Hanesbrands Inc
(336) 519-8080
news
release
FOR IMMEDIATE RELEASE
News
Media, contact:
Matt
Hall, (336) 519-3386
Analysts
and Investors, contact:
HANESBRANDS INC. REPORTS THIRD-QUARTER RESULTS
The company increased earnings and profit margins in the third quarter and reduced debt. Third-quarter sales declined, in line with the company’s stated expectations.
· Q3 EPS of $0.43, up 153 percent; EPS excluding actions of $0.63, up 21 percent.
· Q3 sales of $1.06 billion, down 8 percent.
· Year-to-date debt reduction of $134 million.
· 2010 incremental sales of approximately 5 percent expected from net shelf-space gains at retailers.
“Given that we are in the midst of a recession, we had very good profit growth in the quarter and solidified business momentum for 2010,” Hanesbrands Chairman and Chief Executive Officer Richard A. Noll said. “We have built a platform for future growth through our continued brand investments and low-cost global supply chain. We are protecting margins, reducing debt and substantially ramping up our production capacity to support a strong 2010, in which we expect shelf-space and distribution gains to add approximately 5 percent to our sales.”
Noteworthy Financial Highlights
Selected highlights for the quarter ended Oct. 3, 2009,
compared with the year-ago quarter ended Sept. 27, 2008, include:
· Third-quarter sales were consistent with the company’s previously announced expectations at $1.06 billion, compared with $1.15 billion a year ago. The company increased trade spending, especially for back-to-school programs, to support retailers and position the company for future growth opportunities.
Hanesbrands Inc. Reports Third-Quarter 2009
Results – Page 2
Sales for the Innerwear segment declined by 10 percent with weakness in
intimate apparel and socks. Male
underwear sales were comparable to last year.
Outerwear segment sales decreased by 5 percent with sales strength to
retailers, including increased Champion
brand activewear sales, offset by lower sales to the wholesale channel.
International segment sales decreased by 8 percent, and Hosiery segment sales
declined by 12 percent.
The company’s sales planning assumption continues to be that consumer-spending
levels remain constant through 2009.
·
Operating profit was $93.3 million in the
quarter, up from $58.2 million a year ago.
Operating profit excluding actions increased by 9 percent to $111.1
million. The operating profit improvement
resulted from cost-reduction initiatives and lower commodities.
The third quarter’s operating profit margin excluding actions was 10.5 percent,
compared with 8.9 percent in last year’s third quarter.
·
Diluted EPS increased to $0.43 from $0.17, while
diluted EPS excluding actions increased by 21 percent to $0.63 from $0.52 a
year ago.
EPS benefited from higher operating profit and a lower effective income tax
rate. The effective income tax rate was 14
percent in the quarter, down from a rate of 24 percent in last year’s quarter. The company expects the tax rate for the year to
be 16 percent, reflecting a higher mix of foreign profit due in part to
domestic restructuring charges.
·
Hanesbrands paid down debt by $177 million in
the quarter. The company’s debt is now $134
million lower than the beginning of the year, and the company’s goal remains to
end the year with debt that is $300 million lower than the start of the year. The company’s strong cash flow is benefiting
from reduced inventory.
For 2010, Hanesbrands has the potential for robust cash flow, and its major
priority is to pay down debt by another $300 million. The company also continues to consider
refinancing its debt as the debt markets allow, possibly as early as the fourth
quarter. Refinancing would provide even
greater strategic flexibility in 2010 to reduce leverage and consider bolt-on
acquisitions that could take advantage of the company’s low-cost global supply
chain.
“We continue to invest in our business while reducing debt and expanding
margins in a difficult economic environment,” Hanesbrands Executive Vice
President and Chief Financial Officer E. Lee Wyatt said. “We also continue to strategically manage our
capital structure. The company has set a
new long-term leverage ratio target of 2 to 3 times debt to EBITDA, and we have
the potential to reach that range in 2011.
This would radically change our leverage profile over the next two years.”
(See Table 4 for details and reconciliation with reported operating results consistent with
Hanesbrands Inc. Reports Third-Quarter 2009
Results – Page 3
generally accepted accounting principles. Diluted EPS excluding actions, operating
profit excluding actions, gross profit excluding actions, SG&A excluding
actions, net income excluding actions, EBITDA or earnings before interest,
taxes, depreciation and amortization, and the margins on sales of these
measures are non-GAAP measures used to better assess underlying business
performance because they exclude the effect of unusual actions that are not
directly related to operations. The
unusual actions in the current or year-ago periods were restructuring and
related charges, nonrecurring spinoff-related and other expenses, other expenses,
and the tax effect on these items.)
