FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended January 3, 2009
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-32891
Hanesbrands Inc.
(Exact name of registrant as specified in its charter)
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Maryland
(State of incorporation)
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20-3552316
(I.R.S. employer identification no.) |
1000 East Hanes Mill Road
Winston-Salem, North Carolina
(Address of principal executive office)
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27105
(Zip code) |
(336) 519-4400
(Registrants telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share and related
Preferred Stock Purchase Rights
Name of each exchange on which registered:
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o
(Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of June 27, 2008, the aggregate market value of the registrants common stock held by
non-affiliates was approximately $2,604,038,549 (based on the closing price of the common stock of
$27.75 per share on that date, as reported on the New York Stock Exchange and, for purposes of this
computation only, the assumption that all of the registrants directors and executive officers are
affiliates and that beneficial holders of 5% or more of the
outstanding common stock are not affiliates).
As of February 2, 2009, there were 93,576,662 shares of the registrants common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference to portions of the registrants proxy
statement for its 2009 annual meeting of stockholders.
TABLE OF CONTENTS
Trademarks, Trade Names and Service Marks
We own or have rights to use the trademarks, service marks and trade names that we use in
conjunction with the operation of our business. Some of the more important trademarks that we own
or have rights to use that appear in this Annual Report on Form 10-K include the Hanes, Champion,
C9 by Champion, Playtex, Bali, Leggs, Just My Size, barely there, Wonderbra, Stedman, Outer
Banks, Zorba, Rinbros and Duofold marks, which may be registered in the United States and other
jurisdictions. We do not own any trademark, trade name or service mark of any other company
appearing in this Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
(the Exchange Act). Forward-looking statements include all statements that do not relate solely
to historical or current facts, and can generally be identified by the use of words such as may,
believe, will, expect, project, estimate, intend, anticipate, plan, continue or
similar expressions. In particular, information appearing under Business, Risk Factors and
Managements Discussion and Analysis of Financial Condition and Results of Operations includes
forward-looking statements. Forward-looking statements inherently involve many risks and
uncertainties that could cause actual results to differ materially from those projected in these
statements. Where, in any forward-looking statement, we express an expectation or belief as to
future results or events, such expectation or belief is based on the current plans and expectations
of our management and expressed in good faith and believed to have a reasonable basis, but there
can be no assurance that the expectation or belief will result or be achieved or accomplished. The
following include some but not all of the factors that could cause actual results or events to
differ materially from those anticipated:
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our ability to execute our consolidation and globalization strategy, including migrating
our production and manufacturing operations to lower-cost locations around the world; |
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our ability to successfully manage social, political, economic and other conditions
affecting our foreign operations and supply chain sources, such as disruption of markets,
changes in import and export laws, currency restrictions and currency exchange rate
fluctuations; |
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current economic conditions; |
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consumer spending levels; |
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the risk of inflation or deflation; |
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financial difficulties experienced by any of our top customers or groups of customers; |
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our debt and debt service requirements that restrict our operating and financial
flexibility and impose interest and financing costs; |
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the financial ratios that our debt instruments require us to maintain; |
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future financial performance, including availability, terms and deployment of capital; |
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dramatic changes in the volatile market price of cotton, the primary material used in
the manufacture of our products; |
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the impact of increases in prices of other materials used in our products, such as dyes
and chemicals; |
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the impact of increases in prices of oil-related materials and other costs, such as
energy and utility costs; |
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our ability to effectively manage our inventory and reduce inventory reserves; |
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loss of or reduction in sales to any of our top customers, especially Wal-Mart, or group
of customers; |
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the highly competitive and evolving nature of the industry in which we compete; |
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our ability to keep pace with changing consumer preferences; |
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our ability to continue to effectively distribute our products through our distribution
network as we continue to consolidate our distribution network; |
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our ability to comply with environmental and occupational health and safety laws and
regulations; |
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costs and adverse publicity arising from violations of labor laws by us or any of our
third-party manufacturers; |
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our ability to attract and retain key personnel; |
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new litigation or developments in existing litigation; and |
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possible terrorist attacks and ongoing military action in the Middle East and other
parts of the world. |
There may be other factors that may cause our actual results to differ materially from the
forward-looking statements. Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, the forward-looking statements. We can give no assurances
that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on
our results of operations and financial condition. You should carefully read the factors described
in the Risk Factors section of this Annual Report on Form 10-K for a description of certain risks
that could, among other things, cause our actual results to differ from these forward-looking
statements.
All forward-looking statements speak only as of the date of this Annual Report on Form 10-K
and are expressly qualified in their entirety by the cautionary statements included in this Annual
Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements that
may be made to reflect events or circumstances that arise after the date made or to reflect the
occurrence of unanticipated events, other than as required by law.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission (the SEC). You can inspect, read and copy these reports, proxy
statements and other information at the public reference facilities the SEC maintains at 100 F
Street, N.E., Washington, D.C. 20549.
We make available free of charge at www.hanesbrands.com (in the Investors section) copies of
materials we file with, or furnish to, the SEC. You can also obtain copies of these materials at
prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. You can obtain information on the operation of the public reference
facilities by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov
that makes available reports, proxy statements and other information regarding issuers that file
electronically with it. By referring to our website, www.hanesbrands.com, we do not incorporate our
website or its contents into this Annual Report on Form 10-K.
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PART I
Item 1. Business
General
We are a consumer goods company with a portfolio of leading apparel brands, including Hanes,
Champion, C9 by Champion, Playtex, Bali, Leggs, Just My Size, barely there, Wonderbra, Stedman,
Outer Banks, Zorba, Rinbros and Duofold. We design, manufacture, source and sell a broad range of
apparel essentials such as t-shirts, bras, panties, mens underwear, kids underwear, casualwear,
activewear, socks and hosiery.
The apparel essentials sector of the apparel industry is characterized by frequently
replenished items, such as t-shirts, bras, panties, mens underwear, kids underwear, socks and
hosiery. Growth and sales in the apparel essentials industry are not primarily driven by fashion,
in contrast to other areas of the broader apparel industry. We focus on the core attributes of
comfort, fit and value, while remaining current with regard to consumer trends. The majority of our
core styles continue from year to year, with variations only in color, fabric or design details.
Some products, however, such as intimate apparel, activewear and sheer hosiery, do have an emphasis
on style and innovation. We continue to invest in our largest and strongest brands to achieve our
long-term growth goals. In addition to designing and marketing apparel essentials, we have a long
history of operating a global supply chain that incorporates a mix of self-manufacturing,
third-party contractors and third-party sourcing.
Our fiscal year ends on the Saturday closest to December 31 and, until it was changed during
2006, ended on the Saturday closest to June 30. We refer to the fiscal year ended January 3, 2009
as the year ended January 3, 2009. A reference to a year ended on another date is to the fiscal
year ended on that date.
Our operations are managed and reported in five operating segments: Innerwear, Outerwear,
International, Hosiery and Other. The following table summarizes our operating segments by
category:
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Primary Products |
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Primary Brands |
Innerwear
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Intimate apparel, such as bras,
panties and bodywear
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Hanes, Playtex, Bali, barely
there, Just My Size, Wonderbra,
Duofold |
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Mens underwear and kids underwear
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Hanes, Champion, C9 by
Champion, Polo Ralph Lauren* |
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Socks
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Hanes, Champion, C9 by Champion |
Outerwear
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Activewear, such as performance
t-shirts and shorts and fleece
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Champion, C9 by Champion |
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Casualwear, such as t-shirts,
fleece and sport shirts
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Hanes, Just My Size, Outer
Banks, Champion, Hanes Beefy-T |
International
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Activewear, mens underwear, kids
underwear, intimate apparel,
socks, hosiery and casualwear
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Hanes, Wonderbra,** Champion,
Stedman, Playtex,** Zorba,
Rinbros, Kendall,* Sol y Oro,
Ritmo, Bali |
Hosiery
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Hosiery
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Leggs, Hanes, Donna Karan,*
DKNY,* Just My Size |
Other
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Nonfinished products, including
fabric and certain other materials
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Not applicable |
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Brand used under a license agreement. |
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As a result of the February 2006 sale of the European branded apparel business of Sara Lee
Corporation, or Sara Lee, we are not permitted to sell this brand in the member states of
the European Union, or the EU, several other European countries and South Africa. |
Our brands have a strong heritage in the apparel essentials industry. According to The NPD
Group/Consumer Tracking Service, or NPD, our brands hold either the number one or number two U.S.
market position by sales value in most product categories in which we compete, for the 12 month
period ended November 30, 2008. In 2008, Hanes was number one for the fifth consecutive year on the
Womens Wear Daily Top 100 Brands Survey for
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apparel and accessory brands that women know best
and was number one for the fifth consecutive year as the most preferred mens, womens and
childrens apparel brand of consumers in Retailing Today magazines Top Brands Study.
Additionally, we had five of the top ten intimate apparel brands preferred by consumers in the
Retailing Today study Hanes, Playtex, Bali, Just My Size and Leggs.
Our products are sold through multiple distribution channels. During the year ended January 3,
2009, approximately 44% of our net sales were to mass merchants, 18% were to national chains and
department stores, 9% were direct to consumers, 11% were in our International segment and 18% were
to other retail channels such as embellishers, specialty retailers, warehouse clubs and sporting
goods stores. We have strong, long-term relationships with our top customers, including
relationships of more than ten years with each of our top ten customers. The size and operational
scale of the high-volume retailers with which we do business require extensive category and product
knowledge and specialized services regarding the quantity, quality and planning of product orders.
We have organized multifunctional customer management teams, which has allowed us to form strategic
long-term relationships with these customers and efficiently focus resources on category, product
and service expertise. We also have customer-specific programs such as the C9 by Champion products
marketed and sold through Target stores.
Our ability to react to changing customer needs and industry trends is key to our success. Our
design, research and product development teams, in partnership with our marketing teams, drive our
efforts to bring innovations to market. We seek to leverage our insights into consumer demand in
the apparel essentials industry to develop new products within our existing lines and to modify our
existing core products in ways that make them more appealing, addressing changing customer needs
and industry trends. Examples of our recent innovations include:
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Hanes no ride up panties, specially designed for a better fit that helps women stay
wedgie-free (2008). |
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Hanes Lay Flat Collar Undershirts and Hanes No Ride Up Boxer briefs, the brands latest
innovation in product comfort and fit (2008). |
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Bali Concealers bras, the first and only bra with revolutionary concealing petals for
complete modesty (2008). |
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Hanes Comfort Soft T-shirt (2007). |
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Bali Passion for Comfort bra, designed to be the ultimate comfort bra, features a silky
smooth lining for a luxurious feel against the body (2007). |
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Hanes All-Over Comfort Bra, which features stay-put straps that dont slip, cushioned
wires that dont poke and a tag-free back (2006). |
One of our key initiatives is to globalize our supply chain by balancing across hemispheres
into economic clusters with fewer, larger facilities. During the year ended January 3, 2009, in
furtherance of our efforts to execute our consolidation and globalization strategy, we approved
actions to close 11 manufacturing facilities and three distribution centers and eliminate
approximately 6,800 positions in Mexico, the United States, Costa Rica, Honduras and El Salvador.
The production capacity represented by the manufacturing facilities has been relocated to lower
cost locations in Asia, Central America and the Caribbean Basin. The distribution capacity has been
relocated to our West Coast distribution facility in California in order to expand capacity for
goods we source from Asia. In addition, approximately 200 management and administrative positions
were eliminated, with the majority of these positions based in the United States. We also have
recognized accelerated depreciation with respect to owned or leased assets associated with
manufacturing facilities and distribution centers which we closed during 2008 or anticipate closing
in the next several years as part of our consolidation and globalization strategy. The continued
implementation of this strategy, which is designed to improve operating efficiencies and lower
costs, has resulted and is likely to continue to result in significant costs in the short-term and to
generate savings as well as higher inventory levels for the next 12 to 15 months. As further plans
are developed and approved, we expect to recognize additional restructuring costs as we eliminate
duplicative functions within the organization and transition a significant portion of our
manufacturing capacity to lower-cost locations. As a result of this strategy, we expect to incur
approximately $250 million in restructuring and related charges over the three year period
following the spin off from Sara Lee on September 5, 2006, approximately half of which is expected
to be noncash. As of January 3, 2009, we have recognized approximately $209 million and announced
approximately $219 million in restructuring and related charges related to this strategy since
September 5, 2006.
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We were spun off from Sara Lee on September 5, 2006. In connection with the spin off, Sara Lee
contributed its branded apparel Americas and Asia business to us and distributed all of the
outstanding shares of our common stock to its stockholders on a pro rata basis. References in this
Annual Report on Form 10-K to our assets, liabilities, products, businesses or activities of our
business for periods including or prior to the spin off are generally intended to refer to the
historical assets, liabilities, products, businesses or activities of the contributed businesses as
the businesses were conducted as part of Sara Lee and its subsidiaries prior to the spin off.
Our Brands
Our portfolio of leading brands is designed to address the needs and wants of various consumer
segments across a broad range of apparel essentials products. Each of our brands has a particular
consumer positioning that distinguishes it from its competitors and guides its advertising and
product development. We discuss some of our most important brands in more detail below.
Hanes is the largest and most widely recognized brand in our portfolio. In 2008, Hanes was
number one for the fifth consecutive year on the Womens Wear Daily Top 100 Brands Survey for
apparel and accessory brands that women know best and was number one for the fifth consecutive year
as the most preferred mens, womens and childrens apparel brand of consumers in Retailing Today
magazines Top Brands Study. The Hanes brand covers all of our product categories, including
mens underwear, kids underwear, bras, panties, socks, t-shirts, fleece and sheer hosiery. Hanes
stands for outstanding comfort, style and value. According to Millward Brown Market Research, Hanes
is found in over 85% of the United States households that have purchased mens or womens casual
clothing or underwear in the 12-month period ended December 31, 2008.
Champion is our second-largest brand. Specializing in athletic and other performance apparel,
the Champion brand is designed for everyday athletes. We
believe that Champions combination of
comfort, fit and style provides athletes with mobility, durability and up-to-date styles, all
product qualities that are important in the sale of athletic products. We also distribute products
under the C9 by Champion brand exclusively through Target stores.
Playtex, the third-largest brand within our portfolio, offers a line of bras, panties and
shapewear, including products that offer solutions for hard to fit figures. Bali is the
fourth-largest brand within our portfolio. Bali offers a range of bras, panties and shapewear sold
in the department store channel. Our brand portfolio also includes the following well-known brands:
Leggs, Just My Size, barely there, Wonderbra, Outer Banks and Duofold. These brands serve to
round out our product offerings, allowing us to give consumers a variety of options to meet their
diverse needs.
Our Segments
Our operations are managed in five operating segments, each of which is a reportable segment
for financial reporting purposes: Innerwear, Outerwear, International, Hosiery and Other. These
segments are organized principally by product category and geographic location. Management of each
segment is responsible for the operations of these businesses but share a common supply chain and
media and marketing platforms. For more information about our segments, see Note 21 to our
Consolidated Financial Statements included in this Annual Report on Form 10-K.
Innerwear
The Innerwear segment focuses on core apparel essentials, and consists of products such as
womens intimate apparel, mens underwear, kids underwear, socks, thermals and sleepwear, marketed
under well-known brands that are trusted by consumers. We are an intimate apparel category leader
in the United States with our Hanes, Playtex, Bali, barely there, Just My Size, Wonderbra and
Duofold brands. We are also a leading manufacturer and marketer of mens underwear and kids
underwear under the Hanes, Champion, C9 by Champion and Polo Ralph Lauren brand names. Our
direct-to-consumer retail operations are included within the Innerwear segment. The retail
operations include our value-based (outlet) stores, internet operations and catalogs which sell
products from our portfolio of leading brands. As of January 3, 2009 and December 29, 2007, we had
213 and 216 outlet stores, respectively. Net sales for the year ended January 3, 2009 from our
Innerwear segment were $2.4 billion, representing approximately 56% of total segment net sales.
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Outerwear
We are a leader in the casualwear and activewear markets through our Hanes, Champion and Just
My Size brands, where we offer products such as t-shirts and fleece. Our casualwear lines offer a
range of quality, comfortable clothing for men, women and children marketed under the Hanes and
Just My Size brands. The Just My Size brand offers casual apparel designed exclusively to meet the
needs of plus-size women. In addition to activewear for men and women, Champion provides uniforms
for athletic programs and includes an apparel program, C9 by Champion, at Target stores. We also
license our Champion name for collegiate apparel and footwear. We also supply our t-shirts,
sportshirts and fleece products primarily to wholesalers, who then resell to screen printers and
embellishers, through brands such as Hanes, Champion, Outer Banks and Hanes Beefy-T. Net sales for
the year ended January 3, 2009 from our Outerwear segment were $1.2 billion, representing
approximately 28% of total segment net sales.
International
International includes products that span across the Innerwear, Outerwear and Hosiery
reportable segments and are marketed primarily under the Hanes, Wonderbra, Champion, Stedman,
Playtex, Zorba, Rinbros, Kendall, Sol y Oro, Ritmo and Bali brands. Net sales for the year ended
January 3, 2009 from our International segment were $460 million, representing approximately 11% of
total segment net sales and included sales in Latin America, Asia, Canada and Europe. Canada,
Europe, Japan and Mexico are our largest international markets, and we also have sales offices in
India and China.
Hosiery
We are the leading marketer of womens sheer hosiery in the United States. We compete in the
hosiery market by striving to offer superior values and executing integrated marketing activities,
as well as focusing on the style of our hosiery products. We market hosiery products under our
Leggs, Hanes and Just My Size brands. Net sales for the year ended January 3, 2009 from our
Hosiery segment were $228 million, representing approximately 5% of total segment net sales. We
expect the trend of declining hosiery sales to continue consistent with the overall decline in the
industry and with shifts in consumer preferences.
Other
Our Other segment consists of sales of nonfinished products such as yarn and certain other
materials in the United States and Latin America that maintain asset utilization at certain
manufacturing facilities and are expected to generate break even margins. Net sales for the year
ended January 3, 2009 in our Other segment were $22 million, representing less than 1% of total
segment net sales. Net sales from our Other segment are expected to continue to decline and to
ultimately become insignificant to us as we complete the implementation of our consolidation and
globalization efforts.
Design, Research and Product Development
At the core of our design, research and product development capabilities is a team of more
than 300 professionals. We have combined our design, research and development teams into an
integrated group for all of our product categories. A facility located in Winston-Salem, North
Carolina, is the center of our research, technical design and product development efforts. We also
employ creative design and product development personnel in our design center in New York City.
During the years ended January 3, 2009 and December 29, 2007, the six months ended December 30,
2006 and the year ended July 1, 2006, we spent approximately $46 million, $45 million, $23 million
and $55 million, respectively, on design, research and product development.
Customers
In the year ended January 3, 2009, approximately 88% of our net sales were to customers in the
United States and approximately 12% were to customers outside the United States. Domestically,
almost 83% of our net sales were wholesale sales to retailers, 9% were direct to consumers and 8%
were wholesale sales to third-party embellishers. We have well-established relationships with some
of the largest apparel retailers in the world. Our
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largest customers are Wal-Mart Stores, Inc., or Wal-Mart, Target
Corporation, or Target, and Kohls Corporation, or Kohls, accounting for 27%, 16% and 6%,
respectively, of our total sales in the year ended January 3, 2009. As is common in the apparel
essentials industry, we generally do not have purchase agreements that obligate our customers,
including Wal-Mart, to purchase our products. However, all of our key customer relationships have
been in place for ten years or more. Wal-Mart and Target are our only customers with sales that
exceed 10% of any individual segments sales. In our Innerwear segment, Wal-Mart accounted for 32%
of sales and Target accounted for 13% of sales during the year ended January 3, 2009. In our
Outerwear segment, Target accounted for 30% of sales and Wal-Mart accounted for 21% of sales during
the year ended January 3, 2009.
Due to their size and operational scale, high-volume retailers such as Wal-Mart require
extensive category and product knowledge and specialized services regarding the quantity, quality
and timing of product orders. We have organized multifunctional customer management teams, which
has allowed us to form strategic long-term relationships with these customers and efficiently focus
resources on category, product and service expertise.
Smaller regional customers attracted to our leading brands and quality products also represent
an important component of our distribution. Our organizational model provides for an efficient use
of resources that delivers a high level of category and channel expertise and services to these
customers.
Sales to the mass merchant channel accounted for approximately 44% of our net sales in the
year ended January 3, 2009. We sell all of our product categories in this channel primarily under
our Hanes, Just My Size, Playtex and C9 by Champion brands. Mass merchants feature high-volume,
low-cost sales of basic apparel items along with a diverse variety of consumer goods products, such
as grocery and drug products and other hard lines, and are characterized by large retailers, such
as Wal-Mart. Wal-Mart, which accounted for approximately 27% of our net sales during the year ended
January 3, 2009, is our largest mass merchant customer.
Sales to the national chains and department stores channel accounted for approximately 18% of
our net sales during the year ended January 3, 2009. These retailers target a higher-income
consumer than mass merchants, focus more of their sales on apparel items rather than other consumer
goods such as grocery and drug products, and are characterized by large retailers such as Kohls,
JC Penney Company, Inc. and Sears Holdings Corporation. We sell all of our product categories in
this channel. Traditional department stores target higher-income consumers and carry more high-end,
fashion conscious products than national chains or mass merchants and tend to operate in
higher-income areas and commercial centers. Traditional department stores are characterized by
large retailers such as Macys and Dillards, Inc. We sell products in our intimate apparel,
hosiery and underwear categories through department stores.
Sales to the direct to consumer channel, which are included within the Innerwear segment,
accounted for approximately 9% of our net sales in the year ended January 3, 2009. We sell our
branded products directly to consumers through our 213 outlet stores, as well as our catalogs and
our web sites operating under the Hanes, OneHanesPlace, Just My Size and Champion names. Our outlet
stores are value-based, offering the consumer a savings of 25% to 40% off suggested retail prices,
and sell first-quality, excess, post-season, obsolete and slightly imperfect products. Our catalogs
and web sites address the growing direct to consumer channel that operates in todays 24/7 retail
environment, and we have an active database of approximately three million consumers receiving our
catalogs and emails. Our web sites have experienced significant growth and we expect this trend to
continue as more consumers embrace this retail shopping channel.
Sales in our International segment represented approximately 11% of our net sales during the
year ended January 3, 2009, and included sales in Latin America, Asia, Canada and Europe. Canada,
Europe, Japan and Mexico are our largest international markets, and we also have sales offices in
India and China. We operate in several locations in Latin America including Mexico, Argentina,
Brazil and Central America. From an export business perspective, we use distributors to service
customers in the Middle East and Asia, and have a limited presence in Latin America. The brands
that are the primary focus of the export business include Hanes underwear and Bali, Playtex,
Wonderbra and barely there intimate apparel. As discussed below under Intellectual Property, we
are not permitted to sell Wonderbra and Playtex branded products in the member states of the EU, several other European countries, and South Africa.
Sales in other channels represented approximately 18% of our net sales during the year ended
January 3, 2009. We sell t-shirts, golf and sport shirts and fleece sweatshirts to third-party
embellishers primarily under our Hanes, Hanes Beefy-T and Outer Banks brands. Sales to third-party
embellishers accounted for approximately 8% of our net sales during the year ended January 3, 2009.
We also sell a significant range of our underwear, activewear and socks products under the Champion
brand to wholesale clubs, such as Costco, and sporting goods stores, such as The
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Sports Authority, Inc. We sell primarily legwear and underwear products under the Hanes and Leggs brands to food,
drug and variety stores. We sell products that span across our Innerwear, Outerwear and Hosiery
segments to the U.S. military for sale to servicemen and servicewomen.
Inventory
Effective inventory management is a key component of our future success. Because our customers
do not purchase our products under long-term supply contracts, but rather on a purchase order
basis, effective inventory management requires close coordination with the customer base. Through
Kanban sales and production planning, inventory management, product scheduling, demand
prioritization and related initiatives that facilitate just-in-time production and ordering
systems, we seek to ensure that products are available to meet customer demands while effectively
managing inventory levels. We also employ various other types of inventory management techniques
that include collaborative forecasting and planning, vendor-managed inventory, key event management
and various forms of replenishment management processes. We have demand management planners in our
customer management group who work closely with customers to develop demand forecasts that are
passed to the supply chain. We also have professionals within the customer management group who
coordinate daily with our larger customers to help ensure that our customers planned inventory
levels are in fact available at their individual retail outlets. Additionally, within our supply
chain organization we have dedicated professionals who translate the demand forecast into our
inventory strategy and specific production plans. These individuals work closely with our customer
management team to balance inventory investment/exposure with customer service targets.
Seasonality and Other Factors
Our operating results are subject to some variability. Generally, our diverse range of product
offerings helps mitigate the impact of seasonal changes in demand for certain items. Sales are
typically higher in the last two quarters (July to December) of each fiscal year. Socks, hosiery
and fleece products generally have higher sales during this period as a result of cooler weather,
back-to-school shopping and holidays. Sales levels in any period are also impacted by customers
decisions to increase or decrease their inventory levels in response to anticipated consumer
demand. Our customers may cancel orders, change delivery schedules or change the mix of products
ordered with minimal notice to us. For example, we experienced a shift in timing by our largest
retail customers of back-to-school programs from June to July in 2008. Our results of operations
are also impacted by fluctuations and volatility in the price of cotton and oil-related materials
and the timing of actual spending for our media, advertising and promotion expenses. Media,
advertising and promotion expenses may vary from period to period during a fiscal year depending on
the timing of our advertising campaigns for retail selling seasons and product introductions.
Marketing
Our strategy is to bring consumer-driven innovation to market in a compelling way. Our
approach is to build targeted, effective multimedia advertising and marketing campaigns to increase
awareness of our key brands. Driving growth platforms across categories is a major element of our
strategy as it enables us to meet key consumer needs and leverage advertising dollars. We believe
that the strength of our consumer insights, our distinctive brand propositions and our focus on
integrated marketing give us a competitive advantage in the fragmented apparel marketplace.
In 2008, we launched a number of new advertising and marketing initiatives:
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We launched new Look Who advertising in June featuring Michael Jordan and Charlie
Sheen to support our new Hanes Lay Flat Collar Undershirts and Hanes No Ride Up Boxer briefs. The
campaign includes television advertising as well as online and video game advertising. |
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We introduced our new Hanes No Ride Up Panty with television advertising featuring
Sarah Chalke in another new Look Who advertising campaign. |
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Building on the 10-year strategic alliance with The Walt Disney Company that we entered
into in October 2007, we introduced a line of apparel inspired by the Champion items worn
by characters in Walt Disney Pictures High School Musical 3: Senior Year to coincide
with the opening of that movie in October 2008. |
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We also continued some of our existing advertising and marketing initiatives:
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Our alliance with The Walt Disney Company includes a number of features. Hanes is the
presenting sponsor of the Rock n Roller Coaster Starring Aerosmith, one of the most
popular attractions at Disney-Hollywood Studios in Florida. Hanes has a customizable apparel
venue in Downtown Disney at Walt Disney World Resort that enables guests to design and
personalize their own custom t-shirts and other items. Champion has naming rights for the
stadium at Disneys Wide World of Sports Complex, the nations premier amateur sports
venue. In addition to Champion Stadium, Champion has brand placement and promotional
opportunities throughout the complex. We have in-store promotional and brand building
opportunities at eight ESPN Zone restaurants and stores located across the country. Hanes
and Champion have category exclusivity for select apparel at Disneyland Resort in Anaheim,
Calif., Walt Disney World Resort and Disneys Wide World of Sports Complex Stadium, both
in Florida, and eight ESPN Zone stores. Our products, including t-shirts and tanks and
fleece sweatshirts, sweatpants, hoodies and other family fleece, including infant and
toddler items, are co-labeled, including Disneyland Resort by Hanes, Walt Disney World by
Hanes, Disneys Wide World of Sports Complex by Champion and ESPN Zone by Champion. |
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We continued our How You Play national advertising campaign for Champion that we
launched in 2007. The campaign, which is the first campaign for our Champion brand since
2003, includes print, out-of-home and online components and is designed to capture the
everyday moments of fun and sport in a series of cool and hip lifestyle images. |
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We continued the Live Beautifully campaign for our Bali brand, launched in the Spring
of 2007. The print, television and online ad campaign features Bali bras and panties from
its Passion for Comfort, Seductive Curve and Cotton Creations lines. |
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We continued our innovative and expressive advertising and marketing campaign called
Girl Talk, launched in September 2007, in which confident, everyday women talk about
their breasts, in support of our Playtex 18 Hour and Playtex Secrets product lines. |
Distribution
As of January 3, 2009, we distributed our products for the U.S. market from a total of 22
distribution centers. These facilities include 20 facilities located in the U.S. and two
facilities located in regions where we manufacture our products. We internally manage and operate
16 of these facilities, and we use third-party logistics providers who operate the other six
facilities on our behalf. International distribution operations use a combination of third-party
logistics providers, as well as owned and operated distribution operations, to distribute goods to
our various international markets.
We are in the process of consolidating our distribution network to fewer larger facilities and
have reduced the number of distribution centers from the 48 that we maintained at the time of the
spin off to 36 as of January 3, 2009. In late 2008 we began preparing to ship products from a new
1.3 million square foot distribution center in Perris, California, and on January 13, 2009 began
shipping products from this facility to our customers.
Manufacturing and Sourcing
During the year ended January 3, 2009, approximately 66% of our finished goods sold were
manufactured through a combination of facilities we own and operate and facilities owned and
operated by third-party contractors who perform some of the steps in the manufacturing process for
us, such as cutting and/or sewing. We sourced the remainder of our finished goods from third-party
manufacturers who supply us with finished products based on our designs. We believe that our
balanced approach to product supply, which relies on a combination of owned, contracted and sourced
manufacturing located across different geographic regions, increases the efficiency of our
operations, reduces product costs and offers customers a reliable source of supply.
Finished Goods That Are Manufactured by Hanesbrands
The manufacturing process for finished goods that we manufacture begins with raw materials we
obtain from third parties. The principal raw materials in our product categories are cotton and
synthetics. Our costs for cotton
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yarn and cotton-based textiles vary based upon the fluctuating cost of cotton, which is
affected by, among other factors, weather, consumer demand, speculation on the commodities market
and the relative valuations and fluctuations of the currencies of producer versus consumer
countries and other factors that are generally unpredictable and beyond our control. We attempt to
mitigate the effect of fluctuating raw material costs by entering into short-term supply agreements
that set the price we will pay for cotton yarn and cotton-based textiles in future periods. We also
enter into hedging contracts on cotton designed to protect us from severe market fluctuations in
the wholesale prices of cotton. In addition to cotton yarn and cotton-based textiles, we use thread
and trim for product identification, buttons, zippers, snaps and lace.
Fluctuations in crude oil or petroleum prices may also influence the prices of items used in
our business, such as chemicals, dyestuffs, polyester yarn and foam. Alternate sources of these
materials and services are readily available. After they are sourced, cotton and synthetic
materials are spun into yarn, which is then knitted into cotton, synthetic and blended fabrics. We
spin a significant portion of the yarn and knit a significant portion of the fabrics we use in our
owned and operated facilities. To a lesser extent, we purchase fabric from several domestic and
international suppliers in conjunction with scheduled production. These fabrics are cut and sewn
into finished products, either by us or by third-party contractors. Most of our cutting and sewing
operations are located in Asia, Central America and the Caribbean Basin.
Rising fuel, energy and utility costs may have a significant impact on our manufacturing
costs. These costs may fluctuate due to a number of factors outside our control, including
government policy and regulation and weather conditions.
We continue to consolidate our manufacturing facilities and currently operate 52 manufacturing
facilities, down from 70 at the time of our spin off. In making decisions about the location of
manufacturing operations and third-party sources of supply, we consider a number of factors,
including local labor costs, quality of production, applicable quotas and duties, and freight
costs. During the second quarter of 2008, we added three company-owned sewing plants in Southeast
Asia two in Vietnam and one in Thailand giving us four sewing plants in Asia. In October
2008, we acquired a 370-employee embroidery facility in Honduras. For the past eight years, these
operations have produced embroidered and screen-printed apparel for us. This acquisition better
positions us for long-term growth in these segments. During the fourth quarter of 2008, we
commenced production at our 500,000 square foot socks manufacturing facility in El Salvador. This
facility, co-located with textile manufacturing operations that we acquired in 2007, provides a
manufacturing base in Central America from which to leverage our production scale at a lower cost
location. We also continued construction of a textile production plant in Nanjing, China, which
will be our first company-owned textile production facility in Asia. We expect production to
commence in the fourth quarter of 2009. The Nanjing textile facility will enable us to expand and
leverage our production scale in Asia as we balance our supply chain across hemispheres.
Finished Goods That Are Manufactured by Third Parties
In addition to our manufacturing capabilities, we also source finished goods we design from
third-party manufacturers, also referred to as turnkey products. Many of these turnkey products
are sourced from international suppliers by our strategic sourcing hubs in Hong Kong and other
locations in Asia.
