Hanesbrands Inc
1000 East Hanes Mill Road
Winston-Salem, NC 27105
(336) 519-8080
news release
FOR IMMEDIATE RELEASE
News Media, contact: Matt Hall, (336) 519-3386
Analysts and Investors, contact: Brian Lantz, (336) 519-7130
HANESBRANDS INC. REPORTS SECOND-QUARTER 2009 RESULTS
WINSTON-SALEM, N.C. (July 29, 2009) – Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported results for the 2009 second quarter.
Total net sales in the second quarter declined by 8 percent to $986.0 million, while GAAP earnings per diluted share were $0.32, compared with $0.60 in the year-ago second quarter. Excluding restructuring and other actions, non-GAAP earnings per diluted share in the second quarter were $0.42, compared with $0.65 a year ago.
“We are pleased with our second-quarter performance in the midst of a significant recession,” Hanesbrands Chairman and Chief Executive Officer Richard A. Noll said. “We achieved the sales trend improvement that we expected versus the first quarter, and our operating margin excluding actions of 9.8 percent was greater than 2008’s full-year margin of 9.7 percent. We remain sharply focused on execution, cost control, conservative inventory management, and generating cash to pay down debt.”
Noteworthy Financial Highlights
Selected highlights for the quarter ended July 4, 2009,
compared with the year-ago quarter ended June 28, 2008, include:
·
Second-quarter sales were $986.0 million, compared with $1.07
billion a year ago. The 8 percent sales decline was better than the decline
rate of the past two sequential quarters, which were also impacted by the
recession. Total net sales declined by 13 percent in the first quarter 2009
and by 11 percent in the 14-week fourth quarter of 2008.
The sales decline rate for the Innerwear segment, which consists of replenishment-oriented
basic apparel, continued in the mid-single digits. Second-quarter sales declined
by 4 percent, compared with a decline of 6 percent in the first quarter.
Hanesbrands Inc. Reports Second-Quarter 2009 Results – Page 2
Outerwear segment sales saw the significant trend improvement that the company
anticipated. Second-quarter outerwear sales declined by 11 percent, compared
with the first quarter’s 21 percent decline. Based on the strength of advance
orders, especially fleece, the company expects continued sequential improvement
in the segment’s sales decline rate with third-quarter sales expected to decline
in the mid-single digits or better.
The second-quarter sales decline in the International segment was 20 percent, similar
to the decline in the first quarter. Excluding the impact of foreign exchange
rates on currency, International sales declined by 11 percent in the second
quarter. Based on current currency trading trends, the negative currency
effect is expected to diminish in the third and fourth quarters.
Hosiery segment sales declined by 14 percent in the second quarter, compared
with a 21 percent decline in the first quarter.
“We are trending in the right direction,” Noll said. “We saw the decline rate
improve sequentially in three of our four primary segments. We are now eagerly
watching retail sell-through during the important back-to-school season. We
expect single-digit declines in the third quarter’s total net sales, and
depending on retail sell-through during the back-to-school season, the rate of sales
decline could improve over the second-quarter’s sales decline.”
·
GAAP operating profit was $84.1
million in the quarter, down from $113.1 million a year ago.
Hanesbrands was able to protect its margins through cost-reduction efforts
despite sales declines. The second-quarter’s operating profit margin excluding
actions was 9.8 percent, which was better than the 2008 full-year operating profit
margin excluding actions of 9.7 percent.
·
Hanesbrands ended the quarter with inventory of $1.23 billion,
down $56 million from the beginning of the year and in line with the company’s
plan to reduce its year-end inventory to $1.15 billion or less. Inventory
reduction supports Hanesbrands’ goal to reduce long-term debt by $300 million
in 2009.
“We are very pleased with our ability
to protect margins in this economic climate,” Hanesbrands Executive Vice
President and Chief Financial Officer E. Lee Wyatt said. “This is a
significant achievement. We are tightly managing our SG&A and are
executing on the business model that we laid out for this year, which includes
inventory and debt reduction.”
(Diluted EPS excluding actions, operating profit excluding actions, gross profit excluding actions, SG&A excluding actions, net income excluding actions, EBITDA, 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 expenses, other expenses, and the tax effect on these items. See Table 4 for details and reconciliation with reported operating results consistent with generally accepted accounting principles.)