Other Comments
Continued investment in brand-building programs has solidified significant net shelf-space and distribution gains, starting primarily in early 2010. Program gains significantly outnumber program losses, and the company expects the net space gains to generate approximately 5 percent incremental sales growth in 2010. The growth expectation pertains only to the net space and distribution gains and is not dependent on a consumer spending rebound. In early 2010, Hanesbrands will provide its expectations for total 2010 net sales growth based on the space gains, point-of-sale trends for the holiday period, the outlook for the consumer climate in 2010, and other factors.
Hanesbrands is increasing its production capacity to meet 2010
growth expectations. In early October production
began at the company’s new
As a result of the continuing long-term trend of declining sheer
hosiery consumption in the
The company today closed on the previously announced sale of
its yarn production plants to Parkdale
“We are pleased with our profit and margin performance and our readiness to take advantage of opportunities in 2010,” Noll said. “This year is playing out consistent with our expectations, and we have continued to invest during the recession. We will begin 2010 with momentum. We have retail shelf-space gains, a recapitalized global supply chain and opportunities for a very good year.”
Webcast Conference Call
Hanesbrands will host a live Internet audio webcast of its quarterly investor conference call at 5 p.m. EDT today to review third-quarter results, fourth-quarter assumptions and 2010 space gains. The live Internet broadcast may be accessed on the home page of the Hanesbrands corporate Web site, www.hanesbrands.com. The call is expected to conclude by 6 p.m. EDT.
Hanesbrands Inc. Reports Third-Quarter 2009
Results – Page 4
An archived replay of the conference call webcast will be available in the
investors section of the Hanesbrands corporate Web site. A telephone playback will be available from
approximately 7 p.m. EDT today until midnight EST on Nov. 4, 2009. The replay will be available by calling
toll-free (800) 642-1687, or via toll call at (706) 645-9291. The replay pass code is 33254168.
Cautionary
Statement Concerning Forward-Looking Statements
Statements in this press release that are not
statements of historical fact are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
those regarding our long-term goals and trends associated with our business,
expected reduction in debt, and the net retail space gains that have been
secured for 2010 and the expected impact of the space gains. These forward-looking statements are made only as of the date of this
press release and are based on our current intent, beliefs, plans and
expectations. They involve risks and uncertainties that could
cause actual future results, performance or developments to differ materially
from those described in or implied by such forward-looking statements. These risks and uncertainties include the following: our ability to
execute our consolidation and globalization strategy, including migrating our
production and manufacturing operations to lower-cost locations around the
world; our ability to successfully manage social,
political, economic, legal and other conditions affecting our foreign
operations and supply chain sources; current economic conditions;
consumer spending levels; the risk of inflation or deflation; financial
difficulties experienced by, or loss of or reduction in sales to, any of our
top customers or groups of customers; gains and losses in the shelf space that
our customers devote to our products; our debt and debt service requirements
that restrict our operating and financial flexibility, and impose interest and
financing costs; the financial ratios that our debt instruments require us to
maintain; failure to protect against dramatic changes in the volatile market
price of cotton; the impact of increases in prices of other materials used in
our products and increases in other costs; our ability to effectively manage
our inventory and reduce inventory reserves; retailer consolidation and other
changes in the apparel essentials industry; the highly competitive and evolving
nature of the industry in which we compete; our ability to keep pace with
changing consumer preferences; costs and adverse
publicity from violations of labor or environmental laws by us or our suppliers;
and other risks identified from time to time in our most recent
Securities and Exchange Commission reports, including the 2008 Annual Report on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K,
registration statements, press releases and other communications. The company undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Hanesbrands
Inc.
Hanesbrands Inc. is a leading marketer of
innerwear, outerwear and hosiery apparel under strong consumer brands,
including Hanes, Champion, Playtex, Bali, JMS/Just My Size,
barely there and Wonderbra. The company designs, manufactures, sources and
sells T-shirts, bras, panties, men’s underwear,
children’s underwear, socks, hosiery, casualwear and activewear. Hanesbrands
has approximately 45,000 employees in more than 25 countries. More information may be found on the
company’s Web site at www.hanesbrands.com.
