'This year is playing out consistent with our expectations' – Mr Noll

30 Oct '09

5 min read

-Hanesbrands paid down debt by $177 million in the quarter. The company's debt is now $134 million lower than the beginning of the year, and the company's goal remains to end the year with debt that is $300 million lower than the start of the year. The company's strong cash flow is benefiting from reduced inventory.

For 2010, Hanesbrands has the potential for robust cash flow, and its major priority is to pay down debt by another $300 million. The company also continues to consider refinancing its debt as the debt markets allow, possibly as early as the fourth quarter. Refinancing would provide even greater strategic flexibility in 2010 to reduce leverage and consider bolt-on acquisitions that could take advantage of the company's low-cost global supply chain.

“We continue to invest in our business while reducing debt and expanding margins in a difficult economic environment,” Hanesbrands Executive Vice President and Chief Financial Officer E. Lee Wyatt said. “We also continue to strategically manage our capital structure. The company has set a new long-term leverage ratio target of 2 to 3 times debt to EBITDA, and we have the potential to reach that range in 2011. This would radically change our leverage profile over the next two years.”

Other Comments
Continued investment in brand-building programs has solidified significant net shelf-space and distribution gains, starting primarily in early 2010. Program gains significantly outnumber program losses, and the company expects the net space gains to generate approximately 5 percent incremental sales growth in 2010. The growth expectation pertains only to the net space and distribution gains and is not dependent on a consumer spending rebound.

In early 2010, Hanesbrands will provide its expectations for total 2010 net sales growth based on the space gains, point-of-sale trends for the holiday period, the outlook for the consumer climate in 2010, and other factors.

Hanesbrands is increasing its production capacity to meet 2010 growth expectations. In early October production began at the company's new Nanjing, China, fabric production plant, which will supply the company's Southeast Asia sewing facilities. The company is also substantially ramping up contract production as needed.

As a result of the continuing long-term trend of declining sheer hosiery consumption in the United States, the company announced this week that it expects to close a sheer hosiery manufacturing facility in Winston-Salem with 240 employees in 2010.

The company closed on the previously announced sale of its yarn production plants to Parkdale America, LLC. Exiting yarn production and entering a supply agreement is expected to generate a $100 million balance sheet improvement within six months as a result of working capital improvement and sale proceeds.

“We are pleased with our profit and margin performance and our readinessto take advantage of opportunities in 2010,” Noll said. “This year is playing out consistent with our expectations, and we have continued to invest during the recession. We will begin 2010 with momentum. We have retail shelf-space gains, a recapitalized global supply chain and opportunities for a very good year.”

Hanesbrands Inc

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