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These excerpts taken from the HBI 10-K filed Feb 19, 2008. Components
of Net Sales and Expense
Net
sales
We generate net sales by selling apparel essentials such as
t-shirts, bras, panties, men’s underwear, kids’
underwear, socks, hosiery, casualwear and activewear. Our net
sales are recognized net of discounts, coupons, rebates,
volume-based incentives and cooperative advertising costs. We
recognize revenue when (i) there is persuasive evidence of
an arrangement (ii) the sales price is fixed or
determinable, (iii) title and the risks of ownership have
been transferred to the customer and (iv) collection of the
receivable is reasonably assured, which occurs primarily upon
shipment. Net sales include an estimate for returns and
allowances based upon historical return experience. We also
offer a variety of sales incentives to resellers and consumers
that are recorded as reductions to net sales.
Cost
of sales
Our cost of sales includes the cost of manufacturing finished
goods, which consists of labor, raw materials such as cotton and
petroleum-based products and overhead costs such as depreciation
on owned facilities and equipment. Our cost of sales also
includes finished goods sourced from third-party manufacturers
that supply us with products based on our designs as well as
charges for slow moving or obsolete inventories. Rebates,
discounts and other cash consideration received from a vendor
related to inventory purchases are reflected in cost of sales
when the related inventory item is sold. Our costs of sales do
not include shipping costs, comprised of payments to third party
shippers, or handling costs, comprised of warehousing costs in
our distribution facilities, and thus our gross margins may not
be comparable to those of other entities that include such costs
in cost of sales.
Selling,
general and administrative expenses
Our selling, general and administrative expenses include
selling, advertising, costs of shipping, handling and
distribution to our customers, research and development, rent on
leased facilities, depreciation on owned facilities and
equipment and other general and administrative expenses. Also
included for periods presented prior to the spin off on
September 5, 2006 are allocations of corporate expenses
that consist of expenses for business insurance, medical
insurance, employee benefit plan amounts and, because we were
part of Sara Lee those periods, allocations from Sara Lee for
certain centralized administration costs for treasury, real
estate, accounting, auditing, tax, risk management, human
resources and benefits administration. These allocations of
centralized administration costs were determined on bases that
we and Sara Lee considered to be reasonable
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and take into consideration and include relevant operating
profit, fixed assets, sales and payroll. Selling, general and
administrative expenses also include management payroll,
benefits, travel, information systems, accounting, insurance and
legal expenses.
Restructuring
We have from time to time closed facilities and reduced
headcount, including in connection with previously announced
restructuring and business transformation plans. We refer to
these activities as restructuring actions. When we decide to
close facilities or reduce headcount, we take estimated charges
for such restructuring, including charges for exited
non-cancelable leases and other contractual obligations, as well
as severance and benefits. If the actual charge is different
from the original estimate, an adjustment is recognized in the
period such change in estimate is identified.
Other
expenses
Our other expenses include charges such as losses on early
extinguishment of debt and certain other non-operating items.
Interest
expense, net
As part of the spin off from Sara Lee on September 5, 2006,
we incurred $2.6 billion of debt in the form of the Senior
Secured Credit Facility, the Second Lien Credit Facility and a
bridge loan facility (the “Bridge Loan Facility”),
$2.4 billion of which we paid to Sara Lee. In December
2006, we issued $500 million of floating rate senior notes
and the proceeds were used to repay all amounts outstanding
under the Bridge Loan Facility. On November 27, 2007, we
entered into the Receivables Facility which provides for up to
$250 million in funding accounted for as a secured
borrowing, all of which we borrowed and used to repay a portion
of the Senior Secured Credit Facility. As a result, our interest
expense in the current and future periods will be substantially
higher than in periods prior to our spin off from Sara Lee. As
part of our historical relationship with Sara Lee, we engaged in
intercompany borrowings. We are no longer able to borrow from
Sara Lee.
Our interest expense is net of interest income. Interest income
is the return we earned on our cash and cash equivalents and,
historically, on money we loaned to Sara Lee as part of its
corporate cash management practices. Our cash and cash
equivalents are invested in highly liquid investments with
original maturities of three months or less.