# # #
|
TABLE
1 |
||||||||||
|
HANESBRANDS
INC. |
||||||||||
|
Condensed
Consolidated Statements of Income |
||||||||||
|
(Amounts in
thousands, except per-share amounts) |
||||||||||
|
(Unaudited) |
||||||||||
|
|
||||||||||
|
|
|
Quarter
Ended |
|
|
Nine
Months Ended |
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
October
3, 2009 |
|
September
27, 2008 |
|
|
October
3, |
|
September
27, 2008 |
|
|
Net
sales: |
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ 585,327 |
|
$ 650,372 |
|
|
$ 1,710,920 |
|
$
1,830,437 |
|
|
Outerwear |
|
329,721 |
|
348,467 |
|
|
776,282 |
|
880,809 |
|
|
Hosiery |
|
43,944 |
|
50,197 |
|
|
139,300 |
|
166,672 |
|
|
International |
|
107,399 |
|
116,581 |
|
|
294,674 |
|
352,120 |
|
|
Other |
|
3,745 |
|
4,769 |
|
|
12,022 |
|
20,064 |
|
|
Total segment net sales |
|
1,070,136 |
|
1,170,386 |
|
|
2,933,198 |
|
3,250,102 |
|
|
Less: Intersegment |
|
11,463 |
|
16,751 |
|
|
30,662 |
|
36,449 |
|
|
Total
net sales |
|
1,058,673 |
|
1,153,635 |
-8.2% |
|
2,902,536 |
|
3,213,653 |
-9.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales |
|
701,993 |
|
811,851 |
|
|
1,960,589 |
|
2,145,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
356,680 |
|
341,784 |
4.4% |
|
941,947 |
|
1,067,704 |
-11.8% |
|
As a % of net sales |
|
33.7% |
|
29.6% |
|
|
32.5% |
|
33.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and |
|
|
|
|
|
|
|
|
|
|
|
administrative expenses |
|
248,267 |
|
255,228 |
|
|
702,204 |
|
776,267 |
|
|
As a % of net sales |
|
23.5% |
|
22.1% |
|
|
24.2% |
|
24.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
15,104 |
|
28,355 |
|
|
46,319 |
|
32,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
93,309 |
|
58,201 |
60.3% |
|
193,424 |
|
259,082 |
-25.3% |
|
As a % of net sales |
|
8.8% |
|
5.0% |
|
|
6.7% |
|
8.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses |
|
2,423 |
|
- |
|
|
6,537 |
|
- |
|
|
Interest
expense, net |
|
42,941 |
|
37,253 |
|
|
124,548 |
|
115,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
|
20,948 |
|
|
|
|
|
|
|
Income
tax expense |
|
6,807 |
|
5,028 |
|
|
9,974 |
|
34,512 |
|
|
Net income |
|
$ 41,138 |
|
$ 15,920 |
158.4% |
|
$ 52,365 |
|
$ 109,288 |
-52.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ 0.43 |
|
$ 0.17 |
|
|
$ 0.55 |
|
$ 1.16 |
|
|
Diluted |
|
$ 0.43 |
|
$ 0.17 |
152.9% |
|
$
0.55
|
|
$ 1.14 |
-51.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
95,247 |
|
93,992 |
|
|
94,880 |
|
94,283 |
|
|
Diluted |
|
96,422 |
|
95,018 |
|
|
95,469 |
|
95,483 |
|
|
HANESBRANDS
INC. |
|||||||||||
|
Condensed Consolidated
Balance Sheets |
|||||||||||
|
(Dollars in
thousands) |
|||||||||||
|
(Unaudited) |
|||||||||||
|
|
|||||||||||
|
|
|
|
|
October
3, 2009 |
|
January
3, 2009 |
|||||
|
Assets |
|
|
|||||||||
|
Cash
and cash equivalents |
|
$
38,617 |
|
$ 67,342 |
|||||||
|
Trade
accounts receivable, net |
|
538,540 |
|
404,930 |
|||||||
|
Inventories |
|
1,137,077 |
|
1,290,530 |
|||||||