All contracted and sourced manufacturing must meet our high quality standards. Further, all
contractors and third-party manufacturers must be preaudited and adhere to our strict supplier and
business practices guidelines. These requirements provide strict standards covering hours of work,
age of workers, health and safety conditions and conformity with local laws. Each new supplier must
be inspected and agree to comprehensive compliance terms prior to performance of any production on
our behalf. We audit compliance with these standards and maintain strict compliance performance
records. In addition to our audit procedures, we require certain of our suppliers to be Worldwide
Responsible Apparel Production, or WRAP, certified. WRAP is a recognized apparel certification
program that independently monitors and certifies compliance with certain specified manufacturing
standards that are intended to ensure that a given factory produces sewn goods under lawful,
humane, and ethical conditions. WRAP uses third-party, independent certification firms and requires
factory-by-factory certification.
Trade Regulation
We are exposed to certain risks of doing business outside of the United States. We import
goods from company-owned facilities in Asia, Central America, the Caribbean Basin and Mexico, and
from suppliers in those areas and in Europe, Africa and the Middle East. These import transactions
had been subject to constraints imposed
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by bilateral agreements that imposed quotas that limited
the amount of certain categories of merchandise from certain countries that could be imported into
the United States and the EU.
Effective on January 1, 2005, the United States and other World Trade Organization, or WTO,
member countries, with few exceptions, removed quotas on textile and apparel goods from WTO member
countries including China. However in the middle of 2005, several countries, including the United
States, imposed special safeguard quotas on some Chinese textile and apparel goods pursuant special
provisions contained in Chinas Accession Agreement to the WTO. These quotas expired at the end of
2008. Under different provisions of U.S. law, similar safeguard quotas may be re-imposed against
China or imposed against other countries in the future. Our management evaluates the possible
impact of these and similar actions on our ability to import products from China. If such
safeguards were to be re-imposed, we do not expect that these restraints would have a material
impact on us.
Our management monitors new developments and risks relating to duties, tariffs and quotas.
Changes in these areas have the potential to harm or, in some cases, benefit our business. In
response to the changing import environment resulting from the elimination of quotas, management
has chosen to continue its balanced approach to manufacturing and sourcing. We attempt to limit our
sourcing exposure through geographic diversification with a mix of company-owned and contracted
production, as well as shifts of production among countries and contractors. We will continue to
manage our supply chain from a global perspective and adjust as needed to changes in the global
production environment.
We also monitor a number of international security risks. We are a member of the Customs-Trade
Partnership Against Terrorism, or C-TPAT, a partnership between the government and private sector
initiated after the events of September 11, 2001 to improve supply chain and border security.
C-TPAT partners work with U.S. Customs and Border Protection to protect their supply chains from
concealment of terrorist weapons, including weapons of mass destruction. In exchange, U.S. Customs
and Border Protection provides reduced inspections at the port of arrival and expedited processing
at the border.
Competition
The apparel essentials market is highly competitive and rapidly evolving. Competition
generally is based upon price, brand name recognition, product quality, selection, service and
purchasing convenience. Our businesses face competition today from other large corporations and
foreign manufacturers. These competitors include Berskhire Hathaway Inc. through its subsidiary
Fruit of the Loom, Inc., Warnaco Group Inc., Maidenform Brands, Inc. and Gildan Activewear, Inc. in
our Innerwear business segment and Gildan Activewear, Inc., Berkshire Hathaway Inc. through its
subsidiaries Russell Corporation and Fruit of the Loom, Inc., Nike, Inc., adidas AG through its
adidas and Reebok brands and Under Armour Inc. in our Outerwear business segment. We also compete
with many small manufacturers across all of our business segments, including our International
segment. Additionally, department stores and other retailers, including many of our customers,
market and sell apparel essentials products under private labels that compete directly with our
brands. We also face intense competition from specialty stores that sell private label apparel not
manufactured by us such as Victorias Secret, Old Navy and The Gap.
Our competitive strengths include our strong brands with leading market positions, our
high-volume, core essentials focus, our significant scale of operations and our strong customer
relationships.
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Strong Brands with Leading Market Positions. According to NPD, our brands hold either
the number one or number two U.S. market position by sales value in most product categories
in which we compete, for the 12 month period ended November 30, 2008. According to NPD, our
largest brand, Hanes, is the top-selling apparel brand in the United States by units sold,
for the 12 month period ended November 30, 2008. |
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High-Volume, Core Essentials Focus. We sell high-volume, frequently replenished apparel
essentials. The majority of our core styles continue from year to year, with variations only in color,
fabric or design details, and are frequently replenished by consumers. We believe that our
status as a high-volume seller of core apparel essentials creates a more stable and
predictable revenue base and reduces our exposure to dramatic fashion shifts often observed
in the general apparel industry. |
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Significant Scale of Operations. According to NPD, we are the largest seller of apparel
essentials in the United States as measured by sales value for the 12 month period ended
November 30, 2008. Most of our products are sold to large retailers that have high-volume
demands. We believe that we are able to leverage |
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our significant scale of operations to
provide us with greater manufacturing efficiencies, purchasing power and product design,
marketing and customer management resources than our smaller competitors. |
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Strong Customer Relationships. We sell our products primarily through large,
high-volume retailers, including mass merchants, department stores and national chains. We
have strong, long-term relationships with our top customers, including relationships of
more than ten years with each of our top ten customers. We have aligned significant parts
of our organization with corresponding parts of our customers organizations. We also have
entered into customer-specific programs such as the C9 by Champion products marketed and
sold through Target stores. |
Intellectual Property
Overview
We market our products under hundreds of trademarks and service marks in the United States and
other countries around the world, the most widely recognized Hanes, Champion, C9 by Champion,
Playtex, Bali, Leggs, Just My Size, barely there, Wonderbra, Stedman, Outer Banks, Zorba, Rinbros
and Duofold. Some of our products are sold under trademarks that have been licensed from third
parties, such as Polo Ralph Lauren mens underwear, and we also hold licenses from various toy and
media companies that give us the right to use certain of their proprietary characters, names and
trademarks.
Some of our own trademarks are licensed to third parties, such as Champion for
athletic-oriented accessories. In the United States, the Playtex trademark is owned by Playtex
Marketing Corporation, of which we own a 50% share and which grants to us a perpetual royalty-free
license to the Playtex trademark on and in connection with the sale of apparel in the United States
and Canada. The other 50% share of Playtex Marketing Corporation is owned by Playtex Products,
Inc., an unrelated third-party, which has a perpetual royalty-free license to the Playtex trademark
on and in connection with the sale of non-apparel products in the United States. Outside the United
States and Canada, we own the Playtex trademark and perpetually license such trademark to Playtex
Products, Inc. for non-apparel products. In addition, as described below, as part of Sara Lees
sale in February 2006 of its European branded apparel business, an affiliate of Sun Capital
Partners, Inc., or Sun Capital, has an exclusive, perpetual, royalty-free license to manufacture,
sell and distribute apparel products under the Wonderbra and Playtex trademarks in the member
states of the EU, as well as several other European nations and South Africa. We also own a number
of copyrights. Our trademarks and copyrights are important to our marketing efforts and have
substantial value. We aggressively protect these trademarks and copyrights from infringement and
dilution through appropriate measures, including court actions and administrative proceedings.
Although the laws vary by jurisdiction, trademarks generally remain valid as long as they are
in use and/or their registrations are properly maintained. Most of the trademarks in our portfolio,
including our core brands, are covered by trademark registrations in the countries of the world in
which we do business, with registration periods generally ranging between seven and 10 years
depending on the country. Trademark registrations can be renewed indefinitely as long as the
trademarks are in use. We have an active program designed to ensure that our trademarks are
registered, renewed, protected and maintained. We plan to continue to use all of our core
trademarks and plan to renew the registrations for such trademarks for as long as we continue to
use them. Most of our copyrights are unregistered, although we have a sizable portfolio of
copyrighted lace designs that are the subject of a number of registrations at the U.S. Copyright
Office.
We place high importance on product innovation and design, and a number of these innovations
and designs are the subject of patents. However, we do not regard any segment of our business as
being dependent upon any single patent or group of related patents. In addition, we own proprietary
trade secrets, technology, and know how that we have not patented.
Shared Trademark Relationship with Sun Capital
In February 2006, Sara Lee sold its European branded apparel business to an affiliate of Sun
Capital. In connection with the sale, Sun Capital received an exclusive, perpetual, royalty-free
license to manufacture, sell and distribute apparel products under the Wonderbra and Playtex
trademarks in the member states of the EU, as well as Belarus, Bosnia-Herzegovina, Bulgaria,
Croatia, Macedonia, Moldova, Morocco, Norway, Romania, Russia, Serbia-Montenegro, South Africa,
Switzerland, Ukraine, Andorra, Albania, Channel Islands, Lichtenstein, Monaco, Gibraltar,
Guadeloupe, Martinique, Reunion and French Guyana, which we refer to as the Covered Nations. We
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are not permitted to sell Wonderbra and Playtex branded products in the Covered Nations, and Sun
Capital is not permitted to sell Wonderbra and Playtex branded products outside of the Covered
Nations. In connection with the sale, we also have received an exclusive, perpetual royalty-free
license to sell DIM and UNNO branded products in Panama, Honduras, El Salvador, Costa Rica,
Nicaragua, Belize, Guatemala, Mexico, Puerto Rico, the United States, Canada and, for DIM products,
Japan. We are not permitted to sell DIM or UNNO branded apparel products outside of these countries
and Sun Capital is not permitted to sell DIM or UNNO branded apparel products inside these
countries. In addition, the rights to certain European-originated brands previously part of Sara
Lees branded apparel portfolio were transferred to Sun Capital and are not included in our brand
portfolio.
Licensing Relationship with Tupperware Corporation
In December 2005, Sara Lee sold its direct selling business, which markets cosmetics, skin
care products, toiletries and clothing in 18 countries, to Tupperware Corporation, or Tupperware.
In connection with the sale, Dart Industries Inc., or Dart, an affiliate of Tupperware, received
a three-year exclusive license agreement which expires in June 2009 to use the C Logo, Champion
U.S.A., Wonderbra, W by Wonderbra, The One and Only Wonderbra, Playtex, Just My Size and Hanes
trademarks for the manufacture and sale, under the applicable brands, of certain mens and womens
apparel in the Philippines, including underwear, socks, sportswear products, bras, panties and
girdles, and for the exhaustion of similar product inventory in Malaysia. Dart also received a
ten-year, royalty-free, exclusive license to use the Girls Attitudes trademark for the manufacture
and sale of certain toiletries, cosmetics, intimate apparel, underwear, sports wear, watches, bags
and towels in the Philippines. The rights and obligations under these agreements were assigned to
us as part of the spin off.
In connection with the sale of Sara Lees direct selling business, Tupperware also signed two
five-year distributorship agreements providing Tupperware with the right, which is exclusive for
the first three years of the agreements, to distribute and sell, through door-to-door and similar
channels, Playtex, Champion, Rinbros, Aire, Wonderbra, Hanes and Teens by Hanes apparel items in
Mexico that we have discontinued and/or determined to be obsolete. The agreements also provide
Tupperware with the exclusive right for five years to distribute and sell through such channels
such apparel items sold by us in the ordinary course of business. The agreements also grant a
limited right to use such trademarks solely in connection with the distribution and sale of those
products in Mexico.
Under the terms of the agreements, we reserve the right to apply for, prosecute and maintain
trademark registrations in Mexico for those products covered by the distributorship agreement. The
rights and obligations under these agreements were assigned to us as part of the spin off.
Corporate Social Responsibility
We have a formal corporate social responsibility (CSR) program that consists of five
initiatives: a global business practices ethics program for all employees worldwide; a facility
compliance program that seeks to ensure company and supplier plants meet our labor and social
compliance standards; a product safety program; a global environmental management system that seeks
to reduce the environmental impact of our operations; and a commitment to corporate philanthropy
which seeks to meet the fundamental needs of the communities in which we live and work. We
employ over 20 full-time CSR personnel across the globe to manage our program.
In February 2008, we joined the Fair Labor Association and will undergo the Fair Labor
Associations two-year implementation process for accreditation of our global social compliance
program. The Fair Labor Association works with industry, civil society organizations and colleges
and universities to protect workers rights and improve working conditions in factories around the
world. Participating companies in the Fair Labor Association are required to fulfill 10 company
obligations, including conducting internal monitoring of facilities, submitting to independent
monitoring audits and verification, and managing and reporting information on their compliance
efforts. The Fair Labor Association conducts unannounced independent external monitoring audits of
a sample of a participating companys plants and suppliers and publishes the results of those
audits (and any corrective action plans that may be needed) for the public to review.
We incorporate Leadership in Energy and Environmental Design, or LEED-based practices into
many remodeling and new construction projects for our facilities around the world. In May 2008, we
earned the U.S. Green Building Councils sustainability certification for our Bentonville, Arkansas
sales office. The LEED certification was the first in Bentonville and the first for commercial
interiors in Arkansas. The approximately 10,000 square-foot office, which opened in August 2007 to
support our business with Wal-Mart, features advanced lighting, heating and cooling systems,
natural light for every workspace, energy-efficient appliances, and low-
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emission construction
materials such as paint, adhesives, sealants, carpet, coatings and furniture. LEED for Commercial
Interiors is the tenant-improvement category of the U.S. Green Building Councils nationally
accepted LEED Green Building Rating System. The category honors tenants without whole-building
control who follow rigorous sustainability guidelines to design or improve their interior space.
The LEED-certification process took seven months and required a third-party commissioning agent to
verify the achievement of U.S. Green Building Council standards, including the performance of
lighting and ventilation systems.
In addition, our new distribution center in Perris, California was built to stringent
standards set by the U.S. Green Building Council, and we will seek certification for the building
from the Green Building Council for Leadership in Energy and Environmental Design, which would make
it the largest LEED-certified warehouse in Southern California and one of the biggest in the world.
Sustainable features of this distribution center include reduction of energy usage through
extensive use of natural skylighting, motion-detection lighting, a design that does not require
heating or air conditioning for a comfortable working environment, reduction of water usage
compared with typical warehouses of its size through low-water bathroom fixtures and low-water
landscaping, innovative site grading techniques and use of locally produced concrete and steel and
many other LEED concepts such as use of paints, carpets and other materials with low volatile
organic compound content, an organic-focused pest control program that minimizes chemical pesticide
use, location near public transportation to reduce the parking lot size and reliance on automobile
transportation, preferred parking for low-emission and low-energy vehicles, and on-site bicycle
storage and shower and changing room facilities.
Environmental Matters
We are subject to various federal, state, local and foreign laws and regulations that govern
our activities, operations and products that may have adverse environmental, health and safety
effects, including laws and regulations relating to generating emissions, water discharges, waste,
product and packaging content and workplace safety. Noncompliance with these laws and regulations
may result in substantial monetary penalties and criminal sanctions. We are aware of hazardous
substances or petroleum releases at a few of our facilities and are working with the relevant
environmental authorities to investigate and address such releases. We also have been identified as
a potentially responsible party at a few waste disposal sites undergoing investigation and
cleanup under the federal Comprehensive Environmental Response, Compensation and Liability Act
(commonly known as Superfund) or state Superfund equivalent programs. Where we have determined that
a liability has been incurred and the amount of the loss can reasonably be estimated, we have
accrued amounts in our balance sheet for losses related to these sites. Compliance with
environmental laws and regulations and our remedial environmental obligations historically have not
had a material impact on our operations, and we are not aware of any proposed regulations or
remedial obligations that could trigger significant costs or capital expenditures in order to
comply.
Government Regulation
We are subject to U.S. federal, state and local laws and regulations that could affect our
business, including those promulgated under the Occupational Safety and Health Act, the Consumer
Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the
rules and regulations of the Consumer Products Safety Commission and various environmental laws and
regulations. Our international businesses are subject to similar laws and regulations in the
countries in which they operate. Our operations also are subject to various international trade
agreements and regulations. See Trade Regulation. While we believe that we are in compliance
in all material respects with all applicable governmental regulations, current governmental
regulations may change or become more stringent or unforeseen events may occur, any of which could
have a material adverse effect on our financial position or results of operations.
Employees
As of January 3, 2009, we had approximately 45,200 employees, approximately 10,200 of whom
were located in the United States. Of the employees located in the United States, approximately
2,200 were full or part-time employees in our stores within our direct to consumer channel. As of
January 3, 2009, in the United States, approximately 30 employees were covered by collective
bargaining agreements. A portion of our international employees were also covered by collective
bargaining agreements. We believe our relationships with our employees are good.
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Item 1A. Risk Factors
This section describes circumstances or events that could have a negative effect on our
financial results or operations or that could change, for the worse, existing trends in our
businesses. The occurrence of one or more of the circumstances or events described below could have
a material adverse effect on our financial condition, results of operations and cash flows or on
the trading prices of our common stock. The risks and uncertainties described in this Annual Report
on Form 10-K are not the only ones facing us. Additional risks and uncertainties that currently are
not known to us or that we currently believe are immaterial also may adversely affect our
businesses and operations.
We are continuing to execute our consolidation and globalization strategy and this process involves
significant costs and the risk of operational interruption.
The implementation of our consolidation and globalization strategy, which is designed to
improve operating efficiencies and lower costs, has resulted and is likely to continue to result in
significant costs in the short-term and generate savings as well as higher inventory levels for the
next 12 to 15 months. As further plans are developed and approved, we expect to recognize
additional restructuring costs as we eliminate duplicative functions within the organization and
transition a significant portion of our manufacturing capacity to lower-cost locations. As a
result of this strategy, we expect to incur approximately $250 million in restructuring and related
charges over the three year period following the spin off from Sara Lee on September 5, 2006, of
which approximately half is expected to be noncash. As of January 3, 2009, we have recognized
approximately $209 million and announced approximately $219 million in restructuring and related
charges related to this strategy since September 5, 2006. This process may also result in
operational interruptions, which may have an adverse effect on our business, results of operations,
financial condition and cash flows.
Our supply chain relies on an extensive network of foreign operations and any disruption to or
adverse impact on such operations may adversely affect our business, results of operations,
financial condition and cash flows.
We have an extensive global supply chain in which a significant portion of our products are
manufactured in or sourced from locations in Asia, Central America, the Caribbean Basin and Mexico
and we are continuing to add new manufacturing capacity in Asia, Central America and the Caribbean
Basin. Potential events that may disrupt our foreign operations include:
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political instability and acts of war or terrorism or other international events
resulting in the disruption of trade; |
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other security risks; |
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disruptions in shipping and freight forwarding services; |
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increases in oil prices, which would increase the cost of shipping; |
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interruptions in the availability of basic services and infrastructure, including power
shortages; |
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fluctuations in foreign currency exchange rates resulting in uncertainty as to future
asset and liability values, cost of goods and results of operations that are denominated in
foreign currencies; |
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extraordinary weather conditions or natural disasters, such as hurricanes, earthquakes,
tsunamis, floods or fires; and |
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the occurrence of an epidemic, the spread of which may impact our ability to obtain
products on a timely basis. |
Disruptions in our foreign supply chain could negatively impact our business by interrupting
production in facilities outside the United States, increasing our cost of sales, disrupting
merchandise deliveries, delaying receipt of the products into the United States or preventing us
from sourcing our products at all. Depending on timing, these
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events could also result in lost sales, cancellation charges or excessive markdowns. All of
the foregoing can have an adverse affect on our business, results of operations, financial
condition and cash flows.
Current economic conditions may adversely impact demand for our products, reduce access to credit
and cause our customers and others with which we do business to suffer financial hardship, all of
which could adversely impact our business, results of operations, financial condition and cash
flows.
Worldwide economic conditions have recently deteriorated significantly in many countries and
regions, including the United States, and may remain depressed for the foreseeable future. Although
the majority of our products are replenishment in nature and tend to be purchased by consumers on a
planned, rather than on an impulse, basis, our sales are impacted by discretionary spending by our
customers. Discretionary spending is affected by many factors, including, among others, general
business conditions, interest rates, inflation, consumer debt levels, the availability of consumer
credit, currency exchange rates, taxation, electricity power rates, gasoline prices, unemployment
trends and other matters that influence consumer confidence and spending. Many of these factors are
outside of our control. Our customers purchases of discretionary items, including our products,
could decline during periods when disposable income is lower, when prices increase in response to
rising costs, or in periods of actual or perceived unfavorable economic conditions. For example, we
experienced a spike in oil related commodity prices during the summer of 2008. Increases in our
product costs may not be offset by comparable rises in the income of consumers of our products.
These consumers may choose to purchase fewer of our products or lower-priced products of our
competitors in response to higher prices for our products, or may choose not to purchase our
products at prices that reflect our domestic price increases that become effective from time to
time. If any of these events occur, or if unfavorable economic conditions continue to challenge the
consumer environment, our business, results of operations, financial condition and cash flows could
be adversely affected.
In addition, economic conditions, including decreased access to credit, may result in
financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable
events for our customers, suppliers of raw materials and finished goods, logistics and other
service providers and financial institutions which are counterparties to our credit facilities and
derivatives transactions. In addition, the inability of these third parties to overcome these
difficulties may increase. For example, one of our customers, Mervyns, a regional retailer in
California and the Southwest that originally filed for reorganization under Chapter 11 in July
2008, announced in October 2008 its intention to wind down its business and conduct
going-out-of-business sales at remaining store locations. If third parties on which we rely for
raw materials, finished goods or services are unable to overcome difficulties resulting from the
deterioration in worldwide economic conditions and provide us with the materials and services we
need, or if counterparties to our credit facilities or derivatives transactions do not perform
their obligations, our business, results of operations, financial condition and cash flows could be
adversely affected.
Our customers generally purchase our products on credit, and as a result, our results of
operations, financial condition and cash flows may be adversely affected if our customers
experience financial difficulties.
During the past several years, various retailers, including some of our largest customers,
have experienced significant difficulties, including restructurings, bankruptcies and liquidations,
and the inability of retailers to overcome these difficulties may increase due to the recent
deterioration of worldwide economic conditions. This could adversely affect us because our
customers generally pay us after goods are delivered. Adverse changes in a customers financial
position could cause us to limit or discontinue business with that customer, require us to assume
more credit risk relating to that customers future purchases or limit our ability to collect
accounts receivable relating to previous purchases by that customer. Any of these occurrences
could have a material adverse effect on our business, results of operations, financial condition
and cash flows.
Our indebtedness subjects us to various restrictions and could decrease our profitability and
otherwise adversely affect our business.
As described in Managements Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources, our indebtedness includes the $2.1 billion senior
secured credit facility that we entered into on September 5, 2006 (the Senior Secured Credit
Facility), the $450 million senior secured second lien credit facility that we entered into on
September 5, 2006 (the Second Lien Credit Facility and, together with
the Senior Secured Credit Facility, the Credit Facilities), our $500 million Floating Rate
Senior Notes due 2014 (the Floating Rate Senior Notes) and the $250 million accounts receivable
securitization facility that we entered into on November 27, 2007 (the Receivables Facility). The
Senior Secured Credit Facility, Second Lien Credit
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Facility and the indenture governing the
Floating Rate Senior Notes contain restrictions that affect, and in some cases significantly limit
or prohibit, among other things, our ability to borrow funds, pay dividends or make other
distributions, make investments, engage in transactions with affiliates, or create liens on our
assets.
Our leverage also could put us at a competitive disadvantage compared to our competitors that
are less leveraged. These competitors could have greater financial flexibility to pursue strategic
acquisitions, secure additional financing for their operations by incurring additional debt, expend
capital to expand their manufacturing and production operations to lower-cost areas and apply
pricing pressure on us. In addition, because many of our customers rely on us to fulfill a
substantial portion of their apparel essentials demand, any concern these customers may have
regarding our financial condition may cause them to reduce the amount of products they purchase
from us. Our leverage could also impede our ability to withstand downturns in our industry or the
economy.
If we are unable to maintain financial ratios associated with our indebtedness, such failure could
cause the acceleration of the maturity of such indebtedness which would adversely affect our
business.
Covenants in the Credit Facilities and the Receivables Facility require us to maintain a
minimum interest coverage ratio and a maximum total debt to EBITDA (earnings before income taxes,
depreciation expense and amortization), or leverage ratio. The recent deterioration of worldwide
economic conditions could impact our ability to maintain the financial ratios contained in these
agreements. If we fail to maintain these financial ratios, that failure could result in a default
that accelerates the maturity of the indebtedness under such facilities, which could require that
we repay such indebtedness in full, together with accrued and unpaid interest, unless we are able
to negotiate new financial ratios or waivers of our current ratios with our lenders. Even if we
are able to negotiate new financial ratios or waivers of our current financial ratios, we may be
required to pay fees or make other concessions that may adversely impact our business. Any one of
these options could result in significantly higher interest expense in 2009 and beyond. In
addition, these options could require modification of our interest rate derivative portfolio, which
could require us to make a cash payment in the event of terminating a derivative instrument or
impact the effectiveness of our interest rate hedging instruments and
require us to take non-cash charges. For information regarding our
compliance with these covenants, see Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital Resources Trends and Uncertainties Affecting
Liquidity.
If we fail to meet our payment or other obligations, the lenders could foreclose on, and acquire
control of, substantially all of our assets.
In connection with our incurrence of indebtedness under the Credit Facilities, the lenders
under those facilities have received a pledge of substantially all of our existing and future
direct and indirect subsidiaries, with certain customary or agreed-upon exceptions for foreign
subsidiaries and certain other subsidiaries. Additionally, these lenders generally have a lien on
substantially all of our assets and the assets of our subsidiaries, with certain exceptions. The
financial institutions that are party to the Receivables Facility have a lien on certain of our
domestic accounts receivables. As a result of these pledges and liens, if we fail to meet our
payment or other obligations under the Credit Facilities or the Receivables Facility, the lenders
under those facilities will be entitled to foreclose on substantially all of our assets and, at
their option, liquidate these assets.
Our indebtedness restricts our ability to obtain additional capital in the future.
The restrictions contained in the Credit Facilities and in the indenture governing the
Floating Rate Senior Notes could limit our ability to obtain additional capital in the future to
fund capital expenditures or acquisitions, meet our debt payment obligations and capital
commitments, fund any operating losses or future development of our business affiliates, obtain
lower borrowing costs that are available from secured lenders or engage in advantageous
transactions that monetize our assets, or conduct other necessary or prudent corporate activities.
If we need to incur additional debt or issue equity in order to fund working capital and
capital expenditures or to make acquisitions and other investments, debt or equity financing may
not be available to us on acceptable terms
or at all. If we are not able to obtain sufficient financing, we may be unable to maintain or
expand our business. If we raise funds through the issuance of debt or equity, any debt securities
or preferred stock issued will have rights, preferences and privileges senior to those of holders
of our common stock in the event of a liquidation, and the terms of the debt securities may impose
restrictions on our operations. If we raise funds through the issuance of equity, the issuance
would dilute the ownership interest of our stockholders.
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To service our debt obligations, we may need to increase the portion of the income of our foreign
subsidiaries that is expected to be remitted to the United States, which could increase our income
tax expense.
The amount of the income of our foreign subsidiaries that we expect to remit to the United
States may significantly impact our U.S. federal income tax expense. We pay U.S. federal income
taxes on that portion of the income of our foreign subsidiaries that is expected to be remitted to
the United States and be taxable. In order to service our debt obligations, we may need to increase
the portion of the income of our foreign subsidiaries that we expect to remit to the United States,
which may significantly increase our income tax expense. Consequently, our income tax expense has
been, and will continue to be, impacted by our strategic initiative to make substantial capital
investments outside the United States.
Significant fluctuations and volatility in the price of cotton and other raw materials we purchase
may have a material adverse effect on our business, results of operations, financial condition and
cash flows.
Cotton is the primary raw material used in the manufacture of many of our products. Our costs
for cotton yarn and cotton-based textiles vary based upon the fluctuating cost of cotton, which is
affected by weather, consumer demand, speculation on the commodities market, the relative
valuations and fluctuations of the currencies of producer versus consumer countries and other
factors that are generally unpredictable and beyond our control. While we do enter into short-term
supply agreements and hedges from time to time in an attempt to protect our business from the
volatility of the market price of cotton, our business can be affected by dramatic movements in
cotton prices, although cotton represents only 8% of our cost of sales. Cotton prices were 65 cents
per pound for the year ended January 3, 2009 and 56 cents per pound for the year ended December 29,
2007. The price of cotton currently in our inventory is in the mid 60 cents per pound range which
is the price that will impact our operating results in the first half of 2009. The prices for the
most recent cotton crop, which will impact our operating results in the second half of 2009, have
decreased to the low 50 cents per pound range.
We are not always successful in our efforts to protect our business from the volatility of the
market price of cotton through short-term supply agreements and hedges, and our business can be
adversely affected by dramatic movements in cotton prices. For example, we estimate that a change
of $0.01 per pound in cotton prices would affect our annual raw material costs by $3 million, at
current levels of production. The ultimate effect of this change on our earnings cannot be
quantified, as the effect of movements in cotton prices on industry selling prices are uncertain,
but any dramatic increase in the price of cotton would have a material adverse effect on our
business, results of operations, financial condition and cash flows.
In addition, during the summer of 2008 we experienced a spike in oil related commodity prices
and other raw materials used in our products, such as dyes and chemicals, and increases in other
costs, such as fuel, energy and utility costs. These costs may fluctuate due to a number of
factors outside our control, including government policy and regulation and weather conditions.
Current market returns have had a negative impact on the return on plan assets for our pension and
other postemployment plans, which may require significant funding.
As widely reported, financial markets in the United States, Europe and Asia have been
experiencing extreme disruption in recent months. As a result of this disruption in the domestic
and international equity and bond markets, our pension plans and
other postemployment plans had a
decrease in asset values of approximately 32% during the year ended January 3, 2009. We are unable
to predict the severity or the duration of the current disruptions in the financial markets and the
adverse economic conditions in the United States, Europe and Asia. We are not required to make any
mandatory contributions to our plans in 2009. Nevertheless, the funded status of these plans, and
the related cost reflected in our financial statements, are affected by various factors that are
subject to an inherent degree
of uncertainty, particularly in the current economic environment. Under the Pension Protection
Act of 2006 (the Pension Protection Act), continued losses of asset values may necessitate
increased funding of the plans in the future to meet minimum federal government requirements. The
continued downward pressure on the asset values of these plans may require us to fund obligations
earlier than we had originally planned, which would have a negative impact on cash flows from
operations.
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The loss of one or more of our suppliers of finished goods or raw materials may interrupt our
supplies and materially harm our business.
We purchase all of the raw materials used in our products and approximately 34% of the apparel
designed by us from a limited number of third-party suppliers and manufacturers. Our ability to
meet our customers needs depends on our ability to maintain an uninterrupted supply of raw
materials and finished products from our third-party suppliers and manufacturers. Our business,
financial condition or results of operations could be adversely affected if any of our principal
third-party suppliers or manufacturers experience financial difficulties that they are not able to
overcome resulting from the deterioration in worldwide economic conditions, reproduction problems,
lack of capacity or transportation disruptions. The magnitude of this risk depends upon the timing
of any interruptions, the materials or products that the third-party manufacturers provide and the
volume of production.
Our dependence on third parties for raw materials and finished products subjects us to the
risk of supplier failure and customer dissatisfaction with the quality of our products. Quality
failures by our third-party manufacturers or changes in their financial or business condition that
affect their production could disrupt our ability to supply quality products to our customers and
thereby materially harm our business.
If we fail to manage our inventory effectively, we may be required to establish additional
inventory reserves or we may not carry enough inventory to meet customer demands, causing us to
suffer lower margins or losses.
We are faced with the constant challenge of balancing our inventory with our ability to meet
marketplace needs. We continually monitor our inventory levels to best balance current supply and
demand with potential future demand that typically surges when consumers no longer postpone
purchases in our product categories. Inventory reserves can result from the complexity of our
supply chain, a long manufacturing process and the seasonal nature of certain products. Increases
in inventory levels may also be needed to service our business as we continue to execute our
consolidation and globalization strategy. As a result, we could be subject to high levels of
obsolescence and excess stock. Based on discussions with our customers and internally generated
projections, we produce, purchase and/or store raw material and finished goods inventory to meet
our expected demand for delivery. However, we sell a large number of our products to a small number
of customers, and these customers generally are not required by contract to purchase our goods. If,
after producing and storing inventory in anticipation of deliveries, demand is lower than expected,
we may have to hold inventory for extended periods or sell excess inventory at reduced prices, in
some cases below our cost. There are inherent uncertainties related to the recoverability of
inventory, and it is possible that market factors and other conditions underlying the valuation of
inventory may change in the future and result in further reserve requirements. Excess inventory
charges can reduce gross margins or result in operating losses, lowered plant and equipment
utilization and lowered fixed operating cost absorption, all of which could have a material adverse
effect on our business, results of operations, financial condition or cash flows.
Conversely, we also are exposed to lost business opportunities if we underestimate market
demand and produce too little inventory for any particular period. Because sales of our products
are generally not made under contract, if we do not carry enough inventory to satisfy our
customers demands for our products within an acceptable time frame, they may seek to fulfill their
demands from one or several of our competitors and may reduce the amount of business they do with
us. Any such action could have a material adverse effect on our business, results of operations,
financial condition and cash flows.
