 101,100 | ||||||
(Decrease) increase in income taxes resulting from: | ||||||||
Effect of different tax rates on earnings of foreign subsidiaries | (96,013 | ) | (89,722 | ) | ||||
Income tax recovery and other adjustments related to prior taxation years | 979 | (1,676 | ) | |||||
Effect of changes in tax rates | 2,048 | (1,633 | ) | |||||
Effect of revaluation of deferred income taxes on intangible assets | — | (62,228 | ) | |||||
Non-recognition of tax benefits related to tax losses and temporary differences | 17,169 | 62,488 | ||||||
Effect of non-deductible expenses and other | (1,736 | ) | 6,153 | |||||
Total income tax expense | $ | 21,360 | $ | 14,482 | ||||
Average effective tax rate | 5.7 | % | 3.8 | % |
2018 | 2017 | |||||||
Current income taxes, includes an expense of $3,535 | ||||||||
(2017 - recovery of $1,368) relating to prior taxation years | $ | 12,488 | $ | 9,587 | ||||
Deferred income taxes: | ||||||||
Changes in tax rates | 2,048 | (1,633 | ) | |||||
Revaluation of deferred income taxes on intangible assets | — | (62,228 | ) | |||||
Origination and reversal of temporary differences | (7,789 | ) | 6,576 | |||||
Non-recognition of tax benefits related to tax losses and temporary differences | 17,169 | 62,488 | ||||||
Recognition of tax benefits relating to prior taxation years | (2,556 | ) | (308 | ) | ||||
8,872 | 4,895 | |||||||
Total income tax expense | $ | 21,360 | $ | 14,482 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
December 30, 2018 | December 31, 2017 | |||||||
Deferred income tax assets: | ||||||||
Non-capital losses | $ | 85,800 | $ | 75,433 | ||||
Non-deductible reserves and accruals | 11,395 | 5,712 | ||||||
Property, plant and equipment | 9,227 | 9,629 | ||||||
Other items | 6,039 | 6,609 | ||||||
112,461 | 97,383 | |||||||
Unrecognized deferred income tax assets | (85,724 | ) | (67,152 | ) | ||||
Deferred income tax assets | $ | 26,737 | $ | 30,231 | ||||
Deferred income tax liabilities: | ||||||||
Property, plant and equipment | $ | (29,095 | ) | $ | (24,239 | ) | ||
Intangible assets | (10,265 | ) | (9,705 | ) | ||||
Deferred income tax liabilities | $ | (39,360 | ) | $ | (33,944 | ) | ||
Deferred income taxes | $ | (12,623 | ) | $ | (3,713 | ) |
2018 | 2017 | |||||||
Balance, beginning of fiscal year, net | $ | (3,713 | ) | $ | 1,500 | |||
Recognized in the statements of earnings: | ||||||||
Non-capital losses | 10,367 | 31,202 | ||||||
Non-deductible reserves and accruals | 5,683 | (41,052 | ) | |||||
Property, plant and equipment | (5,267 | ) | (3,062 | ) | ||||
Intangible assets | 94 | 66,888 | ||||||
Other | (532 | ) | 1,984 | |||||
Changes in tax rates | (2,048 | ) | 1,633 | |||||
Unrecognized deferred income tax assets | (17,169 | ) | (62,488 | ) | ||||
(8,872 | ) | (4,895 | ) | |||||
Other | (38 | ) | (318 | ) | ||||
Balance, end of fiscal year, net | $ | (12,623 | ) | $ | (3,713 | ) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | |||||||
Net earnings - basic and diluted | $ | 350,774 | $ | 362,334 | ||||
Basic earnings per share: | ||||||||
Basic weighted average number of common shares outstanding | 211,435 | 224,184 | ||||||
Basic earnings per share | $ | 1.66 | $ | 1.62 | ||||
Diluted earnings per share: | ||||||||
Basic weighted average number of common shares outstanding | 211,435 | 224,184 | ||||||
Plus dilutive impact of stock options, Treasury RSUs and common | ||||||||
shares held in trust | 273 | 351 | ||||||
Diluted weighted average number of common shares outstanding | 211,708 | 224,535 | ||||||
Diluted earnings per share | $ | 1.66 | $ | 1.61 |
2018 | 2017 | ||||||
Depreciation of property, plant and equipment (note 9) | $ | 125,797 | $ | 136,233 | |||
Adjustment for the variation of depreciation of property, plant and equipment included in inventories at the beginning and end of the year | 4,940 | 323 | |||||
Depreciation of property, plant and equipment included in net earnings | 130,737 | 136,556 | |||||
Amortization of intangible assets, excluding software (note 10) | 22,864 | 20,786 | |||||
Amortization of software (note 10) | 4,475 | 4,808 | |||||
Depreciation and amortization included in net earnings | $ | 158,076 | $ | 162,150 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(a) | Adjustments to reconcile net earnings to cash flows from operating activities: |
