| Hanesbrands Inc. Reports Third-Quarter 2008 Results |
WINSTON-SALEM, N.C.--(BUSINESS WIRE)--Oct. 29, 2008--Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported results for the 2008 third quarter. Total net sales in the quarter were unchanged at $1.15 billion. Earnings per diluted share in the quarter were $0.17. Excluding actions and the previously announced impact of a retailer bankruptcy, non-GAAP earnings per diluted share increased by 17 percent to $0.56 as a result of reduced long-term debt, lower base interest rates, and lower income tax expense as a result of the company's global supply chain strategy. "We continued our strategic execution in the third quarter and delivered comparable sales and solid earnings per share in a difficult environment," Hanesbrands Chief Executive Officer Richard A. Noll said. "We remain optimistic about our earnings potential for the fourth quarter due to favorability of expenses that may more than offset the challenges of higher commodity costs and an uncertain sales environment." Noteworthy Financial Highlights Selected highlights for the quarter and nine months ended Sept. 27, 2008, compared with the year-ago periods ended Sept. 29, 2007, include:
Excluding actions and the previously announced Mervyn's bankruptcy impact, non-GAAP diluted EPS increased by $0.08 to $0.56. Excluding actions only, non-GAAP diluted EPS increased by $0.04 to $0.52. For the nine-month period, non-GAAP diluted EPS, excluding actions, increased by 23 percent to $1.59.
Non-GAAP operating profit, which excludes actions, declined by $13.1 million in the quarter. The company was able to substantially offset significant increases of $12 million of higher cotton costs and $7 million of oil-related costs through continued benefits of cost-saving initiatives. SG&A cost increases included $5.5 million of bad debt expense due to the Mervyn's bankruptcy. Non-GAAP operating profit margin excluding actions and the Mervyn's impact was 9.3 percent in the quarter versus 10.0 percent a year ago. (Diluted EPS excluding actions, operating profit excluding actions, operating profit margin excluding actions and SG&A excluding actions 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 quarter were restructuring and related charges, amortization of gain on postretirement benefits, separation of pension plan assets and liabilities, nonrecurring spinoff and related charges, 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.) Other Comments Hanesbrands has informed retail customers that it is raising domestic prices effective mid-first quarter of 2009. The company is taking an average gross price increase of 4 percent for domestic product categories. The range of price increases will vary by product category. Hanesbrands also has continued to strategically structure its debt and liquidity to execute its business strategies through the economic downturn and tight credit markets. At the end of the quarter, Hanesbrands had a $500 million undrawn bank revolver and $86 million in cash on its balance sheet. The company has actively and strategically managed its debt structure since its spinoff to reduce costs and increase flexibility. Of the company's $2.3 billion in long-term debt, the rates on $2.0 billion, or 86 percent, have been fixed or capped. In the third quarter, Hanesbrands fixed the interest rate in July on $500 million of floating-rate bonds for four years at 7.64 percent and in September capped LIBOR for $600 million of floating-rate debt at 3.50 percent for one year. In October, the company fixed LIBOR on an additional $400 million of floating-rate debt at 2.80 percent for two years. The company expects 2008 full-year interest expense of approximately $155 million, and in 2009 full-year interest expense is expected to decrease into an approximate range of $140 million to $155 million. Hanesbrands continues to make significant progress in executing its global supply chain strategy of consolidating manufacturing into fewer, larger facilities in lower-cost countries. In the third quarter, the company announced plans to close nine plants in the Western Hemisphere. In order to manage the supply chain transition in 2009, the company is on track to carry year-end inventory at the previously discussed $1.35 billion level. The company's goal is to reduce inventory by $200 million over the next 18 months as it completes its knits supply chain transition. Hanesbrands continues to manage its capital expenditures. The company is projecting gross capital spending of $180 million for the full year, offset by expected proceeds of $25 million in property sales for net capital spending of $155 million this year. The company is assessing needs and plans for next year but expects gross capital expenditure spending in the range of $115 million to $135 million. "We are sharply focused on execution over the next 12 to 18 months and will manage expenses and inventories conservatively," Noll said. "Our goal is to come out of this economic environment as a stronger company using the strength of our brands, our ability to take pricing, and opportunities we have for further cost reductions." Hanesbrands Policy on Guidance Hanesbrands follows a policy of not providing quarterly or annual EPS guidance. The company plans to communicate appropriately to provide investors with an understanding of long-term goals, the trends associated with its business and current financial performance. Webcast Conference Call Hanesbrands will host a live Internet 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 EST on Nov. 5, 2008. 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 67585195. 