We rely on a relatively small number of customers for a significant portion of our sales, and the
loss of or material reduction in sales to any of our top customers would have a material adverse
effect on our business, results of operations, financial condition and cash flows.
During the year ended January 3, 2009, our top ten customers accounted for 65% of our net
sales and our top customers, Wal-Mart and Target, accounted for 27% and 16% of our net sales,
respectively. We expect that these customers will continue to represent a significant portion of
our net sales in the future. In addition, our top customers are the largest market participants in
our primary distribution channels across all of our product lines. Any loss of or material
reduction in sales to any of our top ten customers, especially Wal-Mart and Target, would be
difficult to recapture, and would have a material adverse effect on our business, results of
operations, financial condition and cash flows.
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We generally do not sell our products under contracts, and, as a result, our customers are
generally not contractually obligated to purchase our products, which causes some uncertainty as to
future sales and inventory levels.
We generally do not enter into purchase agreements that obligate our customers to purchase our
products, and as a result, most of our sales are made on a purchase order basis. For example, we
have no agreements with Wal-Mart that obligate Wal-Mart to purchase our products. If any of our
customers experiences a significant downturn in its business, or fails to remain committed to our
products or brands, the customer is generally under no contractual obligation to purchase our
products and, consequently, may reduce or discontinue purchases from us. In the past, such actions
have resulted in a decrease in sales and an increase in our inventory and have had an adverse
effect on our business, results of operations, financial condition and cash flows. If such actions
occur again in the future, our business, results of operations and financial condition will likely
be similarly affected.
Our existing customers may require products on an exclusive basis, forms of economic support and
other changes that could be harmful to our business.
Customers increasingly may require us to provide them with some of our products on an
exclusive basis, which could cause an increase in the number of stock keeping units, or SKUs, we
must carry and, consequently, increase our inventory levels and working capital requirements.
Moreover, our customers may increasingly seek markdown allowances, incentives and other forms of
economic support which reduce our gross margins and affect our profitability. Our financial
performance is negatively affected by these pricing pressures when we are forced to reduce our
prices without being able to correspondingly reduce our production costs.
We operate in a highly competitive and rapidly evolving market, and our market share and results of
operations could be adversely affected if we fail to compete effectively in the future.
The apparel essentials market is highly competitive and evolving rapidly. Competition is
generally based upon price, brand name recognition, product quality, selection, service and
purchasing convenience. Our businesses face competition today from other large corporations and
foreign manufacturers. These competitors include Berskhire Hathaway Inc. through its subsidiary
Fruit of the Loom, Inc., Warnaco Group Inc., Maidenform Brands, Inc. and Gildan Activewear, Inc. in
our Innerwear business segment and Gildan Activewear, Inc., Berkshire Hathaway Inc. through its
subsidiaries Russell Corporation and Fruit of the Loom, Inc., Nike, Inc., adidas AG through its
adidas and Reebok brands and Under Armour Inc. in our Outerwear business segment. We also compete
with many small manufacturers across all of our business segments, including our International
segment. Additionally, department stores, specialty stores and other retailers, including many of
our customers, market and sell apparel essentials products under private labels that compete
directly with our brands. These customers may buy goods that are manufactured by others, which
represents a lost business opportunity for us, or they may sell private label products manufactured
by us, which have significantly lower gross margins than our branded products. We also face intense
competition from specialty stores that sell private label apparel not manufactured by us, such as
Victorias Secret, Old Navy and The Gap. Increased competition may result in a loss of or a
reduction in shelf space and promotional support and reduced prices, in each case decreasing our
cash flows, operating margins and profitability. Our ability to remain competitive in the areas of
price, quality, brand recognition, research and product development, manufacturing and distribution
will, in large part, determine our future success. If we fail to compete successfully, our market
share, results of operations and financial condition will be materially and adversely affected.
Sales of and demand for our products may decrease if we fail to keep pace with evolving consumer
preferences and trends, which could have an adverse effect on net sales and profitability.
Our success depends on our ability to anticipate and respond effectively to evolving consumer
preferences and trends and to translate these preferences and trends into marketable product
offerings. If we are unable to successfully anticipate, identify or react to changing styles or
trends or misjudge the market for our products, our sales may be lower than expected and we may be
faced with a significant amount of unsold finished goods inventory. In response, we may be forced
to increase our marketing promotions, provide markdown allowances to
our customers or liquidate excess merchandise, any of which could have a material adverse
effect on our net sales and profitability. Our brand image may also suffer if customers believe
that we are no longer able to offer innovative products, respond to consumer preferences or
maintain the quality of our products.
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We are prohibited from selling our Wonderbra and Playtex intimate apparel products in the EU, as
well as certain other countries in Europe and South Africa, and therefore are unable to take
advantage of business opportunities that may arise in such countries.
In February 2006, Sara Lee sold its European branded apparel business to Sun Capital. In
connection with the sale, Sun Capital received an exclusive, perpetual, royalty-free license to
manufacture, sell and distribute apparel products under the Wonderbra and Playtex trademarks in the
member states of the EU, as well as Russia, South Africa, Switzerland and certain other nations in
Europe. Due to the exclusive license, we are not permitted to sell Wonderbra and Playtex branded
products in these nations and Sun Capital is not permitted to sell Wonderbra and Playtex branded
products outside of these nations. Consequently, we will not be able to take advantage of business
opportunities that may arise relating to the sale of Wonderbra and Playtex products in these
nations. For more information on these sales restrictions see Business Intellectual Property.
Our business could be harmed if we are unable to deliver our products to the market due to problems
with our distribution network.
We distribute our products from facilities that we operate as well as facilities that are
operated by third-party logistics providers. These facilities include a combination of owned,
leased and contracted distribution centers. We are in the process of consolidating our
distribution network to fewer larger facilities, including the recent opening of a 1.3 million
square foot facility in Perris, California. This consolidation of our distribution network will
involve significant change, including movement of product during the transitional period,
implementation of new warehouse management systems and technology, and opening of new distribution
centers and new third-party logistics providers to replace parts of our legacy distribution
network. Because substantially all of our products are distributed from a relatively small number
of locations, our operations could also be interrupted by extraordinary weather conditions or
natural disasters, such as hurricanes, earthquakes, tsunamis, floods or fires near our distribution
centers. We maintain business interruption insurance, but it may not adequately protect us from the
adverse effects that could be caused by significant disruptions to our distribution network. In
addition, our distribution network is dependent on the timely performance of services by third
parties, including the transportation of product to and from our distribution facilities. If we are
unable to successfully operate our distribution network, our business, results of operations,
financial condition and cash flows could be adversely affected.
Any inadequacy, interruption, integration failure or security failure with respect to our
information technology could harm our ability to effectively operate our business.
Our ability to effectively manage and operate our business depends significantly on our
information technology systems. As part of our efforts to consolidate our operations, we also
expect to continue to incur costs associated with the integration of our information technology
systems across our company over the next several years. This process involves the consolidation or
possible replacement of technology platforms so that our business functions are served by fewer
platforms, and has resulted in operational inefficiencies and in some cases increased our costs. We
are subject to the risk that we will not be able to absorb the level of systems change, commit the
necessary resources or focus the management attention necessary for the implementation to succeed.
Many key strategic initiatives of major business functions, such as our supply chain and our
finance operations, depend on advanced capabilities enabled by the new systems and if we fail to
properly execute or if we miss critical deadlines in the implementation of this initiative, we
could experience serious disruption and harm to our business. The failure of these systems to
operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in
integrating new systems or systems of acquired businesses or a breach in security of these systems
could adversely impact the operations of our business.
If we experience a data security breach and confidential customer information is disclosed, we may
be subject to penalties and experience negative publicity, which could affect our customer
relationships and have a material adverse effect on our business.
In addition, we and our customers could suffer harm if customer information were accessed by
third parties due to a security failure in our systems. The collection of data and processing of
transactions through our direct-to-consumer internet and catalog operations require us to receive
and store a large amount of personally identifiable data. This type of data is subject to
legislation and regulation in various jurisdictions. Recently, data security breaches suffered by
well-known companies and institutions have attracted a substantial amount of media attention,
prompting state and federal legislative proposals addressing data privacy and security. If some of
the current
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proposals are adopted, we may be subject to more extensive requirements to protect the
customer information that we process in connection with the purchases of our products. We may
become exposed to potential liabilities with respect to the data that we collect, manage and
process, and may incur legal costs if our information security policies and procedures are not
effective or if we are required to defend our methods of collection, processing and storage of
personal data. Future investigations, lawsuits or adverse publicity relating to our methods of
handling personal data could adversely affect our business, results of operations, financial
condition and cash flows due to the costs and negative market reaction relating to such
developments.
Compliance with environmental and other regulations could require significant expenditures.
We are subject to various federal, state, local and foreign laws and regulations that govern
our activities, operations and products that may have adverse environmental, health and safety
effects, including laws and regulations relating to generating emissions, water discharges, waste,
product and packaging content and workplace safety. Noncompliance with these laws and regulations
may result in substantial monetary penalties and criminal sanctions. Future events that could give
rise to manufacturing interruptions or environmental remediation include changes in existing laws
and regulations, the enactment of new laws and regulations, a release of hazardous substances on or
from our properties or any associated offsite disposal location, or the discovery of contamination
from current or prior activities at any of our properties. While we are not aware of any proposed
regulations or remedial obligations that could trigger significant costs or capital expenditures in
order to comply, any such regulations or obligations could adversely affect our business, results
of operations, financial condition and cash flows.
International trade regulations may increase our costs or limit the amount of products that we can
import from suppliers in a particular country, which could have an adverse effect on our business.
Because a significant amount of our manufacturing and production operations are located, or
our products are sourced from, outside the United States, we are subject to international trade
regulations. The international trade regulations to which we are subject or may become subject
include tariffs, safeguards or quotas. These regulations could limit the countries in which we
produce or from which we source our products or significantly increase the cost of operating in or
obtaining materials originating from certain countries. Restrictions imposed by international trade
regulations can have a particular impact on our business when, after we have moved our operations
to a particular location, new unfavorable regulations are enacted in that area or favorable
regulations currently in effect are changed. The countries in which our products are manufactured
or into which they are imported may from time to time impose additional new regulations, or modify
existing regulations, including:
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additional duties, taxes, tariffs and other charges on imports, including retaliatory
duties or other trade sanctions, which may or may not be based on WTO rules, and which
would increase the cost of products produced in such countries; |
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limitations on the quantity of goods which may be imported into the United States from a
particular country, including the imposition of further safeguard mechanisms by the U.S.
government or governments in other jurisdictions, limiting our ability to import goods from
particular countries, such as China; |
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changes in the classification of products that could result in higher duty rates than we
have historically paid; |
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modification of the trading status of certain countries; |
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requirements as to where products are manufactured; |
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creation of export licensing requirements, imposition of restrictions on export
quantities or specification of minimum export pricing; or |
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creation of other restrictions on imports. |
Adverse international trade regulations, including those listed above, would have a material
adverse effect on our business, results of operations, financial condition and cash flows.
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Due to the extensive nature of our foreign operations, fluctuations in foreign currency exchange
rates could negatively impact our results of operations.
We sell a majority of our products in transactions denominated in U.S. dollars; however, we
purchase many of our raw materials, including cotton, our primary raw material, pay a portion of
our wages and make other payments in our supply chain in foreign currencies. As a result, when the
U.S. dollar weakens against any of these currencies, our cost of sales could increase
substantially. Outside the United States, we may pay for materials or finished products in U.S.
dollars, and in some cases a strengthening of the U.S. dollar could effectively increase our costs
where we use foreign currency to purchase the U.S. dollars we need to make such payments. We use
foreign exchange forward and option contracts to hedge material exposure to adverse changes in
foreign exchange rates. We are also exposed to gains and losses resulting from the effect that
fluctuations in foreign currency exchange rates have on the reported results in our Consolidated
Financial Statements due to the translation of operating results and financial position of our
foreign subsidiaries.
We had approximately 45,200 employees worldwide as of January 3, 2009, and our business operations
and financial performance could be adversely affected by changes in our relationship with our
employees or changes to U.S. or foreign employment regulations.
We had approximately 45,200 employees worldwide as of January 3, 2009. This means we have a
significant exposure to changes in domestic and foreign laws governing our relationships with our
employees, including wage and hour laws and regulations, fair labor standards, minimum wage
requirements, overtime pay, unemployment tax rates, workers compensation rates, citizenship
requirements and payroll taxes, which likely would have a direct impact on our operating costs.
Approximately 35,000 of those employees were outside of the United States. A significant increase
in minimum wage or overtime rates in countries where we have employees could have a significant
impact on our operating costs and may require that we relocate those operations or take other steps
to mitigate such increases, all of which may cause us to incur additional costs, expend resources
responding to such increases and lower our margins.
In addition, some of our employees are members of labor organizations or are covered by
collective bargaining agreements. If there were a significant increase in the number of our
employees who are members of labor organizations or become parties to collective bargaining
agreements, we would become vulnerable to a strike, work stoppage or other labor action by these
employees that could have an adverse effect on our business.
We may suffer negative publicity if we or our third-party manufacturers violate labor laws or
engage in practices that are viewed as unethical or illegal, which could cause a loss of business.
We cannot fully control the business and labor practices of our third-party manufacturers, the
majority of whom are located in Asia, Central America and the Caribbean Basin. If one of our own
manufacturing operations or one of our third-party manufacturers violates or is accused of
violating local or international labor laws or other applicable regulations, or engages in labor or
other practices that would be viewed in any market in which our products are sold as unethical, we
could suffer negative publicity, which could tarnish our brands image or result in a loss of
sales. In addition, if such negative publicity affected one of our customers, it could result in a
loss of business for us.
Our business depends on our senior management team and other key personnel.
Our success depends upon the continued contributions of our senior management team and other
key personnel, some of whom have unique talents and experience and would be difficult to replace.
The loss or interruption of the
services of a member of our senior management team or other key personnel could have a
material adverse effect on our business during the transitional period that would be required for a
successor to assume the responsibilities of the position. Our future success will also depend on
our ability to attract and retain key managers, sales people and others. We may not be able to
attract or retain these employees, which could adversely affect our business.
24
The success of our business is tied to the strength and reputation of our brands, including brands
that we license to other parties. If other parties take actions that weaken, harm the reputation of
or cause confusion with our brands, our business, and consequently our sales, results of operations
and cash flows, may be adversely affected.
We license some of our important trademarks to third parties. For example, we license Champion
to third parties for athletic-oriented accessories. Although we make concerted efforts to protect
our brands through quality control mechanisms and contractual obligations imposed on our licensees,
there is a risk that some licensees may not be in full compliance with those mechanisms and
obligations. In that event, or if a licensee engages in behavior with respect to the licensed marks
that would cause us reputational harm, we could experience a significant downturn in that brands
business, adversely affecting our sales and results of operations. Similarly, any misuse of the
Wonderbra or Playtex brands by Sun Capital could result in negative publicity and a loss of sales
for our products under these brands, any of which may have a material adverse effect on our
business, results of operations, financial condition or cash flows.
We design, manufacture, source and sell products under trademarks that are licensed from third
parties. If any licensor takes actions related to their trademarks that would cause their brands or
our company reputational harm, our business may be adversely affected.
We design, manufacture, source and sell a number of our products under trademarks that are
licensed from third parties such as our Polo Ralph Lauren mens underwear. Because we do not
control the brands licensed to us, our licensors could make changes to their brands or business
models that could result in a significant downturn in a brands business, adversely affecting our
sales and results of operations. If any licensor engages in behavior with respect to the licensed
marks that would cause us reputational harm, or if any of the brands licensed to us violates the
trademark rights of another or are deemed to be invalid or unenforceable, we could experience a
significant downturn in that brands business, adversely affecting our sales and results of
operations, and we may be required to expend significant amounts on public relations, advertising
and, possibly, legal fees.
Businesses that we may acquire may fail to perform to expectations, and we may be unable to
successfully integrate acquired businesses with our existing business.
From time to time, we may evaluate potential acquisition opportunities to support and
strengthen our business. We may not be able to realize all or a substantial portion of the
anticipated benefits of acquisitions that we may consummate. Newly acquired businesses may not
achieve expected results of operations, including expected levels of revenues, and may require
unanticipated costs and expenditures. Acquired businesses may also subject us to liabilities that
we were unable to discover in the course of our due diligence, and our rights to indemnification
from the sellers of such businesses, even if obtained, may not be sufficient to offset the relevant
liabilities. In addition, the integration of newly acquired businesses may be expensive and
time-consuming and may not be entirely successful. Integration of the acquired businesses may also
place additional pressures on our systems of internal control over financial reporting. If we are
unable to successfully integrate newly acquired businesses or if acquired businesses fail to
produce targeted results, it could have an adverse effect on our results of operations or financial
condition.
Our historical financial information and operations for periods prior to the spin off are not
necessarily indicative of our results as a separate company and therefore may not be reliable as an
indicator of our future financial results.
Our historical financial statements for periods prior to the spin off on September 5, 2006
were created from Sara Lees financial statements using our historical results of operations and
historical bases of assets and liabilities as part of Sara Lee. Accordingly, historical financial
information for periods prior to the spin off is not necessarily indicative of what our financial
position, results of operations and cash flows would have been if we had been a separate,
stand alone entity during those periods. Our historical financial information for periods prior
to the spin off is also not necessarily indicative of what our results of operations, financial
position and cash flows will be in the future and, for periods prior to the spin off, does not
reflect many significant changes in our capital structure, funding and operations resulting from
the spin off. While our results of operations for periods prior to the spin off include all costs
of Sara Lees branded apparel business, these costs and expenses do not include all of the costs
that would have been incurred by us had we been an independent company during those periods. In
addition, we have
not made adjustments to our historical financial information to reflect changes, many of which
are significant, that occurred in our cost structure, financing and operations as a result of the
spin off, including the substantial debt we
25
incurred and pension liabilities we assumed in
connection with the spin off. In addition, our effective income tax rate as reflected in our
historical financial information for periods prior to the spin off has not been and may not be
indicative of our future effective income tax rate.
If the IRS determines that our spin off from Sara Lee does not qualify as a tax-free distribution
or a tax-free reorganization, we may be subject to substantial liability.
Sara Lee has received a private letter ruling from the Internal Revenue Service, or the IRS,
to the effect that, among other things, the spin off qualifies as a tax-free distribution for U.S.
federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended, or
the Internal Revenue Code, and as part of a tax-free reorganization under Section 368(a)(1)(D) of
the Internal Revenue Code, and the transfer to us of assets and the assumption by us of liabilities
in connection with the spin off will not result in the recognition of any gain or loss for U.S.
federal income tax purposes to Sara Lee.
Although the private letter ruling relating to the qualification of the spin off under
Sections 355 and 368(a)(1)(D) of the Internal Revenue Code generally is binding on the IRS, the
continuing validity of the ruling is subject to the accuracy of factual representations and
assumptions made in connection with obtaining such private letter ruling. Also, as part of the
IRSs general policy with respect to rulings on spin off transactions under Section 355 of the
Internal Revenue Code, the private letter ruling obtained by Sara Lee is based upon representations
by Sara Lee that certain conditions which are necessary to obtain tax-free treatment under Section
355 and Section 368(a)(1)(D) of the Internal Revenue Code have been satisfied, rather than a
determination by the IRS that these conditions have been satisfied. Any inaccuracy in these
representations could invalidate the ruling.
If the spin off does not qualify for tax-free treatment for U.S. federal income tax purposes,
then, in general, Sara Lee would be subject to tax as if it has sold the common stock of our
company in a taxable sale for its fair market value. Sara Lees stockholders would be subject to
tax as if they had received a taxable distribution equal to the fair market value of our common
stock that was distributed to them, taxed as a dividend (without reduction for any portion of a
Sara Lees stockholders basis in its shares of Sara Lee common stock) for U.S. federal income tax
purposes and possibly for purposes of state and local tax law, to the extent of a Sara Lees
stockholders pro rata share of Sara Lees current and accumulated earnings and profits (including
any arising from the taxable gain to Sara Lee with respect to the spin off). It is expected that
the amount of any such taxes to Sara Lees stockholders and to Sara Lee would be substantial.
Pursuant to a tax sharing agreement we entered into with Sara Lee in connection with the spin
off, we agreed to indemnify Sara Lee and its affiliates for any liability for taxes of Sara Lee
resulting from: (1) any action or failure to act by us or any of our affiliates following the
completion of the spin off that would be inconsistent with or prohibit the spin off from qualifying
as a tax-free transaction to Sara Lee and to Sara Lees stockholders under Sections 355 and
368(a)(1)(D) of the Internal Revenue Code, or (2) any action or failure to act by us or any of our
affiliates following the completion of the spin off that would be inconsistent with or cause to be
untrue any material, information, covenant or representation made in connection with the private
letter ruling obtained by Sara Lee from the IRS relating to, among other things, the qualification
of the spin off as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the
Internal Revenue Code. Our indemnification obligations to Sara Lee and its affiliates are not
limited in amount or subject to any cap. We expect that the amount of any such taxes to Sara Lee
would be substantial.
Anti-takeover provisions of our charter and bylaws, as well as Maryland law and our stockholder
rights agreement, may reduce the likelihood of any potential change of control or unsolicited
acquisition proposal that you might consider favorable.
Our charter permits our board of directors, without stockholder approval, to amend the charter
to increase or decrease the aggregate number of shares of stock or the number of shares of stock of
any class or series that we have the authority to issue. In addition, our board of directors may
classify or reclassify any unissued shares of common stock or preferred stock and may set the
preferences, conversion or other rights, voting powers and other terms of
the classified or reclassified shares. Our board of directors could establish a series of
preferred stock that could have the effect of delaying, deferring or preventing a transaction or a
change in control that might involve a premium price for our common stock or otherwise be in the
best interest of our stockholders. Our board of directors also is permitted, without stockholder
approval, to implement a classified board structure at any time.
26
Our bylaws, which only can be amended by our board of directors, provide that nominations of
persons for election to our board of directors and the proposal of business to be considered at a
stockholders meeting may be made only in the notice of the meeting, by our board of directors or by
a stockholder who is entitled to vote at the meeting and has complied with the advance notice
procedures of our bylaws. Also, under Maryland law, business combinations between us and an
interested stockholder or an affiliate of an interested stockholder, including mergers,
consolidations, share exchanges or, in circumstances specified in the statute, asset transfers or
issuances or reclassifications of equity securities, are prohibited for five years after the most
recent date on which the interested stockholder becomes an interested stockholder. An interested
stockholder includes any person who beneficially owns 10% or more of the voting power of our shares
or any affiliate or associate of ours who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of our stock. A person is
not an interested stockholder under the statute if our board of directors approved in advance the
transaction by which he otherwise would have become an interested stockholder. However, in
approving a transaction, our board of directors may provide that its approval is subject to
compliance, at or after the time of approval, with any terms and conditions determined by our
board. After the five-year prohibition, any business combination between us and an interested
stockholder generally must be recommended by our board of directors and approved by two
supermajority votes or our common stockholders must receive a minimum price, as defined under
Maryland law, for their shares. The statute permits various exemptions from its provisions,
including business combinations that are exempted by our board of directors prior to the time that
the interested stockholder becomes an interested stockholder.
In addition, we have adopted a stockholder rights agreement which provides that in the event
of an acquisition of or tender offer for 15% of our outstanding
common stock, our stockholders, other than the acquiror,
shall be granted rights to purchase our common stock at a certain price. The stockholder rights
agreement could make it more difficult for a third-party to acquire our common stock without the
approval of our board of directors.
These and other provisions of Maryland law or our charter and bylaws could have the effect of
delaying, deferring or preventing a transaction or a change in control that might involve a premium
price for our common stock or otherwise be considered favorably by our stockholders.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Executive Officers of the Registrant
The chart below lists our executive officers and is followed by biographic information about
them. No family relationship exists between any of our directors or executive officers.
|
|
|
|
|
Name |
|
Age |
|
Positions |
Richard A. Noll |
|
51 |
|
Chief Executive Officer and Chairman of the Board of Directors |
Gerald W. Evans Jr. |
|
49 |
|
President, Global Supply Chain and Asia Business Development |
William J. Nictakis |
|
48 |
|
President, Chief Commercial Officer |
Joia M. Johnson |
|
48 |
|
Executive Vice President, General Counsel and Corporate Secretary |
Kevin W. Oliver |
|
51 |
|
Executive Vice President, Human Resources |
E. Lee Wyatt Jr. |
|
56 |
|
Executive Vice President, Chief Financial Officer |
Richard A. Noll has served as our Chief Executive Officer since April 2006, as a director
since our formation in September 2005 and as Chairman of the Board of Directors since January 2009.
From December 2002 until the completion of the spin off in September 2006, he also served as a
Senior Vice President of Sara Lee. From July 2005 to April 2006, Mr. Noll served as President and
Chief Operating Officer of Sara Lee Branded Apparel. Mr. Noll
served as Chief Executive Officer of the Sara Lee Bakery Group from July 2003 to July 2005 and
as the Chief Operating Officer of the Sara Lee Bakery Group from July 2002 to July 2003. From July
2001 to July 2002, Mr. Noll was Chief Executive Officer of Sara Lee Legwear, Sara Lee Direct and
Sara Lee Mexico. Mr. Noll joined Sara Lee in 1992 and held a number of management positions with
increasing responsibilities while employed by Sara Lee.
Gerald W. Evans Jr. has served as our President, Global Supply Chain and Asia Business
Development since February 2008. From the completion of the spin off in September 2006 until
February 2008, he served as Executive Vice President, Chief Supply Chain Officer. From July 2005
until the completion of the spin off, Mr. Evans served
27
as a Vice President of Sara Lee and as Chief
Supply Chain Officer of Sara Lee Branded Apparel. Mr. Evans served as President and Chief Executive
Officer of Sara Lee Sportswear and Underwear from March 2003 until June 2005 and as President and
Chief Executive Officer of Sara Lee Sportswear from March 1999 to February 2003.
William J. Nictakis has served as our President, Chief Commercial Officer since November 2007.
From June 2003 until November 2007, Mr. Nictakis served as President of the Sara Lee Bakery Group.
From May 1999 through June 2003, Mr. Nictakis was Vice President, Sales, of Frito-Lay, Inc., a
subsidiary of PepsiCo, Inc. that manufactures, markets, sells and distributes branded snacks.
Joia M. Johnson has served as our Executive Vice President, General Counsel and Corporate
Secretary since January 2007. From May 2000 until January 2007, Ms. Johnson served as Executive
Vice President, General Counsel and Secretary of RARE Hospitality International, Inc., an owner,
operator and franchisor of national chain restaurants.
Kevin W. Oliver has served as our Executive Vice President, Human Resources since the
completion of the spin off in September 2006. From January 2006 until the completion of the spin
off, Mr. Oliver served as a Vice President of Sara Lee and as Senior Vice President, Human
Resources of Sara Lee Branded Apparel. From February 2005 to December 2005, Mr. Oliver served as
Senior Vice President, Human Resources for Sara Lee Food and Beverage and from August 2001 to
January 2005 as Vice President, Human Resources for the Sara Lee Bakery Group.
E. Lee Wyatt Jr. has served as our Executive Vice President, Chief Financial Officer since the
completion of the spin off in September 2006. From September 2005 until the completion of the spin
off, Mr. Wyatt served as a Vice President of Sara Lee and as Chief Financial Officer of Sara Lee
Branded Apparel. Prior to joining Sara Lee, Mr. Wyatt was Executive Vice President, Chief Financial
Officer and Treasurer of Sonic Automotive, Inc. from April 2003 to September 2005, and Vice
President of Administration and Chief Financial Officer of Sealy Corporation from September 1998 to
February 2003.
Item 2. Properties
We own and lease properties supporting our administrative, manufacturing, distribution and
direct outlet activities. We own our approximately 470,000 square-foot headquarters located in
Winston-Salem, North Carolina, which houses our various sales, marketing and corporate business
functions. Research and development as well as certain product-design functions also are located in
Winston-Salem, while other design functions are located in New York City. Our products are
manufactured through a combination of facilities we own and operate and facilities owned and
operated by third-party contractors who perform some of the steps in the manufacturing process for
us, such as cutting and/or sewing. We source the remainder of our finished goods from third-party
manufacturers who supply us with finished products based on our designs.
As of January 3, 2009, we owned and leased properties in 23 countries, including 52
manufacturing facilities and 22 distribution centers, as well as office facilities. The leases for
these properties expire between January 4, 2009 and 2019, with the exception of some seasonal
warehouses that we lease on a month-by-month basis. For more information about our capital lease
obligations, see Managements Discussion and Analysis of Financial Condition and Results of
Operations Future Contractual Obligations and Commitments.
As of January 3, 2009, we also operated 213 direct outlet stores in 40 states, most of which
are leased under
five-year, renewable lease agreements. We believe that our facilities, as well as equipment,
are in good condition and meet our current business needs.
28
The following table summarizes our properties by country as of January 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned |
|
|
Leased |
|
|
|
|
Properties by Country (1) |
|
Square Feet |
|
|
Square Feet |
|
|
Total |
|
United States |
|
|
10,378,908 |
|
|
|
5,413,658 |
|
|
|
15,792,566 |
|
Non-U.S. facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
|
|
867,167 |
|
|
|
355,533 |
|
|
|
1,222,700 |
|
Dominican Republic |
|
|
746,484 |
|
|
|
400,338 |
|
|
|
1,146,822 |
|
Honduras |
|
|
356,279 |
|
|
|
917,966 |
|
|
|
1,274,245 |
|
El Salvador |
|
|
1,051,395 |
|
|
|
268,892 |
|
|
|
1,320,287 |
|
Costa Rica |
|
|
470,111 |
|
|
|
|
|
|
|
470,111 |
|
Canada |
|
|
289,480 |
|
|
|
126,777 |
|
|
|
416,257 |
|
Brazil |
|
|
|
|
|
|
164,548 |
|
|
|
164,548 |
|
Thailand |
|
|
277,733 |
|
|
|
14,142 |
|
|
|
291,875 |
|
Belgium |
|
|
|
|
|
|
101,934 |
|
|
|
101,934 |
|
Argentina |
|
|
87,279 |
|
|
|
7,301 |
|
|
|
94,580 |
|
China |
|
|
1,099,166 |
|
|
|
87,573 |
|
|
|
1,186,739 |
|
Vietnam |
|
|
111,385 |
|
|
|
68,129 |
|
|
|
179,514 |
|
10 other countries |
|
|
|
|
|
|
78,019 |
|
|
|
78,019 |
|
|
|
|
|
|
|
|
|
|
|
Total non-U.S. facilities |
|
|
5,356,479 |
|
|
|
2,591,152 |
|
|
|
7,947,631 |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
15,735,387 |
|
|
|
8,004,810 |
|
|
|
23,740,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes vacant land. |
The following table summarizes the properties primarily used by our segments as of January 3,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned |
|
|
Leased |
|
|
|
|
Properties by Country (1) |
|
Square Feet |
|
|
Square Feet |
|
|
Total |
|
Innerwear |
|
|
5,149,083 |
|
|
|
3,984,565 |
|
|
|
9,133,648 |
|
Outerwear |
|
|
4,601,476 |
|
|
|
1,223,013 |
|
|
|
5,824,489 |
|
International |
|
|
452,014 |
|
|
|
837,960 |
|
|
|
1,289,974 |
|
Hosiery |
|
|
1,143,897 |
|
|
|
39,000 |
|
|
|
1,182,897 |
|
Other (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
11,346,470 |
|
|
|
6,084,538 |
|
|
|
17,431,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes vacant land, facilities no longer in operation intended for disposal, sourcing
offices not associated with a particular segment, and office buildings housing corporate
functions. |
|
(2) |
|
Our Other segment is comprised of sales of nonfinished products such as fabric and certain
other materials in the United States and Latin America that maintain asset utilization at
certain manufacturing facilities used by one or more of the Innerwear, Outerwear,
International or Hosiery segments and are expected to generate break even margins. No
facilities are used primarily by our Other segment. |
Item 3. Legal Proceedings
Although we are subject to various claims and legal actions that occur from time to time in
the ordinary course of our business, we are not party to any pending legal proceedings that we
believe could have a material adverse effect on our business, results of operations, financial
condition or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the quarter ended January 3, 2009.
29
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market for our Common Stock
Our common stock currently is traded on the New York Stock Exchange, or the NYSE,
under the symbol HBI. A when-issued trading market for our common stock on the NYSE began on
August 16, 2006, and regular way trading of our common stock began on September 6, 2006. Prior to
August 16, 2006, there was no public market for our common stock. Each share of our common stock
has attached to it one preferred stock purchase right. These rights initially will be transferable
with and only with the transfer of the underlying share of common stock. We have not made any
unregistered sales of our equity securities.