Income
tax expense (benefit)
Our effective income tax rate fluctuates from period to period
and can be materially impacted by, among other things:
Inflation
and Changing Prices
We believe that changes in net sales and in net income that have
resulted from inflation or deflation have not been material
during the periods presented. There is no assurance, however,
that inflation or deflation will not materially affect us in the
future. Cotton is the primary raw material we use to manufacture
many of our
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products and is subject to fluctuations in prices. Further
discussion of the market sensitivity of cotton is included in
“Quantitative and Qualitative Disclosures about Market
Risk.”
Components of Net Sales and Expense Net sales We generate net sales by selling apparel essentials such as t-shirts, bras, panties, men’s underwear, kids’ underwear, socks, hosiery, casualwear and activewear. Our net sales are recognized net of discounts, coupons, rebates, volume-based incentives and cooperative advertising costs. We recognize revenue when (i) there is persuasive evidence of an arrangement (ii) the sales price is fixed or determinable, (iii) title and the risks of ownership have been transferred to the customer and (iv) collection of the receivable is reasonably assured, which occurs primarily upon shipment. Net sales include an estimate for returns and allowances based upon historical return experience. We also offer a variety of sales incentives to resellers and consumers that are recorded as reductions to net sales. Cost of sales Our cost of sales includes the cost of manufacturing finished goods, which consists of labor, raw materials such as cotton and petroleum-based products and overhead costs such as depreciation on owned facilities and equipment. Our cost of sales also includes finished goods sourced from third-party manufacturers that supply us with products based on our designs as well as charges for slow moving or obsolete inventories. Rebates, discounts and other cash consideration received from a vendor related to inventory purchases are reflected in cost of sales when the related inventory item is sold. Our costs of sales do not include shipping costs, comprised of payments to third party shippers, or handling costs, comprised of warehousing costs in our distribution facilities, and thus our gross margins may not be comparable to those of other entities that include such costs in cost of sales. Selling, general and administrative expenses Our selling, general and administrative expenses include selling, advertising, costs of shipping, handling and distribution to our customers, research and development, rent on leased facilities, depreciation on owned facilities and equipment and other general and administrative expenses. Also included for periods presented prior to the spin off on September 5, 2006 are allocations of corporate expenses that consist of expenses for business insurance, medical insurance, employee benefit plan amounts and, because we were part of Sara Lee those periods, allocations from Sara Lee for certain centralized administration costs for treasury, real estate, accounting, auditing, tax, risk management, human resources and benefits administration. These allocations of centralized administration costs were determined on bases that we and Sara Lee considered to be reasonable
Table of Contentsand take into consideration and include relevant operating profit, fixed assets, sales and payroll. Selling, general and administrative expenses also include management payroll, benefits, travel, information systems, accounting, insurance and legal expenses. Restructuring We have from time to time closed facilities and reduced headcount, including in connection with previously announced restructuring and business transformation plans. We refer to these activities as restructuring actions. When we decide to close facilities or reduce headcount, we take estimated charges for such restructuring, including charges for exited non-cancelable leases and other contractual obligations, as well as severance and benefits. If the actual charge is different from the original estimate, an adjustment is recognized in the period such change in estimate is identified. Other expenses Our other expenses include charges such as losses on early extinguishment of debt and certain other non-operating items. Interest expense, net As part of the spin off from Sara Lee on September 5, 2006, we incurred $2.6 billion of debt in the form of the Senior Secured Credit Facility, the Second Lien Credit Facility and a bridge loan facility (the “Bridge Loan Facility”), $2.4 billion of which we paid to Sara Lee. In December 2006, we issued $500 million of floating rate senior notes and the proceeds were used to repay all amounts outstanding under the Bridge Loan Facility. On November 27, 2007, we entered into the Receivables Facility which provides for up to $250 million in funding accounted for as a secured borrowing, all of which we borrowed and used to repay a portion of the Senior Secured Credit Facility. As a result, our interest expense in the current and future periods will be substantially higher than in periods prior to our spin off from Sara Lee. As part of our historical relationship with Sara Lee, we engaged in intercompany borrowings. We are no longer able to borrow from Sara Lee. Our interest expense is net of interest income. Interest income is the return we earned on our cash and cash equivalents and, historically, on money we loaned to Sara Lee as part of its corporate cash management practices. Our cash and cash equivalents are invested in highly liquid investments with original maturities of three months or less. Income tax expense (benefit) Our effective income tax rate fluctuates from period to period and can be materially impacted by, among other things:
Inflation and Changing Prices We believe that changes in net sales and in net income that have resulted from inflation or deflation have not been material during the periods presented. There is no assurance, however, that inflation or deflation will not materially affect us in the future. Cotton is the primary raw material we use to manufacture many of our
Table of Contentsproducts and is subject to fluctuations in prices. Further discussion of the market sensitivity of cotton is included in “Quantitative and Qualitative Disclosures about Market Risk.” This excerpt taken from the HBI 8-K filed Nov 29, 2006. Components
of Net Sales and Expense
Net
sales
We generate net sales by selling apparel essentials such as
t-shirts, bras, panties, men’s underwear, kids’
underwear, socks, hosiery, casualwear and activewear. Our net
sales are recognized net of discounts, coupons, rebates,
volume-based incentives and cooperative advertising costs. We
recognize net sales when title and risk of loss pass to our
customers. Net sales include an estimate for returns and
allowances based upon historical return experience. We also
offer a variety of sales incentives to resellers and consumers
that are recorded as reductions to net sales.
