Exhibit 99.1
Hanesbrands Inc
1000 East Hanes Mill Road
Winston-Salem, NC 27105
(336) 519-4400
1000 East Hanes Mill Road
Winston-Salem, NC 27105
(336) 519-4400
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 2007 RESULTS
WINSTON-SALEM, N.C. (Oct. 25, 2007) — Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported results for the 2007 third quarter.
Total net sales increased by 3.1 percent to $1.15 billion, and earnings per diluted share decreased to $0.40 primarily as a result of higher interest expense associated with the company’s independent structure following its spinoff in September 2006.
“We delivered solid performance in the quarter,” said Hanesbrands Chief Executive Officer Richard A. Noll. “We increased sales in a mixed retail market, we executed well against our initiatives, and we generated strong cash flow that we used to prepay debt and repurchase shares.”
Noteworthy Financial Highlights
Selected highlights for the third quarter and nine-month period ended Sept. 29, 2007, include:
• | Total net sales in the quarter increased by 3.1 percent to $1.15 billion, and total net sales in the first nine months of the fiscal year increased by 1.3 percent to $3.32 billion. The year-ago quarter and nine-month period ended Sept. 30, 2006. | |
For the quarter and the first nine months, the company has recorded strong sales growth in the outerwear segment, while sales of innerwear, the company’s largest segment, have declined. | ||
Innerwear sales for the first nine months are down 0.7 percent. The decline was primarily a result of softness in children’s underwear and licensed male underwear in the department store channel, although continued strong intimate apparel and sock sales partially offset the decline. |
Hanesbrands Inc. Reports Third-Quarter 2007 Results — Page 2
Outerwear segment sales increased by 4.7 percent for the first nine months, reflecting strong sales ofHanesbrand casualwear andChampionbrand activewear. The strong outerwear performance has been fueled by a return to focusing on basic apparel in the mass retail channel for casualwear. | ||
International sales increased by 2.6 percent year-to-date on the strength of the European casualwear business. Year-to-date sheer hosiery segment sales are down by 0.9 percent, significantly better than historical trends, while hosiery sales increased in the quarter by 13.1 percent on the strength of core product growth. | ||
• | Operating profit in the quarter, based on generally accepted accounting principles, increased to $105.7 million, from $93.9 million a year ago. For the first nine months, operating profit was $262.7 million compared with $270.0 million in the year-ago period. | |
The company’s operating profit margin excluding actions, a measure the company uses to better assess underlying performance, was 10.0 percent for the quarter and the nine-month period. | ||
“We are pleased that our year-to-date operating profit margin excluding actions has edged higher than last year,” Noll said. “Our cost-reduction efforts are slightly ahead of schedule, which has allowed us to exceed our goal of offsetting the increased costs we have as a standalone company.” | ||
• | Diluted earnings per share were $0.40 in the quarter, compared with $0.52 a year ago, and for the nine-month period diluted EPS was $0.79 versus $1.91 a year ago. The decline in the quarter was primarily a result of increased interest expense associated with the company’s independent structure. In the nine-month period, the decline in diluted EPS reflected increased interest expense, higher restructuring and related expenses, and a higher tax rate. | |
Diluted EPS excluding actions was $0.48 in the quarter compared with $0.75 a year ago. In the nine-month period, diluted EPS excluding actions was $1.29 versus $2.33 a year ago. | ||
• | Hanesbrands used its continued strong cash flow from operations to prepay long-term debt in the quarter by $75 million and repurchase $29 million of company stock. For the first nine months of the year, Hanesbrands has paid down $128 million of long-term debt, repurchased $44 million in company stock and voluntarily contributed $48 million to its qualified pension plans. |
(Operating profit margin excluding actions and diluted EPS 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 quarter and nine-month period were plant closings and reorganization, 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 4A and 4B for details and reconciliation with reported operating results.)