The following table sets forth the high and low sales prices for our common stock for the
indicated periods:
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
2007 |
|
|
|
|
|
|
|
|
Quarter ended March 30, 2007 |
|
$ |
29.65 |
|
|
$ |
23.69 |
|
Quarter ended June 30, 2007 |
|
$ |
29.65 |
|
|
$ |
25.25 |
|
Quarter ended September 29, 2007 |
|
$ |
33.73 |
|
|
$ |
24.00 |
|
Quarter ended December 29, 2007 |
|
$ |
31.58 |
|
|
$ |
25.20 |
|
2008 |
|
|
|
|
|
|
|
|
Quarter ended March 29, 2008 |
|
$ |
30.40 |
|
|
$ |
21.47 |
|
Quarter ended June 28, 2008 |
|
$ |
37.73 |
|
|
$ |
27.45 |
|
Quarter ended September 27, 2008 |
|
$ |
29.00 |
|
|
$ |
21.38 |
|
Quarter ended January 3, 2009 |
|
$ |
22.77 |
|
|
$ |
8.54 |
|
Holders of Record
On February 2, 2009, there were 44,338 holders of record of our common stock. Because many of
the shares of our common stock are held by brokers and other institutions on behalf of
stockholders, we are unable to determine the exact number of beneficial stockholders represented by
these record holders, but we believe that there were more than 98,000 beneficial owners of our
common stock as of February 2, 2009.
Dividends
We currently do not pay regular dividends on our outstanding stock. The declaration of any
future dividends and, if declared, the amount of any such dividends, will be subject to our actual
future earnings, capital requirements, regulatory restrictions, debt covenants, other contractual
restrictions and to the discretion of our board of directors. Our board of directors may take into
account such matters as general business conditions, our financial condition and results of
operations, our capital requirements, our prospects and such other factors as our board of
directors may deem relevant.
Issuer Purchases of Equity Securities
There were no purchases by Hanesbrands during the quarter ended January 3, 2009 of equity
securities that are registered under Section 12 of the Exchange Act.
Performance Graph
The following graph compares the cumulative total stockholder return on our common stock with
the comparable cumulative return of the S&P MidCap 400 Index and the S&P 1500 Apparel, Accessories
& Luxury Goods Index. The graph assumes that $100 was invested in our common stock and each index on
August 11, 2006, the effective date of the registration of our common stock under Section 12 of the
Exchange Act, although a when-issued trading market for our common stock did not begin until
August 16, 2006, and regular way trading did not
30
begin until September 6, 2006. The stock price
performance on the following graph is not necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
Compliance with Certain New York Stock Exchange Requirements
As required by the rules of the New York Stock Exchange, Richard A. Noll, our Chief Executive
Officer must certify to the New York Stock Exchange each year that he is not aware of any violation
by Hanesbrands of New York Stock Exchange corporate governance listing standards as of the date of
his certification, qualifying the certification to the extent necessary. Mr. Nolls certification
filed with the New York Stock Exchange on May 15, 2008 did not contain any qualifications. We are
filing, as exhibits to this Annual Report on Form 10-K, the certifications required by Section 302
of the Sarbanes-Oxley Act of 2002.
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of January 3,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities to |
|
|
Weighted Average |
|
|
|
|
|
|
be Issued Upon Exercise |
|
|
Exercise Price of |
|
|
Number of Securities |
|
|
|
of Outstanding Options, |
|
|
Outstanding Options, |
|
|
Remaining Available for |
|
Plan Category |
|
Warrants and Rights |
|
|
Warrants and Rights |
|
|
Future Issuance (1) |
|
Equity compensation
plans approved by
security holders |
|
|
8,503,216 |
|
|
$ |
22.78 |
|
|
|
5,781,240 |
|
Equity compensation
plans not approved
by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
8,503,216 |
|
|
$ |
22.78 |
|
|
|
5,781,240 |
|
|
|
|
(1) |
|
The amount appearing under Number of securities remaining available
for future issuance under equity compensation plans includes
3,546,505 shares available under the Hanesbrands Inc. Omnibus
Incentive Plan of 2006 and 2,234,735 shares available under the
Hanesbrands Inc. Employee Stock Purchase Plan of 2006. |
31
Item 6. Selected Financial Data
The following table presents our selected historical financial data. The statement of
income data for the years ended January 3, 2009 and December 29, 2007, the six-month period ended
December 30, 2006 and the year ended July 1, 2006 and the balance sheet data as of January 3, 2009
and December 29, 2007 have been derived from our audited Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K. The statement of income data for the years ended July
2, 2005 and July 3, 2004 and the balance sheet data as of December 30, 2006, July 1, 2006, July 2,
2005 and July 3, 2004 has been derived from our consolidated financial statements not included in
this Annual Report on Form 10-K.
In October 2006, our Board of Directors approved a change in our fiscal year end from
the Saturday closest to June 30 to the Saturday closest to December 31. As a result of this change,
our consolidated financial statements include presentation of the transition period beginning on
July 2, 2006 and ending on December 30, 2006.
Our historical financial data for periods prior to our spin off from Sara Lee on September 5,
2006 is not necessarily indicative of our future performance or what our financial position and
results of operations would have been if we had operated as a
separate, stand alone entity during
all of the periods shown. The data should be read in conjunction with our historical financial
statements and Managements Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Annual Report on Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Ended |
|
|
Years Ended |
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
July 2, |
|
|
July 3, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
(amounts in thousands, except per share data) |
|
Statement of Income Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
$ |
2,250,473 |
|
|
$ |
4,472,832 |
|
|
$ |
4,683,683 |
|
|
$ |
4,632,741 |
|
Cost of sales |
|
|
2,871,420 |
|
|
|
3,033,627 |
|
|
|
1,530,119 |
|
|
|
2,987,500 |
|
|
|
3,223,571 |
|
|
|
3,092,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,377,350 |
|
|
|
1,440,910 |
|
|
|
720,354 |
|
|
|
1,485,332 |
|
|
|
1,460,112 |
|
|
|
1,540,715 |
|
Selling, general and administrative
expenses |
|
|
1,009,607 |
|
|
|
1,040,754 |
|
|
|
547,469 |
|
|
|
1,051,833 |
|
|
|
1,053,654 |
|
|
|
1,087,964 |
|
Gain on curtailment of
postretirement benefits |
|
|
|
|
|
|
(32,144 |
) |
|
|
(28,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
50,263 |
|
|
|
43,731 |
|
|
|
11,278 |
|
|
|
(101 |
) |
|
|
46,978 |
|
|
|
27,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
317,480 |
|
|
|
388,569 |
|
|
|
190,074 |
|
|
|
433,600 |
|
|
|
359,480 |
|
|
|
425,285 |
|
Other (income) expense |
|
|
(634 |
) |
|
|
5,235 |
|
|
|
7,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
155,077 |
|
|
|
199,208 |
|
|
|
70,753 |
|
|
|
17,280 |
|
|
|
13,964 |
|
|
|
24,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
(benefit) |
|
|
163,037 |
|
|
|
184,126 |
|
|
|
111,920 |
|
|
|
416,320 |
|
|
|
345,516 |
|
|
|
400,872 |
|
Income tax expense (benefit) |
|
|
35,868 |
|
|
|
57,999 |
|
|
|
37,781 |
|
|
|
93,827 |
|
|
|
127,007 |
|
|
|
(48,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
127,169 |
|
|
$ |
126,127 |
|
|
$ |
74,139 |
|
|
$ |
322,493 |
|
|
$ |
218,509 |
|
|
$ |
449,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic(1) |
|
$ |
1.35 |
|
|
$ |
1.31 |
|
|
$ |
0.77 |
|
|
$ |
3.35 |
|
|
$ |
2.27 |
|
|
$ |
4.67 |
|
Earnings per share diluted(2) |
|
$ |
1.34 |
|
|
$ |
1.30 |
|
|
$ |
0.77 |
|
|
$ |
3.35 |
|
|
$ |
2.27 |
|
|
$ |
4.67 |
|
Weighted average shares basic(1) |
|
|
94,171 |
|
|
|
95,936 |
|
|
|
96,309 |
|
|
|
96,306 |
|
|
|
96,306 |
|
|
|
96,306 |
|
Weighted average shares diluted(2) |
|
|
95,164 |
|
|
|
96,741 |
|
|
|
96,620 |
|
|
|
96,306 |
|
|
|
96,306 |
|
|
|
96,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
July 2, |
|
|
July 3, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
67,342 |
|
|
$ |
174,236 |
|
|
$ |
155,973 |
|
|
$ |
298,252 |
|
|
$ |
1,080,799 |
|
|
$ |
674,154 |
|
Total assets |
|
|
3,534,049 |
|
|
|
3,439,483 |
|
|
|
3,435,620 |
|
|
|
4,903,886 |
|
|
|
4,257,307 |
|
|
|
4,402,758 |
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,130,907 |
|
|
|
2,315,250 |
|
|
|
2,484,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities |
|
|
469,703 |
|
|
|
146,347 |
|
|
|
271,168 |
|
|
|
49,987 |
|
|
|
53,559 |
|
|
|
35,934 |
|
Total noncurrent liabilities |
|
|
2,600,610 |
|
|
|
2,461,597 |
|
|
|
2,755,168 |
|
|
|
49,987 |
|
|
|
53,559 |
|
|
|
35,934 |
|
Total stockholders or parent
companies equity |
|
|
185,155 |
|
|
|
288,904 |
|
|
|
69,271 |
|
|
|
3,229,134 |
|
|
|
2,602,362 |
|
|
|
2,797,370 |
|
|
|
|
(1) |
|
Prior to the spin off on September 5, 2006, the number of shares used
to compute basic and diluted earnings per share is 96,306, which was
the number of shares of our common stock outstanding on September 5,
2006. |
|
(2) |
|
Subsequent to the spin off on September 5, 2006, the number of shares
used to compute diluted earnings per share is based on the number of
shares of our common stock outstanding, plus the potential dilution
that could occur if restricted stock units and options granted under
our equity-based compensation arrangements were exercised or converted
into common stock. |
32
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
This managements discussion and analysis of financial condition and results of
operations, or MD&A, contains forward-looking statements that involve risks and uncertainties.
Please see Forward-Looking Statements and Risk Factors in this Annual Report on Form 10-K for a
discussion of the uncertainties, risks and assumptions associated with these statements. This
discussion should be read in conjunction with our historical financial statements and related notes
thereto and the other disclosures contained elsewhere in this Annual Report on Form 10-K. On
October 26, 2006, our Board of Directors approved a change in our fiscal year end from the Saturday
closest to June 30 to the Saturday closest to December 31. We refer to the resulting transition
period from July 2, 2006 to December 30, 2006 in this Annual Report on Form 10-K as the six months
ended December 30, 2006. The results of operations for the periods reflected herein are not
necessarily indicative of results that may be expected for future periods, and our actual results
may differ materially from those discussed in the forward-looking statements as a result of various
factors, including but not limited to those listed under Risk Factors in this Annual Report on
Form 10-K and included elsewhere in this Annual Report on Form 10-K.
MD&A is a supplement to our Consolidated Financial Statements and notes thereto included
elsewhere in this Annual Report on Form 10-K, and is provided to enhance your understanding of our
results of operations and financial condition. Our MD&A is organized as follows:
|
|
|
Overview. This section provides a general description of our company and operating
segments, business and industry trends, our key business strategies, our consolidation and
globalization strategy, and background information on other matters discussed in this MD&A. |
|
|
|
|
Components of Net Sales and Expense. This section provides an overview of the
components of our net sales and expense that are key to an understanding of our results of
operations. |
|
|
|
|
Highlights from the Year Ended January 3, 2009. This section discusses some of the
highlights of our performance and activities during 2008. |
|
|
|
|
Consolidated Results of Operations and Operating Results by Business Segment. These
sections provide our analysis and outlook for the significant line items on our statements
of income, as well as other information that we deem meaningful to an understanding of our
results of operations on both a consolidated basis and a business segment basis. |
|
|
|
|
Liquidity and Capital Resources. This section provides an analysis of trends and
uncertainties affecting liquidity, cash requirements for our business, sources and uses of
our cash and our financing arrangements. |
|
|
|
|
Critical Accounting Policies and Estimates. This section discusses the accounting
policies that we consider important to the evaluation and reporting of our financial
condition and results of operations, and whose application requires significant judgments
or a complex estimation process. |
|
|
|
|
Recently Issued Accounting Pronouncements. This section provides a summary of the most
recent authoritative accounting pronouncements and guidance that we will be required to
adopt in a future period. |
Overview
Our Company
We are a consumer goods company with a portfolio of leading apparel brands, including
Hanes, Champion, C9 by Champion, Playtex, Bali, Leggs, Just My Size, barely there, Wonderbra,
Stedman, Outer Banks, Zorba, Rinbros and Duofold. We design, manufacture, source and sell a broad
range of apparel essentials such as t-shirts, bras, panties, mens underwear, kids underwear,
casualwear, activewear, socks and hosiery.
According to NPD, our brands hold either the number one or number two U.S. market position by
sales value in most product categories in which we compete, for the 12 month period ended November
30, 2008. In 2008, Hanes was number one for the fifth consecutive year on the Womens Wear Daily
Top 100 Brands Survey for apparel and accessory brands that women know best and was number one
for the fifth consecutive year as the most preferred mens, womens and childrens apparel brand of consumers in Retailing Today magazines Top
Brands Study. Additionally, the company had five of the top ten intimate apparel brands preferred
by consumers in the Retailing Today study Hanes, Playtex, Bali, Just My Size and Leggs.
33
Our distribution channels include direct to consumer sales at our outlet stores, national
chains and department stores and warehouse clubs, mass-merchandise outlets and international sales.
For the year ended January 3, 2009, approximately 44% of our net sales were to mass merchants, 18%
were to national chains and department stores, 9% were direct to consumers, 11% were in our
International segment and 18% were to other retail channels such as embellishers, specialty
retailers, warehouse clubs and sporting goods stores.
Our Segments
Our operations are managed in five operating segments, each of which is a reportable segment
for financial reporting purposes: Innerwear, Outerwear, International, Hosiery and Other. These
segments are organized principally by product category and geographic location. Management of each
segment is responsible for the operations of these businesses but share a common supply chain and
media and marketing platforms.
|
|
|
Innerwear. The Innerwear segment focuses on core apparel essentials, and consists of
products such as womens intimate apparel, mens underwear, kids underwear, socks,
thermals and sleepwear, marketed under well-known brands that are trusted by consumers. We
are an intimate apparel category leader in the United States with our Hanes, Playtex, Bali,
barely there, Just My Size, Wonderbra and Duofold brands. We are also a leading
manufacturer and marketer of mens underwear and kids underwear under the Hanes, Champion,
C9 by Champion and Polo Ralph Lauren brand names. Our direct-to-consumer retail operations
are included within the Innerwear segment. The retail operations include our value-based
(outlet) stores, internet operations and catalogs which sell products from our portfolio
of leading brands. As of January 3, 2009 and December 29, 2007, we had 213 and 216 outlet
stores, respectively. Net sales for the year ended January 3, 2009 from our Innerwear
segment were $2.4 billion, representing approximately 56% of total segment net sales. |
|
|
|
|
Outerwear. We are a leader in the casualwear and activewear markets through our Hanes,
Champion and Just My Size brands, where we offer products such as t-shirts and fleece. Our
casualwear lines offer a range of quality, comfortable clothing for men, women and children
marketed under the Hanes and Just My Size brands. The Just My Size brand offers casual
apparel designed exclusively to meet the needs of plus-size women. In addition to
activewear for men and women, Champion provides uniforms for athletic programs and includes
an apparel program, C9 by Champion, at Target stores. We also license our Champion name for
collegiate apparel and footwear. We also supply our t-shirts, sportshirts and fleece
products primarily to wholesalers, who then resell to screen printers and embellishers,
through brands such as Hanes, Champion, Outer Banks and Hanes Beefy-T. Net sales for the
year ended January 3, 2009 from our Outerwear segment were $1.2 billion, representing
approximately 28% of total segment net sales. |
|
|
|
|
International. International includes products that span across the Innerwear,
Outerwear and Hosiery reportable segments and are primarily marketed under the Hanes,
Wonderbra, Champion, Stedman, Playtex, Zorba, Rinbros, Kendall, Sol y Oro, Ritmo and Bali
brands. Net sales for the year ended January 3, 2009 from our International segment were
$460 million, representing approximately 11% of total segment net sales and included sales
in Latin America, Asia, Canada and Europe. Canada, Europe, Japan and Mexico are our largest
international markets, and we also have sales offices in India and China. |
|
|
|
|
Hosiery. We are the leading marketer of womens sheer hosiery in the United States. We
compete in the hosiery market by striving to offer superior values and executing integrated
marketing activities, as well as focusing on the style of our hosiery products. We market
hosiery products under our Leggs, Hanes and Just My Size brands. Net sales for the year
ended January 3, 2009 from our Hosiery segment were $228 million, representing
approximately 5% of total segment net sales. We expect the trend of declining hosiery sales
to continue consistent with the overall decline in the industry and with shifts in consumer
preferences. |
|
|
|
|
Other. Our Other segment consists of sales of nonfinished products such as yarn and
certain other materials in the United States and Latin America that maintain asset
utilization at certain manufacturing facilities and are expected to generate break even
margins. Net sales for the year ended January 3, 2009 in our Other segment were $22
million, representing less than 1% of total segment net sales. Net sales from our Other
segment are expected to continue to decline and to ultimately become insignificant to us as
we complete the implementation of our consolidation and globalization efforts. |
34
Business and Industry Trends
We are operating in an uncertain and volatile economic environment, which could have
unanticipated adverse effects on our business. The current retail environment has been impacted by
recent volatility in the financial markets, including declines in stock prices, and by uncertain
economic conditions. Increases in food and fuel prices, changes in the credit and housing markets
leading to the current financial and credit crisis, actual and potential job losses among many
sectors of the economy, significant declines in the stock market resulting in large losses to
consumer retirement and investment accounts, and uncertainty regarding future federal tax and
economic policies have all added to declines in consumer confidence and curtailed retail spending.
We expect the weak retail environment to continue and do not expect macroeconomic conditions
to be conducive to growth in 2009. Achieving financial results that compare favorably with
year-ago results will be challenging in the first half of 2009. In the first quarter of 2009, we
expect a sales decline that is more or less consistent with the fourth quarter 2008 trend and
reflects expected lower casualwear sales in the Outerwear segment primarily in the first half of
2009. We also expect substantial pressure on profitability due to the economic climate,
significantly higher commodity costs, increased pension costs and increased costs associated with
implementing our price increase that is not effective for the entire first quarter of 2009,
including repackaging costs.
The apparel essentials market is highly competitive and evolving rapidly. Competition
is generally based upon price, brand name recognition, product quality, selection, service and
purchasing convenience. The majority of our core styles continue from year to year, with variations
only in color, fabric or design details. Some products, however, such as intimate apparel,
activewear and sheer hosiery, do have an emphasis on style and innovation. Our businesses face
competition today from other large corporations and foreign manufacturers, as well as smaller
companies, department stores, specialty stores and other retailers that market and sell apparel
essentials products under private labels that compete directly with our brands.
Our top ten customers accounted for 65% of our net sales and our top customer,
Wal-Mart, accounted for over $1.1 billion of our sales for the year ended January 3, 2009. Our
largest customers in the year ended January 3, 2009 were Wal-Mart, Target and Kohls, which
accounted for 27%, 16% and 6% of total sales, respectively. The growth in retailers can create
pricing pressures as our customers grow larger and seek to have greater concessions in their
purchase of our products, while they can be increasingly demanding that we provide them with some
of our products on an exclusive basis. To counteract these effects, it has become increasingly
important to leverage our national brands through investment in our largest and strongest brands as
our customers strive to maximize their performance especially in todays challenging economic
environment. In addition, during the past several years, various retailers, including some of our
largest customers, have experienced significant difficulties, including restructurings,
bankruptcies and liquidations, and the ability of retailers to overcome these difficulties may
increase due to the recent deterioration of worldwide economic conditions.
Anticipating changes in and managing our operations in response to consumer preferences
remains an important element of our business. In recent years, we have experienced changes in our
net sales, revenues and cash flows in accordance with changes in consumer preferences and trends.
For example, we expect the trend of declining hosiery sales to continue consistent with the overall
decline in the industry and with shifts in consumer preferences. The Hosiery segment only comprised
5% of our net sales in the year ended January 3, 2009 however, and as a result, the decline in the
Hosiery segment has not had a significant impact on our net sales, revenues or cash flows.
Generally, we manage the Hosiery segment for cash, placing an emphasis on reducing our cost
structure and managing cash efficiently.
Our Key Business Strategies
Sell more, spend less and generate cash are our broad strategies to build our brands,
reduce our costs and generate cash.
Sell More
Through our sell more strategy, we seek to drive profitable growth by consistently offering
consumers brands they love and trust and products with unsurpassed value. Key initiatives we are
employing to implement this strategy include:
35
|
|
|
Build big, strong brands in big core categories with innovative key items. Our ability
to react to changing customer needs and industry trends is key to our success. Our design,
research and product development teams, in partnership with our marketing teams, drive our
efforts to bring innovations to market. We seek to leverage our insights into consumer
demand in the apparel essentials industry to develop new products within our existing lines
and to modify our existing core products in ways that make them more appealing, addressing
changing customer needs and industry trends. We also support our key brands with targeted,
effective advertising and marketing campaigns. |
|
|
|
|
Foster strategic partnerships with key retailers via team selling. We foster
relationships with key retailers by applying our extensive category and product knowledge,
leveraging our use of multi-functional customer management teams and developing new
customer-specific programs such as C9 by Champion for Target. Our goal is to strengthen and
deepen our existing strategic relationships with retailers and develop new strategic
relationships. |
|
|
|
|
Use Kanban concepts to have the right products available in the right quantities at the
right time. Through Kanban, a multi-initiative effort that determines production
quantities, and in doing so, facilitates just-in-time production and ordering systems, we
seek to ensure that products are available to meet customer demands while effectively
managing inventory levels. |
Spend Less
Through our spend less strategy, we seek to become an integrated organization that leverages
its size and global reach to reduce costs, improve flexibility and provide a high level of service.
Key initiatives we are employing to implement this strategy include:
|
|
|
Globalizing our supply chain by balancing across hemispheres into economic clusters
with fewer, larger facilities. As a provider of high-volume products, we are continually
seeking to improve our cost-competitiveness and operating flexibility through supply chain
initiatives. Through our consolidation and globalization strategy, which is discussed in
more detail below, we will continue to transition additional parts of our supply chain to
lower-cost locations in Asia, Central America and the Caribbean Basin in an effort to
optimize our cost structure. As part of this process, we are using Kanban concepts to
optimize the way we manage demand, to increase manufacturing flexibility to better respond
to demand variability and to simplify our finished goods and the raw materials we use to
produce them. We expect that these changes in our supply chain will result in significant
cost efficiencies and increased asset utilization. |
|
|
|
|
Leverage our global purchasing and manufacturing scale. Historically, we have had a
decentralized operating structure with many distinct operating units. We are in the process
of consolidating purchasing, manufacturing and sourcing across all of our product
categories in the United States. We believe that these initiatives will streamline our
operations, improve our inventory management, reduce costs and standardize processes. |
Generate Cash
Through our generate cash strategy, we seek to effectively generate and invest cash at or
above our weighted average cost of capital to provide superior returns for both our equity and debt
investors. Key initiatives we are employing to implement this strategy include:
|
|
|
Optimizing our capital structure to take advantage of our business models strong and
consistent cash flows. Maintaining appropriate debt leverage and utilizing excess cash to,
for example, pay down debt, invest in our own stock and selectively pursue strategic
acquisitions are keys to building a stronger business and generating additional value for
investors. |
|
|
|
|
Continuing to improve turns for accounts receivables, inventory, accounts payable and
fixed assets. Our ability to generate cash is enhanced through more efficient management of
accounts receivables, inventory, accounts payable and fixed assets. |
36
Consolidation and Globalization Strategy
We expect to continue our restructuring efforts as we continue to execute our consolidation
and globalization strategy. We have closed plant locations, reduced our workforce, and relocated
some of our manufacturing capacity to lower cost locations in Asia, Central America and the
Caribbean Basin. For example, during the year ended January 3, 2009, in furtherance of our
consolidation and globalization strategy, we approved actions to close 11 manufacturing facilities
and three distribution centers and eliminate
approximately 6,800 positions in Mexico, the United States, Costa Rica, Honduras and El Salvador.
In addition, approximately 200 management and administrative positions were
eliminated, with the majority of these positions based in the United States. We also have
recognized accelerated depreciation with respect to owned or leased assets associated with
manufacturing facilities and distribution centers which closed during 2008 or we anticipate closing
in the next several years as part of our consolidation and globalization strategy. While we believe
that this strategy has had and will continue to have a beneficial impact on our operational
efficiency and cost structure, we have incurred significant costs to implement these initiatives.
In particular, we have recorded charges for severance and other employment-related obligations
relating to workforce reductions, as well as payments in connection with lease and other contract
terminations. In addition, we incurred charges for one-time write-offs of stranded raw materials
and work in process inventory determined not to be salvageable or cost-effective to relocate
related to the closure of manufacturing facilities. These amounts are included in the Cost of
sales, Restructuring and Selling, general and administrative expenses lines of our statements
of income.
Our significant supply chain capital spending and acquisition actions during 2008 include:
|
|
|
During the second quarter of 2008, we added three company-owned sewing plants in
Southeast Asia two in Vietnam and one in Thailand giving us four sewing plants in
Asia. |
|
|
|
|
In October 2008, we acquired a 370-employee embroidery facility in Honduras. For the
past eight years, these operations have produced embroidered and screen-printed apparel for
us. This acquisition better positions us for long-term growth in these segments. |
|
|
|
|
During the fourth quarter of 2008, we commenced production at our 500,000 square foot
socks manufacturing facility in El Salvador. This facility, co-located with textile
manufacturing operations that we acquired in 2007, provides a manufacturing base in Central
America from which to leverage our production scale at a lower cost location. |
|
|
|
|
We continued construction of a textile production plant in Nanjing, China, which will be
our first company-owned textile production facility in Asia. We expect production to
commence in the fourth quarter of 2009. The Nanjing textile facility will enable us to
expand and leverage our production scale in Asia as we balance our supply chain across
hemispheres. |
We have made significant progress in our multiyear goal of generating gross savings
that could approach or exceed $200 million. As a result of the restructuring actions taken since
our spin off from Sara Lee on September 5, 2006, our cost structure was reduced and efficiencies
improved, generating savings of $62 million during the year ended January 3, 2009. In addition to
the saving generated from restructuring actions, we benefited from $14 million in savings related
to other cost reduction initiatives during the year ended January 3, 2009. Of the seven
manufacturing facilities and distribution centers approved for closure in 2006, two were closed in
2006 and five were closed in 2007. Of the 19 manufacturing facilities and distribution centers
approved for closure in 2007, 10 were closed in 2007 and nine were closed in 2008. Of the 14
manufacturing facilities and distribution centers approved for closure in 2008, nine were closed in
2008 and five are expected to close in 2009. For more information about our restructuring actions,
see Note 5, titled Restructuring to our Consolidated Financial Statements included in this Annual
Report on Form 10-K.
The continued implementation of our globalization and consolidation strategy, which is
designed to improve operating efficiencies and lower costs, has resulted and is likely to continue
to result in significant costs in the short-term and generate savings as well as higher inventory
levels for the next 12 to 15 months. As further plans are developed and approved, we expect to
recognize additional restructuring costs as we eliminate duplicative functions within the
organization and transition a significant portion of our manufacturing capacity to lower-cost
locations. As a result of this strategy, we expect to incur approximately $250 million in
restructuring and related charges over the three year period following the spin off from Sara Lee
on September 5, 2006, of which approximately half is
37
expected to be noncash. As of January 3, 2009,
we have recognized approximately $209 million and announced approximately $219 million in
restructuring and related charges related to these efforts since September 5, 2006. Of these
charges, approximately $84 million relates to accelerated depreciation of buildings and equipment
for facilities that have been or will be closed, approximately $79 million relates to employee
termination and other benefits, approximately $19 million relates to write-offs of stranded raw
materials and work in process inventory determined not to be salvageable or cost-effective to
relocate, approximately $17 million relates to lease termination and other costs and approximately
$10 million related to impairments of fixed assets.
Seasonality and Other Factors
Our operating results are subject to some variability. Generally, our diverse range of
product offerings helps mitigate the impact of seasonal changes in demand for certain items. Sales
are typically higher in the last two quarters (July to December) of each fiscal year. Socks,
hosiery and fleece products generally have higher sales during this period as a result of cooler
weather, back-to-school shopping and holidays. Sales levels in any period are also impacted by
customers decisions to increase or decrease their inventory levels in response to anticipated
consumer demand. Our customers may cancel orders, change delivery schedules or change the mix of
products ordered with minimal notice to us. For example, we experienced a shift in timing by our
largest retail customers of back-to-school programs from June to July in 2008. Our results of
operations are also impacted by fluctuations and volatility in the price of cotton and oil-related
materials and the timing of actual spending for our media, advertising and promotion expenses.
Media, advertising and promotion expenses may vary from period to period during a fiscal year
depending on the timing of our advertising campaigns for retail selling seasons and product
introductions.
Although the majority of our products are replenishment in nature and tend to be purchased by
consumers on a planned, rather than on an impulse, basis, our sales are impacted by discretionary
spending by our customers. Discretionary spending is affected by many factors, including, among
others, general business conditions, interest rates, inflation, consumer debt levels, the
availability of consumer credit, currency exchange rates, taxation, electricity power rates,
gasoline prices, unemployment trends and other matters that influence consumer confidence and
spending. Many of these factors are outside of our control. Our customers purchases of
discretionary items, including our products, could decline during periods when disposable income is
lower, when prices increase in response to rising costs, or in periods of actual or perceived
unfavorable economic conditions. These consumers may choose to purchase fewer of our products or
lower-priced products of our competitors in response to higher prices for our products, or may
choose not to purchase our products at prices that reflect our domestic price increases that become
effective from time to time.
Inflation and Changing Prices
Inflation can have a long-term impact on us because increasing costs of materials and labor
may impact our ability to maintain satisfactory margins. For example, a significant portion of our
products are manufactured in other countries and a further decline in the value of the U.S. dollar
may result in higher manufacturing costs. Similarly, the cost of the materials that are used in our
manufacturing process, such as oil related commodity prices, rose during the summer of 2008 as a
result of inflation and other factors. In addition, inflation often is accompanied by higher
interest rates, which could have a negative impact on spending, in which case our margins could
decrease. Moreover, increases in inflation may not be matched by rises in income, which also could
have a negative impact on spending. If we incur increased costs that are unable to be recouped, or
if consumer spending continues to decrease generally, our business, results of operations,
financial condition and cash flows may be adversely affected. In an effort to mitigate the impact
of these incremental costs on our operating results, we informed our retail customers during 2008
that we would be raising domestic prices effective during the first quarter of 2009. We are
implementing an average gross price increase of four percent in our domestic product categories.
The range of price increases varies by individual product category.
Our costs for cotton yarn and cotton-based textiles vary based upon the fluctuating cost of
cotton, which is affected by weather, consumer demand, speculation on the commodities market, the
relative valuations and fluctuations of the currencies of producer versus consumer countries and other factors that
are generally unpredictable and beyond our control. While we do enter into short-term supply
agreements and hedges from time to time in an attempt to protect our business from the volatility
of the market price of cotton, our business can be affected by dramatic movements in cotton prices,
although cotton represents only 8% of our cost of sales. Cotton prices were 65 cents per pound for
the year ended January 3, 2009 and 56 cents per pound for the year ended December 29, 2007. The
price of cotton currently in our inventory is in the mid 60 cents per pound range which is
38
the price that will impact our operating results in the first half of 2009. The prices for the most
recent cotton crop, which will impact our operating results in the second half of 2009, have
decreased to the low 50 cents per pound range. In addition, during the summer of 2008 we
experienced a spike in oil related commodity prices and other raw materials used in our products,
such as dyes and chemicals, and increases in other costs, such as fuel, energy and utility costs.
Further discussion of the market sensitivity of cotton is included in Quantitative and Qualitative
Disclosures about Market Risk.
Components of Net Sales and Expense
Net sales
We generate net sales by selling apparel essentials such as t-shirts, bras, panties, mens
underwear, kids underwear, socks, hosiery, casualwear and activewear. Our net sales are recognized
net of discounts, coupons, rebates, volume-based incentives and cooperative advertising costs. We
recognize revenue when (i) there is persuasive evidence of an arrangement, (ii) the sales price is
fixed or determinable, (iii) title and the risks of ownership have been transferred to the customer
and (iv) collection of the receivable is reasonably assured, which occurs primarily upon shipment.
Net sales include an estimate for returns and allowances based upon historical return experience.
We also offer a variety of sales incentives to resellers and consumers that are recorded as
reductions to net sales.
Cost of sales
Our cost of sales includes the cost of manufacturing finished goods, which consists of labor,
raw materials such as cotton and petroleum-based products and overhead costs such as depreciation
on owned facilities and equipment. Our cost of sales also includes finished goods sourced from
third-party manufacturers that supply us with products based on our designs as well as charges for
slow moving or obsolete inventories. Rebates, discounts and other cash consideration received from
a vendor related to inventory purchases are reflected in cost of sales when the related inventory
item is sold. Our costs of sales do not include shipping costs, comprised of payments to third
party shippers, or handling costs, comprised of warehousing costs in our distribution facilities,
and thus our gross margins may not be comparable to those of other entities that include such costs
in cost of sales.
