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
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 FOURTH-QUARTER 2007 RESULTS
WINSTON-SALEM, N.C. (Jan. 31, 2008) — Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported results for the 2007 fourth quarter.
Diluted earnings per share in the fourth quarter increased to $0.52 from $0.25. Non-GAAP diluted earnings per share, which exclude actions, increased by 31 percent in the quarter to $0.38 as a result of increased sales and cost-reduction initiatives. (See non-GAAP description below.)
Total net sales in the quarter increased by 2.4 percent to $1.16 billion.
“We capped a successful first year, in which we exceeded our financial goals, with solid performance in the fourth quarter in a tough consumer climate,” said Hanesbrands Chief Executive Officer Richard A. Noll. “And, as we have done all year, we continued to generate strong cash flow, using it to reduce long-term debt by an additional $50 million in the quarter.”
Noteworthy Financial Highlights
Selected highlights for the fourth quarter and fiscal year ended Dec. 29, 2007, include:
• | Total net sales in the quarter increased by 2.4 percent to $1.16 billion — the fourth consecutive quarter of sales growth. By sequential quarter, sales in the fiscal year grew by 0.7 percent, 0.2 percent, 3.1 percent and 2.4 percent. Total net sales for the full fiscal year increased by $71 million, or 1.6 percent, to $4.47 billion. | |
“One of our strategies is to invest in our largest and strongest brands with innovative key items supported by great media,” Noll said. “This strategy is delivering results.” |
Hanesbrands Inc. Reports Fourth-Quarter 2007 Results — Page 2
For the quarter and the full year,Hanes,ChampionandBalibrand sales increased. TheChampionbrand has recorded double-digit sales growth for three consecutive years. For the full year, sales to each of the company’s top three customers increased.
• | Diluted earnings per share in the quarter were $0.52, up from $0.25 a year ago, while diluted EPS for the year was $1.30 versus $2.16 a year ago. The full-year decline reflected increased interest expense as a result of the company’s independent structure, higher restructuring costs and a higher tax rate. | |
Non-GAAP diluted EPS increased by 31 percent in the quarter to $0.38 from $0.29 a year ago. The increase was primarily a result of increased sales and operating profit and lower interest expense. | ||
• | Operating profit in the quarter, based on generally accepted accounting principles, increased to $125.9 million, from $96.2 million a year ago. For the year, operating profit increased to $388.6 million compared with $366.2 million a year ago. | |
Non-GAAP operating profit increased by 6.6 percent in the quarter and 3.3 percent in the year, to $101.8 million and $432.0 million, respectively. The company’s non-GAAP operating profit margin, a measure the company uses to better assess underlying performance because it excludes actions, was 9.7 percent for the year, compared with 9.5 percent last year. | ||
“We achieved operating profit growth and improved our margins during a year of significant change,” Noll said. “We exceeded our goal to offset our stand-alone company costs and selected increased investment in our business with cost savings from consolidation and moving supply chain operations to lower cost countries.” | ||
• | Hanesbrands used its continued strong cash flow from operations to prepay long-term debt in the quarter by $50 million. Cash flow from operations for the year increased by 28 percent to $359 million. In fiscal 2007, Hanesbrands repaid $178 million of long-term debt, repurchased $44 million in company stock and voluntarily contributed $48 million to its qualified pension plans. | |
Since Hanesbrands spun off in September 2006, the company has reduced long-term debt by $285 million and voluntarily contributed $96 million to its qualified pension plans. |
(Operating profit 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 full year were plant closings and reorganization, gain on curtailment of postretirement benefits, 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 Fourth-Quarter 2007 Results — Page 3
Other Highlights
As part of continued investment in brands and marketing, theChampionbrand launched its “How You Play” advertising campaign on Nov. 7, the first campaign for the brand since 2003. On Oct. 31, Hanesbrands announced a 10-year strategic alliance with The Walt Disney Company that includes basic apparel exclusivity for theHanesandChampionbrands, product co-branding, attraction sponsorships and other brand visibility and signage at Disney properties. The alliance included the naming rights for the stadium at Disney’s Wide World of Sports Complex, now known as Champion Stadium.
As part of its global supply chain strategy, Hanesbrands acquired in December the Inversiones Bonaventure S.A. de C.V. hosiery sewing operation in Las Lourdes, El Salvador. The 900-employee Bonaventure plant had been a contract sewing supplier for Hanesbrands for 12 years.
“We are very pleased with our performance in our first year of independence,” Noll said. “We delivered sales growth, margin expansion and continued strong cash generation. This puts us in good position as we seek to achieve our long-term growth goals for sales, operating profit and earnings per share.
“This would not have been possible without the significant efforts of our worldwide workforce to manage change, embrace our improvement strategies and focus on our competitiveness. I appreciate all of their efforts and commitment to our success.”
