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Sales remain unchanged at Hanesbrands in Q3

31 Oct '08
5 min read

The unusual actions in the current or year-ago quarter were restructuring and related charges, amortization of gain on postretirement benefits, separation of pension plan assets and liabilities, nonrecurring spinoff and related charges, 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:
Hanesbrands has informed retail customers that it is raising domestic prices effective mid-first quarter of 2009. The company is taking an average gross price increase of 4 percent for domestic product categories. The range of price increases will vary by product category.

Hanesbrands also has continued to strategically structure its debt and liquidity to execute its business strategies through the economic downturn and tight credit markets. At the end of the quarter, Hanesbrands had a $500 million undrawn bank revolver and $86 million in cash on its balance sheet.

The company has actively and strategically managed its debt structure since its spinoff to reduce costs and increase flexibility. Of the company's $2.3 billion in long-term debt, the rates on $2.0 billion, or 86 percent, have been fixed or capped.

In the third quarter, Hanesbrands fixed the interest rate in July on $500 million of floating-rate bonds for four years at 7.64 percent and in September capped LIBOR for $600 million of floating-rate debt at 3.50 percent for one year. In October, the company fixed LIBOR on an additional $400 million of floating-rate debt at 2.80 percent for two years.

The company expects 2008 full-year interest expense of approximately $155 million, and in 2009 full-year interest expense is expected to decrease into an approximate range of $140 million to $155 million.

Hanesbrands continues to make significant progress in executing its global supply chain strategy of consolidating manufacturing into fewer, larger facilities in lower-cost countries. In the third quarter, the company announced plans to close nine plants in the Western Hemisphere.

In order to manage the supply chain transition in 2009, the company is on track to carry year-end inventory at the previously discussed $1.35 billion level. The company's goal is to reduce inventory by $200 million over the next 18 months as it completes its knits supply chain transition.

Hanesbrands continues to manage its capital expenditures. The company is projecting gross capital spending of $180 million for the full year, offset by expected proceeds of $25 million in property sales for net capital spending of $155 million this year. The company is assessing needs and plans for next year but expects gross capital expenditure spending in the range of $115 million to $135 million.

"We are sharply focused on execution over the next 12 to 18 months and will manage expenses and inventories conservatively," Noll said. "Our goal is to come out of this economic environment as a stronger company using the strength of our brands, our ability to take pricing, and opportunities we have for further cost reductions."

Hanesbrands Inc

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