Hanesbrands Inc. Reports Third-Quarter 2007 Results — Page 3
Other Highlights
Hanesbrands continues to invest in its brands and product marketing, focusing on its largest and strongest brands. On Sept. 3,Playtexlaunched its “Girl Talk” advertising and marketing campaign, which takes a fun, honest and irreverent approach to women’s everyday bra-fitting challenges. A video of outtakes from the filming of thePlaytextelevision commercial was watched by more than 4 million visitors on YouTube.com, one of the highest 24-hour view rates for a roadblock ad ever recorded on the video Web site.
The latest “Look Who”Hanesadvertising forComfortSoftmen’s underwear featuring Michael Jordan and Cuba Gooding Jr. and for theAll-Over Comfort Brafeaturing Jennifer Love Hewitt continue to perform well with consumers.
Hanesbrands has continued to reach key milestones in its global supply chain strategy of improving competitiveness by operating fewer, bigger facilities and moving production to lower-cost countries. In August, Hanesbrands acquired its second offshore textile plant, the 1,300-employee textile manufacturing operations of Industrias Duraflex, S.A. de C.V., in San Juan Opico, El Salvador. Hanesbrands has also selected Nanjing, China, as the site to build a textile production plant, which will be the first company-owned textile production facility in Asia.
During the third quarter, Hanesbrands substantially completed the separation of its pension plan assets and liabilities from the company’s former parent. As a result, Hanesbrands’ pension plans in total are approximately 97 percent funded.
“Since our spinoff, we have increased sales, expanded our margins, and strengthened our balance sheet,” Noll said. “Our strategic initiatives of investing in our brands, reducing costs and driving cash generation are creating value and positioning us to achieve our long-term growth goals.”
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 10 a.m. EDT today. The broadcast may be accessed on the home page of the Hanesbrands corporate Web site,www.hanesbrands.com. The call is expected to conclude by 11 a.m.
An archived replay of the conference call webcast will be available in the investors section of the Hanesbrands Web site. A telephone playback will be available from approximately noon EDT today until midnight on Nov. 1, 2007. The replay will be available by calling toll-free (800) 642-1687, or by toll call (706) 645-9291. The replay pass code is 18801620.
Hanesbrands Inc. Reports Third-Quarter 2007 Results — Page 4
Cautionary Statement Concerning Forward-Looking Statements
Statements in this press release that are not statements of historical fact are forward-looking statements, 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; fluctuations in the price or availability of cotton or labor; our substantial debt and debt-service requirements that restrict our operating and financial flexibility and impose significant interest and financing costs; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including the 2006 Annual Report on Form 10-K, 2007 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, includingHanes, Champion, Playtex, Bali, Just My Size, barely thereandWonderbra. 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 24 countries. More information may be found on the company’s Web site atwww.hanesbrands.com.
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TABLE 1
HANESBRANDS INC.