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. EST 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 EST today until midnight on Feb. 7, 2008. The replay will be available by calling toll-free (800) 642-1687, or by toll call at (706) 645-9291. The replay pass code is 29092926.
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
Hanesbrands Inc. Reports Fourth-Quarter 2007 Results — Page 4
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 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)
Condensed Consolidated Statements of Income
(Amounts in thousands, except per-share amounts)
(Unaudited)
Quarter Ended | Year Ended | |||||||||||||||||||||||
December 29, | December 30, | December 29, | December 30, | |||||||||||||||||||||
2007 | 2006 | % Change | 2007 | 2006 | % Change | |||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Innerwear | $ | 639,788 | $ | 644,685 | $ | 2,556,906 | $ | 2,574,967 | ||||||||||||||||
Outerwear | 325,262 | 297,978 | 1,221,845 | 1,154,107 | ||||||||||||||||||||
Hosiery | 76,983 | 87,359 | 266,198 | 278,253 | ||||||||||||||||||||
International | 118,779 | 104,603 | 421,898 | 400,167 | ||||||||||||||||||||
Other | 10,291 | 8,585 | 56,920 | 44,670 | ||||||||||||||||||||
Total segment net sales | 1,171,103 | 1,143,210 | 4,523,767 | 4,452,164 | ||||||||||||||||||||
Less: Intersegment | 11,973 | 11,705 | 49,230 | 48,698 | ||||||||||||||||||||
Total net sales | 1,159,130 | 1,131,505 | 2.4 | % | 4,474,537 | 4,403,466 | 1.6 | % | ||||||||||||||||
Cost of sales | 799,275 | 776,782 | 3,033,627 | 2,960,759 | ||||||||||||||||||||
Gross profit | 359,855 | 354,723 | 1.4 | % | 1,440,910 | 1,442,707 | -0.1 | % | ||||||||||||||||
As a % of net sales | 31.0 | % | 31.3 | % | 32.2 | % | 32.8 | % | ||||||||||||||||
Selling, general and administrative expenses | 266,937 | 285,043 | 1,040,754 | 1,093,436 | ||||||||||||||||||||
As a % of net sales | 23.0 | % | 25.2 | % | 23.3 | % | 24.8 | % | ||||||||||||||||
Gain on curtailment of postretirement benefits | (32,144 | ) | (28,467 | ) | (32,144 | ) | (28,467 | ) | ||||||||||||||||
Restructuring | (802 | ) | 1,965 | 43,731 | 11,516 | |||||||||||||||||||
Operating profit | 125,864 | 96,182 | 30.9 | % | 388,569 | 366,222 | 6.1 | % | ||||||||||||||||
As a % of net sales | 10.9 | % | 8.5 | % | 8.7 | % | 8.3 | % | ||||||||||||||||
Other expenses | 3,795 | 7,401 | 5,235 | 7,401 | ||||||||||||||||||||
Interest expense, net | 46,991 | 53,184 | 199,208 | 79,621 | ||||||||||||||||||||
Income before income tax expense | 75,078 | 35,597 | 184,126 | 279,200 | ||||||||||||||||||||
Income tax expense | 25,285 | 11,803 | 57,999 | 71,184 | ||||||||||||||||||||
Net income | $ | 49,793 | $ | 23,794 | 109.3 | % | $ | 126,127 | $ | 208,016 | -39.4 | % | ||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic | $ | 0.52 | $ | 0.25 | $ | 1.31 | $ | 2.16 | ||||||||||||||||
Diluted | $ | 0.52 | $ | 0.25 | $ | 1.30 | $ | 2.16 | ||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 95,381 | 96,309 | 95,936 | 96,309 | ||||||||||||||||||||
Diluted | 96,650 | 96,620 | 96,741 | 96,390 |
TABLE 2
HANESBRANDS INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
December 29, 2007 | December 30, 2006 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 174,236 | $ | 155,973 | ||||
Trade accounts receivable | 575,069 | 488,629 | ||||||
Inventories | 1,117,052 | 1,216,501 | ||||||
Other current assets | 227,977 | 210,077 | ||||||
Total current assets | 2,094,334 | 2,071,180 | ||||||
Property, net | 534,286 | 556,866 | ||||||
Intangible assets and goodwill | 461,691 | 418,706 | ||||||
Other noncurrent assets | 349,172 | 388,868 | ||||||
Total assets | $ | 3,439,483 | $ | 3,435,620 | ||||
Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 669,405 | $ | 587,542 | ||||
Other current liabilities | 19,577 | 23,639 | ||||||
Total current liabilities | 688,982 | 611,181 | ||||||
Long-term debt | 2,315,250 | 2,484,000 | ||||||
Other noncurrent liabilities | 146,347 | 271,168 | ||||||
Total liabilities | 3,150,579 | 3,366,349 | ||||||
Equity | 288,904 | 69,271 | ||||||
Total liabilities and equity | $ | 3,439,483 | $ | 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)