Selling, general and administrative expenses
Our selling, general and administrative expenses include selling, advertising, costs of
shipping, handling and distribution to our customers, research and development, rent on leased
facilities, depreciation on owned facilities and equipment and other general and administrative
expenses. Also included for periods presented prior to the spin off on September 5, 2006 are
allocations of corporate expenses that consist of expenses for business insurance, medical
insurance, employee benefit plan amounts and, because we were part of Sara Lee those periods,
allocations from Sara Lee for certain centralized administration costs for treasury, real estate,
accounting, auditing, tax, risk management, human resources and benefits administration. These
allocations of centralized administration costs were determined on bases that we and Sara Lee
considered to be reasonable and take into consideration and include relevant operating profit,
fixed assets, sales and payroll. Selling, general and administrative expenses also include
management payroll, benefits, travel, information systems, accounting, insurance and legal
expenses.
Restructuring
We have from time to time closed facilities and reduced headcount, including in connection
with previously announced restructuring and business transformation plans. We refer to these activities as
restructuring actions. When we decide to close facilities or reduce headcount, we take estimated
charges for such restructuring, including charges for exited non-cancelable leases and other
contractual obligations, as well as severance and benefits. If the actual charge is different from
the original estimate, an adjustment is recognized in the period such change in estimate is
identified.
39
Other (income) expenses
Our other (income) expenses include charges such as losses on early extinguishment of debt and
certain other non-operating items.
Interest expense, net
As part of the spin off from Sara Lee on September 5, 2006, we incurred $2.6 billion
of debt. Since the spin off, we have made changes in our financing structuring and have made net
principal payments of $423 million of debt. In December 2006, we issued $500 million of Floating
Rate Senior Notes and the proceeds were used to repay a portion of the debt incurred at the spin
off. In November 2007, we entered into the Receivables Facility which provides for up to $250
million in funding accounted for as a secured borrowing, all of which we borrowed and used to repay
a portion of the Senior Secured Credit Facility. In addition, we have amended the terms of our
Senior Secured Credit Facility and Second Lien Credit Facility to provide more flexibility to
change our financial structure in the future.
Our interest expense is net of interest income. Interest income is the return we earned on our
cash and cash equivalents and, historically, on money we loaned to Sara Lee as part of its
corporate cash management practices. Our cash and cash equivalents are invested in highly liquid
investments with original maturities of three months or less.
Income tax expense (benefit)
Our effective income tax rate fluctuates from period to period and can be materially impacted
by, among other things:
|
|
|
changes in the mix of our earnings from the various jurisdictions in which we operate; |
|
|
|
|
the tax characteristics of our earnings; |
|
|
|
|
the timing and amount of earnings of foreign subsidiaries that we repatriate to the
United States, which may increase our tax expense and taxes paid; and |
|
|
|
|
the timing and results of any reviews of our income tax filing positions in the
jurisdictions in which we transact business. |
Highlights from the Year Ended January 3, 2009
|
|
|
Diluted earnings per share were $1.34 in the year ended January 3, 2009, compared with
$1.30 in the year ended December 29, 2007. |
|
|
|
|
Operating profit was $317 million in the year ended January 3, 2009, compared with $389
million in the year ended December 29, 2007. |
|
|
|
|
Total net sales in the year ended January 3, 2009 was $4.25 billion, compared with $4.47
billion to the year ended December 29, 2007. |
|
|
|
|
During the year ended January 3, 2009, we approved actions to close 11 manufacturing
facilities and three distribution centers in Mexico, the United
States, Costa Rica, Honduras and El Salvador. The production capacity represented by the manufacturing facilities
has been relocated to lower cost locations in Asia, Central America and the Caribbean
Basin. The distribution capacity has been relocated to our West Coast
distribution facility in California in order to expand capacity for goods we source from
Asia. In addition, we completed several such actions in the year ended January 3, 2009 that
were approved in 2008. |
|
|
|
|
Gross capital expenditures were $187 million during the year ended January 3, 2009 as we
continued to build out our textile and sewing network in Asia, Central America and the
Caribbean Basin. |
|
|
|
|
During the second quarter of 2008, we added three company-owned sewing plants in
Southeast Asia two in Vietnam and one in Thailand giving us four sewing plants in
Asia. In addition, during the fourth quarter of 2008, we acquired an embroidery facility in
Honduras. |
40
|
|
|
We repurchased $30 million of company stock during the year ended January 3, 2009. |
|
|
|
|
We ended 2008 with $463 million of borrowing availability under our $500 million
revolving loan facility (the Revolving Loan Facility), $67 million in cash and cash
equivalents and $67 million of borrowing availability under our international loan
facilities, compared to $430 million, $174 million and $89 million, respectively, at the
end of 2007. |
Consolidated Results of Operations Year Ended January 3, 2009 (2008) Compared with Year Ended
December 29, 2007 (2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
$ |
(225,767 |
) |
|
|
(5.0 |
)% |
Cost of sales |
|
|
2,871,420 |
|
|
|
3,033,627 |
|
|
|
(162,207 |
) |
|
|
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,377,350 |
|
|
|
1,440,910 |
|
|
|
(63,560 |
) |
|
|
(4.4 |
) |
Selling, general and
administrative
expenses |
|
|
1,009,607 |
|
|
|
1,040,754 |
|
|
|
(31,147 |
) |
|
|
(3.0 |
) |
Gain on curtailment
of postretirement
benefits |
|
|
|
|
|
|
(32,144 |
) |
|
|
(32,144 |
) |
|
NM |
Restructuring |
|
|
50,263 |
|
|
|
43,731 |
|
|
|
6,532 |
|
|
|
14.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
317,480 |
|
|
|
388,569 |
|
|
|
(71,089 |
) |
|
|
(18.3 |
) |
Other (income) expense |
|
|
(634 |
) |
|
|
5,235 |
|
|
|
(5,869 |
) |
|
|
(112.1 |
) |
Interest expense, net |
|
|
155,077 |
|
|
|
199,208 |
|
|
|
(44,131 |
) |
|
|
(22.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income tax expense |
|
|
163,037 |
|
|
|
184,126 |
|
|
|
(21,089 |
) |
|
|
(11.5 |
) |
Income tax expense |
|
|
35,868 |
|
|
|
57,999 |
|
|
|
(22,131 |
) |
|
|
(38.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
127,169 |
|
|
$ |
126,127 |
|
|
$ |
1,042 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
$ |
(225,767 |
) |
|
|
(5.0 |
)% |
Consolidated net sales were lower by $226 million or 5% in 2008 compared to 2007
primarily due to weak sales at retail, which reflect a difficult economic and retail environment in
which the ultimate consumers of our products have been significantly limiting their discretionary
spending and visiting retail stores less frequently. The economic recession continued to impact
consumer spending, resulting in one of the worst holiday shopping seasons in 40 years as retail
sales fell for the sixth straight month in December. Our Innerwear, Outerwear, Hosiery and Other
segment net sales were lower by $154 million (6%), $41 million (3%), $38 million (14%) and $35
million (62%), respectively, and were partially offset by higher net sales in our International
segment of $38 million (9%). Although the majority of our products are replenishment in nature and
tend to be purchased by consumers on a planned, rather than on an impulse, basis, weakness in the
retail environment can impact our results in the short-term, as it did in 2008. The total impact
of the 53rd week in 2008, which is included in the amounts above, was a $54 million
increase in sales.
The lower net sales in our Innerwear segment were primarily due to a decline in the
intimate apparel, socks, thermals and sleepwear product categories. Total intimate apparel net sales were $102 million
lower in 2008 compared to 2007. We experienced lower intimate apparel sales in our smaller brands
(barely there, Just My Size and Wonderbra) of $49 million, our Hanes brand of $42 million and our
private label brands of $10 million which we believe was primarily attributable to weaker sales at
retail as noted above. In 2008 compared to 2007, our Playtex brand intimate apparel net sales were
higher by $10 million and our Bali brand intimate apparel net sales were lower by $11 million. Net
sales in our male underwear product category were $8 million lower, which includes
41
the impact of exiting a license arrangement for a boys character underwear program in early 2008 that lowered
sales by $15 million. In addition, net sales of socks, thermals and sleepwear product categories
were lower in 2008 compared to 2007 by $32 million, $10 million and $4 million, respectively.
In our Outerwear segment, net sales of our Champion brand activewear were $34 million
higher in 2008 compared to 2007, and were offset by lower net sales of our casualwear product
categories of $79 million. Net sales in our Hosiery segment declined substantially more than the
long-term trend primarily due to lower sales of the Hanes brand to national chains and department
stores and our Leggs brand to mass retailers and food and drug stores in 2008 compared to 2007. We
expect the trend of declining hosiery sales to continue consistent with the overall decline in the
industry and with shifts in consumer preferences.
The overall lower net sales were partially offset by higher net sales in our
International segment that were driven by a favorable impact of $22 million related to foreign
currency exchange rates and by the growth in our casualwear businesses in Europe and Asia. The
favorable impact of foreign currency exchange rates was primarily due to the strengthening of the
Japanese yen, Euro and Brazilian real.
The decline in net sales for our Other segment is primarily due to the continued vertical
integration of a yarn and fabric operation acquisition from 2006 with less focus on sales of
nonfinished fabric and yarn to third parties. We expect this decline to continue and sales for this
segment to ultimately become insignificant to us as we complete the implementation of our
consolidation and globalization efforts.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Gross profit |
|
$ |
1,377,350 |
|
|
$ |
1,440,910 |
|
|
$ |
(63,560 |
) |
|
|
(4.4 |
)% |
As a percent of net sales, our gross profit percentage was 32.4% in 2008 compared to
32.2% in 2007. While the gross profit percentage was higher, gross profit dollars were lower due to
lower sales volume of $85 million, unfavorable product sales mix of $35 million, higher cotton
costs of $30 million, higher production costs of $20 million related to higher energy and oil
related costs including freight costs and other vendor price increases of $12 million. The cotton
prices reflected in our results were 65 cents per pound in 2008 as compared to 56 cents per pound
in 2007. Energy and oil related costs were higher due to a spike in oil related commodity prices
during the summer of 2008. Our results will continue to reflect higher costs for cotton and oil
related materials until these costs cease to be reflected on our balance sheet in the first half of
2009 and we will start to benefit in the second half of 2009 from lower commodity costs. In
addition, in connection with the consolidation and globalization of our supply chain, we incurred
one-time restructuring related write-offs of stranded raw materials and work in process inventory
determined not to be salvageable or cost-effective to relocate of $19 million in 2008, which were
offset by lower accelerated depreciation of $13 million.
These higher expenses were primarily offset by savings from our cost reduction initiatives and
prior restructuring actions of $41 million, lower other manufacturing overhead costs of $24 million
primarily related to better volumes earlier in the year, lower on-going excess and obsolete
inventory costs of $14 million, lower sales incentives of $11 million, $10 million of lower duty
costs primarily related to higher refunds of $9 million, a $9 million favorable impact related to
foreign currency exchange rates, $8 million of favorable one-time out of period cost recognition
related to the capitalization of certain inventory supplies to be on a consistent basis across all
business lines, $4 million of lower start-up and shut down costs associated with our consolidation
and globalization of our supply chain and higher product sales pricing of $3 million. Our duty refunds were
higher in 2008 primarily due to the final passage of the Dominican Republic-Central America-United
States Free Trade Agreement in Costa Rica as a result of which we can, on a one-time basis, recover
duties paid since January 1, 2004 totaling approximately $15 million. The lower excess and obsolete
inventory costs in 2008 are attributable to both our continuous evaluation of inventory levels and
simplification of our product category offerings since the spin off. We realized the benefits of
driving down obsolete inventory levels through aggressive management and promotions and realized
the benefits from decreases in style counts ranging from 7% to 30% in our various product category
offerings. The quality of our inventory remained good with obsolete inventory down 23% from last
year. The favorable foreign currency exchange rate impact in our International segment was
primarily due to the strengthening of the Japanese yen, Euro and Brazilian real.
42
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Selling, general
and administrative
expenses |
|
$ |
1,009,607 |
|
|
$ |
1,040,754 |
|
|
$ |
(31,147 |
) |
|
|
(3.0 |
)% |
Our selling, general and administrative expenses were $31 million lower in 2008
compared to 2007. Our cost reduction efforts resulted in lower expenses in 2008 compared to 2007
related to savings of $21 million from our prior restructuring actions for compensation and related
benefits, lower consulting expenses related to various areas of $5 million, lower non-media related
media, advertising and promotion expenses (MAP) expenses of $3 million, lower accelerated
depreciation of $3 million, lower postretirement healthcare and life insurance expense of $2
million and lower stock compensation expense of $2 million.
Our media related MAP expenses were $11 million lower in 2008 as compared to 2007. While our
spending for media related MAP was down in 2008, it was the second highest spending level in our
history. We supported our key brands with targeted, effective advertising and marketing campaigns
such as the launch of Hanes No Ride Up Panties and marketing initiatives for Champion and Playtex
in the first half of 2008 and significantly lowered our overall spending during the second half of
2008. In contrast, in 2007, our media related MAP spending was spread across multiple product
categories and brands. MAP expenses may vary from period to period during a fiscal year depending
on the timing of our advertising campaigns for retail selling seasons and product introductions.
In addition, spin off and related charges of $3 million recognized in 2007 did not recur in
2008. Our pension income of $12 million was higher by $9 million, which included an adjustment that
reduced pension expense in 2007 related to the final separation of our pension assets and
liabilities from those of Sara Lee.
We experienced higher bad debt expense of $7 million primarily related to the Mervyns
bankruptcy, higher computer software amortization costs of $5 million, higher technology consulting
and related expenses of $4 million and higher distribution expenses of $4 million in 2008 compared
to 2007. The higher technology consulting and computer software amortization costs are related to
our efforts to integrate our information technology systems across our company which involves
reducing the number of information technology platforms serving our business functions. The higher
distribution expenses in 2008 compared to 2007 were primarily related to higher volumes in our
international business, higher postage and freight costs and higher rework expenses in our
distribution centers. We also incurred higher expenses of $3 million in 2008 compared to 2007 as a
result of opening 10 retail stores over the last 12 months. In addition, we incurred $7 million in
amortization of gain on curtailment of postretirement benefits in 2007 which did not recur in 2008.
Gain on Curtailment of Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Gain on curtailment
of postretirement
benefits |
|
$ |
|
|
|
$ |
(32,144 |
) |
|
$ |
(32,144 |
) |
|
NM |
In December 2006, we notified retirees and employees of the phase out of premium subsidies for
early retiree medical coverage and move to an access-only plan for early retirees by the end of
2007. In December 2007, in connection with the termination of the postretirement medical plan, we
recognized a final gain on curtailment of plan benefits of $32 million. Concurrently with the
termination of the existing plan, we established a new access only plan that is fully paid by the
participants.
43
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Restructuring |
|
$ |
50,263 |
|
|
$ |
43,731 |
|
|
$ |
6,532 |
|
|
|
14.9 |
% |
During 2008, we approved actions to close 11 manufacturing facilities and three
distribution centers and eliminate approximately 6,800 positions in Mexico,
the United States, Costa Rica, Honduras and El Salvador. The production capacity represented by the manufacturing
facilities has been relocated to lower cost locations in Asia, Central America and the Caribbean
Basin. The distribution capacity has been relocated to our West Coast distribution facility in
California in order to expand capacity for goods we source from Asia. In addition, approximately
200 management and administrative positions were eliminated, with the majority of these positions
based in the United States. We recorded a charge of $34 million related to employee termination
and other benefits recognized in accordance with benefit plans previously communicated to the
affected employee group, fixed asset impairment charges of $9 million and charges related to
exiting supply contracts of $11 million, which was partially offset by $4 million of favorable
settlements of contract obligations for lower amounts than previously estimated.
In 2008, we recorded $19 million in one-time write-offs of stranded raw materials and
work in process inventory determined not to be salvageable or cost-effective to relocate related to
the closure of manufacturing facilities in the Cost of sales line. In addition, in connection
with our consolidation and globalization strategy, in 2008 and 2007, we recognized non-cash charges
of $24 million and $37 million, respectively, in the Cost of sales line and a non-cash charge of
$3 million in the Selling, general and administrative expenses line in 2007 related to
accelerated depreciation of buildings and equipment for facilities that have been closed or will be
closed.
These actions, which are a continuation of our consolidation and globalization
strategy, are expected to result in benefits of moving production to lower-cost manufacturing
facilities, leveraging our large scale in high-volume products and consolidating production
capacity.
During 2007, we incurred $44 million in restructuring charges which primarily related to a
charge of $32 million related to employee termination and other benefits associated with plant
closures approved during that period and the elimination of certain management and administrative
positions, a $10 million charge for estimated lease termination costs associated with facility
closures and a $2 million impairment charge associated with facility closures.
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Operating profit |
|
$ |
317,480 |
|
|
$ |
388,569 |
|
|
$ |
(71,089 |
) |
|
|
(18.3 |
)% |
Operating profit was lower in 2008 compared to 2007 as a result of lower gross profit of $64
million, a $32 million gain on curtailment of postretirement benefits recognized in 2007 which did
not recur in 2008 and higher restructuring and related charges for facility closures of $7 million
partially offset by lower selling, general and administrative expenses of $31 million. The lower
gross profit was primarily the result of lower sales volume, unfavorable product sales mix and
increases in manufacturing input costs for cotton and energy and other oil related costs, all of
which exceeded our savings from executing our consolidation and globalization strategy during 2008.
The total impact of the 53rd week in 2008, which is included in the amounts above, was
a $6 million increase in operating profit.
44
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Other (income) expense |
|
$ |
(634 |
) |
|
$ |
5,235 |
|
|
$ |
(5,869 |
) |
|
|
(112.1 |
)% |
During 2008, we recognized a gain of $2 million related to the repurchase of $6 million of our
Floating Rate Senior Notes for $4 million. This gain was partially offset by a $1 million loss on
early extinguishment of debt related to unamortized debt issuance costs on the Senior Secured
Credit Facility for the prepayment of $125 million of principal in December 2008. During 2007, we
recognized losses on early extinguishment of debt related to unamortized debt issuance costs on the
Senior Secured Credit Facility for prepayments of $428 million of principal in 2007, including a
prepayment of $250 million that was made in connection with funding from the Receivables Facility
we entered into in November 2007.
Interest Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Interest expense, net |
|
$ |
155,077 |
|
|
$ |
199,208 |
|
|
$ |
(44,131 |
) |
|
|
(22.2 |
)% |
Interest expense, net was lower by $44 million in 2008 compared to 2007. The lower
interest expense is primarily attributable to a lower weighted average interest rate, $32 million
of which resulted from a lower London Interbank Offered Rate, or LIBOR, and $4 million of which
resulted from reduced interest rates achieved through changes in our financing structure such as
the February 2007 amendment to our Senior Secured Credit Facility and the Receivables Facility that
we entered into in November 2007. In addition, interest expense was reduced by $8 million as a
result of our net prepayments of long-term debt during 2007 and 2008 of $303 million. Our weighted
average interest rate on our outstanding debt was 6.09% during 2008 compared to 7.74% in 2007.
At January 3, 2009, we had outstanding interest rate hedging arrangements whereby we have
capped the interest rate on $400 million of our floating rate debt at 3.50% and had fixed the
interest rate on $1.4 billion of our floating rate debt at 4.16%. Approximately 82% of our total
debt outstanding at January 3, 2009 was at a fixed or capped LIBOR rate.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Income tax expense |
|
$ |
35,868 |
|
|
$ |
57,999 |
|
|
$ |
(22,131 |
) |
|
|
(38.2 |
)% |
Our annual effective income tax rate was 22.0% in 2008 compared to 31.5% in 2007. The lower
income tax expense is attributable primarily to lower pre-tax income and a lower effective income
tax rate. The lower effective income tax rate is primarily due to higher unremitted earnings from
foreign subsidiaries in 2008 taxed at rates less than the U.S. statutory rate. Our annual effective
tax rate reflects our strategic initiative to make substantial capital investments outside the
United States in our global supply chain in 2008.
45
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net income |
|
$ |
127,169 |
|
|
$ |
126,127 |
|
|
$ |
1,042 |
|
|
|
0.8 |
% |
Net income for 2008 was higher than 2007 primarily due to lower interest expense, lower
selling, general and administrative expenses and a lower effective income tax rate offset by lower
gross profit resulting from lower sales volume and higher manufacturing input costs, a gain on
curtailment of postretirement benefits recognized in 2007 which did not recur in 2008 and higher
restructuring charges. The total impact of the 53rd week in 2008 was a $3 million
increase in net income.
46
Operating Results by Business Segment Year Ended January 3, 2009 (2008) Compared with Year
Ended December 29, 2007 (2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
2,402,831 |
|
|
$ |
2,556,906 |
|
|
$ |
(154,075 |
) |
|
|
(6.0 |
)% |
Outerwear |
|
|
1,180,747 |
|
|
|
1,221,845 |
|
|
|
(41,098 |
) |
|
|
(3.4 |
) |
International |
|
|
460,085 |
|
|
|
421,898 |
|
|
|
38,187 |
|
|
|
9.1 |
|
Hosiery |
|
|
227,924 |
|
|
|
266,198 |
|
|
|
(38,274 |
) |
|
|
(14.4 |
) |
Other |
|
|
21,724 |
|
|
|
56,920 |
|
|
|
(35,196 |
) |
|
|
(61.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment net sales |
|
|
4,293,311 |
|
|
|
4,523,767 |
|
|
|
(230,456 |
) |
|
|
(5.1 |
) |
Intersegment |
|
|
(44,541 |
) |
|
|
(49,230 |
) |
|
|
(4,689 |
) |
|
|
(9.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
$ |
(225,767 |
) |
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
277,486 |
|
|
$ |
305,959 |
|
|
$ |
(28,473 |
) |
|
|
(9.3 |
) |
Outerwear |
|
|
68,769 |
|
|
|
71,364 |
|
|
|
(2,595 |
) |
|
|
(3.6 |
) |
International |
|
|
57,070 |
|
|
|
53,147 |
|
|
|
3,923 |
|
|
|
7.4 |
|
Hosiery |
|
|
71,596 |
|
|
|
76,917 |
|
|
|
(5,321 |
) |
|
|
(6.9 |
) |
Other |
|
|
(472 |
) |
|
|
(1,361 |
) |
|
|
889 |
|
|
|
65.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit |
|
|
474,449 |
|
|
|
506,026 |
|
|
|
(31,577 |
) |
|
|
(6.2 |
) |
Items not included in segment
operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
(52,143 |
) |
|
|
(60,213 |
) |
|
|
(8,070 |
) |
|
|
(13.4 |
) |
Amortization of trademarks and
other intangibles |
|
|
(12,019 |
) |
|
|
(6,205 |
) |
|
|
5,814 |
|
|
|
93.7 |
|
Gain on curtailment of
postretirement benefits |
|
|
|
|
|
|
32,144 |
|
|
|
(32,144 |
) |
|
NM |
Restructuring |
|
|
(50,263 |
) |
|
|
(43,731 |
) |
|
|
6,532 |
|
|
|
14.9 |
|
Inventory write-off included in
cost of sales |
|
|
(18,696 |
) |
|
|
|
|
|
|
18,696 |
|
|
NM |
Accelerated depreciation
included in cost of sales |
|
|
(23,862 |
) |
|
|
(36,912 |
) |
|
|
(13,050 |
) |
|
|
(35.4 |
) |
Accelerated depreciation
included in selling, general and
administrative expenses |
|
|
14 |
|
|
|
(2,540 |
) |
|
|
(2,554 |
) |
|
|
(100.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
317,480 |
|
|
|
388,569 |
|
|
|
(71,089 |
) |
|
|
(18.3 |
) |
Other income (expense) |
|
|
634 |
|
|
|
(5,235 |
) |
|
|
5,869 |
|
|
|
112.1 |
|
Interest expense, net |
|
|
(155,077 |
) |
|
|
(199,208 |
) |
|
|
(44,131 |
) |
|
|
(22.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
expense |
|
$ |
163,037 |
|
|
$ |
184,126 |
|
|
$ |
(21,089 |
) |
|
|
(11.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Innerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
2,402,831 |
|
|
$ |
2,556,906 |
|
|
$ |
(154,075 |
) |
|
|
(6.0 |
)% |
Segment operating profit |
|
|
277,486 |
|
|
|
305,959 |
|
|
|
(28,473 |
) |
|
|
(9.3 |
) |
Overall net sales in the Innerwear segment were lower by $154 million or 6% in 2008
compared to 2007. The difficult economic and retail environment significantly impacted consumers
discretionary spending which resulted in lower sales in our intimate apparel, socks, thermals and
sleepwear product categories. Total intimate apparel net sales were $102 million lower in 2008
compared to 2007. We experienced lower intimate apparel sales in our smaller brands (barely there,
Just My Size and Wonderbra) of $49 million, our Hanes brand of $42 million and our private label
brands of $10 million which we believe was primarily attributable to weaker sales at retail. In
2008 compared to 2007, our Playtex brand intimate apparel net sales were higher by $10 million and
our Bali brand intimate apparel net sales were lower by $11 million. The growth in our Playtex
brand sales was supported by successful marketing initiatives in the first half of 2008. Net sales
in our male underwear product category were $8 million lower, which includes the impact of exiting
a license arrangement for a boys character underwear program in early 2008 that lowered sales by
$15 million. The lower net sales in our socks product category reflects a decline in kids and
mens Hanes brand net sales of $19 million and Champion brand net sales of $11 million primarily
related to the loss of a mens program for one of our customers. In addition, net sales of thermals
and sleepwear product categories were lower in 2008 compared to 2007 by $10 million and $4 million,
respectively. The total impact of the 53rd week in 2008, which is included in the
amounts above, was a $34 million increase in sales for the Innerwear segment.
As a percent of segment net sales, gross profit percentage in the Innerwear segment
was 36.9% in 2008 compared to 36.8% in 2007. While the gross profit percentage was higher, gross
profit dollars were lower due to lower sales volume of $67 million, unfavorable product sales mix
of $28 million, higher cotton costs of $12 million, higher production costs of $10 million related
to higher energy and oil related costs including freight costs, other vendor price increases of $7
million and lower product sales pricing of $4 million. These higher costs were offset by savings
from our cost reduction initiatives and prior restructuring actions of $27 million, lower sales
incentives of $21 million, $11 million of lower duty costs primarily related to higher refunds and
$8 million of favorable one-time out of period cost recognition related to the capitalization of
certain inventory supplies to be on a consistent basis across all business lines. In addition, we
incurred lower on-going excess and obsolete inventory costs of $8 million arising from realizing
the benefits of driving down obsolete inventory levels through aggressive management and promotions
and simplifying our product category offerings which reduced our style counts ranging from 7% to
30% in our various product category offerings.
The lower Innerwear segment operating profit in 2008 compared to 2007 is primarily
attributable to lower gross profit and higher bad debt expense of $4 million primarily related to
the Mervyns bankruptcy. We also incurred higher expenses of $3 million in 2008 compared to 2007
as a result of opening 10 retail stores over the last 12 months. These higher costs were partially
offset by savings of $15 million from prior restructuring actions primarily for compensation and
related benefits, lower media related MAP expenses of $8 million and lower non-media related MAP
expenses of $7 million. A significant portion of the selling, general and administrative expenses
in each segment is an allocation of our consolidated selling, general and administrative expenses,
however certain expenses that are specifically identifiable to a segment are charged directly to
each segment. The allocation methodology for the consolidated selling, general and administrative
expenses for 2008 is consistent with 2007. Our consolidated selling, general and administrative
expenses before segment allocations was $31 million lower in 2008 compared to 2007.
48
Outerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
1,180,747 |
|
|
$ |
1,221,845 |
|
|
$ |
(41,098 |
) |
|
|
(3.4 |
)% |
Segment operating profit |
|
|
68,769 |
|
|
|
71,364 |
|
|
|
(2,595 |
) |
|
|
(3.6 |
) |
Net sales in the Outerwear segment were lower by $41 million or 3% in 2008 compared to
2007, primarily as a result of higher net sales of Champion brand activewear of $34 million offset
by lower net sales of retail casualwear of $55 million and lower net sales through our
embellishment channel of $24 million, primarily in promotional t-shirts and sportshirts. Our
Champion brand sales continue to benefit from our investment in the brand through our marketing
initiatives. Our How You Play marketing campaign has received a very positive response from
consumers. The lower retail casualwear net sales of $55 million reflect a $6 million impact related
to the loss of seasonal programs continuing into the first half of 2009. We expect the impact on
2009 net sales of losing these programs, which consist of recurring seasonal programs that were
renewed in prior years but were not renewed for 2009, to occur primarily in the first half of 2009;
losses may be offset by any new seasonal programs we may add. The total impact of the
53rd week in 2008, which is included in the amounts above, was a $14 million increase in
sales for the Outerwear segment.
As a percent of segment net sales, gross profit percentage in the Outerwear segment
was 22.1% in 2008 compared to 21.6% in 2007. While the gross profit percentage was higher, gross
profit dollars were lower due to higher cotton costs of $18 million, higher production costs of $10
million related to higher energy and oil related costs including freight costs, lower sales volume
of $9 million, higher sales incentives of $8 million and other vendor price increases of $3
million. These higher costs were partially offset by lower other manufacturing overhead costs of
$23 million, savings of $11 million from our cost reduction initiatives and prior restructuring
actions, higher product sales pricing of $7 million, lower on-going excess and obsolete inventory
costs of $2 million and favorable product sales mix of $2 million.
The lower Outerwear segment operating profit in 2008 compared to 2007 is primarily
attributable to lower gross profit, higher distribution expenses of $5 million, higher technology
consulting and related expenses of $3 million, higher non-media related MAP expenses of $3 million
and higher bad debt expense of $2 million primarily related to the Mervyns bankruptcy. These
higher costs were partially offset by savings of $6 million from our cost reduction initiatives and
prior restructuring actions and lower media-related MAP expenses of $5 million. A significant
portion of the selling, general and administrative expenses in each segment is an allocation of our
consolidated selling, general and administrative expenses, however certain expenses that are
specifically identifiable to a segment are charged directly to each segment. The allocation
methodology for the consolidated selling, general and administrative expenses for 2008 is
consistent with 2007. Our consolidated selling, general and administrative expenses before segment
allocations was $31 million lower in 2008 compared to 2007.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
460,085 |
|
|
$ |
421,898 |
|
|
$ |
38,187 |
|
|
|
9.1 |
% |
Segment operating profit |
|
|
57,070 |
|
|
|
53,147 |
|
|
|
3,923 |
|
|
|
7.4 |
|
Overall net sales in the International segment were higher by $38 million or 9% in
2008 compared to 2007. During 2008, we experienced higher net sales, in each case including the
impact of foreign currency and the 53rd week, in Europe of $20 million, Asia of $18
million and Canada of $2 million. The growth in our European casualwear business was driven by the
strength of the Stedman brand that is sold in the embellishment channel. Higher sales in our
Champion brand casualwear business in Asia and our Champion and Hanes brands male underwear business in Canada also contributed to the sales growth. Changes in foreign currency
exchange rates had a favorable impact on net sales of $22 million in 2008 compared to 2007. The
favorable impact was primarily due to the strengthening of the Japanese yen, Euro and Brazilian
real. The total impact of the 53rd week in 2008 was a $2 million increase in sales for
the International segment.
49
As a percent of segment net sales, gross profit percentage was 40.8% in 2008 compared
to 2007 at 41.3%. While the gross profit percentage was lower, gross profit dollars were higher for
2008 compared to 2007 as a result of a favorable impact related to foreign currency exchange rates
of $9 million, favorable product sales mix of $7 million and lower on-going excess and obsolete
inventory costs of $3 million partially offset by higher sales incentives of $6 million.
The higher International segment operating profit in 2008 compared to 2007 is primarily
attributable to the higher gross profit partially offset by higher distribution expenses of $3
million, higher media-related MAP expenses of $2 million and higher non-media related MAP expenses
of $2 million. Changes in foreign currency exchange rates, which are included in the impact on
gross profit above, had a favorable impact on segment operating profit of $4 million in 2008
compared to 2007.
Hosiery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
227,924 |
|
|
$ |
266,198 |
|
|
$ |
(38,274 |
) |
|
|
(14.4 |
)% |
Segment operating profit |
|
|
71,596 |
|
|
|
76,917 |
|
|
|
(5,321 |
) |
|
|
(6.9 |
) |
Net sales in the Hosiery segment declined by $38 million or 14%, which was
substantially more than the long-term trend primarily due to lower sales of the Hanes brand to
national chains and department stores and the Leggs brand to mass retailers and food and drug
stores. In addition, we experienced lower sales of $4 million related the Donna Karan and DKNY
license agreement and lower sales of our Just My Size brand of $3 million. We expect the trend of
declining hosiery sales to continue consistent with the overall decline in the industry and with
shifts in consumer preferences. Generally, we manage the Hosiery segment for cash, placing an
emphasis on reducing our cost structure and managing cash efficiently. The total impact of the
53rd week in 2008, which is included in the amounts above, was a $4 million increase in
sales for the Hosiery segment.