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 launch as an independent company and the benefits expected from that launch, 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, 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 migrate our production and manufacturing operations to lower-cost countries around the world; our ability to effectively implement other components of our business strategy; costs and adverse publicity from violations of labor or environmental laws by us or our suppliers; our ability to successfully manage adverse changes in social, political, economic, legal and other conditions affecting our foreign operations; retailer consolidation and other changes in the apparel essentials industry; our ability to keep pace with changing consumer preferences; loss of or reduction in sales to, or financial difficulties experienced by, any of our top customers or group of customers; fluctuations in the price or availability of cotton, oil or labor; inflationary pressure on consumer demand; our debt and debt-service requirements that restrict our operating and financial flexibility and impose interest and financing costs; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including the 2007 Annual Report on Form 10-K, 2008 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 50,000 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
-----------------------------
September 27, September 29,
2008 2007 % Change
------------- ------------- --------
Net sales:
Innerwear $ 650,372 $ 635,167
Outerwear 348,467 349,352
Hosiery 50,197 64,120
International 116,581 103,341
Other 4,769 13,587
-------------- --------------
Total segment net sales 1,170,386 1,165,567
Less: Intersegment 16,751 11,961
-------------- --------------
Total net sales 1,153,635 1,153,606 0.0
Cost of sales 811,851 792,587
-------------- --------------
Gross profit 341,784 361,019 -5.3
As a % of net sales 29.6% 31.3%
Selling, general and
administrative expenses 255,228 253,233
As a % of net sales 22.1% 22.0%
Restructuring 28,355 2,062
-------------- --------------
Operating profit 58,201 105,724 -45.0
As a % of net sales 5.0% 9.2%
Other expenses - 889
Interest expense, net 37,253 49,270
-------------- --------------
Income before income tax
expense
20,948 55,565
Income tax expense 5,028 16,669
-------------- --------------
Net income $ 15,920 $ 38,896 -59.1
============== ==============
Earnings per share:
Basic $ 0.17 $ 0.41
Diluted $ 0.17 $ 0.40 -57.5
Weighted average shares
outstanding:
Basic 93,992 95,664
Diluted 95,018 96,615
Nine Months Ended
-----------------------------
September 27, September 29,
2008 2007 % Change
------------- ------------- --------
Net sales:
Innerwear $1,830,437 $1,917,118
Outerwear 880,809 896,583
Hosiery 166,672 189,215
International 352,120 303,119
Other 20,064 46,629
-------------- --------------
Total segment net sales 3,250,102 3,352,664
Less: Intersegment 36,449 37,257
-------------- --------------
Total net sales % 3,213,653 3,315,407 -3.1%
Cost of sales 2,145,949 2,234,352
-------------- --------------
Gross profit % 1,067,704 1,081,055 -1.2%
As a % of net sales 33.2% 32.6%
Selling, general and
administrative expenses 776,267 773,817
As a % of net sales 24.2% 23.3%
Restructuring 32,355 44,533
-------------- --------------
Operating profit % 259,082 262,705 -1.4%
As a % of net sales 8.1% 7.9%
Other expenses - 1,440
Interest expense, net 115,282 152,217
-------------- --------------
Income before income tax
expense
143,800 109,048
Income tax expense 34,512 32,714
-------------- --------------
Net income % $ 109,288 $ 76,334 43.2%
============== ==============
Earnings per share:
Basic $ 1.16 $ 0.79
Diluted % $ 1.14 $ 0.79 44.3%
Weighted average shares
outstanding:
Basic 94,283 96,100
Diluted 95,483 96,682
TABLE 2
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
September 27, December 29,
2008 2007
--------------- ---------------
Assets
Cash and cash equivalents $ 86,212 $ 174,236
Trade accounts receivable, net 562,937 575,069
Inventories 1,359,008 1,117,052
Other current assets 244,224 227,977
--------------- ---------------
Total current assets 2,252,381 2,094,334
--------------- ---------------
Property, net 562,963 534,286
Intangible assets and goodwill 473,991 461,691
Other noncurrent assets 338,303 349,172
--------------- ---------------
Total assets $ 3,627,638 $ 3,439,483
=============== ===============
Liabilities
Accounts payable and accrued
liabilities $ 700,056 $ 669,405
Other current liabilities 71,528 19,577
--------------- ---------------
Total current liabilities 771,584 688,982
--------------- ---------------
Long-term debt 2,315,250 2,315,250
Other noncurrent liabilities 159,870 146,347
--------------- ---------------
Total liabilities 3,246,704 3,150,579
--------------- ---------------
Equity 380,934 288,904
--------------- ---------------
Total liabilities and equity $ 3,627,638 $ 3,439,483
=============== ===============
TABLE 3
HANESBRANDS INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Nine Months Ended
-------------------------------
September 27, September 29,
2008 2007
--------------- ---------------
Operating Activities:
Net income $ 109,288 $ 76,334
Depreciation and amortization 77,613 99,921
Other noncash items 15,655 17,721
Changes in assets and liabilities, net (221,177) 41,867
--------------- ---------------
Net cash (used in) provided by
operating activities (18,621) 235,843
--------------- ---------------
Investing Activities:
Purchases of property and equipment,
net and other (109,644) (50,320)
--------------- ---------------
Financing Activities:
Net borrowings on notes payable, stock
repurchases and other 40,776 (167,739)
--------------- ---------------
Effect of changes in foreign currency
exchange rates on cash (535) 2,620
--------------- ---------------
(Decrease) increase in cash and cash
equivalents (88,024) 20,404
Cash and cash equivalents at beginning
of year 174,236 155,973
--------------- ---------------
Cash and cash equivalents at end of
period $ 86,212 $ 176,377
=============== ===============
TABLE 4
HANESBRANDS INC.