Cost
of sales
Our cost of sales includes the cost of manufacturing finished
goods, which consists largely of labor and raw materials such as
cotton and petroleum-based products. Our cost of sales also
includes finished goods sourced from third-party manufacturers
who supply us with products based on our designs as well as
charges for slow moving or obsolete inventories. Rebates,
discounts and other cash consideration received from a vendor
related to inventory purchases are reflected in cost of sales
when the related inventory item is sold. Our costs of sales do
not include shipping and handling costs, and thus our gross
margins may not be comparable to those of other entities that
include such costs in costs of sales.
Selling,
general and administrative expenses
Our selling, general and administrative expenses, or
“SG&A expenses,” include selling, advertising,
shipping, handling and distribution costs, rent on leased
facilities, depreciation on owned facilities and equipment and
other general and administrative expenses. Also included are
allocations of corporate expenses and charges which consist of
expenses for business insurance, medical insurance, employee
benefit plan amounts and, because we were part of Sara Lee
during all periods presented, allocations from Sara Lee for
certain centralized administration costs for treasury, real
estate, accounting, auditing, tax, risk management, human
resources and benefits administration. These allocations of
centralized administration costs were determined on bases that
we and Sara Lee considered to be reasonable and take into
consideration and include relevant operating profit, fixed
assets, sales and payroll. SG&A expenses also include
management payroll, benefits, travel, information systems,
accounting, insurance and legal expenses.
Restructuring
We have from time to time closed facilities and reduced
headcount, including in connection with previously announced
restructuring and business transformation plans. We refer to
these activities as restructuring actions. When we decide to close
facilities or reduce headcount we take estimated charges for
such restructuring, including charges for exited noncancelable
leases and other contractual obligations, as well as severance
and benefits. If the actual charge is different from the
original estimate, an adjustment is recognized in the period
such change in estimate is identified.
Interest
expense
As part of our historical relationship with Sara Lee, we engaged
in intercompany borrowings. We also have borrowed monies from
third parties under a credit facility and a revolving line of
credit. The interest charged under these facilities was recorded
as interest expense. We are no longer able to borrow from Sara
Lee. As part of the spin off on September 5, 2006, we
incurred $2.6 billion of debt in the form of a new senior
secured credit facility, a new senior secured second lien credit
facility and a bridge loan facility, $2.4 billion of the
proceeds of which was paid to Sara Lee. As a result, our
interest expense in future periods will be substantially higher
than in historical periods.
Interest
income
Interest income is the return we earned on our cash and cash
equivalents and, historically, on money we lent to Sara Lee as
part of its corporate cash management practices. Our cash and
cash equivalents are invested in highly liquid investments with
original maturities of three months or less.
Income
tax expense (benefit)
Our effective income tax rate fluctuates from period to period
and can be materially impacted by, among other things:
In particular, to service the substantial amount of debt we
incurred in connection with the spin off and to meet other
general corporate needs, we may have less flexibility than we
have had previously regarding the timing or amount of future
earnings that we repatriate from foreign subsidiaries. As a
result, we believe that our income tax rate in future periods is
likely to be higher, on average, than our historical effective
tax rates.