As a percent of segment net sales, gross profit percentage was 47.1% in 2008 compared to 47.2%
in 2007. The lower gross profit percentage for 2008 compared to 2007 is the result of unfavorable
product sales mix of $17 million and lower sales volume of $10 million, offset by savings of $4
million from our cost reduction initiatives and prior restructuring actions, lower sales incentives
of $4 million and lower other manufacturing overhead costs of $2 million.
The lower Hosiery segment operating profit in 2008 compared to 2007 is primarily attributable
to lower gross profit partially offset by lower distribution expenses of $5 million, savings of $2
million from our cost reduction initiatives and prior restructuring actions, lower non-media
related MAP expenses of $2 million and lower spending of $3 million in numerous areas. A
significant portion of the selling, general and administrative expenses in each segment is an
allocation of our consolidated selling, general and administrative expenses, however certain
expenses that are specifically identifiable to a segment are charged directly to each segment. The
allocation methodology for the consolidated selling, general and administrative expenses for 2008
is consistent with 2007. Our consolidated selling, general and administrative expenses before
segment allocations was $31 million lower in 2008 compared to 2007.
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
Higher |
|
|
Percent |
|
|
|
2009 |
|
|
2007 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
21,724 |
|
|
$ |
56,920 |
|
|
$ |
(35,196 |
) |
|
|
(61.8 |
)% |
Segment operating profit |
|
|
(472 |
) |
|
|
(1,361 |
) |
|
|
889 |
|
|
|
65.3 |
|
The decline in net sales in our Other segment is primarily due to the continued vertical
integration of a yarn and fabric operation acquisition from 2006 with less focus on sales of
nonfinished fabric and yarn to third parties. We expect this decline to continue and sales for this
segment to ultimately become insignificant to us as we complete the
50
implementation of our consolidation and globalization efforts. Net sales in this segment are
generated for the purpose of maintaining asset utilization at certain manufacturing facilities and
generating break even margins.
General Corporate Expenses
General corporate expenses were lower in 2008 compared to 2007 primarily due to $11 million of
higher foreign exchange transaction gains, $6 million of higher gains on sales of assets, $3
million of lower start-up and shut-down costs associated with our consolidation and globalization
of our supply chain and $3 million of spin off and related charges recognized in 2007 which did not
recur in 2008. These lower expenses were partially offset by $7 million in amortization of gain on
curtailment of postretirement benefits in 2007 which did not recur in 2008, $7 million in losses
from foreign currency derivatives and a $3 million adjustment that reduced pension expense in 2007
related to the final separation of our pension assets and liabilities from those of Sara Lee.
Consolidated Results of Operations Year Ended December 29, 2007 Compared with Twelve Months
Ended December 30, 2006
The information presented below for the year ended December 29, 2007 was derived from our
consolidated financial statements. The unaudited information presented for the twelve months ended
December 30, 2006 (which twelve month period we refer to as 2006 in this Consolidated Results of
Operation Year Ended December 29, 2007 Compared with Twelve Months Ended December 30, 2006
section and the section entitled Operating Results by Business Segment Year Ended December 29,
2007 Compared with Twelve Months Ended December 30, 2006) is presented due to the change in our
fiscal year end and was derived by combining the six months ended July 1, 2006 and the six months
ended December 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
Net sales |
|
$ |
4,474,537 |
|
|
$ |
4,403,466 |
|
|
$ |
71,071 |
|
|
|
1.6 |
% |
Cost of sales |
|
|
3,033,627 |
|
|
|
2,960,759 |
|
|
|
72,868 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,440,910 |
|
|
|
1,442,707 |
|
|
|
(1,797 |
) |
|
|
(0.1 |
) |
Selling, general and
administrative
expenses |
|
|
1,040,754 |
|
|
|
1,093,436 |
|
|
|
(52,682 |
) |
|
|
(4.8 |
) |
Gain on curtailment
of postretirement
benefits |
|
|
(32,144 |
) |
|
|
(28,467 |
) |
|
|
3,677 |
|
|
|
12.9 |
|
Restructuring |
|
|
43,731 |
|
|
|
11,516 |
|
|
|
32,215 |
|
|
|
279.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
388,569 |
|
|
|
366,222 |
|
|
|
22,347 |
|
|
|
6.1 |
|
Other expenses |
|
|
5,235 |
|
|
|
7,401 |
|
|
|
(2,166 |
) |
|
|
(29.3 |
) |
Interest expense, net |
|
|
199,208 |
|
|
|
79,621 |
|
|
|
119,587 |
|
|
|
150.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income tax
expense |
|
|
184,126 |
|
|
|
279,200 |
|
|
|
(95,074 |
) |
|
|
(34.1 |
) |
Income tax expense |
|
|
57,999 |
|
|
|
71,184 |
|
|
|
(13,185 |
) |
|
|
(18.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
126,127 |
|
|
$ |
208,016 |
|
|
$ |
(81,889 |
) |
|
|
(39.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
51
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
4,474,537 |
|
|
$ |
4,403,466 |
|
|
$ |
71,071 |
|
|
|
1.6 |
% |
Consolidated net sales were higher by $71 million or 2% in 2007 compared to 2006. Our
Outerwear, International and Other segment net sales were higher by $68 million (6%), $22 million
(5%) and $12 million (27%), respectively, and were offset by lower segment net sales in Innerwear
of $18 million (1%) and Hosiery of $12 million (4%).
The overall higher net sales were primarily due to double digit growth in sales volume
in Champion brand sales, growth in Hanes brand casualwear, socks, sleepwear, intimate apparel and
mens underwear sales and Bali brand intimate apparel sales. Our Champion brand sales have
increased by double-digits in each of the last three years. The higher net sales were offset
primarily by lower sales of promotional t-shirts sold primarily through our embellishment channel,
lower Playtex brand intimate apparel sales, lower Hanes brand kids underwear sales and lower
licensed mens underwear sales in the department store channel.
Our strategy of investing in our largest and strongest brands generated growth in
2007. In 2007, we launched a number of new advertising and marketing initiatives for our top
brands, including our Hanes ComfortSoft campaigns, Bali Passion for Comfort, Playtex Girl Talk
and most recently our Champion How you Play advertising campaign which is the first campaign for
the brand since 2003. We also announced a 10-year strategic alliance with The Walt Disney Company
that includes basic apparel exclusivity for the Hanes and Champion brands, product co-branding,
attraction sponsorships and other brand visibility and signage at Disney properties. The alliance
included the naming rights for the stadium at Disneys Wide World of Sports Complex, now known as
Champion Stadium.
Net sales in the Hosiery segment were lower primarily due to lower sales of the Leggs
brand to mass retailers and food and drug stores. We expect the trend of declining hosiery sales to
continue consistent with the overall decline in the industry and with shifts in consumer
preferences. The higher net sales from our Other segment primarily resulted from an immaterial
change in the way we recognized sales to third party suppliers in 2006. The full year change was
reflected in 2006 with a $5 million impact on net sales and minimal impact on net income.
The changes in foreign currency exchange rates had a favorable impact on net sales of $15
million in 2007 compared to 2006.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Gross profit |
|
$ |
1,440,910 |
|
|
$ |
1,442,707 |
|
|
$ |
(1,797 |
) |
|
|
(0.1 |
)% |
As a percent of net sales, our gross profit percentage was 32.2% in 2007 compared to
32.8% in 2006. The lower gross profit percentage was primarily due to higher cotton costs of $21
million, higher excess and obsolete inventory costs of $21 million, $16 million of higher
accelerated depreciation, $16 million of unfavorable product sales mix and $13 million of higher
start-up and shut down costs associated with the consolidation and globalization of our supply
chain. In addition, gross profit was negatively impacted by higher incentives of $14 million of
which $16 million resulted from a change in the classification of certain sales incentives in 2007
which were previously classified as media, advertising and promotion expenses in 2006. This change
in classification was made in accordance with EITF 01-9, Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendors Products), because the estimated fair
value of the identifiable benefit was no longer obtained beginning in 2007.
Cotton prices, which were approximately 50 cents per pound in 2006, returned to the
ten year historical average of approximately 56 cents per pound in 2007. The higher excess and
obsolete inventory costs in 2007 compared to 2006 are primarily attributable to $9 million of costs
associated with the rationalization of our socks product category offerings and $5 million related
to exiting a licensing arrangement for a kids underwear program. The
52
remaining $7 million of higher excess and obsolete costs aggregates all other product categories as
part of our continuous evaluation of both inventory levels and simplification of our product
category offerings. The higher accelerated depreciation in 2007 was a result of facilities closed
or to be closed in connection with our consolidation and globalization strategy.
These higher costs were offset primarily by savings from our cost reduction initiatives and
prior restructuring actions of $30 million, lower allocations of overhead costs of $24 million, $19
million of improved plant performance, $13 million of higher sales volume, lower duty costs of $9
million, primarily due to the receipt of $8 million in duty refunds relating to duties paid several
years ago, and $4 million of lower spending in numerous other areas.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Selling, general
and administrative
expenses |
|
$ |
1,040,754 |
|
|
$ |
1,093,436 |
|
|
$ |
(52,682 |
) |
|
|
(4.8 |
)% |
Selling, general and administrative expenses were $53 million lower in 2007 compared
to 2006. Our expenses were lower primarily due to lower spin off and related charges of $45
million, $12 million of savings from prior restructuring actions, $10 million of lower distribution
expenses and $7 million in amortization of gain on curtailment of postretirement benefits. Our MAP
expenses were lower by $41 million, primarily with respect to non-media related MAP expenses. The
lower non-media related MAP expenses are primarily attributable to $25 million of cost reduction
initiatives and better deployment of these resources and $16 million due to a change in the
classification of certain sales incentives in 2007 which were classified as MAP expenses in 2006.
MAP expenses may vary from period to period during a fiscal year depending on the timing of our
advertising campaigns for retail selling seasons and product introductions. In addition, pension
expense was reduced by $3 million in 2007 as a result of the final separation of our pension assets
and liabilities from those of Sara Lee.
Our
cost reduction efforts during 2007 allowed us to offset
$7 million of higher stand alone
expenses associated with being an independent company and make investments in our strategic
initiatives resulting in $16 million of higher media related MAP expenses and $13 million in higher
technology consulting expenses in 2007. In addition, our allocations of overhead costs were $24
million lower during 2007 compared to 2006. Accelerated depreciation was $3 million higher in 2007
as a result of facilities closed or to be closed in connection with our consolidation and
globalization strategy.
Gain on Curtailment of Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Gain on curtailment
of postretirement
benefits |
|
$ |
(32,144 |
) |
|
$ |
(28,467 |
) |
|
$ |
3,677 |
|
|
|
12.9 |
% |
In December 2006, we notified retirees and employees of the phase out of premium subsidies for
early retiree medical coverage and move to an access-only plan for early retirees by the end of
2007. We also eliminated the medical plan for retirees ages 65 and older as a result of coverage
available under the expansion of Medicare with Part D drug coverage and eliminated future
postretirement life benefits. The gain on curtailment in 2006 represented the unrecognized amounts
associated with prior plan amendments that were being amortized into income over the remaining
service period of the participants prior to the December 2006 amendments. In 2007, we recognized $7
million in postretirement benefit income which was recorded in Selling, general and administrative
expenses, primarily representing the amortization of negative prior service costs, which was
partially offset by service costs,
interest costs on the accumulated benefit obligation and actuarial gains and losses
accumulated in the plan. In December 2007, we terminated the existing plan and recognized a final
gain on curtailment of plan benefits of $32 million. Concurrently with the termination of the
existing plan, we established a new access only plan that is fully paid by the participants.
53
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Restructuring |
|
$ |
43,731 |
|
|
$ |
11,516 |
|
|
$ |
32,215 |
|
|
|
279.7 |
% |
During 2007, we approved actions to close 16 manufacturing facilities and three
distribution centers affecting 6,213 employees in the Dominican Republic, Mexico, the United
States, Brazil and Canada, while moving production to lower-cost
operations in Asia, Central
America and the Caribbean Basin. In addition, 428 management and administrative positions were eliminated, with the
majority of these positions based in the United States. These actions resulted in a charge of $32
million, representing costs associated with the planned termination of 6,641 employees, primarily
attributable to employee and other termination benefits recognized in accordance with benefit plans
previously communicated to the affected employee group. In addition, we recognized a charge of $10
million for estimated lease termination costs and $2 million primarily related to impairment
charges associated with facility closures approved in prior periods, for facilities that were
exited during 2007.
Of the seven manufacturing facilities and distribution centers that were approved for
closure in 2006, two were closed in 2006 and five were closed in 2007. Of the 19 manufacturing
facilities and distribution centers that were approved for closure in 2007, 10 were closed in 2007
and nine were expected to close in 2008.
In connection with our consolidation and globalization strategy, non-cash charges of
$37 million and $3 million, respectively, of accelerated depreciation of buildings and equipment
for facilities closed or to be closed is reflected in Cost of sales and Selling, general and
administrative expenses.
These actions, which are a continuation of our consolidation and globalization strategy, are
expected to result in benefits of moving production to lower-cost manufacturing facilities,
leveraging our large scale in high-volume products and consolidating production capacity.
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Operating profit |
|
$ |
388,569 |
|
|
$ |
366,222 |
|
|
$ |
22,347 |
|
|
|
6.1 |
% |
Operating profit was higher in 2007 by $22 million compared to 2006 primarily as a result of
lower selling, general and administrative expenses of $53 million and higher gain on curtailment of
postretirement benefits of $4 million partially offset by higher restructuring charges of $32
million and lower gross profit of $2 million. Our ability to control costs and execute on our
consolidation and globalization strategy during 2007 allowed us to offset $29 million of higher
investments in our strategic initiatives and $7 million of
higher stand alone expenses associated
with being an independent company.
Other Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Other expenses |
|
$ |
5,235 |
|
|
$ |
7,401 |
|
|
$ |
(2,166 |
) |
|
|
(29.3) |
% |
We recognized losses on early extinguishment of debt related to unamortized debt issuance
costs on the Senior
Secured Credit Facility for prepayments of $428 million of principal in 2007, including a
prepayment of $250 million that was made in connection with funding from the Receivables Facility
we entered into in November 2007.
54
Interest Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Interest expense, net |
|
$ |
199,208 |
|
|
$ |
79,621 |
|
|
$ |
119,587 |
|
|
|
150.2 |
% |
Interest expense, net was higher in 2007 by $120 million compared to 2006 primarily as
a result of the indebtedness incurred in connection with the spin off from Sara Lee on September 5,
2006, consisting of $2.6 billion pursuant to the Senior Secured Credit Facility, the Second Lien
Credit Facility and the Bridge Loan Facility. In December 2006, we issued $500 million of Floating
Fate Senior Notes and the net proceeds were used to repay the Bridge Loan Facility.
In February 2007, we entered into a first amendment to the Senior Secured Credit Facility with
our lenders, which primarily lowered the applicable borrowing margin with respect to the Term B
loan facility from 2.25% to 1.75% on LIBOR based loans and from 1.25% to 0.75% on Base Rate loans.
In November 2007, we entered into the Receivables Facility with conduits that issue commercial
paper in the short-term market and are not affiliated with us, which provides for up to $250
million in funding accounted for as a secured borrowing and is secured by certain domestic trade
receivables. The borrowing rate is generally the conduits cost to issue commercial paper, plus
certain dealer fees, which equated to 5.93% from November 27, 2007 through December 29, 2007. Our
weighted average interest rate on our outstanding debt in 2007 was 7.74%.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Income tax expense |
|
$ |
57,999 |
|
|
$ |
71,184 |
|
|
$ |
(13,185 |
) |
|
|
(18.5 |
)% |
Our effective income tax rate was 31.5% in 2007 compared to 25.5% in 2006. The higher
effective tax rate is attributable primarily to our new independent structure and higher remitted
earnings from foreign subsidiaries in 2007.
Our effective tax rate is heavily influenced by the amount of permanent capital
investment we make outside the United States to fund our supply chain consolidation and
globalization strategy rather than remitting those earnings back to the United States.
As we continue to fund our supply chain consolidation and globalization strategy in future
years, we may elect to permanently invest earnings from foreign subsidiaries which would result in
a lower overall effective tax rate.
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net income |
|
$ |
126,127 |
|
|
$ |
208,016 |
|
|
$ |
(81,889 |
) |
|
|
(39.4 |
)% |
Net income for 2007 was lower than 2006 primarily due to higher interest expense and a higher
effective income tax rate as a result of our independent structure partially offset by higher
operating profit and lower other expenses.
55
Operating Results by Business Segment Year Ended December 29, 2007 Compared with Twelve Months
Ended December 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
2,556,906 |
|
|
$ |
2,574,967 |
|
|
$ |
(18,061 |
) |
|
|
(0.7) |
% |
Outerwear |
|
|
1,221,845 |
|
|
|
1,154,107 |
|
|
|
67,738 |
|
|
|
5.9 |
|
International |
|
|
421,898 |
|
|
|
400,167 |
|
|
|
21,731 |
|
|
|
5.4 |
|
Hosiery |
|
|
266,198 |
|
|
|
278,253 |
|
|
|
(12,055 |
) |
|
|
(4.3 |
) |
Other |
|
|
56,920 |
|
|
|
44,670 |
|
|
|
12,250 |
|
|
|
27.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net segment sales |
|
|
4,523,767 |
|
|
|
4,452,164 |
|
|
|
71,603 |
|
|
|
1.6 |
|
Intersegment |
|
|
(49,230 |
) |
|
|
(48,698 |
) |
|
|
532 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
4,474,537 |
|
|
$ |
4,403,466 |
|
|
$ |
71,071 |
|
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
305,959 |
|
|
$ |
339,528 |
|
|
$ |
(33,569 |
) |
|
|
(9.9) |
% |
Outerwear |
|
|
71,364 |
|
|
|
57,310 |
|
|
|
14,054 |
|
|
|
24.5 |
|
International |
|
|
53,147 |
|
|
|
37,799 |
|
|
|
15,348 |
|
|
|
40.6 |
|
Hosiery |
|
|
76,917 |
|
|
|
49,281 |
|
|
|
27,636 |
|
|
|
56.1 |
|
Other |
|
|
(1,361 |
) |
|
|
(931 |
) |
|
|
(430 |
) |
|
|
(46.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment
operating profit |
|
|
506,026 |
|
|
|
482,987 |
|
|
|
23,039 |
|
|
|
4.8 |
|
Items not included in
segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
(60,213 |
) |
|
|
(104,065 |
) |
|
|
(43,852 |
) |
|
|
(42.1 |
) |
Amortization of
trademarks and other
intangibles |
|
|
(6,205 |
) |
|
|
(8,452 |
) |
|
|
(2,247 |
) |
|
|
(26.6 |
) |
Gain on curtailment of
postretirement benefits |
|
|
32,144 |
|
|
|
28,467 |
|
|
|
3,677 |
|
|
|
12.9 |
|
Restructuring |
|
|
(43,731 |
) |
|
|
(11,516 |
) |
|
|
32,215 |
|
|
|
279.7 |
|
Accelerated depreciation
included in cost of sales |
|
|
(36,912 |
) |
|
|
(21,199 |
) |
|
|
15,713 |
|
|
|
74.1 |
|
Accelerated depreciation
included in selling,
general and
administrative expenses |
|
|
(2,540 |
) |
|
|
|
|
|
|
2,540 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
388,569 |
|
|
|
366,222 |
|
|
|
22,347 |
|
|
|
6.1 |
|
Other expenses |
|
|
(5,235 |
) |
|
|
(7,401 |
) |
|
|
(2,166 |
) |
|
|
(29.3 |
) |
Interest expense, net |
|
|
(199,208 |
) |
|
|
(79,621 |
) |
|
|
119,587 |
|
|
|
150.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income tax expense |
|
$ |
184,126 |
|
|
$ |
279,200 |
|
|
$ |
(95,074 |
) |
|
|
(34.1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
56
Innerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
2,556,906 |
|
|
$ |
2,574,967 |
|
|
$ |
(18,061 |
) |
|
|
(0.7 |
)% |
Segment operating profit |
|
|
305,959 |
|
|
|
339,528 |
|
|
|
(33,569 |
) |
|
|
(9.9 |
) |
Overall net sales in the Innerwear segment were slightly lower by $18 million or 1% in 2007
compared to 2006. We experienced lower sales volume of Playtex brand intimate apparel sales of $23
million, lower Hanes brand kids underwear sales of $21 million, lower licensed mens underwear
sales in the department store channel of $10 million and $3 million lower Just My Size brand sales.
The lower net sales were partially offset by higher Hanes brand socks, sleepwear, intimate
apparel sales and mens underwear of $11 million, $8 million, $5 million and $4 million,
respectively, and higher Bali brand sales of $12 million.
Net sales for the Hanes brand were higher in most key categories, except for kids underwear.
Hanes mens underwear benefited from an increased focus on core products and better overall
performance at retail during the year-end holiday season. Total socks sales, which exceeded $340
million in 2007, were higher by 4%, primarily due to new programs at our top two customers. Our
Bali brand sales were higher primarily as a result of our Passion for Comfort media campaign
launched in 2007. Playtex brand sales were lower in 2007 due to soft department store retail sales
and a reduction in retail inventory primarily in the first three quarters of 2007.
As a percent of segment net sales, gross profit percentage in the Innerwear segment was 36.8%
in 2007 compared to 37.4% in 2006. The gross profit percentage was lower due to unfavorable product
sales mix of $19 million, higher excess and obsolete inventory costs of $13 million, unfavorable
product sales pricing of $12 million, $9 million in higher cotton costs and unfavorable plant
performance of $4 million. The higher excess and obsolete inventory costs in 2007 compared to 2006
are primarily attributable to $9 million of costs associated with the rationalization of our socks
product category offerings and $5 million related to exiting a licensing arrangement for a kids
underwear program. In addition, gross profit was negatively impacted by higher incentives of $15
million primarily due to a change in the classification of certain sales incentives in 2007 which
were classified as media, advertising and promotion expenses in 2006. These higher expenses were
partially offset by lower allocations of overhead costs of $15 million, lower duty costs of $14
million primarily due to the receipt of $7 million in duty refunds relating to duties paid several
years ago, $10 million of higher sales volume and $10 million in savings from our cost reduction
initiatives and prior restructuring actions.
The lower Innerwear segment operating profit in 2007 compared to 2006 is primarily
attributable to lower gross profit and a higher allocation of selling, general and administrative
expenses of $22 million. These higher expenses were partially offset by lower MAP expenses of $11
million, primarily due to a change in the classification of certain sales incentives in 2007 which
were classified as MAP expenses in 2006. Our consolidated selling, general and administrative
expenses before segment allocations were lower in 2007 compared to 2006 primarily due to lower spin
off and related charges, savings from prior restructuring actions, lower distribution expenses,
amortization of gain on curtailment of postretirement benefits, lower MAP expenses and lower
pension expense offset by higher stand alone expenses, lower allocations of overhead costs, higher
accelerated depreciation and higher technology consulting expenses.
Outerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
1,221,845 |
|
|
$ |
1,154,107 |
|
|
$ |
67,738 |
|
|
|
5.9 |
% |
Segment operating profit |
|
|
71,364 |
|
|
|
57,310 |
|
|
|
14,054 |
|
|
|
24.5 |
|
Net sales in the Outerwear segment were higher by $68 million in 2007 compared to 2006
primarily as a result of higher Champion brand activewear and Hanes brand retail casualwear net
sales. Overall activewear and retail casualwear net sales were higher by $60 million and $50
million, respectively, in 2007 compared to 2006. The higher net sales were partially offset by
lower net sales in our casualwear business as a result of lower sales of promotional t-shirts sold
primarily through our embellishment channel of $42 million, most of which occurred in the
57
first half of 2007. Champion, our second largest brand, benefited from higher penetration in
the sporting goods channel, and, together with C9 by Champion, in the mid-tier department store
channel. In 2007, we expanded the depth and breadth of distribution in sporting goods with our
Champion Double Dry performance products. Champion sales have increased by double-digits in each
of the three years ended December 2007.
As a percent of segment net sales, gross profit percentage in the Outerwear segment was 21.6%
in 2007 compared to 19.4% in 2006. The improvement in gross profit is primarily attributable to
improved plant performance of $18 million, savings from our cost reduction initiatives and prior
restructuring actions of $16 million, higher sales volume of $13 million, lower allocations of
overhead costs of $9 million and favorable product sales pricing of $8 million offset primarily by
higher cotton costs of $11 million, higher excess and obsolete inventory costs of $8 million,
higher duty costs of $4 million and higher sales incentives of $4 million.
The higher Outerwear segment operating profit in 2007 compared to 2006 is primarily
attributable to a higher gross profit and lower MAP expenses of $3 million which was offset by a
higher allocation of selling, general and administrative expenses of $28 million. Our consolidated
selling, general and administrative expenses before segment allocations were lower in 2007 compared
to 2006 primarily due to lower spin off and related charges, savings from prior restructuring
actions, lower distribution expenses, amortization of gain on curtailment of postretirement
benefits, lower MAP expenses and lower pension expense offset by higher stand alone expenses, lower
allocations of overhead costs, higher accelerated depreciation and higher technology consulting
expenses.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
421,898 |
|
|
$ |
400,167 |
|
|
$ |
21,731 |
|
|
|
5.4 |
% |
Segment operating profit |
|
|
53,147 |
|
|
|
37,799 |
|
|
|
15,348 |
|
|
|
40.6 |
|
Overall net sales in the International segment were higher by $22 million in 2007 compared to
2006. During 2007 we experienced higher net sales, in each case including the impact of foreign
currency, in Europe of $17 million, higher net sales of $6 million in our emerging markets in Asia
and $3 million of higher sales in Latin America, which were partially offset by lower sales in
Canada of $5 million. The growth in our European casualwear business was primarily driven by the
strength of the Stedman and Hanes brands that are sold in the embellishment channel. The higher
sales in Asia were the result of significant retail distribution gains in China and India. Changes
in foreign currency exchange rates had a favorable impact on net sales of $15 million in 2007
compared to 2006 primarily due to the strengthening of the Canadian dollar, Brazilian real and the
Euro.
As a percent of segment net sales, gross profit percentage was 41.3% in 2007 compared to 40.7%
in 2006 primarily due to $4 million of lower sales incentives, $2 million of favorable product
sales mix and $2 million of favorable product sales pricing.
The higher International segment operating profit in 2007 compared to 2006 is primarily
attributable to the higher gross profit from higher sales volume, $3 million in lower MAP expenses
and $1 million in lower distribution expenses. Changes in foreign currency exchange rates had a
favorable impact on segment operating profit of $3 million in 2007 compared to 2006 primarily due
to the strengthening of the Canadian dollar, Brazilian real and the Euro.
Hosiery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
266,198 |
|
|
$ |
278,253 |
|
|
$ |
(12,055 |
) |
|
|
(4.3 |
)% |
Segment operating profit |
|
|
76,917 |
|
|
|
49,281 |
|
|
|
27,636 |
|
|
|
56.1 |
|
Net sales in the Hosiery segment were lower by $12 million in 2007 compared to 2006 primarily
due to lower sales of the Leggs brand to mass retailers and food and drug stores. We expect the
trend of declining hosiery sales to continue consistent with the overall decline in the industry
and with shifts in consumer preferences.
58
As a percent of segment net sales, gross profit percentage was 47.2% in 2007 compared to 41.3%
in 2006 primarily due to improved plant performance of $10 million, lower sales incentives of $3
million and $5 million in savings from our cost reduction initiatives and prior restructuring
actions which was partially offset by $10 million of lower sales volume.
Hosiery segment operating profit was higher in 2007 compared to 2006 primarily due to a higher
gross profit, $6 million in lower MAP expenses and $12 million in lower allocated selling, general
and administrative expenses.
Our consolidated selling, general and administrative expenses before segment allocations were
lower in 2007 compared to 2006 primarily due to lower spin off and related charges, savings from
prior restructuring actions, lower distribution expenses, amortization of gain on curtailment of
postretirement benefits, lower MAP expenses and lower pension expense offset by higher stand alone
expenses, lower allocations of overhead costs, higher accelerated depreciation and higher
technology consulting expenses.
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
|
|
|
December 29, |
|
|
December 30, |
|
|
Higher |
|
|
Percent |
|
|
|
2007 |
|
|
2006 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
56,920 |
|
|
$ |
44,670 |
|
|
$ |
12,250 |
|
|
|
27.4 |
% |
Segment operating profit |
|
|
(1,361 |
) |
|
|
(931 |
) |
|
|
(430 |
) |
|
|
(46.2 |
) |
The higher net sales from our Other segment primarily resulted from an immaterial change in
the way we recognized sales to third party suppliers in 2006. The full year change was reflected in
2006 with a $5 million impact on net sales and minimal impact on segment operating profit. Net
sales in this segment are generated for the purpose of maintaining asset utilization at certain
manufacturing facilities.
General Corporate Expenses
General corporate expenses were lower in 2007 compared to 2006 primarily due to lower spin off
and related charges of $45 million, amortization of gain on postretirement benefits of $7 million
and a $3 million reduction in pension expense related to the final separation of our pension plan
assets and liabilities from those of Sara Lee. These lower expenses were partially offset by higher
stand alone expenses associated with being an independent company of $7 million and $4 million of
higher expenses in numerous other areas.
59
Consolidated Results of Operations Six Months Ended December 30, 2006 Compared with Six Months
Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
2,250,473 |
|
|
$ |
2,319,839 |
|
|
$ |
(69,366 |
) |
|
|
(3.0 |
)% |
Cost of sales |
|
|
1,530,119 |
|
|
|
1,556,860 |
|
|
|
(26,741 |
) |
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
720,354 |
|
|
|
762,979 |
|
|
|
(42,625 |
) |
|
|
(5.6 |
) |
Selling, general and
administrative expenses |
|
|
547,469 |
|
|
|
505,866 |
|
|
|
41,603 |
|
|
|
8.2 |
|
Gain on curtailment of
postretirement benefits |
|
|
(28,467 |
) |
|
|
|
|
|
|
28,467 |
|
|
NM |
Restructuring |
|
|
11,278 |
|
|
|
(339 |
) |
|
|
11,617 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
190,074 |
|
|
|
257,452 |
|
|
|
(67,378 |
) |
|
|
(26.2 |
) |
Other expenses |
|
|
7,401 |
|
|
|
|
|
|
|
7,401 |
|
|
NM |
Interest expense, net |
|
|
70,753 |
|
|
|
8,412 |
|
|
|
62,341 |
|
|
|
741.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
111,920 |
|
|
|
249,040 |
|
|
|
(137,120 |
) |
|
|
(55.1 |
) |
Income tax expense |
|
|
37,781 |
|
|
|
60,424 |
|
|
|
(22,643 |
) |
|
|
(37.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
74,139 |
|
|
$ |
188,616 |
|
|
$ |
(114,477 |
) |
|
|
(60.7) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Net sales |
|
$ |
2,250,473 |
|
|
$ |
2,319,839 |
|
|
$ |
(69,366 |
) |
|
|
(3.0) |
% |
Net sales decreased $52 million, $12 million and $17 million in our Innerwear, Hosiery and
Other segments, respectively. These declines were offset by increases in net sales of $13 million
and $2 million in our Outerwear and International segments, respectively. Overall net sales
decreased due to a $28 million impact from our intentional discontinuation of low-margin product
lines in the Outerwear segment and a $12 million decrease in sheer hosiery sales. Additionally, the
acquisition of National Textiles, L.L.C. in September 2005 caused a $16 million decrease in our
Other segment as sales to this business were included in net sales in periods prior to the
acquisition. Finally, we experienced slower sell-through of innerwear products in the mass
merchandise and department store retail channels during the latter half of the six months ended
December 30, 2006.
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Cost of sales |
|
$ |
1,530,119 |
|
|
$ |
1,556,860 |
|
|
$ |
(26,741 |
) |
|
|
(1.7) |
% |
Cost of sales were lower year over year as a result of a decrease in net sales, favorable
spending from the benefits of manufacturing cost savings initiatives and a favorable impact from
shifting certain production to lower cost locations. These savings were offset partially by higher
cotton costs, unusual charges primarily to exit certain contracts and low margin product lines, and
accelerated depreciation as a result of our announced plans to close four textile and sewing plants
in the United States, Puerto Rico and Mexico.
60
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Gross profit |
|
$ |
720,354 |
|
|
$ |
762,979 |
|
|
$ |
(42,625 |
) |
|
|
(5.6) |
% |
As a percent of net sales, gross profit percentage decreased to 32.0% for the six months ended
December 30, 2006 from 32.9% for the six months ended December 31, 2005. The decrease in gross
profit percentage was due to $21 million in accelerated depreciation as a result of our announced
plans to close four textile and sewing plants, higher cotton costs of $18 million, $15 million of
unusual charges primarily to exit certain contracts and low margin product lines and an $11 million
impact from lower manufacturing volume. The higher costs were partially offset by $38 million of
net favorable spending from our prior year restructuring actions, manufacturing cost savings
initiatives and a favorable impact of shifting certain production to lower cost locations. In
addition, the impact on gross profit from lower net sales was $16 million.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Selling, general
and administrative
expenses |
|
$ |
547,469 |
|
|
$ |
505,866 |
|
|
$ |
41,603 |
|
|
|
8.2 |
% |
Selling, general and administrative expenses increased partially due to higher non-recurring
spin off and related costs of $17 million and incremental costs associated with being an
independent company of $10 million, excluding the corporate allocations associated with Sara Lee
ownership in the prior year of $21 million. Media, advertising and promotion costs increased $12
million primarily due to unusual charges to exit certain license agreements and additional
investments in our brands. Other unusual charges increasing selling, general and administrative
expenses by $12 million primarily included certain freight revenue being moved to net sales during
the six months ended December 30, 2006 and a reduction of estimated allocations to inventory costs.