Year Ended | ||||||||
December 29, 2007 | December 30, 2006 | |||||||
Operating activities: | ||||||||
Net income | $ | 126,127 | $ | 208,016 | ||||
Depreciation and amortization | 131,676 | 133,161 | ||||||
Changes in assets and liabilities, net, and other | 101,237 | (60,964 | ) | |||||
Net cash from operating activities | 359,040 | 280,213 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment, net, and other | (101,085 | ) | (81,102 | ) | ||||
Financing Activities: | ||||||||
Transactions with parent companies and other | (243,379 | ) | (555,876 | ) | ||||
Effect of changes in foreign currency exchange rates on cash | 3,687 | 2,106 | ||||||
Increase (decrease) in cash and cash equivalents | 18,263 | (354,659 | ) | |||||
Cash and cash equivalents at beginning of year | 155,973 | 510,632 | ||||||
Cash and cash equivalents at end of year | $ | 174,236 | $ | 155,973 | ||||
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
Results with Certain Information Excluding
Actions
Quarter Ended | Year Ended | |||||||||||||||
December 29, | December 30, | December 29, | December 30, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
A. Operating profit excluding actions | ||||||||||||||||
Operating profit as reported | $ | 125,864 | $ | 96,182 | $ | 388,569 | $ | 366,222 | ||||||||
Plant closings and reorganization | 7,457 | 18,771 | 83,183 | 32,715 | ||||||||||||
Gain on curtailment of postretirement benefits | (32,144 | ) | (28,467 | ) | (32,144 | ) | (28,467 | ) | ||||||||
Amortization of gain on postretirement benefits included in SG&A | (1,341 | ) | — | (7,377 | ) | — | ||||||||||
Separation of pension plan assets and liabilities included in SG&A | 1,409 | — | (3,408 | ) | — | |||||||||||
Spinoff and related charges included in SG&A | 509 | 8,977 | 3,209 | 47,887 | ||||||||||||
Operating profit excluding actions | $ | 101,754 | $ | 95,463 | $ | 432,032 | $ | 418,357 | ||||||||
Percentage of net sales | 8.8 | % | 8.4 | % | 9.7 | % | 9.5 | % | ||||||||
B. Net income excluding actions | ||||||||||||||||
Net income as reported | $ | 49,793 | $ | 23,794 | $ | 126,127 | $ | 208,016 | ||||||||
Plant closings and reorganization | 7,457 | 18,771 | 83,183 | 32,715 | ||||||||||||
Gain on curtailment of postretirement benefits | (32,144 | ) | (28,467 | ) | (32,144 | ) | (28,467 | ) | ||||||||
Amortization of gain on postretirement benefits included in SG&A | (1,341 | ) | — | (7,377 | ) | — | ||||||||||
Separation of pension plan assets and liabilities included in SG&A | 1,409 | — | (3,408 | ) | — | |||||||||||
Spinoff and related charges included in SG&A | 509 | 8,977 | 3,209 | 47,887 | ||||||||||||
Other expenses (Losses on early extinguishment of debt) | 3,795 | 7,401 | 5,235 | 7,401 | ||||||||||||
Tax effect on plant closings and reorganization, gain on curtailment, amortization of gain, separation of pension plan assets and liabilities, spinoff and related charges, and other expenses | 6,842 | (2,216 | ) | (15,340 | ) | (15,179 | ) | |||||||||
Net income excluding actions | $ | 36,320 | $ | 28,260 | $ | 159,485 | $ | 252,373 | ||||||||
Diluted earnings per share excluding actions | $ | 0.38 | $ | 0.29 | $ | 1.65 | $ | 2.62 | ||||||||
C. Supply chain actions | ||||||||||||||||
Plant closings and reorganization | ||||||||||||||||
-Accelerated depreciation included in Cost of sales | $ | 7,616 | $ | 16,806 | $ | 36,912 | $ | 21,199 | ||||||||
-Accelerated depreciation included in SG&A | 643 | — | 2,540 | — | ||||||||||||
-Restructuring | (802 | ) | 1,965 | 43,731 | 11,516 | |||||||||||
Total | $ | 7,457 | $ | 18,771 | $ | 83,183 | $ | 32,715 | ||||||||
Noncash amount | $ | 9,398 | $ | 16,806 | $ | 38,970 | $ | 17,318 | ||||||||
D. EBITDA | ||||||||||||||||
Net income | $ | 49,793 | $ | 23,794 | $ | 126,127 | $ | 208,016 | ||||||||
Interest expense, net | 46,991 | 53,184 | 199,208 | 79,621 | ||||||||||||
Income tax expense | 25,285 | 11,803 | 57,999 | 71,184 | ||||||||||||
Depreciation and amortization | 31,755 | 43,839 | 131,676 | 133,161 | ||||||||||||
Total EBITDA | $ | 153,824 | $ | 132,620 | $ | 515,010 | $ | 491,982 | ||||||||