|
Other
current assets |
|
324,352 |
|
347,523 |
|||||||
|
|
Total
current assets |
|
2,038,586 |
|
2,110,325 |
||||||
|
|
|
|
|
|
|
||||||
|
Property,
net |
|
612,911 |
|
588,189 |
|||||||
|
Intangible
assets and goodwill |
|
460,893 |
|
469,445 |
|||||||
|
Other
noncurrent assets |
|
379,523 |
|
366,090 |
|||||||
|
|
Total
assets |
|
$
3,491,913 |
|
$ 3,534,049
|
||||||
|
|
|
|
|
|
|
||||||
|
Liabilities |
|
|
|
|
|||||||
|
Accounts
payable and accrued liabilities |
|
$
612,423 |
|
$
640,910 |
|||||||
|
Notes
payable |
|
62,158 |
|
61,734 |
|||||||
|
Accounts
receivable securitization facility |
|
249,043 |
|
45,640 |
|||||||
|
|
Total
current liabilities |
|
923,624 |
|
748,284 |
||||||
|
Long-term
debt |
|
1,793,680 |
|
2,130,907 |
|||||||
|
Other
noncurrent liabilities |
|
481,425 |
|
469,703 |
|||||||
|
|
Total
liabilities |
|
3,198,729 |
|
3,348,894 |
||||||
|
|
|
|
|
|
|
||||||
|
Equity
|
|
293,184 |
|
185,155 |
|||||||
|
|
Total
liabilities and equity |
|
$ 3,491,913 |
|
$ 3,534,049 |
||||||
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
|
TABLE
3 |
|
|
|
|
|||||||
|
HANESBRANDS
INC. |
|||||||||||
|
Condensed
Consolidated Statements of Cash Flows |
|||||||||||
|
(Dollars in
thousands) |
|||||||||||
|
(Unaudited) |
|||||||||||
|
|
|||||||||||
|
|
|
|
|
Nine
Months Ended |
|||||||
|
|
|
|
|
October
3, 2009 |
|
September
27, 2008 |
|||||
|
|
|
|
|
|
|
||||||
|
Operating
Activities: |
|
|
|
|
|||||||
|
Net
income |
|
$
52,365 |
|
$
109,288 |
|||||||
|
Depreciation
and amortization |
|
66,769 |
|
77,613 |
|||||||
|
Other
noncash items |
|
40,681 |
|
15,655 |
|||||||
|
Changes
in assets and liabilities, net |
|
|
50,992 |
|
(221,177) |
||||||
|
Net
cash provided by (used in) operating activities |
|
|
210,807 |
|
(18,621) |
||||||
|
|
|
|
|
|
|
||||||
|
Investing
Activities: |
|
|
|
|
|||||||
|
Purchases
of property and equipment, net, and other |
|
|
(83,885) |
|
(109,644) |
||||||
|
|
|
|
|
|
|
||||||
|
Financing
Activities: |
|
|
|
|
|||||||
|
Net
borrowings on notes payable, debt, stock repurchases and |
|
|
(155,935) |
|
40,776 |
||||||
|
|
|
|
|
|
|
||||||
|
Effect
of changes in foreign currency exchange rates on cash |
|
|
288 |
|
(535) |
||||||
|
Decrease
in cash and cash equivalents |
|
|
(28,725) |
|
(88,024) |
||||||
|
|
|
|
|
|
|
||||||
|
Cash
and cash equivalents at beginning of year |
|
|
67,342 |
|
174,236 |
||||||
|
Cash
and cash equivalents at end of period |
|
|
$
38,617 |
|
$
86,212
|
||||||
|
TABLE
4 |
||||||||
|
HANESBRANDS INC. |
||||||||
|
Supplemental
Financial Information |
||||||||
|
(Amounts in
thousands, except per-share amounts) |
||||||||
|
(Unaudited) |
||||||||
|
Reconciliation
of Reported Operating Results with Certain
Information Excluding Actions |
||||||||
|
|
|
|||||||
|
|
|
Quarter
Ended |
|
Nine
Months Ended |
||||
|
A. Excluding actions data |
|
October
3, 2009 |
|
September
27, 2008 |
|
October
3, |
|
September
27, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
