This excerpt taken from the HBI 8-K filed Apr 27, 2009.
HANESBRANDS INC. REPORTS FIRST-QUARTER 2009 RESULTS
WINSTON-SALEM, N.C. (April 27, 2009) Hanesbrands Inc. (NYSE: HBI), a leading marketer of innerwear, outerwear and hosiery apparel, today reported first-quarter 2009 results.
Earnings per diluted share in the quarter decreased to a loss of $0.20. Excluding actions, non-GAAP earnings per diluted share were $0.03, down $0.39 from a year ago amid tight cost control but lower sales. Total net sales decreased by 13 percent to $857.8 million, as expected due to conditions in the retail marketplace.
Our overall results were in line with our expectations and were significantly impacted by the economic recession, Hanesbrands Chairman and Chief Executive Officer Richard A. Noll said. Sales declined in the quarter at a rate consistent with what we had communicated to investors, and we tightly controlled expenses to mitigate the impact of reduced consumer spending. The second quarter looks as if both the sales and operating profit rate of decline could improve.
Noteworthy Financial Highlights
Selected highlights for the quarter ended April 4, 2009, compared with the year-ago quarter ended March 29, 2008, include:
In the first quarter, the Innerwear sales decline of 6 percent was less severe than the 11 percent decline in the fourth quarter 2008. As expected, the Outerwear sales decline of 21 percent was more severe than the 8 percent decline in the fourth quarter, primarily due to lower casualwear sales in the retail and wholesale channels. Based on advanced booked sales, the company expects improvement in the sales decline rate for the Outerwear segment to a decline in the mid-single digits in the third quarter.
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Hosiery products continue to be more adversely impacted by reduced consumer discretionary spending than other apparel categories. Hosiery segment sales declined by 21 percent in the first quarter, similar to the decline in the fourth quarter. The decline in International segment sales accelerated from 9 percent in the fourth quarter to 21 percent as the impact of the recession intensified overseas and the dollar strengthened against foreign currencies.
Retailers are still experiencing soft sell-through but are beginning to loosen inventory constraints, Noll said. We have secured or are in the process of securing an incremental $75 million to $90 million of promotional and new-product programs that will ship in the second through fourth quarters. Given all of this, we may see improvements in the second-quarter sales rate with total sales potentially declining in the single digits. For the full year, the sales scenarios that we depicted in our February investor day meeting still remain intact.
Excluding actions, non-GAAP operating profit declined to $40.7 million and the operating profit margin declined to 4.7 percent, as a result of lower sales volume, higher commodity costs and higher pension costs, partially offset by increased product pricing and lower other selling, general and administrative expenses. As a percent of sales, SG&A excluding actions was 26 percent, comparable to the year-ago quarter.
(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, spinoff-related expenses, 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.)
In March, Hanesbrands announced that it amended its first-lien credit agreement with debt holders to delay the covenants most restrictive debt-leverage ratio from the fourth quarter 2009 until the third quarter 2011.
Based on its cash-flow expectations, the company reiterates its goal to reduce its long-term debt by at least $300 million in 2009 and its goal to reduce its year-end inventory by $150 million.
After assessing product demand modeling, the company has decided to start production Oct. 12, 2009, at its new Nanjing, China, knit textile manufacturing plant. The plant is the companys first company-owned fabric manufacturing facility in Asia and will support the companys product sewing operations in Southeast Asia.
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The company also announced today that it will continue to exercise tight cost controls in light of the economic environment and will lay off 250 management employees. The company expects to incur restructuring and related charges, including severance costs, totaling approximately $15 million, primarily in the second quarter of fiscal 2009.
So far, this year is unfolding as we thought, Noll said. We are conservatively managing costs and inventory while we continue execution of our key strategies, including debt reduction of $300 million this year.
Webcast Conference Call
Hanesbrands will host a live Internet webcast of its quarterly investor conference call at 4:30 p.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 5:30 p.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 7 p.m. EDT today until midnight on May 4, 2009. 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 94466907.