Condensed Consolidated Statements of Income
(Dollars in thousands, except per-share amounts)
(Unaudited)
Condensed Consolidated Statements of Income
(Dollars in thousands, except per-share amounts)
(Unaudited)
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
September 29, 2007 | September 30, 2006 | % Change | September 29, 2007 | September 30, 2006 | % Change | |||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Innerwear | $ | 635,167 | $ | 651,183 | $ | 1,917,118 | $ | 1,930,282 | ||||||||||||||||
Outerwear | 349,352 | 318,320 | 896,583 | 856,129 | ||||||||||||||||||||
Hosiery | 64,120 | 56,707 | 189,215 | 190,894 | ||||||||||||||||||||
International | 103,341 | 93,126 | 303,119 | 295,564 | ||||||||||||||||||||
Other | 13,587 | 10,796 | 46,629 | 36,085 | ||||||||||||||||||||
Total segment net sales | 1,165,567 | 1,130,132 | 3,352,664 | 3,308,954 | ||||||||||||||||||||
Less: Intersegment | 11,961 | 11,164 | 37,257 | 36,993 | ||||||||||||||||||||
Total net sales | 1,153,606 | 1,118,968 | 3.1 | % | 3,315,407 | 3,271,961 | 1.3 | % | ||||||||||||||||
Cost of sales | 792,587 | 753,337 | 2,234,352 | 2,183,977 | ||||||||||||||||||||
Gross profit | 361,019 | 365,631 | -1.3 | % | 1,081,055 | 1,087,984 | -0.6 | % | ||||||||||||||||
As a % of net sales | 31.3 | % | 32.7 | % | 32.6 | % | 33.3 | % | ||||||||||||||||
Selling, general and administrative expenses | 253,233 | 262,426 | 773,817 | 808,393 | ||||||||||||||||||||
As a % of net sales | 22.0 | % | 23.5 | % | 23.3 | % | 24.7 | % | ||||||||||||||||
Restructuring | 2,062 | 9,313 | 44,533 | 9,551 | ||||||||||||||||||||
Operating profit | 105,724 | 93,892 | 12.6 | % | 262,705 | 270,040 | -2.7 | % | ||||||||||||||||
As a % of net sales | 9.2 | % | 8.4 | % | 7.9 | % | 8.3 | % | ||||||||||||||||
Other expenses | 889 | — | 1,440 | — | ||||||||||||||||||||
Interest expense, net | 49,270 | 17,569 | 152,217 | 26,437 | ||||||||||||||||||||
Income before income tax expense | 55,565 | 76,323 | 109,048 | 243,603 | ||||||||||||||||||||
Income tax expense | 16,669 | 25,978 | 32,714 | 59,381 | ||||||||||||||||||||
Net income | $ | 38,896 | $ | 50,345 | -22.7 | % | $ | 76,334 | $ | 184,222 | -58.6 | % | ||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic | $ | 0.41 | $ | 0.52 | $ | 0.79 | $ | 1.91 | ||||||||||||||||
Diluted | $ | 0.40 | $ | 0.52 | $ | 0.79 | $ | 1.91 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 95,664 | 96,306 | 96,100 | 96,306 | ||||||||||||||||||||
Diluted | 96,615 | 96,319 | 96,682 | 96,306 |
TABLE 2
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
September 29, 2007 | December 30, 2006 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 176,377 | $ | 155,973 | ||||
Trade accounts receivable | 577,759 | 488,629 | ||||||
Inventories | 1,195,765 | 1,216,501 | ||||||
Other current assets | 197,116 | 210,077 | ||||||
Total current assets | 2,147,017 | 2,071,180 | ||||||
Property, net | 521,282 | 556,866 | ||||||
Intangible assets and goodwill | 452,123 | 418,706 | ||||||
Other noncurrent assets | 392,569 | 388,868 | ||||||
Total assets | $ | 3,512,991 | $ | 3,435,620 | ||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 724,236 | $ | 587,542 | ||||
Other current liabilities | 45,143 | 23,639 | ||||||
Total current liabilities | 769,379 | 611,181 | ||||||
Long-term debt | 2,365,250 | 2,484,000 | ||||||
Other noncurrent liabilities | 158,610 | 271,168 | ||||||
Total liabilities | 3,293,239 | 3,366,349 | ||||||
Equity | 219,752 | 69,271 | ||||||
Total liabilities and equity | $ | 3,512,991 | $ | 3,435,620 | ||||
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 | ||||||||
September 29, 2007 | September 30, 2006 | |||||||
Operating activities: | ||||||||
Net income | $ | 76,334 | $ | 184,222 | ||||
Depreciation and amortization | 99,921 | 89,322 | ||||||
Changes in assets and liabilities, net, and other | 59,588 | (72,914 | ) | |||||
Net cash from operating activities | 235,843 | 200,630 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment, net, and other | (50,320 | ) | (76,424 | ) | ||||
Financing Activities: | ||||||||
Transactions with parent companies and other | (167,739 | ) | (428,142 | ) | ||||
Effect of changes in foreign currency exchange rates on cash | 2,620 | 2,384 | ||||||
Increase (decrease) in cash and cash equivalents | 20,404 | (301,552 | ) | |||||
Cash and cash equivalents at beginning of year | 155,973 | 510,632 | ||||||
Cash and cash equivalents at end of period | $ | 176,377 | $ | 209,080 | ||||
TABLE 4
HANESBRANDS INC.