Hanesbrands Inc. Reports Second-Quarter 2009 Results – Page 3
Other Comments
Hanesbrands continues to leverage the strength of its brands
and the company’s marketing investments. In April, Hanesbrands entered a
multiyear agreement with a major mass merchandise retailer to become the
exclusive supplier of plus-sized T-shirts, fleece and other outerwear apparel
through its Just My Size brand across all the retailer’s doors.
In August, Hanesbrands will begin shipping Playtex 18-hour bras to a
national department store chain, increasing the brand’s leading distribution in
the United States to the mass, mid-tier and department store channels.
Continued marketing investment in Hanes is allowing
the brand to continue to broaden distribution with space and share gains in the
important mid-tier retailer channel. For example, Hanes is launching
new innerwear programs beginning in January 2010 in two major national mid-tier
store chains. The Champion brand is also capitalizing on its strength
as evidenced by increased penetration of the sporting-goods and
department-store channels, including new programs in 2010.
These continued investments in driving big brands through key items play an
important role as the company strives to reach its long-term growth goals.
“Our strategies are working, and the year is progressing as we expected,” Noll said. “We are successfully navigating the recession, and we are nearing the startup of our Asian fabric manufacturing plant in Nanjing, China, as we seek to generate growth momentum going into 2010.”
Webcast Conference Call
Hanesbrands will host a live Internet audio webcast of its quarterly investor conference call at 4:30 p.m. EDT today. 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 5:30 p.m. EDT.
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 EDT on Aug. 5, 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 18872708.
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. 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,
Hanesbrands Inc. Reports Second-Quarter 2009 Results – Page 4
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; 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, 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 |
|
|
Six Months Ended |
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
July 4, 2009 |
|
June 28, 2008 |
% Change |
|
July 4, 2009 |
|
June 28, 2008 |
% Change |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ 611,779 |
|
$ 636,335 |
|
|
$ 1,125,593 |
|
$ 1,180,065 |
|
|
Outerwear |
|
231,654 |
|
260,137 |
|
|
446,561 |
|
532,342 |
|
|
International |
|
104,073 |
|
130,903 |
|
|
187,275 |
|
235,539 |
|
|
Hosiery |
|
42,584 |
|
49,734 |
|
|
95,356 |
|
116,475 |
|
|
Other |
|
5,634 |
|
4,174 |
|
|
8,277 |
|
15,295 |
|
|
Total segment net sales |
|
995,724 |
|
1,081,283 |
|
|
1,863,062 |
|
2,079,716 |
|
|
Less: Intersegment |
|
9,702 |
|
9,112 |
|
|
19,199 |
|
19,698 |
|
|
Total net sales |
|
986,022 |
|
1,072,171 |
-8.0% |
|
1,843,863 |
|
2,060,018 |
-10.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
658,631 |
|
691,215 |
|
|
1,258,596 |
|
1,334,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
327,391 |
|
380,956 |
-14.1% |
|
585,267 |
|
725,920 |
-19.4% |
|
As a % of net sales |
|
33.2% |
|
35.5% |
|
|
31.7% |
|
35.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and |
|
|
|
|
|
|
|
|
|
|
|
administrative expenses |
|
230,699 |
|
266,427 |
|
|
453,937 |