2018 | 2017 | ||||||
Depreciation and amortization (note 20) | $ | 158,076 | $ | 162,150 | |||
Restructuring charges related to property, plant and equipment (note 17) | 12,394 | 930 | |||||
Loss on disposal of property, plant and equipment and intangible assets | 1,124 | 368 | |||||
Share-based compensation | 19,513 | 15,867 | |||||
Deferred income taxes (note 18) | 8,872 | 4,895 | |||||
Unrealized net (gain) loss on foreign exchange and financial derivatives | 882 | (863 | ) | ||||
Timing differences between settlement of financial derivatives and transfer of deferred gains and losses in accumulated OCI to inventory and net earnings | — | (10,070 | ) | ||||
Other non-current assets | (1,445 | ) | (523 | ) | |||
Other non-current liabilities | 2,839 | 2,445 | |||||
$ | 202,255 | $ | 175,199 |
(b) | Variations in non-cash transactions: |
2018 | 2017 | ||||||
Additions to property, plant and equipment and intangible assets included in accounts payable and accrued liabilities | $ | 4,977 | $ | 258 | |||
Proceeds on disposal of property, plant and equipment included in other current assets | (86 | ) | 36 | ||||
Impact of adoption of new accounting standards (note 2(d)) | (1,515 | ) | — | ||||
Balance due on business acquisitions (note 5) | — | 2,700 | |||||
Non-cash ascribed value credited to contributed surplus for dividends attributed to Treasury RSUs | 754 | 447 | |||||
Non-cash ascribed value credited to share capital from shares issued or distributed pursuant to vesting of restricted share units and exercise of stock options | 6,681 | 9,623 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | ||||||
Short-term employee benefits | $ | 8,615 | $ | 9,446 | |||
Post-employment benefits | 2,995 | 205 | |||||
Share-based payments | 12,592 | 10,932 | |||||
$ | 24,202 | $ | 20,583 |
December 30, 2018 | December 31, 2017 | ||||||
DSUs | $ | 8,310 | $ | 9,460 |
(a) | Claims and litigation |
(b) | Guarantees |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
2018 | 2017 | ||||||
Activewear | $ | 2,321,395 | $ | 2,043,147 | |||
Hosiery and underwear | 587,170 | 707,669 | |||||
$ | 2,908,565 | $ | 2,750,816 |
2018 | 2017 | ||||||
United States | $ | 2,484,877 | $ | 2,381,193 | |||
Canada | 120,764 | 131,061 | |||||
International | 302,924 | 238,562 | |||||
$ | 2,908,565 | $ | 2,750,816 |
December 30, 2018 | December 31, 2017 | ||||||
United States | $ | 455,491 | $ | 487,228 | |||
Canada | 132,045 | 141,820 | |||||
Honduras | 387,301 | 386,348 | |||||
Caribbean Basin | 544,282 | 559,422 | |||||
Other | 92,291 | 89,176 | |||||
$ | 1,611,410 | $ | 1,663,994 |
2018 | 2017 | ||||
Customer A | 19.0 | % | 16.5 | % | |
Customer B | 10.0 | % | 7.6 | % | |
Customer C | 7.6 | % | 11.9 | % |
KPMG LLP 600 de Maisonneuve Blvd. West Suite 1500 Tour KPMG Montréal, Québec H3A 0A3 | Telephone (514) 840-2100 Fax (514) 840-2187 Internet www.kpmg.ca |
• | our Report of Independent Registered Public Accounting Firm dated February 20, 2019 on the consolidated financial statements which comprise the consolidated statements of financial position as of December 30, 2018 and December 31, 2017, the consolidated statements of earnings and comprehensive income, changes in equity and cash flows for the years ended December 30, 2018 and December 31, 2017, and the related notes (collectively, the consolidated financial statements); and |
• | our Report of Independent Registered Public Accounting Firm dated February 20, 2019 on the Company’s internal control over financial reporting as at December 30, 2018; |
1. | I have reviewed this annual report on Form 40-F of Gildan Activewear Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the issuer and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
1. | I have reviewed this annual report on Form 40-F of Gildan Activewear Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the issuer and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
Title: | Executive Vice-President, Chief Financial and Administrative Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
Title: | Executive Vice-President, Chief Financial and Administrative Officer |
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