In addition, we experienced slightly higher spending of approximately $10 million in numerous areas
such as technology consulting, distribution, severance and market research, which were partially
offset by headcount savings from prior year restructuring actions and a reduction in pension and
postretirement expenses.
Gain on Curtailment of Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Gain on curtailment
of postretirement
benefits |
|
$ |
(28,467 |
) |
|
$ |
|
|
|
$ |
28,467 |
|
|
NM |
In December 2006, we notified retirees and employees that we would phase out premium subsidies
for early retiree medical coverage and move to an access-only plan for early retirees by the end of
2007. We also decided to eliminate the medical plan for retirees ages 65 and older as a result of
coverage available under the expansion of Medicare with Part D drug coverage and eliminate future
postretirement life benefits. The gain on curtailment represents the unrecognized amounts
associated with prior plan amendments that were being amortized into income over the remaining
service period of the participants prior to the December 2006 amendments. We recorded
postretirement benefit income related to this plan in 2007, primarily representing the amortization
of negative prior service costs, which was partially offset by service costs, interest costs on the
accumulated benefit obligation and actuarial gains and losses accumulated in the plan. We recorded
a final gain on curtailment of plan benefits in December 2007.
61
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Restructuring |
|
$ |
11,278 |
|
|
$ |
(339 |
) |
|
$ |
11,617 |
|
|
NM |
During the six months ended December 30, 2006, we approved actions to close four textile and
sewing plants in the United States, Puerto Rico and Mexico and consolidate three distribution
centers in the United States. These actions resulted in a charge of $11 million, representing costs
associated with the planned termination of 2,989 employees for employee termination and other
benefits in accordance with benefit plans previously communicated to the affected employee group.
In connection with these restructuring actions, a charge of $21 million for accelerated
depreciation of buildings and equipment is reflected in the Cost of sales line of the
Consolidated Statement of Income. These actions were expected to be completed in early 2007. These
actions, which are a continuation of our long-term global supply chain globalization strategy, are
expected to result in benefits of moving production to lower-cost manufacturing facilities,
improved alignment of sewing operations with the flow of textiles, leveraging our large scale in
high-volume products and consolidating production capacity.
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Operating profit |
|
$ |
190,074 |
|
|
$ |
257,452 |
|
|
$ |
(67,378 |
) |
|
|
(26.2) |
% |
Operating profit for the six months ended December 30, 2006 decreased as compared to the six
months ended December 31, 2005 primarily as a result of facility closures announced in the six
months ended December 30, 2006 and restructuring related costs of $32 million, higher non-recurring
spin off and related charges of $17 million, higher costs associated with being an independent
company of $10 million, unusual charges of $35 million primarily to exit certain contracts and low
margin product lines, charges to exit certain license agreements and additional investments in our
brands. In addition, we experienced higher cotton and production related costs of $29 million,
lower gross margin from lower net sales of $16 million and slightly higher selling, general and
administrative spending of approximately $10 million in numerous areas such as technology
consulting, distribution, severance and market research. These higher costs were offset partially
by favorable spending from our prior year restructuring actions, manufacturing cost savings
initiatives, a favorable impact of shifting certain production to lower cost locations and lower
corporate allocations from Sara Lee totaling $59 million and the gain on curtailment of
postretirement benefits of $28 million.
Other Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Other expenses |
|
$ |
7,401 |
|
|
$ |
|
|
|
$ |
7,401 |
|
|
NM |
In connection with the offering of the Floating Rate Senior Notes we recognized a $6 million
loss on early extinguishment of debt for unamortized debt issuance costs on the Bridge Loan
Facility entered into in connection with the spin off from Sara Lee. We recognized approximately $1
million loss on early extinguishment of debt related to unamortized debt issuance costs on the
Senior Secured Credit Facility for the prepayment of $100 million of principal in December 2006.
62
Interest Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Interest expense, net |
|
$ |
70,753 |
|
|
$ |
8,412 |
|
|
$ |
62,341 |
|
|
|
741.1 |
% |
In connection with the spin off, we incurred $2.6 billion of debt pursuant to the Senior
Secured Credit Facility, the Second Lien Credit Facility and the Bridge Loan Facility, $2.4 billion
of the proceeds of which was paid to Sara Lee. As a result, our net interest expense in the six
months ended December 30, 2006 was substantially higher than in the comparable period.
Under the Credit Facilities, we are required to hedge a portion of our floating rate debt to
reduce interest rate risk caused by floating rate debt issuance. During the six months ended
December 30, 2006, we entered into various hedging arrangements whereby we capped the interest rate
on $1 billion of our floating rate debt at 5.75%. We also entered into interest rate swaps tied to
the 3-month LIBOR whereby we fixed the interest rate on an aggregate of $500 million of our
floating rate debt at a blended rate of approximately 5.16%. Approximately 60% of our total debt
outstanding at December 30, 2006 was at a fixed or capped rate. There was no hedge ineffectiveness
during the six months ended December 30, 2006 period related to these instruments.
In December 2006, we completed the offering of $500 million aggregate principal amount of the
Floating Rate Senior Notes. The Floating Rate Senior Notes bear interest at a per annum rate, reset
semiannually, equal to the six month LIBOR plus a margin of 3.375%. The proceeds from the offering
were used to repay all outstanding borrowings under the Bridge Loan Facility.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Income tax expense |
|
$ |
37,781 |
|
|
$ |
60,424 |
|
|
$ |
(22,643 |
) |
|
|
(37.5) |
% |
Our effective income tax rate increased from 24.3% for the six months ended December 31, 2005
to 33.8% for the six months ended December 30, 2006. The increase in our effective tax rate as an
independent company is attributable primarily to the expiration of tax incentives for manufacturing
in Puerto Rico of $9 million, which were repealed effective for the periods after July 1, 2006,
higher taxes on remittances of foreign earnings for the period of $9 million and $5 million tax
effect of lower unremitted earnings from foreign subsidiaries in the six months ended December 30,
2006 taxed at rates less than the U.S. statutory rate. The tax expense for both periods was
impacted by a number of significant items that are set out in the reconciliation of our effective
tax rate to the U.S. statutory rate in Note 18 titled Income Taxes to our Consolidated Financial
Statements.
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(unaudited) |
|
|
|
(dollars in thousands) |
|
Net income |
|
$ |
74,139 |
|
|
$ |
188,616 |
|
|
$ |
(114,477 |
) |
|
|
(60.7) |
% |
Net income for the six months ended December 30, 2006 was lower than for the six months ended
December 31, 2005 primarily as a result of reduced operating profit, increased interest expense,
higher income taxes as an independent company and losses on early extinguishment of debt.
63
Operating Results by Business Segment Six Months Ended December 30, 2006 Compared with Six
Months Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
1,295,868 |
|
|
$ |
1,347,582 |
|
|
$ |
(51,714 |
) |
|
|
(3.8 |
)% |
Outerwear |
|
|
616,298 |
|
|
|
603,585 |
|
|
|
12,713 |
|
|
|
2.1 |
|
International |
|
|
197,729 |
|
|
|
195,980 |
|
|
|
1,749 |
|
|
|
0.9 |
|
Hosiery |
|
|
144,066 |
|
|
|
155,897 |
|
|
|
(11,831 |
) |
|
|
(7.6 |
) |
Other |
|
|
19,381 |
|
|
|
36,096 |
|
|
|
(16,715 |
) |
|
|
(46.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net segment sales |
|
|
2,273,342 |
|
|
|
2,339,140 |
|
|
|
(65,798 |
) |
|
|
(2.8 |
) |
Intersegment |
|
|
(22,869 |
) |
|
|
(19,301 |
) |
|
|
3,568 |
|
|
|
18.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
2,250,473 |
|
|
$ |
2,319,839 |
|
|
$ |
(69,366 |
) |
|
|
(3.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
172,008 |
|
|
$ |
192,449 |
|
|
$ |
(20,441 |
) |
|
|
(10.6 |
)% |
Outerwear |
|
|
21,316 |
|
|
|
49,248 |
|
|
|
(27,932 |
) |
|
|
(56.7 |
) |
International |
|
|
15,236 |
|
|
|
16,574 |
|
|
|
(1,338 |
) |
|
|
(8.1 |
) |
Hosiery |
|
|
36,205 |
|
|
|
26,531 |
|
|
|
9,674 |
|
|
|
36.5 |
|
Other |
|
|
(288 |
) |
|
|
1,202 |
|
|
|
(1,490 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit |
|
|
244,477 |
|
|
|
286,004 |
|
|
|
(41,527 |
) |
|
|
(14.5 |
) |
Items not included in segment
operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
(46,927 |
) |
|
|
(24,846 |
) |
|
|
22,081 |
|
|
|
88.9 |
|
Amortization of trademarks and
other intangibles |
|
|
(3,466 |
) |
|
|
(4,045 |
) |
|
|
(579 |
) |
|
|
(14.3 |
) |
Gain on curtailment of
postretirement benefits |
|
|
28,467 |
|
|
|
|
|
|
|
28,467 |
|
|
NM |
Restructuring |
|
|
(11,278 |
) |
|
|
339 |
|
|
|
11,617 |
|
|
NM |
Accelerated depreciation
included in cost of sales |
|
|
(21,199 |
) |
|
|
|
|
|
|
21,199 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
190,074 |
|
|
|
257,452 |
|
|
|
(67,378 |
) |
|
|
(26.2 |
) |
Other expenses |
|
|
(7,401 |
) |
|
|
|
|
|
|
7,401 |
|
|
NM |
Interest expense, net |
|
|
(70,753 |
) |
|
|
(8,412 |
) |
|
|
62,341 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
expense |
|
$ |
111,920 |
|
|
$ |
249,040 |
|
|
$ |
(137,120 |
) |
|
|
(55.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,295,868 |
|
|
$ |
1,347,582 |
|
|
$ |
(51,714 |
) |
|
|
(3.8 |
)% |
Segment operating profit |
|
|
172,008 |
|
|
|
192,449 |
|
|
|
(20,441 |
) |
|
|
(10.6 |
) |
Net sales in our Innerwear segment decreased primarily due to lower mens underwear
and kids underwear sales of $36 million and lower thermal sales of $14 million, as well as
additional investments in our brands as compared to the six months ended December 31, 2005. We
experienced lower sell-through of products in the mass merchandise and department store retail
channels primarily in the latter half of the six months ended December 30, 2006.
64
As a percent of segment net sales, gross profit percentage in the Innerwear segment
increased from 36.5% for the six months ended December 31, 2005 to 37.0% for the six months ended
December 30, 2006, reflecting a positive impact of favorable spending of $21 million from our prior
year restructuring actions, cost savings initiatives and savings associated with moving to lower
cost locations. These changes were partially offset by an unfavorable impact of lower volumes of
$18 million, higher cotton costs of $7 million and unusual costs of $8 million primarily associated
with exiting certain low margin product lines.
The decrease in segment operating profit is primarily attributable to the gross profit impact
of the items noted above and higher allocated selling, general and administrative expenses of $8
million. Media, advertising and promotion costs were slightly higher due to changes in license
agreements, net of lower media spend on innerwear categories. Our total selling, general and
administrative expenses before segment allocations increased as a result of unusual charges, higher
stand alone costs as an independent company and higher spending in numerous areas such as
technology consulting, distribution, severance and market research, which were partially offset by
headcount savings from prior year restructuring actions and a reduction in pension and
postretirement expenses.
Outerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
616,298 |
|
|
$ |
603,585 |
|
|
$ |
12,713 |
|
|
|
2.1 |
% |
Segment operating profit |
|
|
21,316 |
|
|
|
49,248 |
|
|
|
(27,932 |
) |
|
|
(56.7 |
) |
Net sales in our Outerwear segment increased primarily due to $33 million of increased
sales of activewear and $33 million of increased sales of boys fleece as compared to the six
months ended December 31, 2005. These changes were partially offset by the $28 million impact of
our intentional exit of certain lower margin fleece product lines, lower womens and girls fleece
sales of $16 million and $9 million of lower sportshirt, jersey and other fleece sales.
As a percent of segment net sales, gross profit percentage declined from 20.7% for the
six months ended December 31, 2005 to 19.8% for the six months ended December 30, 2006 primarily as
a result of higher cotton costs of $11 million, $5 million associated with exiting certain low
margin product lines and higher duty, freight and contractor costs of $6 million, partially offset
by $19 million in cost savings initiatives and a favorable impact with shifting production to lower
cost locations.
The decrease in segment operating profit is primarily attributable to the gross profit impact
of the items noted above, higher media advertising and promotion expenses directly attributable to
our casualwear products of $15 million and higher allocated selling, general and administrative
expenses of $10 million. Our total selling, general and administrative expenses before segment
allocations increased as a result of unusual charges, higher stand alone costs as an independent
company and higher spending in numerous areas such as technology consulting, distribution,
severance and market research, which were partially offset by headcount savings from prior year
restructuring actions and a reduction in pension and postretirement expenses.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
197,729 |
|
|
$ |
195,980 |
|
|
$ |
1,749 |
|
|
|
0.9 |
% |
Segment operating profit |
|
|
15,236 |
|
|
|
16,574 |
|
|
|
(1,338 |
) |
|
|
(8.1 |
) |
Net sales in our International segment increased slightly due to higher sales of
t-shirts in Europe and higher sales in our emerging markets in China, India and Brazil, partially
offset by softer sales in Mexico and lower sales in Japan due to a shift in the launch of fall
seasonal products. Changes in foreign currency exchange rates increased net sales by $3 million.
65
As a percent of segment net sales, gross profit percentage increased from 39.7% to
40.2% for the six months ended December 30, 2006. The increase resulted primarily from a $3 million
decrease in overall spending and $1 million from positive changes in foreign currency exchange
rates. These changes were offset by a $4 million impact from unfavorable manufacturing efficiencies
compared to the prior period.
The decrease in segment operating profit is attributable to the gross profit impact of the
items noted above offset by higher allocated selling, general and administrative expenses of $3
million.
Hosiery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
144,066 |
|
|
$ |
155,897 |
|
|
$ |
(11,831 |
) |
|
|
(7.6 |
)% |
Segment operating profit |
|
|
36,205 |
|
|
|
26,531 |
|
|
|
9,674 |
|
|
|
36.5 |
|
Net sales in our Hosiery segment decreased primarily due to the continued decline in
U.S. sheer hosiery consumption. As compared to the six months ended December 31, 2005, overall
sales for the Hosiery segment declined 8% due to a continued reduction in sales of Leggs to mass
retailers and food and drug stores and declining sales of Hanes to department stores. Overall,
the hosiery market declined 4.5% for the six months ended December 30, 2006.
Gross profit declined slightly primarily due to the decline in net sales offset by
favorable spending of $3 million from cost savings initiatives and a reduction in pension and
postretirement expenses.
Segment operating profit increased due primarily to $10 million of lower allocated selling,
general and administrative expenses.
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
December 30, |
|
|
December 31, |
|
|
Higher |
|
|
Percent |
|
|
|
2006 |
|
|
2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
19,381 |
|
|
$ |
36,096 |
|
|
$ |
(16,715 |
) |
|
|
(46.3 |
)% |
Segment operating profit |
|
$ |
(288 |
) |
|
$ |
1,202 |
|
|
|
(1,490 |
) |
|
NM |
Net sales in the Other segment decreased primarily due to the acquisition of National
Textiles, L.L.C. in September 2005 which caused a $16 million decline as sales to this business
were previously included in net sales prior to the acquisition.
As a percent of segment net sales, gross profit percentage increased from 4.8% for the
six months ended December 31, 2005 to 9.9% for the six months ended December 30, 2006 primarily as
a result of favorable manufacturing variances.
The decrease in segment operating profit is primarily attributable to higher allocated
selling, general and administrative expenses in the current period of $2 million offset by the
favorable manufacturing variances noted above. As sales of this segment are generated for the
purpose of maintaining asset utilization at certain manufacturing facilities, gross profit and
operating profit are lower than those of our other segments.
General Corporate Expenses
General corporate expenses increased primarily due to higher nonrecurring spin off and related
costs of $17 million and higher stand alone costs of $10 million of operating as an independent
company.
66
Consolidated Results of Operations Year Ended July 1, 2006 Compared with Year Ended July 2, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
4,472,832 |
|
|
$ |
4,683,683 |
|
|
$ |
(210,851 |
) |
|
|
(4.5 |
)% |
Cost of sales |
|
|
2,987,500 |
|
|
|
3,223,571 |
|
|
|
(236,071 |
) |
|
|
(7.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,485,332 |
|
|
|
1,460,112 |
|
|
|
25,220 |
|
|
|
1.7 |
|
Selling, general and administrative
expenses |
|
|
1,051,833 |
|
|
|
1,053,654 |
|
|
|
(1,821 |
) |
|
|
(0.2 |
) |
Restructuring |
|
|
(101 |
) |
|
|
46,978 |
|
|
|
(47,079 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
433,600 |
|
|
|
359,480 |
|
|
|
74,120 |
|
|
|
20.6 |
|
Interest expense, net |
|
|
17,280 |
|
|
|
13,964 |
|
|
|
3,316 |
|
|
|
23.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
416,320 |
|
|
|
345,516 |
|
|
|
70,804 |
|
|
|
20.5 |
|
Income tax expense |
|
|
93,827 |
|
|
|
127,007 |
|
|
|
(33,180 |
) |
|
|
(26.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
322,493 |
|
|
$ |
218,509 |
|
|
$ |
103,984 |
|
|
|
47.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
4,472,832 |
|
|
$ |
4,683,683 |
|
|
$ |
(210,851 |
) |
|
|
(4.5 |
)% |
Net sales declined primarily due to the $142 million impact from the discontinuation of
low-margin product lines in the Innerwear, Outerwear and International segments and a $48 million
decline in sheer hosiery sales. Other factors netting to $21 million of this decline include lower
selling prices and changes in product sales mix.
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
2,987,500 |
|
|
$ |
3,223,571 |
|
|
$ |
(236,071 |
) |
|
|
(7.3 |
)% |
Cost of sales declined year over year primarily as a result of the decline in net sales. As a
percent of net sales, gross margin increased from 31.2% in 2005 to 33.2% in 2006. The increase in
gross margin percentage was primarily due to a $140 million impact from lower cotton costs, and
lower charges for slow moving and obsolete inventories and a $13 million impact from the benefits
of prior year restructuring actions partially offset by an $84 million impact of lower selling
prices and changes in product sales mix. Although our 2006 results benefited from lower cotton
prices, our costs vary based upon the fluctuating cost of cotton.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative
|
|
$ |
1,051,833 |
|
|
$ |
1,053,654 |
|
|
$ |
(1,821 |
) |
|
|
(0.2 |
)% |
Selling, general and administrative expenses declined due to a $31 million benefit from prior
year restructuring actions, an $11 million reduction in variable distribution costs and a $7
million reduction in pension plan expense. These decreases were partially offset by a $47 million
decrease in recovery of bad debts, higher share-based compensation expense, increased advertising and promotion costs and higher costs incurred
related to the spin off. Measured as a percent of net sales, selling, general and administrative
expenses increased from 22.5% in 2005 to 23.5% in 2006.
67
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
$ |
(101 |
) |
|
$ |
46,978 |
|
|
$ |
(47,079 |
) |
|
NM |
The charge for restructuring in 2005 is primarily attributable to costs for severance actions
related to the decision to terminate 1,126 employees, most of whom were located in the United
States. The income from restructuring in 2006 resulted from the impact of certain restructuring
actions that were completed for amounts more favorable than originally expected which is partially
offset by $4 million of costs associated with the decision to terminate 449 employees.
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
$ |
433,600 |
|
|
$ |
359,480 |
|
|
$ |
74,120 |
|
|
|
20.6 |
% |
Operating profit in 2006 was higher than in 2005 as a result of the items discussed above.
Interest Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
$ |
17,280 |
|
|
$ |
13,964 |
|
|
$ |
3,316 |
|
|
|
23.7 |
% |
Interest expense decreased year over year as a result of lower average balances on borrowings
from Sara Lee. Interest income decreased significantly as a result of lower average cash balances.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
93,827 |
|
|
$ |
127,007 |
|
|
$ |
(33,180 |
) |
|
|
(26.1 |
)% |
Our effective income tax rate decreased from 36.8% in 2005 to 22.5% in 2006. The decrease in
our effective tax rate is attributable primarily to an $81.6 million charge in 2005 related to the
repatriation of the earnings of foreign subsidiaries to the United States. Of this total, $50.0
million was recognized in connection with the remittance of current year earnings to the United
States, and $31.6 million related to earnings repatriated under the provisions of the American Jobs
Creation Act of 2004. The tax expense for both periods was impacted by a number of significant
items which are set out in the reconciliation of our effective tax rate to the U.S. statutory rate
in Note 18 titled Income Taxes to our Consolidated Financial Statements.
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
322,493 |
|
|
$ |
218,509 |
|
|
$ |
103,984 |
|
|
|
47.6 |
% |
Net income in 2006 was higher than in 2005 as a result of the items discussed above.
68
Operating Results by Business Segment Year Ended July 1, 2006 Compared with Year Ended July 2,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
2,627,101 |
|
|
$ |
2,703,637 |
|
|
$ |
(76,536 |
) |
|
|
(2.8 |
)% |
Outerwear |
|
|
1,140,703 |
|
|
|
1,198,286 |
|
|
|
(57,583 |
) |
|
|
(4.8 |
) |
International |
|
|
398,157 |
|
|
|
399,989 |
|
|
|
(1,832 |
) |
|
|
(0.5 |
) |
Hosiery |
|
|
290,125 |
|
|
|
338,468 |
|
|
|
(48,343 |
) |
|
|
(14.3 |
) |
Other |
|
|
62,809 |
|
|
|
88,859 |
|
|
|
(26,050 |
) |
|
|
(29.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net segment sales |
|
|
4,518,895 |
|
|
|
4,729,239 |
|
|
|
(210,344 |
) |
|
|
(4.4 |
) |
Intersegment |
|
|
(46,063 |
) |
|
|
(45,556 |
) |
|
|
507 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
4,472,832 |
|
|
$ |
4,683,683 |
|
|
$ |
(210,851 |
) |
|
|
(4.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
344,643 |
|
|
$ |
300,796 |
|
|
$ |
43,847 |
|
|
|
14.6 |
% |
Outerwear |
|
|
74,170 |
|
|
|
68,301 |
|
|
|
5,869 |
|
|
|
8.6 |
|
International |
|
|
37,003 |
|
|
|
32,231 |
|
|
|
4,772 |
|
|
|
14.8 |
|
Hosiery |
|
|
39,069 |
|
|
|
40,776 |
|
|
|
(1,707 |
) |
|
|
(4.2 |
) |
Other |
|
|
127 |
|
|
|
(174 |
) |
|
|
301 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit |
|
|
495,012 |
|
|
|
441,930 |
|
|
|
53,082 |
|
|
|
12.0 |
|
Items not included in segment
operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
(52,482 |
) |
|
|
(21,823 |
) |
|
|
30,659 |
|
|
|
140.5 |
|
Amortization of trademarks and other
identifiable intangibles |
|
|
(9,031 |
) |
|
|
(9,100 |
) |
|
|
(69 |
) |
|
|
(0.8 |
) |
Restructuring |
|
|
101 |
|
|
|
(46,978 |
) |
|
|
(47,079 |
) |
|
NM |
Accelerated depreciation included in
cost of sales |
|
|
|
|
|
|
(4,549 |
) |
|
|
(4,549 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
433,600 |
|
|
|
359,480 |
|
|
|
74,120 |
|
|
|
20.6 |
|
Interest expense, net |
|
|
(17,280 |
) |
|
|
(13,964 |
) |
|
|
3,316 |
|
|
|
23.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
$ |
416,320 |
|
|
$ |
345,516 |
|
|
$ |
70,804 |
|
|
|
20.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,627,101 |
|
|
$ |
2,703,637 |
|
|
$ |
(76,536 |
) |
|
|
(2.8 |
)% |
Segment operating profit |
|
|
344,643 |
|
|
|
300,796 |
|
|
|
43,847 |
|
|
|
14.6 |
|
Net sales in the Innerwear segment decreased primarily due to a $65 million impact of
our discontinuation of certain sleepwear, thermal and private label product lines and the closure
of certain retail stores. Net sales were also negatively impacted by $15 million of lower sock
sales due to both lower shipment volumes and lower pricing.
Gross profit percentage in the Innerwear segment increased from 35.1% in 2005 to 37.2%
in 2006, reflecting a $78 million impact of lower charges for slow moving and obsolete inventories,
lower cotton costs and benefits from prior restructuring actions, partially offset by lower gross
margins for socks due to pricing pressure and mix.
The increase in Innerwear segment operating profit is primarily attributable to the increase
in gross margin and a $37 million impact of lower allocated selling expenses and other selling,
general and administrative expenses due to headcount reductions. This is partially offset by $21 million related to higher allocated
media advertising and promotion costs.
69
Outerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,140,703 |
|
|
$ |
1,198,286 |
|
|
$ |
(57,583 |
) |
|
|
(4.8 |
)% |
Segment operating profit |
|
|
74,170 |
|
|
|
68,301 |
|
|
|
5,869 |
|
|
|
8.6 |
|
Net sales in the Outerwear segment decreased primarily due to the $64 million impact
of our exit of certain lower-margin fleece product lines and a $33 million impact of lower sales of
casualwear products both in the retail channel and in the embellishment channel, resulting from
lower prices and an unfavorable sales mix, partially offset by a $44 million impact from higher
sales of activewear products.
Gross profit percentage in the Outerwear segment increased from 18.9% in 2005 to 20.0%
in 2006, reflecting a $72 million impact of lower charges for slow moving and obsolete inventories,
lower cotton costs, benefits from prior restructuring actions and the exit of certain lower-margin
fleece product lines, partially offset by pricing pressures and an unfavorable sales mix of
t-shirts sold in the embellishment channel.
The increase in Outerwear segment operating profit is primarily attributable to a higher gross
profit percentage and a $7 million impact of lower allocated selling, general and administrative
expenses due to the benefits of prior restructuring actions.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
398,157 |
|
|
$ |
399,989 |
|
|
$ |
(1,832 |
) |
|
|
(0.5 |
)% |
Segment operating profit |
|
|
37,003 |
|
|
|
32,231 |
|
|
|
4,772 |
|
|
|
14.8 |
|
Net sales in the International segment decreased primarily as a result of $4 million
in lower sales in Latin America which were mainly the result of a $13 million impact from our exit
of certain low-margin product lines. Changes in foreign currency exchange rates increased net sales
by $10 million.
Gross profit percentage increased from 39.1% in 2005 to 40.6% in 2006. The increase is
due to lower allocated selling, general and administrative expenses and margin improvements in
sales in Canada resulting from greater purchasing power for contracted goods.
The increase in International segment operating profit is primarily attributable to a $7
million impact of improvements in gross profit in Canada.
Hosiery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
290,125 |
|
|
$ |
338,468 |
|
|
$ |
(48,343 |
) |
|
|
(14.3 |
)% |
Segment operating profit |
|
|
39,069 |
|
|
|
40,776 |
|
|
|
(1,707 |
) |
|
|
(4.2 |
) |
Net sales in the Hosiery segment decreased primarily due to the continued decline in
sheer hosiery consumption in the United States. Outside unit volumes in the Hosiery segment
decreased by 13% in 2006, with an 11% decline in Leggs volume to mass retailers and food and
drug stores and a 22% decline in Hanes volume to department stores. Overall the hosiery market
declined 11%.
Gross profit percentage in the Hosiery segment increased from 38.0% in 2005 to 40.2%
in 2006. The increase resulted primarily from improved product sales mix and pricing.
The decrease in Hosiery segment operating profit is primarily attributable to lower sales
volume.
70
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Higher |
|
|
Percent |
|
|
|
July 1, 2006 |
|
|
July 2, 2005 |
|
|
(Lower) |
|
|
Change |
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
Net sales |
|
$ |
62,809 |
|
|
$ |
88,859 |
|
|
$ |
(26,050 |
) |
|
|
(29.3) |
% |
Segment operating profit |
|
|
127 |
|
|
|
(174 |
) |
|
|
301 |
|
|
NM |
Net sales decreased primarily due to the acquisition of National Textiles, L.L.C. in September
2005 which caused a $72 million decline as sales to this business were previously included in net
sales prior to the acquisition. Sales to National Textiles, L.L.C. subsequent to the acquisition of
this business are eliminated for purposes of segment reporting. This decrease was partially offset
by $40 million in fabric sales to third parties by National Textiles, L.L.C. subsequent to the
acquisition. An additional offset was related to increased sales of $7 million due to the
acquisition of a Hong Kong based sourcing business at the end of 2005.
Gross profit and segment operating profit remained flat as compared to 2005. As sales in this
segment are generated for the purpose of maintaining asset utilization at certain manufacturing
facilities, gross profit and operating profit are lower than those of our other segments.
General Corporate Expenses
General corporate expenses not allocated to the segments increased in 2006 from 2005 as a
result of higher incurred costs related to the spin off.
Liquidity and Capital Resources
Trends and Uncertainties Affecting Liquidity
Our primary sources of liquidity are our cash generated by operations and availability under
our Revolving Loan Facility and our international loan facilities. At January 3, 2009 we had $463
million of borrowing availability under our $500 million Revolving Loan Facility (after taking into
account outstanding letters of credit), $67 million in cash and cash equivalents and $67 million of
borrowing availability under our international loan facilities. We currently believe that our
existing cash balances and cash generated by operations, together with our available credit
capacity, will enable us to comply with the terms of our indebtedness and meet foreseeable
liquidity requirements.
The following has or is expected to impact liquidity:
|
|
|
we have principal and interest obligations under our long-term debt; |
|
|
|
|
we expect to continue to invest in efforts to improve operating efficiencies and lower
costs; |
|
|
|
|
we expect to continue to add new manufacturing capacity in Asia, Central America and
the Caribbean Basin; |
|
|
|
|
we anticipate that we will decrease the portion of the income of our foreign
subsidiaries that is expected to be remitted to the United States, which could
significantly decrease our effective income tax rate; and |
|
|
|
|
we have the authority to repurchase up to 10 million shares of our stock in the open
market over the next few years, 2.8 million of which we have repurchased as of January 3,
2009 at a cost of $75 million. In light of the current economic recession, we may choose
not to repurchase any stock and focus more on the repayment of our debt in the next twelve
months. |
We are operating in an uncertain and volatile economic environment, which could have
unanticipated adverse effects on our business. The current retail environment has been impacted by
recent volatility in the financial markets, including declines in stock prices, and by uncertain
economic conditions. Increases in food and fuel prices, changes in the credit and housing markets
leading to the current financial and credit
crisis, actual and potential job losses among many sectors of the economy, significant
declines in the stock market resulting in large losses to consumer retirement and investment
accounts, and uncertainty regarding future federal tax and economic policies have all added to
declines in consumer confidence and curtailed retail spending.
71
We expect the weak retail environment to continue and do not expect macroeconomic conditions
to be conducive to growth in 2009. Achieving financial results that compare favorably with
year-ago results will be challenging in the first half of 2009. In the first quarter of 2009, we
expect a sales decline that is more or less consistent with the fourth quarter 2008 trend and
reflects expected lower casualwear sales in the Outerwear segment primarily in the first half of
2009. We also expect substantial pressure on profitability due to the economic climate,
significantly higher commodity costs, increased pension costs and increased costs associated with
implementing our price increase that is not effective for the entire first quarter of 2009,
including repackaging costs.
We expect to be able to manage our working capital levels and capital expenditure amounts to
maintain sufficient levels of liquidity. Factors that could help us in these efforts include the
domestic gross price increase of 4% commencing during the first quarter of 2009, lower commodity
costs in the second half of the year, the ability to execute previously discussed discretionary
spending cuts and additional cost benefits from previous restructuring and related actions.
Depending on conditions in the capital markets and other factors, we will from time to time
consider other financing transactions, the proceeds of which could be used to refinance current
indebtedness or for other purposes. We continue to monitor the impact, if any, of the current
conditions in the credit markets on our operations. Our access to financing at reasonable interest
rates could become influenced by the economic and credit market environment.
As of January 3, 2009, we were in compliance with all covenants under our credit facilities.
We ended the year with a leverage ratio, as calculated under the Senior Secured Credit Facility,
the Second Lien Credit Facility and the Receivables Facility, of 3.3 to 1. The maximum leverage
ratio permitted under the Senior Secured Credit Facility and the Receivables Facility, which are
the most restrictive, was 3.75 to 1 for the quarter ended January 3, 2009 and will decline over
time until it reaches 3.00 to 1 for quarters beginning with the fourth quarter of 2009.