|
521,039 |
|
|
As a % of net sales |
|
23.4% |
|
24.8% |
|
|
24.6% |
|
25.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
12,544 |
|
1,442 |
|
|
31,215 |
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
84,148 |
|
113,087 |
-25.6% |
|
100,115 |
|
200,881 |
-50.2% |
|
As a % of net sales |
|
8.5% |
|
10.5% |
|
|
5.4% |
|
9.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
168 |
|
- |
|
|
4,114 |
|
- |
|
|
Interest expense, net |
|
44,807 |
|
37,635 |
|
|
81,607 |
|
78,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
8,618 |
|
18,108 |
|
|
3,167 |
|
29,484 |
|
|
Net income |
|
$ 30,555 |
|
$ 57,344 |
-46.7% |
|
$ 11,227 |
|
$ 93,368 |
-88.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ 0.32 |
|
$ 0.61 |
|
|
$ 0.12 |
|
$ 0.99 |
|
|
Diluted |
|
$ 0.32 |
|
$ 0.60 |
-46.7% |
|
$ 0.12 |
|
$ 0.97 |
-87.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
95,023 |
|
94,355 |
|
|
94,724 |
|
94,395 |
|
|
Diluted |
|
96,167 |
|
96,059 |
|
|
95,607 |
|
95,839 |
|
|
HANESBRANDS INC. |
|||||||||
|
Condensed Consolidated Balance Sheets |
|||||||||
|
(Dollars in thousands) |
|||||||||
|
(Unaudited) |
|||||||||
|
|
|||||||||
|
|
|
|
|
July 4, 2009 |
|
January 3, 2009 |
|||
|
Assets |
|
|
|||||||
|
Cash and cash equivalents |
|
$ 47,561 |
|
$ 67,342 |
|||||
|
Trade accounts receivable, net |
|
505,302 |
|
404,930 |
|||||
|
Inventories |
|
1,234,543 |
|
1,290,530 |
|||||
|
Other current assets |
|
325,111 |
|
347,523 |
|||||
|
|
Total current assets |
|
2,112,517 |
|
2,110,325 |
||||
|
|
|
|
|
|
|
||||
|
Property, net |
|
617,072 |
|
588,189 |
|||||
|
Intangible assets and goodwill |
|
463,670 |
|
469,445 |
|||||
|
Other noncurrent assets |
|
382,832 |
|
366,090 |
|||||
|
|
Total assets |
|
$ 3,576,091 |
|
$ 3,534,049 |
||||
|
|
|
|
|
|
|
||||
|
Liabilities |
|
|
|
|
|||||
|
Accounts payable and accrued liabilities |
|
$ 584,701 |
|
$ 640,910 |
|||||
|
Notes payable |
|
64,013 |
|
61,734 |
|||||
|
Accounts receivable securitization facility |
|
226,000 |
|
45,640 |
|||||
|
|
Total current liabilities |
|
874,714 |
|
748,284 |
||||
|
Long-term debt |
|
1,993,930 |
|
2,130,907 |
|||||
|
Other noncurrent liabilities |
|
468,302 |
|
469,703 |
|||||
|
|
Total liabilities |
|
3,336,946 |
|
3,348,894 |
||||
|
|
|
|
|
|
|
||||
|
Equity |
|
239,145 |
|
185,155 |
|||||
|
|
Total liabilities and equity |
|
$ 3,576,091 |
|
$ 3,534,049 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
TABLE 3 |
|
|
|
|
|||||
|
HANESBRANDS INC. |
|||||||||
|
Condensed Consolidated Statements of Cash Flows |
|||||||||
|
(Dollars in thousands) |
|||||||||
|
(Unaudited) |
|||||||||
|
|
|||||||||
|
|
|
|
|
Six Months Ended |
|||||
|
|
|
|
|
July 4, 2009 |
|
June 28, 2008 |
|||
|
|
|
|
|
|
|
||||
|
Operating Activities: |
|
|
|
|
|||||
|
Net income |
|
$ 11,227 |
|
$ 93,368 |
|||||
|
Depreciation and amortization |
|
45,629 |
|
54,960 |
|||||
|
Other noncash items |
|
18,576 |
|
7,526 |
|||||
|
Changes in assets and liabilities, net |
|
|
(48,915) |
|
(205,816) |
||||
|
Net cash provided by (used in) operating activities |
|
|
26,517 |
|
(49,962) |
||||
|
|
|
|
|
|
|
||||
|
Investing Activities: |
|
|
|
|
|||||
|
Purchases of property and equipment, net, and other |
|
|
(69,037) |
|
(74,020) |
||||
|
|
|
|
|
|
|
||||
|
Financing Activities: |
|
|
|
|
|||||
|
Net
borrowings on notes payable, debt, stock repurchases and |
|
|
22,828 |
|
45,533 |
||||
|
|
|
|
|
|
|
||||
|
