Hanesbrands reports Q1 loss, to lay off 250 jobs

29 Apr '09

5 min read

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.)

Other Comments
In March, Hanesbrands announced that it amended its first-lien credit agreement with debt holders to delay the covenant's 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 company's first company-owned fabric manufacturing facility in Asia and will support the company's product sewing operations in Southeast Asia.

The company also announced 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.”

Hanesbrands Inc

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