Supplemental Financial Information
(Dollars in thousands, excluding per-share amounts)
(Unaudited)
Reconciliation of Reported Operating Results with
Certain Information Excluding Actions
Quarter Ended Nine Months Ended
------------------- -----------------------
September September September September
27, 29, 27, 29,
A. Excluding actions data 2008 2007 2008 2007
-------------------------- --------- --------- ----------- -----------
Gross profit $359,822 $372,821 $1,092,933 $1,110,537
SG&A 257,715 257,582 777,533 780,073
Operating profit 102,107 115,239 315,400 330,464
Net operating profit after
taxes (NOPAT) 77,601 80,667 239,704 231,325
Net income 49,289 46,179 152,090 124,773
Earnings per diluted share 0.52 0.48 1.59 1.29
As a % of net sales
--------------------------
Gross profit 31.2% 32.3% 34.0% 33.5%
SG&A 22.3% 22.3% 24.2% 23.5%
Operating profit 8.9% 10.0% 9.8% 10.0%
Net income 4.3% 4.0% 4.7% 3.8%
B. Operating results
excluding actions
--------------------------
Gross profit as reported $341,784 $361,019 $1,067,704 $1,081,055
Accelerated depreciation
included in Cost of sales 4,011 11,616 11,202 29,296
Inventory write-off
included in Cost of sales 14,027 186 14,027 186
--------- --------- ----------- -----------
Gross profit excluding
actions $359,822 $372,821 $1,092,933 $1,110,537
========= ========= =========== ===========
SG&A as reported $255,228 $253,233 $ 776,267 $ 773,817
Amortization of gain on
postretirement benefits
included in SG&A - 2,012 - 6,036
Separation of pension plan
assets and liabilities
included in SG&A - 4,817 - 4,817
Spinoff and related
charges included in SG&A - (1,531) - (2,700)
Accelerated depreciation
included in SG&A 2,487 (949) 1,266 (1,897)
--------- --------- ----------- -----------
SG&A excluding actions $257,715 $257,582 $ 777,533 $ 780,073
========= ========= =========== ===========
Operating profit as
reported $ 58,201 $105,724 $ 259,082 $ 262,705
Gross profit actions 18,038 11,802 25,229 29,482
SG&A actions (2,487) (4,349) (1,266) (6,256)
Restructuring 28,355 2,062 32,355 44,533
--------- --------- ----------- -----------
Operating profit excluding
actions 102,107 115,239 315,400 330,464
Income tax expense at
effective rate (24,506) (34,572) (75,696) (99,139)
--------- --------- ----------- -----------
NOPAT $ 77,601 $ 80,667 $ 239,704 $ 231,325
========= ========= =========== ===========
C. Net income excluding
actions
--------------------------
Net income as reported $ 15,920 $ 38,896 $ 109,288 $ 76,334
Gross profit actions 18,038 11,802 25,229 29,482
SG&A actions (2,487) (4,349) (1,266) (6,256)
Restructuring 28,355 2,062 32,355 44,533
Losses on early
extinguishment of debt - 889 - 1,440
Tax effect on actions (10,537) (3,121) (13,516) (20,760)
--------- --------- ----------- -----------
Net income excluding
actions $ 49,289 $ 46,179 $ 152,090 $ 124,773
========= ========= =========== ===========
D. EBITDA
--------------------------
Net income $ 15,920 $ 38,896 $ 109,288 $ 76,334
Interest expense, net 37,253 49,270 115,282 152,217
Income tax expense 5,028 16,669 34,512 32,714
Depreciation and
amortization 22,653 33,658 77,613 99,921
--------- --------- ----------- -----------
Total EBITDA $ 80,854 $138,493 $ 336,695 $ 361,186
========= ========= =========== ===========
CONTACT: Hanesbrands Inc. News Media: Matt Hall, 336-519-3386 or Analysts and Investors: Brian Lantz, 336-519-7130 SOURCE: Hanesbrands Inc. |