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This excerpt taken from the HBI 10-Q filed May 11, 2009. Recently
Issued Accounting Pronouncements
Employers’
Disclosures about Postretirement Benefit Plan
Assets
In December 2008, the FASB issued Staff Position
No. FAS 132(R)-1, Employers’ Disclosures about
Postretirement Benefit Plan Assets
(“FSP 132(R)-1”). FSP 132(R)-1 expands the
disclosure requirements of FASB Statement No. 132(R) to
include more detailed disclosures about an employers’ plan
assets, including employers’ investment strategies, major
categories of plan assets, concentrations of risk within plan
assets, and valuation techniques used to measure the fair value
of plan assets, similar to the disclosure requirements of
SFAS 157. FSP 132(R)-1 is effective for fiscal years
ending after December 15, 2009. Since FSP 132(R)-1
only requires additional disclosures, adoption of the statement
is not expected to have a material impact on our financial
condition, results of operations or cash flows.
Interim
Disclosures about Fair Value of Financial
Instruments
In April 2009, the FASB issued Staff Position
No. 107-1
and Accounting Principal Board Opinion
No. 28-1,
Interim Disclosures about Fair Value of Financial Instruments
(“FSP 107-1”).
FSP 107-1
amends FASB Statement No. 107, Disclosures about Fair Value
of Financial Instruments, to require disclosures about fair
value of financial instruments in interim financial statements
as well as in annual financial statements. This statement also
amends Accounting Principal Board Opinion No. 28, Interim
Financial Reporting, to require those disclosures in all interim
financial statements. FSP 107-1 is effective for interim
and annual periods ending after June 15, 2009. Since
FSP 107-1 only requires additional disclosures, adoption of
the statement is not expected to have a material impact on our
financial condition, results of operations or cash flows.
We are required under the Senior Secured Credit Facility and the
Second Lien Credit Facility to hedge a portion of our floating
rate debt to reduce interest rate risk caused by floating rate
debt issuance. Given the recent turmoil in the financial and
credit markets, we have expanded our interest rate hedging
portfolio at what we believe to be advantageous rates that are
expected to minimize our overall interest rate risk. At
April 4, 2009, we have outstanding hedging arrangements
whereby we capped the LIBOR interest rate component on
$400 million of our floating rate debt at 3.50%. We also
entered into interest rate swaps tied to the
3-month and
6-month
LIBOR rates whereby we fixed the LIBOR interest rate component
on an aggregate of $1.4 billion of our floating rate debt
at a blended rate of approximately 4.16%. Approximately 79% of
our total debt outstanding at April 4, 2009 is at a fixed
or capped LIBOR rate. Due to the recent significant changes in
the credit markets, the fair values of our interest rate hedging
instruments have increased approximately $11.3 million
during the first quarter ended April 4, 2009. As these
derivative instruments are accounted for as hedges, the change
in fair value has been deferred into Accumulated Other
Comprehensive Loss in our Condensed Consolidated Balance Sheets
until the hedged transactions impact our earnings.
Cotton is the primary raw material we use to manufacture many of
our products. While we attempt to protect our business from the
volatility of the market price of cotton through short-term
supply agreements and hedges from time to time, our business can
be adversely affected by dramatic movements in cotton prices.
The cotton prices in our results were 74 cents per pound for the
quarter ended April 4, 2009. After taking into
Table of Contents
consideration the cotton costs currently included in our
inventory and short-term supply agreements, we expect our cost
of cotton to average 55 cents per pound for the full year of
2009 compared to 65 cents per pound for 2008. The ultimate
effect of these pricing levels on our earnings cannot be
quantified, as the effect of movements in cotton prices on
industry selling prices are uncertain, but any dramatic increase
in the price of cotton could have a material adverse effect on
our business, results of operations, financial condition and
cash flows.
There have been no other significant changes in our market risk
exposures from those described in Item 7A of our Annual
Report on
Form 10-K
for the year ended January 3, 2009.
As required by Exchange Act
Rule 13a-15(b),
our management, including the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness
of our disclosure controls and procedures, as defined in
Exchange Act
Rule 13a-15(e),
as of the end of the period covered by this report. Based on
that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
were effective.
In connection with the evaluation required by Exchange Act
Rule 13a-15(d),
our management, including the Chief Executive Officer and Chief
Financial Officer, concluded that no changes in our internal
control over financial reporting occurred during the period
covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
Not applicable.
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