Inflation
and Changing Prices
We believe that changes in net sales and in net income that have
resulted from inflation or deflation have not been material
during the periods presented. There is no assurance, however,
that inflation or deflation will not materially affect us in the
future.
This excerpt taken from the HBI 10-K filed Sep 28, 2006. Components
of Net Sales and Expense
Net
sales
We generate net sales by selling apparel essentials such as
t-shirts, bras, panties, men’s underwear, kids’
underwear, socks, hosiery, casualwear and activewear. Our net
sales are recognized net of discounts, coupons, rebates,
volume-based incentives and cooperative advertising costs. We
recognize net sales when title and risk of loss pass to our
customers. Net sales include an estimate for returns and
allowances based upon historical return experience. We also
offer a variety of sales incentives to resellers and consumers
that are recorded as reductions to net sales.
Table of Contents
Cost
of sales
Our cost of sales includes the cost of manufacturing finished
goods, which consists largely of labor and raw materials such as
cotton and petroleum-based products. Our cost of sales also
includes finished goods sourced from third-party manufacturers
who supply us with products based on our designs as well as
charges for slow moving or obsolete inventories. Rebates,
discounts and other cash consideration received from a vendor
related to inventory purchases are reflected in cost of sales
when the related inventory item is sold. Our costs of sales do
not include shipping and handling costs, and thus our gross
margins may not be comparable to those of other entities that
include such costs in costs of sales.
Selling,
general and administrative expenses
Our selling, general and administrative expenses, or
“SG&A expenses,” include selling, advertising,
shipping, handling and distribution costs, rent on leased
facilities, depreciation on owned facilities and equipment and
other general and administrative expenses. Also included are
allocations of corporate expenses and charges which consist of
expenses for business insurance, medical insurance, employee
benefit plan amounts and, because we were part of Sara Lee
during all periods presented, allocations from Sara Lee for
certain centralized administration costs for treasury, real
estate, accounting, auditing, tax, risk management, human
resources and benefits administration. These allocations of
centralized administration costs were determined on bases that
we and Sara Lee considered to be reasonable and take into
consideration and include relevant operating profit, fixed
assets, sales and payroll. SG&A expenses also include
management payroll, benefits, travel, information systems,
accounting, insurance and legal expenses.
Charges
for (income from) exit activities
We have from time to time closed facilities and reduced
headcount, including in connection with previously announced
restructuring and business transformation plans. We refer to
these activities as exit activities. When we decide to close
facilities or reduce headcount we take estimated charges for
such exit activities, including charges for exited noncancelable
leases and other contractual obligations, as well as severance
and benefits. If the actual charge is different from the
original estimate, an adjustment is recognized in the period
such change in estimate is identified.
Interest
expense
As part of our historical relationship with Sara Lee, we engaged
in intercompany borrowings. We also have borrowed monies from
third parties under a credit facility and a revolving line of
credit. The interest charged under these facilities was recorded
as interest expense. We are no longer able to borrow from Sara
Lee. As part of the spin off on September 5, 2006, we
incurred $2.6 billion of debt in the form of a new senior
secured credit facility, a new senior secured second lien credit
facility and a bridge loan facility, $2.4 billion of the
proceeds of which was paid to Sara Lee. As a result, our
interest expense in future periods will be substantially higher
than in historical periods.
Interest
income
Interest income is the return we earned on our cash and cash
equivalents and, historically, on money we lent to Sara Lee as
part of its corporate cash management practices. Our cash and
cash equivalents are invested in highly liquid investments with
original maturities of three months or less.
Income
tax expense (benefit)
Our effective income tax rate fluctuates from period to period
and can be materially impacted by, among other things:
Table of Contents
In particular, to service the substantial amount of debt we
incurred in connection with the spin off and to meet other
general corporate needs, we may have less flexibility than we
have had previously regarding the timing or amount of future
earnings that we repatriate from foreign subsidiaries. As a
result, we believe that our income tax rate in future periods is
likely to be higher, on average, than our historical effective
tax rates.
Inflation
and Changing Prices
We believe that changes in net sales and in net income that have
resulted from inflation or deflation have not been material
during the periods presented. There is no assurance, however,
that inflation or deflation will not materially affect us in the
future.
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