Effect of changes in foreign currency exchange rates on cash |
|
|
(89) |
|
1,131 |
||||
|
Decrease in cash and cash equivalents |
|
|
(19,781) |
|
(77,318) |
||||
|
|
|
|
|
|
|
||||
|
Cash and cash equivalents at beginning of year |
|
|
67,342 |
|
174,236 |
||||
|
Cash and cash equivalents at end of period |
|
|
$ 47,561 |
|
$ 96,918 |
||||
|
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 |
|
Six Months Ended |
||||
|
A. Excluding actions data |
|
July 4, 2009 |
|
June 28, 2008 |
|
July 4, 2009 |
|
June 28, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ 327,326 |
|
$ 385,589 |
|
$ 590,788 |
|
$ 733,111 |
|
SG&A |
|
$ 230,440 |
|
$ 265,849 |
|
$ 453,222 |
|
$ 519,818 |
|
Operating profit |
|
$ 96,886 |
|
$ 119,740 |
|
$ 137,566 |
|
$ 213,293 |
|
Net income |
|
$ 40,622 |
|
$ 62,400 |
|
$ 43,648 |
|
$ 102,801 |
|
Earnings per diluted share |
|
$ 0.42 |
|
$ 0.65 |
|
$ 0.46 |
|
$ 1.07 |
|
Weighted average diluted shares outstanding |
|
96,167 |
|
96,059 |
|
95,607 |
|
95,839 |
|
|
|
|
|
|
|
|
|
|
|
As a % of net sales |
|
|
|
|
|
|
|
|
|
Gross profit |
|
33.2% |
|
36.0% |
|
32.0% |
|
35.6% |
|
SG&A |
|
23.4% |
|
24.8% |
|
24.6% |
|
25.2% |
|
Operating profit |
|
9.8% |
|
11.2% |
|
7.5% |
|
10.4% |
|
Net income |
|
4.1% |
|
5.8% |
|
2.4% |
|
5.0% |
|
|
|
|
|
|
|
|
|
|
|
B. Operating results excluding actions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit as reported |
|
$ 327,391 |
|
$ 380,956 |
|
$ 585,267 |
|
$ 725,920 |
|
Accelerated depreciation included in Cost of sales |
|
(224) |
|
4,633 |
|
2,274 |
|
7,191 |
|
Inventory write-off included in Cost of sales |
|
159 |
|
- |
|
3,247 |
|
- |
|
Gross profit excluding actions |
|
$ 327,326 |
|
$ 385,589 |
|
$ 590,788 |
|
$ 733,111 |
|
|
|
|
|
|
|
|
|
|
|
SG&A as reported |
|
$ 230,699 |
|
$ 266,427 |
|
$ 453,937 |
|
$ 521,039 |
|
Spinoff-related expenses included in SG&A |
|
(74) |
|
- |
|
(360) |
|
- |
|
Accelerated depreciation included in SG&A |
|
(185) |
|
(578) |
|
(355) |
|
(1,221) |
|
SG&A excluding actions |
|
$ 230,440 |
|
$ 265,849 |
|
$ 453,222 |
|
$ 519,818 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit as reported |
|
$ 84,148 |
|
$ 113,087 |
|
$ 100,115 |
|
$ 200,881 |
|
Gross profit actions |
|
(65) |
|
4,633 |
|
5,521 |
|
7,191 |
|
SG&A actions |
|
259 |
|
578 |
|
715 |
|
1,221 |
|
Restructuring |
|
12,544 |
|
1,442 |
|
31,215 |
|
4,000 |
|
Operating profit excluding actions |
|
$ 96,886 |
|
$ 119,740 |
|
$ 137,566 |
|
$ 213,293 |
|
|
|
|
|
|
|
|
|
|
|
C. Net income excluding actions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as reported |
|
$ 30,555 |
|
$ 57,344 |
|
$ 11,227 |
|
$ 93,368 |
|
Gross profit actions |
|
(65) |
|
4,633 |
|
5,521 |
|
7,191 |
|
SG&A actions |
|
259 |
|
578 |
|
715 |
|
1,221 |
|
Restructuring |
|
12,544 |
|
1,442 |
|
31,215 |
|
4,000 |
|
Other expenses |
|
168 |
|
- |
|
4,114 |
|
- |
|
Tax effect on actions |
|
(2,839) |
|
(1,597) |
|
(9,144) |
|
(2,979) |
|
Net income excluding actions |
|
$ 40,622 |
|
$ 62,400 |
|
$ 43,648 |
|
$ 102,801 |
|
|
|
|
|
|
|
|
|
|
|
D. EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ 30,555 |
|
$ 57,344 |
|
$ 11,227 |
|
$ 93,368 |
|
Interest expense, net |
|
44,807 |
|
37,635 |
|
81,607 |
|
78,029 |
|
Income tax expense |
|
8,618 |
|
18,108 |
|
3,167 |
|
29,484 |
|
Depreciation and amortization |
|
21,579 |
|
28,696 |
|
45,629 |
|
54,960 |
|
Total EBITDA |
|
$ 105,559 |
|
$ 141,783 |
|
$ 141,630 |
|
$ 255,841 |