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Hanesbrands reaffirms 2010 sales growth guidance
21 Dec '09
4 min read
“Our new debt structure is simpler and gives us greater flexibility to execute multiple strategies for earnings growth,” Hanesbrands Executive Vice President and Chief Financial Officer E. Lee Wyatt said. “We have the potential to sustain substantial growth momentum.”
The new debt structure has a less restrictive leverage ratio covenant of 4.5 times debt to EBITDA, stepping down to 4.0 times by the end of 2010 and then 3.75 times in mid-2011. The company's target is to reduce leverage to 2 to 3 times debt to EBITDA, possibly as early as 2011.
The company's goal is to reduce debt by $300 million in 2009, which would reduce interest expense by approximately $20 million to $25 million next year. Another $300 million of debt reduction in 2010, a priority for the company, would deliver a similar interest expense reduction in 2011.
The new debt structure provides the company with significant additional flexibility to make acquisitions. The company has the potential to use its excess cash flow to leverage its low-cost production capability through small bolt-on acquisitions in the $200 million to $300 million range. The company's former financial covenants restricted the company to acquisitions of $100 million annually.
The company's disciplined criteria for considering potential acquisitions would require acquisitions to be in core apparel essentials categories, involve minimal integration risk, generate cost synergies, provide revenue opportunities and deliver superior returns to shareholders.
Also under the new debt structure, the company has expanded capability to return cash to shareholders either through share repurchases or dividends.
The new debt structure has a less restrictive leverage ratio covenant of 4.5 times debt to EBITDA, stepping down to 4.0 times by the end of 2010 and then 3.75 times in mid-2011. The company's target is to reduce leverage to 2 to 3 times debt to EBITDA, possibly as early as 2011.
The company's goal is to reduce debt by $300 million in 2009, which would reduce interest expense by approximately $20 million to $25 million next year. Another $300 million of debt reduction in 2010, a priority for the company, would deliver a similar interest expense reduction in 2011.
The new debt structure provides the company with significant additional flexibility to make acquisitions. The company has the potential to use its excess cash flow to leverage its low-cost production capability through small bolt-on acquisitions in the $200 million to $300 million range. The company's former financial covenants restricted the company to acquisitions of $100 million annually.
The company's disciplined criteria for considering potential acquisitions would require acquisitions to be in core apparel essentials categories, involve minimal integration risk, generate cost synergies, provide revenue opportunities and deliver superior returns to shareholders.
Also under the new debt structure, the company has expanded capability to return cash to shareholders either through share repurchases or dividends.
Hanesbrands Inc
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