$
357,067 |
|
$ 359,822
|
|
$ 947,855 |
|
$ 1,092,933 |
|
SG&A |
|
$
245,927 |
|
$ 257,715 |
|
$ 699,149 |
|
$ 777,533 |
|
Operating
profit |
|
$ 111,140 |
|
$ 102,107 |
|
$ 248,706 |
|
$ 315,400 |
|
Net
income |
|
$
60,645 |
|
$ 49,289 |
|
$ 104,293 |
|
$ 152,090 |
|
Earnings
per diluted share |
|
$ 0.63 |
|
$ 0.52 |
|
$ 1.09 |
|
$ 1.59 |
|
Weighted
average diluted shares outstanding |
|
96,422 |
|
95,018 |
|
95,469 |
|
95,483 |
|
|
|
|
|
|
|
|
|
|
|
As
a % of net sales |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
33.7% |
|
31.2% |
|
32.7% |
|
34.0% |
|
SG&A |
|
23.2% |
|
22.3% |
|
24.1% |
|
24.2% |
|
Operating
profit |
|
10.5% |
|
8.9% |
|
8.6% |
|
9.8% |
|
Net
income |
|
5.7% |
|
4.3% |
|
3.6% |
|
4.7% |
|
|
|
|
|
|
|
|
|
|
|
B. Operating results excluding actions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit as reported |
|
$ 356,680 |
|
$ 341,784 |
|
$ 941,947 |
|
$ 1,067,704 |
|
Accelerated
depreciation included in Cost of sales |
|
118 |
|
4,011 |
|
2,392 |
|
11,202 |
|
Inventory
write-off included in Cost of sales |
|
269 |
|
14,027 |
|
3,516 |
|
14,027 |
|
Gross
profit excluding actions |
|
$
357,067 |
|
$ 359,822
|
|
$ 947,855 |
|
$ 1,092,933 |
|
|
|
|
|
|
|
|
|
|
|
SG&A
as reported |
|
$ 248,267 |
|
$ 255,228 |
|
$ 702,204 |
|
$ 776,267 |
|
Spinoff-related
and other expenses included in SG&A |
|
(2,157) |
|
- |
|
(2,517) |
|
- |
|
Accelerated
depreciation included in SG&A |
|
(183) |
|
2,487 |
|
(538) |
|
1,266 |
|
SG&A
excluding actions |
|
$
245,927
|
|
$ 257,715 |
|
$ 699,149 |
|
$ 777,533 |
|
|
|
|
|
|
|
|
|
|
|
Operating
profit as reported |
|
$ 93,309 |
|
$
58,201 |
|
$ 193,424 |
|
$ 259,082 |
|
Gross
profit actions |
|
387 |
|
18,038 |
|
5,908 |
|
25,229 |
|
SG&A
actions |
|
2,340 |
|
(2,487) |
|
3,055 |
|
(1,266) |
|
Restructuring |
|
15,104 |
|
28,355 |
|
46,319 |
|
32,355 |
|
Operating
profit excluding actions |
|
$
111,140 |
|
$ 102,107
|
|
$ 248,706
|
|
$ 315,400 |
|
|
|
|
|
|
|
|
|
|
|
C. Net income excluding actions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income as reported |
|
$
41,138
|
|
$ 15,920 |
|
$
52,365 |
|
$ 109,288 |
|
Gross
profit actions |
|
387 |
|
18,038 |
|
5,908 |
|
25,229 |
|
SG&A
actions |
|
2,340 |
|
(2,487) |
|
3,055 |
|
(1,266) |
|
Restructuring |
|
15,104 |
|
28,355 |
|
46,319 |
|
32,355 |
|
Other
expenses |
|
2,423 |
|
- |
|
6,537 |
|
- |
|
Tax
effect on actions |
|
(747) |
|
(10,537) |
|
(9,891) |
|
(13,516) |
|
Net
income excluding actions |
|
$ 60,645 |
|
$ 49,289
|
|
$
104,293 |
|
$ 152,090 |
|
|
|
|
|
|
|
|
|
|
|
D. EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ 41,138 |
|
$
15,920
|
|
$ 52,365 |
|
$ 109,288 |
|
Interest
expense, net |
|
42,941 |
|
37,253 |
|
124,548 |
|
115,282 |
|
Income
tax expense |
|
6,807 |
|
5,028 |
|
9,974 |
|
34,512 |
|
Depreciation
and amortization |
|
21,140 |
|
22,653 |
|
66,769 |
|
77,613 |
|
Total
EBITDA |
|
$ 112,026
|
|
$
80,854 |
|
$ 253,656 |
|
$ 336,695 |