This excerpt taken from the HBI 10-Q filed May 11, 2009.
Cash Requirements for Our Business
We rely on our cash flows generated from operations and the borrowing capacity under our Revolving Loan Facility and international loan facilities to meet the cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, restructuring costs,
capital expenditures, maturities of debt and related interest payments, contributions to our pension plans and repurchases of our stock. We believe we have sufficient cash and available borrowings for our short-term needs. In light of the current economic environment and our outlook for 2009, we expect to use excess cash flows to pay down long-term debt of approximately $300 million rather than to repurchase our stock or make discretionary contributions to our pension plans.
The implementation of our consolidation and globalization strategy, which is designed to improve operating efficiencies and lower costs, has resulted and is likely to continue to result in significant costs in the short-term and generate savings as well as higher inventory levels for the next nine months. As further plans are developed and approved, we expect to recognize additional restructuring costs as we eliminate duplicative functions within the organization and transition a significant portion of our manufacturing capacity to lower-cost locations. During the first quarter of 2009 we recognized $24 million in restructuring and related charges for our restructuring actions.
Capital spending could vary significantly from year to year as we continue to execute our supply chain consolidation and globalization strategy and complete the integration and consolidation of our technology systems. We spent $56 million on capital expenditures during the first quarter of 2009 which represents approximately 50% of planned expenditures for the full year in 2009. We will place emphasis in the near term on careful management of our capital expenditures in 2009 and 2010. Capital spending in any given year over the next two years could be in excess of our annual depreciation and amortization expense until the completion of the actions related to our globalization strategy at which time we would expect our annual capital spending to be relatively comparable to our annual depreciation and amortization expense.
In March 2009, the IRS published guidance regarding pension funding requirements for 2009 which allowed for the selection of a monthly discount rate from any month within a five month lookback period prior to the pension plan year-end as compared to the use of the December 2008 monthly discount rate in the valuation of liabilities. Applying the October 2008 monthly discount rate in accordance with this new IRS guidance, the funded status of our U.S. qualified pension plans as of January 3, 2009, the date as of which pension contributions are determined for 2009, was 86% rather than 75% as previously reported. We do not expect to be required to make any mandatory contributions to our plans in 2009. We may elect to make voluntary contributions to avoid certain benefit payment restrictions under the Pension Protection Act. The funded status as of April 4, 2009 decreased to 80% due to a reduction in the market values of our pension assets as a result of the poor performance of the financial markets.
There have been no other significant changes in the cash requirements for our business from those described in our Annual Report on Form 10-K for the year ended January 3, 2009.