“We managed through a $160 million cotton inflation bubble with a successful pricing strategy and came out stronger, more innovative and more profitable. We achieved the guidance we laid out at the beginning of the year even with our decision to exit certain underperforming businesses.”
Net sales increased 5 percent to $1.15 billion in the fourth quarter compared with the year-ago quarter and increased 2 percent to $4.53 billion for the full fiscal year. Full-year sales increased 4 percent excluding the managed decline in the branded printwear division and the decline in a large mid-tier retailer undergoing a strategic shift.
Fourth-quarter adjusted EPS more than doubled to $1.07, excluding bond prepayment expenses that reduced EPS by $0.30. Each of the company’s business segments reported at least double-digit operating profit growth in the quarter. Full-year adjusted EPS increased 7 percent to $2.62. The Innerwear segment was the strongest contributor to full-year results, delivering 18 percent growth in operating profit.
The company also generated $508 million of free cash flow in the year and prepaid $550 million of long-term bonds. The company ended the year with long-term debt of approximately 2.5 times adjusted EBITDA.
“By reducing bond debt by $750 million over the past 13 months, we have ended our era of high debt leverage, and the momentum of strong results in the back half of 2012 positions us well for continued profit growth in 2013,” Hanes Chairman and Chief Executive Officer Richard A. Noll said.
2012 Financial Highlights and Business Segment Summary
Key accomplishments for 2012 include:
Record Free Cash Flow. Solid performance and a focus on reducing inventory resulted in record free cash flow of $508 million in 2012. Year-end inventories improved to $1.25 billion, a decline of $354 million from $1.61 billion a year earlier.
Deleveraged Balance Sheet - the Company significantly reduced its debt and no longer considers itself highly leveraged. Hanes prepaid $550 million in long-term bonds in 2012 and $750 million over the past five quarters. The company’s year-end long-term debt ratio was approximately 2.5 times adjusted EBITDA.
Successful Exit from Underperforming Businesses- the Company successfully undertook an effort to reduce risk in its business and create more consistent results by quickly exiting its European imagewear screen-print business and reorganizing its domestic screen-print channel business as branded printwear focusing on higher-margin branded Hanes and Champion products.
Return of Earnings Power- the Company generated record profitability in the second half, with sales growth of 4 percent, an operating profit margin of 13 percent, and adjusted EPS growth of 75 percent. The company successfully managed through significant cotton inflation and returned to performance in the second half that reflects the company’s earnings potential for 2013 and beyond.
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