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8-K - FORM 8-K - Hanesbrands Inc. | g20949e8vk.htm |
EX-99.2 - EX-99.2 - Hanesbrands Inc. | g20949exv99w2.htm |
Exhibit 99.1
Hanesbrands Inc
1000 East Hanes Mill Road
Winston-Salem, NC 27105
(336) 519-8080
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 THIRD-QUARTER RESULTS
WINSTON-SALEM, N.C. (Oct. 28, 2009) Hanesbrands Inc. (NYSE: HBI), one of the worlds largest
apparel essentials companies, today reported results for the 2009 third quarter and announced
expected net shelf-space gains for 2010.
The company increased earnings and profit margins in the third quarter and reduced debt.
Third-quarter sales declined, in line with the companys 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 companys 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 companys
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 quarters operating profit margin excluding actions was 10.5 percent, compared with 8.9 percent in last years 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 years 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 companys debt is now $134 million lower than the beginning of the year, and the companys goal remains to end the year with debt that is $300 million lower than the start of the year. The companys 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 companys 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 companys new Nanjing, China, fabric production plant, which will supply
the companys Southeast Asia sewing facilities. The company is also substantially ramping up
contract production as needed.
As a result of the continuing long-term trend of declining sheer hosiery consumption in the United
States, the company announced this week that it expects to close a sheer hosiery manufacturing
facility in Winston-Salem with 240 employees in 2010.
The company today closed on the previously announced sale of its yarn
production plants to Parkdale America, LLC. Exiting yarn production and entering a supply agreement is expected to generate a $100
million balance sheet improvement within six months as a result of working capital improvement and sale proceeds.
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, mens underwear, childrens underwear, socks, hosiery, casualwear and activewear.
Hanesbrands has approximately 45,000 employees in more than 25 countries. More information may be
found on the companys Web site at www.hanesbrands.com.
# # #
TABLE 1
HANESBRANDS INC.
Condensed Consolidated Statements of Income
(Amounts in thousands, except per-share amounts)
(Unaudited)
Condensed Consolidated Statements of Income
(Amounts in thousands, except per-share amounts)
(Unaudited)
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
October 3, | September 27, | October 3, | September 27, | |||||||||||||||||||||
2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
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 |
47,945 | 20,948 | 62,339 | 143,800 | ||||||||||||||||||||
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 |
TABLE 2
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
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)
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Nine Months Ended | ||||||||
October 3, | September 27, | |||||||
2009 | 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
other |
(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)
Supplemental Financial Information
(Amounts in thousands, except per-share amounts)
(Unaudited)
Reconciliation of Reported Operating Results with
Certain Information Excluding Actions
Certain Information Excluding Actions
Quarter Ended | Nine Months Ended | |||||||||||||||
October 3, | September 27, | October 3, | September 27, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
A. Excluding actions data |
||||||||||||||||
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 | ||||||||