Supplemental Financial Information
(Dollars in thousands, except per-share amounts)
(Unaudited)
Supplemental Financial Information
(Dollars in thousands, except per-share amounts)
(Unaudited)
Reconciliation of Reported Operating Results
with Certain Information Excluding Actions
with Certain Information Excluding Actions
Quarter Ended | Nine Months Ended | |||||||||||||||
September 29, 2007 | September 30, 2006 | September 29, 2007 | September 30, 2006 | |||||||||||||
A. Operating profit excluding actions | ||||||||||||||||
Operating profit as reported | $ | 105,724 | $ | 93,892 | $ | 262,705 | $ | 270,040 | ||||||||
Plant closings and reorganization | 14,813 | 13,706 | 75,912 | 13,944 | ||||||||||||
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 | 20,010 | 2,700 | 38,910 | ||||||||||||
Operating profit excluding actions | $ | 115,239 | $ | 127,608 | $ | 330,464 | $ | 322,894 | ||||||||
Percentage of net sales | 10.0 | % | 11.4 | % | 10.0 | % | 9.9 | % | ||||||||
B. Net income excluding actions | ||||||||||||||||
Net income as reported | $ | 38,896 | $ | 50,345 | $ | 76,334 | $ | 184,222 | ||||||||
Plant closings and reorganization | 14,813 | 13,706 | 75,912 | 13,944 | ||||||||||||
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 | 20,010 | 2,700 | 38,910 | ||||||||||||
Other expenses (Losses on early extinguishment of debt) | 889 | — | 1,440 | — | ||||||||||||
Tax effect on plant closings and reorganization, amortization of gain, separation of pension plan assets and liabilities, spinoff and related charges, and other expenses | (3,121 | ) | (11,476 | ) | (20,760 | ) | (12,884 | ) | ||||||||
Net income excluding actions | $ | 46,179 | $ | 72,585 | $ | 124,773 | $ | 224,192 | ||||||||
Diluted earnings per share excluding actions | $ | 0.48 | $ | 0.75 | $ | 1.29 | $ | 2.33 | ||||||||
C. Supply chain actions | ||||||||||||||||
Plant closings and reorganization | ||||||||||||||||
-Accelerated depreciation included in Cost of sales | $ | 11,616 | $ | 4,393 | $ | 29,296 | $ | 4,393 | ||||||||
-Inventory write-off included in Cost of sales | 186 | — | 186 | — | ||||||||||||
-Accelerated depreciation included in SG&A | 949 | — | 1,897 | — | ||||||||||||
-Restructuring | 2,062 | 9,313 | 44,533 | 9,551 | ||||||||||||
Total | $ | 14,813 | $ | 13,706 | $ | 75,912 | $ | 13,944 | ||||||||
Noncash amount | $ | 13,018 | $ | 4,393 | $ | 29,572 | $ | 512 | ||||||||
D. EBITDA | ||||||||||||||||
Net income | $ | 38,896 | $ | 50,345 | $ | 76,334 | $ | 184,222 | ||||||||
Interest expense, net | 49,270 | 17,569 | 152,217 | 26,437 | ||||||||||||
Income tax expense | 16,669 | 25,978 | 32,714 | 59,381 | ||||||||||||
Depreciation and amortization | 33,658 | 29,573 | 99,921 | 89,322 | ||||||||||||
Total EBITDA | $ | 138,493 | $ | 123,465 | $ | 361,186 | $ | 359,362 | ||||||||