Particularly in the current adverse economic climate, we continue to monitor our covenant
compliance carefully. We expect to maintain compliance with our covenants during 2009, however
economic conditions or the occurrence of events discussed above under Risk Factors could cause
noncompliance. We have been exploring and will continue to explore the multiple options available,
including amendments to credit facilities, to ensure that we remain in compliance with our
covenants in this uncertain economic environment. Any one of these options could result in
significantly higher interest expense in 2009 and beyond. In addition, these options could require
modification of our interest rate derivative portfolio, which could require us to make a cash
payment in the event of terminating a derivative instrument or impact the effectiveness of our
interest rate hedging instruments and require us to take non-cash charges.
Cash Requirements for Our Business
We rely on our cash flows generated from operations and the borrowing capacity under our
Revolving Loan Facility and international loan facilities to meet the cash requirements of our
business. The primary cash requirements of our business are payments to vendors in the normal
course of business, restructuring costs, capital expenditures, maturities of long-term debt and
related interest payments, contributions to our pension plans and repurchases of our stock. We
believe we have sufficient cash and available borrowings for our short-term needs. In light of the
current economic environment and our outlook for 2009, we expect to use excess cash flows to pay
down long-term debt rather than to repurchase our stock or make discretionary contributions to our
pension plans.
The implementation of our consolidation and globalization strategy, which is designed to
improve operating efficiencies and lower costs, has resulted and is likely to continue to result in
significant costs in the short-term and generate savings as well as higher inventory levels for the
next 12 to 15 months. As further plans are developed and approved, we expect to recognize
additional restructuring costs as we eliminate duplicative functions within the organization and
transition a significant portion of our manufacturing capacity to lower-cost locations.
While capital spending could vary significantly from year to year, we anticipated early in
2008 that our capital spending over the next three years could be as high as $500 million as we
continue to execute our supply chain consolidation and globalization strategy and complete the
integration and consolidation of our technology systems. In light of the current economic
recession, we have re-evaluated our future spending plans and reduced the expected amounts during
2008 through 2010 to be approximately $400 million. We will place emphasis in the near term on
careful management of our capital expenditures in 2009 and 2010. Capital spending in any given
year over the next three years could be significantly in excess of our annual depreciation and
amortization expense until the completion of actions related to our globalization strategy at which
time we would expect our annual capital spending to be relatively comparable to our annual
depreciation and amortization expense.
72
Pension Plans
Since the spin off, we have voluntarily contributed $98 million to our pension plans.
Additionally, during 2007 we completed the separation of our pension plan assets and liabilities
from those of Sara Lee in accordance with governmental regulations, which resulted in a higher
total amount of pension plan assets of approximately $74 million being transferred to us than
originally was estimated prior to the spin off. Prior to spin off, the fair value of plan assets
included in the annual valuations represented a best estimate based upon a percentage allocation of
total assets of the Sara Lee trust.
As widely reported, financial markets in the United States, Europe and Asia have been
experiencing extreme disruption in recent months. As a result of this disruption in the domestic
and international equity and bond markets, our pension plans had a decrease in asset values of
approximately 32% during the year ended January 3, 2009. Our U.S. qualified pension plans are
approximately 75% funded as of January 3, 2009 and we do not expect to be required to make any
mandatory contributions to our plans in 2009. We may elect to make voluntary contributions to
obtain an 80% funded level which will avoid certain benefit payment restrictions under the Pension
Protection Act. The funded status reflects a significant decrease in the fair value of plan assets
due to the stock markets performance during 2008 which we expect will result in increased pension
expense in 2009 of $33 million to $21 million. See Note 16 to our Consolidated Financial Statements
for more information on the plan asset components.
Share Repurchase Program
On February 1, 2007, we announced that our Board of Directors granted authority for the
repurchase of up to 10 million shares of our common stock. Share repurchases are made periodically
in open-market transactions, and are subject to market conditions, legal requirements and other
factors. Additionally, management has been granted authority to establish a trading plan under Rule
10b5-1 of the Exchange Act in connection with share repurchases, which will allow us to repurchase
shares in the open market during periods in which the stock trading window is otherwise closed for
our company and certain of our officers and employees pursuant to our insider trading policy.
During 2008, we purchased 1.2 million shares of our common stock at a cost of $30 million (average
price of $24.71). Since inception of the program, we have purchased 2.8 million shares of our
common stock at a cost of $75 million (average price of $26.33). The primary objective of our share
repurchase program is to reduce the impact of dilution caused by the exercise of options and
vesting of stock unit awards. In light of the current economic recession, we may choose not to
repurchase any stock and focus more on the repayment of our debt in the next twelve months.
Off-Balance Sheet Arrangements
We
do not have any off-balance sheet arrangements within the meaning of
Item 303(a)(4) of SEC Regulation S-K.
Future Contractual Obligations and Commitments
The following table contains information on our contractual obligations and commitments as of
January 3, 2009, and their expected timing on future cash flows and liquidity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
At January 3, |
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
1 Year |
|
|
1 - 3 Years |
|
|
3 - 5 Years |
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
2,176,547 |
|
|
$ |
45,640 |
|
|
$ |
276,602 |
|
|
$ |
910,625 |
|
|
$ |
943,680 |
|
Notes payable |
|
|
61,734 |
|
|
|
61,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on debt
obligations(1) |
|
|
575,778 |
|
|
|
121,479 |
|
|
|
224,966 |
|
|
|
200,063 |
|
|
|
29,270 |
|
Operating lease obligations |
|
|
226,633 |
|
|
|
43,488 |
|
|
|
71,840 |
|
|
|
41,639 |
|
|
|
69,666 |
|
Purchase obligations(2) |
|
|
626,919 |
|
|
|
507,373 |
|
|
|
41,149 |
|
|
|
27,076 |
|
|
|
51,321 |
|
Other long-term
obligations(3) |
|
|
76,856 |
|
|
|
29,460 |
|
|
|
19,712 |
|
|
|
14,334 |
|
|
|
13,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,744,467 |
|
|
$ |
809,174 |
|
|
$ |
634,269 |
|
|
$ |
1,193,737 |
|
|
$ |
1,107,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
(1) |
|
Interest obligations on floating rate debt instruments are calculated for future periods
using interest rates in effect at January 3, 2009. |
|
(2) |
|
Purchase obligations, as disclosed in the table, are obligations to purchase goods and
services in the ordinary course of business for production and inventory needs (such as raw
materials, supplies, packaging, and manufacturing arrangements), capital expenditures,
marketing services, royalty-bearing license agreement payments and other professional
services. This table only includes purchase obligations for which we have agreed upon a fixed
or minimum quantity to purchase, a fixed, minimum or variable pricing arrangement, and an
approximate delivery date. Actual cash expenditures relating to these obligations may vary
from the amounts shown in the table above. We enter into purchase obligations when terms or
conditions are favorable or when a long-term commitment is necessary. Many of these
arrangements are cancelable after a notice period without a significant penalty. This table
omits purchase obligations that did not exist as of January 3, 2009, as well as obligations
for accounts payable and accrued liabilities recorded on the Consolidated Balance Sheet. |
|
(3) |
|
Represents the projected payment for long-term liabilities recorded on the Consolidated
Balance Sheet for deferred compensation, severance, certain employee benefit claims, capital
leases and unrecognized tax benefits in accordance with FASB Interpretation 48, Accounting for
Uncertainty in Income Taxes (FIN 48). |
Due to our current funded status of our pension plans, we do not expect to be required to make
any mandatory contributions to the plans in the next year. The future timing of the pension funding
obligations associated with our defined benefit pension and postretirement plans beyond the next
year is dependent on a number of factors including investment results and other factors that
contribute to future pension expense and cannot be reasonably estimated at this time. A discussion
of our pension and postretirement plans is included in Notes 16 and 17 to our Consolidated
Financial Statements. Our obligations for employee health and property and casualty losses are also
excluded from the table.
Sources and Uses of Our Cash
The information presented below regarding the sources and uses of our cash flows for the years
ended January 3, 2009 and December 29, 2007 was derived from our consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
177,397 |
|
|
$ |
359,040 |
|
Investing activities |
|
|
(177,248 |
) |
|
|
(101,085 |
) |
Financing activities |
|
|
(104,738 |
) |
|
|
(243,379 |
) |
Effect of changes in foreign currency exchange rates on cash |
|
|
(2,305 |
) |
|
|
3,687 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
$ |
(106,894 |
) |
|
$ |
18,263 |
|
Cash and cash equivalents at beginning of year |
|
|
174,236 |
|
|
|
155,973 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
67,342 |
|
|
$ |
174,236 |
|
|
|
|
|
|
|
|
Operating Activities
Net cash provided by operating activities was $177 million in 2008 compared to $359 million in
2007. The net change in cash from operating activities of $182 million for 2008 compared to 2007 is
attributable to the higher uses of our working capital, primarily driven by changes in inventory.
Inventory grew $183
million from December 29, 2007 primarily due to increases in levels needed to service our
business as we continue to execute our consolidation and globalization strategy which had an impact
of approximately $112 million. In addition, cost increases for inputs such as cotton, oil and
freight were approximately $53 million and other factors such as reserves had an impact of
approximately $18 million. We continually monitor our inventory levels to best balance current
supply and demand with potential future demand that typically surges when consumers no longer
postpone purchases in our product categories. Accounts receivable was lower in 2008 compared to
2007 primarily as a result of lower sales volumes in the fourth quarter of 2008.
74
Over the next twelve to fifteen months, we expect to decrease our inventory levels to
approximately $1.15 billion as we complete the execution of our supply chain consolidation and
globalization strategy. Due to the normal pattern of building inventories for back to school
selling seasons, first quarter 2009 inventories could temporarily increase from this year end
level.
Investing Activities
Net cash used in investing activities was $177 million in 2008 compared to $101 million in
2007. The higher net cash used in investing activities of $76 million for 2008 compared to 2007 was
primarily the result of higher capital expenditures. During 2008 gross capital expenditures were
$187 million as we continued to build out our textile and sewing network in Asia, Central America
and the Caribbean Basin and invest in our technology strategic initiatives which were offset by
cash proceeds from sales of assets of $25 million, primarily from dispositions of plant and
equipment associated with our restructuring initiatives. In addition, we acquired a sewing
operation in Thailand and an embroidery operation in Honduras for an aggregate cost of $15 million
during 2008.
Financing Activities
Net cash used in financing activities was $105 million in 2008 compared to $243 million in
2007. The lower net cash used in financing activities of $138 million for 2008 compared to 2007 was
primarily the result of lower repayments of $303 million under the Senior Secured Credit Facility,
higher net borrowings on notes payable of $65 million, the receipt from Sara Lee of $18 million in
cash in 2008 and lower stock repurchases of $14 million, partially offset by borrowings of $250
million of principal under the Receivables Facility in 2007, repayments of $7 million under the
Receivables Facility in 2008 and cash paid to repurchase $4 million of Floating Rate Senior Notes
in 2008.
Cash and Cash Equivalents
As of January 3, 2009 and December 29, 2007, cash and cash equivalents were $67 million and
$174 million, respectively. The lower cash and cash equivalents as of January 3, 2009 was primarily
the result of net capital expenditures of $162 million, net principal payments on debt of $139
million, $30 million of stock repurchases, the acquisitions of a sewing operation in Thailand and
an embroidery operation in Honduras for an aggregate cost of $15 million partially offset by $178
million related to other uses of working capital, $43 million of net borrowings on notes payable
and the receipt from Sara Lee of $18 million in cash.
Financing Arrangements
We believe our financing structure provides a secure base to support our ongoing operations
and key business strategies. Depending on conditions in the capital markets and other factors, we
will from time to time consider other financing transactions, the proceeds of which could be used
to refinance current indebtedness or for other purposes. We continue to monitor the impact, if any,
of the current conditions in the credit markets on our operations. Our access to financing at
reasonable interest rates could become influenced by the economic and credit market environment.
Deterioration in the capital markets, which has caused many financial institutions to seek
additional capital, merge with larger and stronger financial institutions and, in some cases, fail,
has led to concerns about the stability of financial institutions. We currently hold interest rate
cap and swap derivative instruments to mitigate a portion of our interest rate risk
and hold foreign exchange rate derivative instruments to mitigate the potential impact of
currency fluctuations. Credit risk is the exposure to nonperformance of another party to these
arrangements. We mitigate credit risk by dealing with highly rated bank counterparties. We believe
that our exposures are appropriately diversified across counterparties and that these
counterparties are creditworthy financial institutions.
Moodys Investors Services (Moodys) corporate credit rating for us is Ba3 and Standard &
Poors Ratings Services (Standard & Poors) corporate credit rating for us is BB-. In May 2008,
Standard & Poors raised our corporate credit rating from B+, and also raised our bank loan and
unsecured debt ratings. Standard & Poors stated that the rating upgrade reflects our positive
operating momentum as a stand-alone entity since our spin off from Sara Lee in September 2006, and
also stated that our credit protection measures and operating results have improved and are in line
with Standard & Poors expectations. Standard & Poors also noted that management is on track in
75
executing our strategies. The current outlook of both Standard & Poors and Moodys for us is
stable. Moodys did not change our corporate credit rating or its ratings for our bank loans or
unsecured debt during 2008.
In connection with the spin off, on September 5, 2006, we entered into the $2.15 billion
Senior Secured Credit Facility which includes the $500 million Revolving Loan Facility that was
undrawn at the time of the spin off, the $450 million Second Lien Credit Facility and the $500
million Bridge Loan Facility. We paid $2.4 billion of the proceeds of these borrowings to Sara Lee
in connection with the consummation of the spin off. As of January 3, 2009, we had $463 million of
borrowing availability under the Revolving Loan Facility after taking into account outstanding
letters of credit. The Bridge Loan Facility was paid off in full through the issuance of the $500
million of Floating Rate Senior Notes issued in December 2006. On November 27, 2007, we entered
into the Receivables Facility which provides for up to $250 million in funding accounted for as a
secured borrowing, limited to the availability of eligible receivables, and is secured by certain
domestic trade receivables. The proceeds from the Receivables Facility were used to pay off a
portion of the Senior Secured Credit Facility.
Senior Secured Credit Facility
The Senior Secured Credit Facility initially provided for aggregate borrowings of $2.15
billion, consisting of: (i) a $250.0 million Term A loan facility (the Term A Loan Facility);
(ii) a $1.4 billion Term B loan facility (the Term B Loan Facility); and (iii) the $500 million
Revolving Loan Facility that was undrawn as of January 3, 2009. Issuances of letters of credit
reduce the amount available under the Revolving Loan Facility. As of January 3, 2009, $37 million
of standby and trade letters of credit were issued under this facility and $463 million was
available for borrowing. As of January 3, 2009, $139 million and $851 million in principal was
outstanding under the Term A Loan Facility and Term B Loan Facility, respectively.
The Senior Secured Credit Facility is guaranteed by substantially all of our existing and
future direct and indirect U.S. subsidiaries, with certain customary or agreed-upon exceptions for
certain subsidiaries. We and each of the guarantors under the Senior Secured Credit Facility have
granted the lenders under the Senior Secured Credit Facility a valid and perfected first priority
(subject to certain customary exceptions) lien and security interest in the following:
|
|
|
the equity interests of substantially all of our direct and indirect U.S. subsidiaries
and 65% of the voting securities of certain foreign subsidiaries; and |
|
|
|
|
substantially all present and future property and assets, real and personal, tangible
and intangible, of Hanesbrands and each guarantor, except for certain enumerated
interests, and all proceeds and products of such property and assets. |
The Term A Loan Facility matures on September 5, 2012. The Term A Loan Facility will amortize
in an amount per annum equal to the following: year 1 5.00%; year 2 10.00%; year 3 15.00%;
year 4 20.00%; year 5 25.00%; year 6 25.00%. The Term B Loan Facility matures on September
5, 2013. The Term B Loan Facility will be repaid in equal quarterly installments in an amount equal
to 1% per annum, with the balance due on the maturity date. The Revolving Loan Facility matures on
September 5, 2011. All borrowings under the Revolving Loan Facility must be repaid in full upon maturity.
Outstanding borrowings under the Senior Secured Credit Facility are prepayable without penalty. As
a result of the prepayments of principal we have made, we do not have any mandatory payments of
principal in 2009.
At our option, borrowings under the Senior Secured Credit Facility may be maintained from time
to time as (a) Base Rate loans, which shall bear interest at the higher of (i) 1/2 of 1% in excess
of the federal funds rate and (ii) the rate published in the Wall Street Journal as the prime
rate (or equivalent), in each case in effect from time to time, plus the applicable margin in
effect from time to time (which is currently 0.50% for the Term A Loan Facility and the Revolving
Loan Facility and 0.75% for the Term B Loan Facility), or (b) LIBOR-based loans, which shall bear
interest at the LIBO Rate (as defined in the Senior Secured Credit Facility and adjusted for
maximum reserves), as determined by the administrative agent for the respective interest period
plus the applicable margin in effect from time to time (which is currently 1.50% for the Term A
Loan Facility and the Revolving Loan Facility and 1.75% for the Term B Loan Facility).
In February 2007, we entered into an amendment to the Senior Secured Credit Facility, pursuant
to which the applicable margin with respect to Term B Loan Facility was reduced from 2.25% to 1.75%
with respect to LIBOR-based loans and from 1.25% to 0.75% with respect to loans maintained as Base
Rate loans.
76
On August 21, 2008, we entered into a Second Amendment (the Second Amendment) to the Senior
Secured Credit Facility. Pursuant to the Second Amendment, the amount of unsecured indebtedness
which we and our subsidiaries that are obligors pursuant to the Senior Secured Credit Facility may
incur under senior notes was increased from $500,000 to $1,000,000. The provisions of the Senior
Secured Credit Facility which require the proceeds of the issuance of any such notes be applied to
repay amounts due with respect to the Senior Secured Credit Facility, and specify how any such
proceeds will be applied, remain unchanged.
The Senior Secured Credit Facility requires us to comply with customary affirmative, negative
and financial covenants. The Senior Secured Credit Facility requires that we maintain a minimum
interest coverage ratio and a maximum total debt to EBITDA (earnings before income taxes,
depreciation expense and amortization), or leverage ratio. The interest coverage ratio covenant
requires that the ratio of our EBITDA for the preceding four fiscal quarters to our consolidated
total interest expense for such period shall not be less than a specified ratio for each fiscal
quarter ending after December 15, 2006. This ratio was 2.75 to 1 for the quarter ended January 3,
2009 and will increase over time until it reaches 3.25 to 1 for fiscal quarters ending after
October 15, 2009. The leverage ratio covenant requires that the ratio of our total debt to our
EBITDA for the preceding four fiscal quarters will not be more than a specified ratio for each
fiscal quarter ending after December 15, 2006. This ratio was 3.75 to 1 for the quarter ended
January 3, 2009 and will decline over time until it reaches 3 to 1 for fiscal quarters ending after
October 15, 2009. The method of calculating all of the components used in the covenants is included
in the Senior Secured Credit Facility. As of January 3, 2009, we were in compliance with all
covenants.
The Senior Secured Credit Facility contains customary events of default, including nonpayment
of principal when due; nonpayment of interest, fees or other amounts after stated grace period;
inaccuracy of representations and warranties; violations of covenants; certain bankruptcies and
liquidations; any cross-default of more than $50 million; certain judgments of more than $50
million; certain events related to the Employee Retirement Income Security Act of 1974, as amended,
or ERISA, and a change in control (as defined in the Senior Secured Credit Facility).
Second Lien Credit Facility
The Second Lien Credit Facility provides for aggregate borrowings of $450 million by
Hanesbrands wholly-owned subsidiary, HBI Branded Apparel Limited, Inc. The Second Lien Credit
Facility is unconditionally guaranteed by Hanesbrands and each entity guaranteeing the Senior
Secured Credit Facility, subject to the same exceptions and exclusions provided in the Senior
Secured Credit Facility. The Second Lien Credit Facility and the guarantees in respect thereof are
secured on a second-priority basis (subordinate only to the Senior Secured Credit Facility and any
permitted additions thereto or refinancings
thereof) by substantially all of the assets that secure the Senior Secured Credit Facility
(subject to the same exceptions).
Loans under the Second Lien Credit Facility will bear interest in the same manner as those
under the Senior Secured Credit Facility, subject to a margin of 2.75% for Base Rate loans and
3.75% for LIBOR based loans.
On August 21, 2008, we entered into an amendment (the Second Lien Amendment) to the Second
Lien Credit Facility. Pursuant to the Second Lien Amendment, the amount of unsecured indebtedness
which we and our subsidiaries that are obligors pursuant to the Second Lien Credit Facility may
incur under senior notes was increased from $500,000 to $1,000,000. The provisions of the Second
Lien Credit Facility which require the proceeds of the issuance of any such notes be applied to
repay amounts due with respect to the Second Lien Credit Facility, and specify how any such
proceeds will be applied, remain unchanged.
The Second Lien Credit Facility requires us to comply with customary affirmative, negative and
financial covenants. The Second Lien Credit Facility requires that we maintain a minimum interest
coverage ratio and a maximum leverage ratio. The interest coverage ratio covenant requires that the
ratio of our EBITDA for the preceding four fiscal quarters to our consolidated total interest
expense for such period shall not be less than a specified ratio for each fiscal quarter ending
after December 15, 2006. This ratio was 2.0 to 1 for the quarter ended January 3, 2009 and will
increase over time until it reaches 2.5 to 1 for fiscal quarters ending after April 15, 2009. The
leverage ratio covenant requires that the ratio of our total debt to our EBITDA for the preceding
four fiscal quarters will not be more than a specified ratio for each fiscal quarter ending after
December 15, 2006. This ratio was 4.5 to 1 for the quarter ended
January 3, 2009 and will decline over
time until it reaches 3.75 to 1 for fiscal quarters ending after October 15, 2009. The method of
calculating all of the components used in the covenants is included in the Second Lien Credit
Facility. As of January 3, 2009, we were in compliance with all covenants.
77
The Second Lien Credit Facility contains customary events of default, including nonpayment of
principal when due; nonpayment of interest, fees or other amounts after stated grace period;
inaccuracy of representations and warranties; violations of covenants; certain bankruptcies and
liquidations; any cross-default of more than $60 million; certain judgments of more than $60
million; certain ERISA-related events; and a change in control (as defined in the Second Lien
Credit Facility).
The Second Lien Credit Facility matures on March 5, 2014, and includes premiums for prepayment
of the loan prior to September 5, 2009 based on the timing of the prepayment. The Second Lien
Credit Facility will not amortize and will be repaid in full on its maturity date.
Floating Rate Senior Notes
On December 14, 2006, we issued $500 million aggregate principal amount of the Floating Rate
Senior Notes. The Floating Rate Senior Notes are senior unsecured obligations that rank equal in
right of payment with all of our existing and future unsubordinated indebtedness. The Floating Rate
Senior Notes bear interest at an annual rate, reset semi-annually, equal to LIBOR plus 3.375%.
Interest is payable on the Floating Rate Senior Notes on June 15 and December 15 of each year. The
Floating Rate Senior Notes will mature on December 15, 2014. The net proceeds from the sale of the
Floating Rate Senior Notes were approximately $492 million. As noted above, these proceeds,
together with our working capital, were used to repay in full the $500 million outstanding under
the Bridge Loan Facility. The Floating Rate Senior Notes are guaranteed by substantially all of our
domestic subsidiaries.
We may redeem some or all of the Floating Rate Senior Notes at any time on or after December
15, 2008 at a redemption price equal to the principal amount of the Floating Rate Senior Notes plus
a premium of 2% if redeemed during the 12-month period commencing on December 15, 2008, 1% if
redeemed during the 12-month period commencing on December 15, 2009 and no premium if redeemed
after December 15, 2010, as well as any accrued and unpaid interest as of the redemption date. We
repurchased $6 million of the Floating Rate Senior Notes for $4 million resulting in a gain of $2
million during the year ended January 3, 2009.
Accounts Receivable Securitization
On November 27, 2007, we entered into the Receivables Facility, which provides for up to $250
million in funding accounted for as a secured borrowing, limited to the availability of eligible
receivables, and is secured by certain domestic trade receivables. The Receivables Facility will
terminate on November 27, 2010. Under the terms of the Receivables Facility, the company sells, on
a revolving basis, certain domestic trade receivables to HBI Receivables LLC (Receivables LLC), a
wholly-owned bankruptcy-remote subsidiary that in turn uses the trade receivables to secure the
borrowings, which are funded through conduits that issue commercial paper in the short-term market
and are not affiliated with us or through committed bank purchasers if the conduits fail to fund.
The assets and liabilities of Receivables LLC are fully reflected on our Consolidated Balance
Sheet, and the securitization is treated as a secured borrowing for accounting purposes. The
borrowings under the Receivables Facility remain outstanding throughout the term of the agreement
subject to our maintaining sufficient eligible receivables by continuing to sell trade receivables
to Receivables LLC unless an event of default occurs. Availability of funding under the facility
depends primarily upon the eligible outstanding receivables balance. As of January 3, 2009, we had
$243 million outstanding under the Receivables Facility. The outstanding balance under the
Receivables Facility is reported on our Consolidated Balance Sheet in long-term debt based on the
three-year term of the agreement and the fact that remittances on the receivables do not
automatically reduce the outstanding borrowings.
We used all $250 million of the proceeds from the Receivables Facility to make a prepayment of
principal under the Senior Secured Credit Facility. Unless the conduits fail to fund, the yield on
the commercial paper is the conduits cost to issue the commercial paper plus certain dealer fees,
is considered a financing cost and is included in interest expense on the Consolidated Statement of
Income. If the conduits fail to fund, the Receivables Facility would be funded through committed
bank purchasers, and the interest rate payable at our option at the rate announced from time to
time by JPMorgan as its prime rate or at the LIBO Rate (as defined in the Receivables Facility)
plus the applicable margin in effect from time to time. The average blended interest rate for the
year ended January 3, 2009 was 3.50%.
78
The Receivables Facility contains customary events of default and requires us to maintain the
same interest coverage ratio and leverage ratio as required by the Senior Secured Credit Facility.
As of January 3, 2009, we were in compliance with all covenants.
Notes Payable
Notes payable were $62 million at January 3, 2009 and $20 million at December 29, 2007.
We have a short-term revolving facility arrangement with a Salvadoran branch of a U.S. bank
amounting to $45 million of which $29 million was outstanding at January 3, 2009 which accrues
interest at 7.38%. We were in compliance with the covenants contained in this facility at January
3, 2009.
We have a short-term revolving facility arrangement with a Thai branch of a U.S. bank
amounting to THB 600 million ($17 million) of which $15 million was outstanding at January 3, 2009
which accrues interest at 4.35%. We were in compliance with the covenants contained in this
facility at January 3, 2009.
We have a short-term revolving facility arrangement with a Chinese branch of a U.S. bank
amounting to RMB 56 million ($8 million) of which $8 million was outstanding at January 3, 2009
which accrues interest at 5.36%. Borrowings under the facility accrue interest at the prevailing
base lending rates published by the Peoples Bank of China from time to time less 10%. We were in
compliance with the covenants contained in this facility at January 3, 2009.
We have a short-term revolving facility arrangement with an Indian branch of a U.S. bank
amounting to INR 260 million ($5 million) of which $5 million was outstanding at January 3, 2009
which accrues interest at 16.50%. We were in compliance with the covenants contained in this
facility at January 3, 2009.
We have other short-term obligations amounting to $4,029 which consisted of a short-term
revolving facility arrangement with a Japanese branch of a U.S. bank amounting to JPY 1,100 million
($12 million)
of which $2 million was outstanding at January 3, 2009 which accrues interest at 2.42%, and a
short-term revolving facility arrangement with a Vietnamese branch of a U.S. bank amounting to $14
million of which $2 million was outstanding at January 3, 2009 which accrues interest at 12.14%. We
were in compliance with the covenants contained in the facilities at January 3, 2009.
In addition, we have short-term revolving credit facilities in various other locations that
can be drawn on from time to time amounting to $27 million of which $0 was outstanding at January
3, 2009.
Derivatives
We are required under the Senior Secured Credit Facility and the Second Lien Credit Facility
to hedge a portion of our floating rate debt to reduce interest rate risk caused by floating rate
debt issuance. Given the recent turmoil in the financial and credit markets, we have expanded our
interest rate hedging portfolio at what we believe to be advantageous rates that are expected to
minimize our overall interest rate risk. At January 3, 2009, we have outstanding hedging
arrangements whereby we capped the interest rate on $400 million of our floating rate debt at
3.50%. We also entered into interest rate swaps tied to the 3-month and 6-month LIBOR rates whereby
we fixed the interest rate on an aggregate of $1.4 billion of our floating rate debt at a blended
rate of approximately 4.16%. Approximately 82% of our total debt outstanding at January 3, 2009 is
at a fixed or capped LIBOR rate. The table below summarizes our interest rate derivative portfolio
with respect to our long-term debt as of January 3, 2009.
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate |
|
|
Hedge |
|
|
|
Amount |
|
|
LIBOR |
|
|
Spreads |
|
|
Expiration Dates |
|
Debt covered by interest rate caps: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured and Second Lien
Credit Facilities |
|
$ |
400,000 |
|
|
|
3.50 |
% |
|
0.75% to 3.75% |
|
October 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt covered by interest rate
swaps: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Notes |
|
|
493,680 |
|
|
|
4.26 |
% |
|
|
3.38 |
% |
|
December 2012 |
Senior Secured and Second Lien Credit Facilities |
|
|
500,000 |
|
|
5.14% to 5.18% |
|
0.75% to 3.75% |
|
October 2009 October 2011 |
Senior Secured and Second Lien
Credit Facilities |
|
|
400,000 |
|
|
|
2.80 |
% |
|
0.75% to 3.75% |
|
October 2010 |
Unhedged debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
Securitization |
|
|
242,617 |
|
|
Not applicable |
|
Not applicable |
|
Not applicable |
Senior Secured and Second Lien
Credit Facilities |
|
|
140,250 |
|
|
Not applicable |
|
Not applicable |
|
Not applicable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,176,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We use forward exchange and option contracts to reduce the effect of fluctuating foreign
currencies for a portion of our anticipated short-term foreign currency-denominated transactions.
Cotton is the primary raw material we use to manufacture many of our products. We generally
purchase our raw materials at market prices. We use commodity financial instruments, options and
forward contracts to hedge the price of cotton, for which there is a high correlation between the
hedged item and the hedged instrument. We generally do not use commodity financial instruments to
hedge other raw material commodity prices.
Critical Accounting Policies and Estimates
We have chosen accounting policies that we believe are appropriate to accurately and fairly
report our operating results and financial position in conformity with accounting principles
generally accepted in the United States. We apply these accounting policies in a consistent manner.
Our significant accounting policies are discussed in Note 2, titled Summary of Significant
Accounting Policies, to our Consolidated Financial Statements.
The application of critical accounting policies requires that we make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosures. These estimates and assumptions are based on historical and other factors
believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on
an ongoing basis and may retain outside consultants to assist in our evaluation. If actual results
ultimately differ from previous estimates, the revisions are included in results of operations in
the period in which the actual amounts become known. The critical accounting policies that involve
the most significant management judgments and estimates used in preparation of our Consolidated
Financial Statements, or are the most sensitive to change from outside factors, are the following:
Sales Recognition and Incentives
We recognize revenue when (i) there is persuasive evidence of an arrangement, (ii) the sales
price is fixed or determinable, (iii) title and the risks of ownership have been transferred to the
customer and (iv) collection of the receivable is reasonably assured, which occurs primarily upon
shipment. We record
provisions for any uncollectible amounts based upon our historical collection statistics and
current customer information. Our management reviews these estimates each quarter and makes
adjustments based upon actual experience.
Note 2(d), titled Summary of Significant Accounting Policies Sales Recognition and
Incentives, to our Consolidated Financial Statements describes a variety of sales incentives that
we offer to resellers and consumers of our products. Measuring the cost of these incentives
requires, in many cases, estimating future customer utilization
80
and redemption rates. We use
historical data for similar transactions to estimate the cost of current incentive programs. Our
management reviews these estimates each quarter and makes adjustments based upon actual experience
and other available information. We classify the costs associated with cooperative advertising as a
reduction of Net sales in our Consolidated Statements of Income in accordance with EITF 01-9,
Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors
Products).
Accounts Receivable Valuation
Accounts receivable consist primarily of amounts due from customers. We carry our accounts
receivable at their net realizable value. We record provisions for any uncollectible amounts based
upon our best estimate of probable losses inherent in the accounts receivable portfolio determined
on the basis of historical experience, specific allowances for known troubled accounts and other
currently available information. Charges to the allowance for doubtful accounts are reflected in
the Selling, general and administrative expenses line and charges to the allowance for customer
chargebacks and other customer deductions are primarily reflected as a reduction in the Net sales
line of our Consolidated Statements of Income. Our management reviews these estimates each quarter
and makes adjustments based upon actual experience. Because we cannot predict future changes in
the financial stability of our customers, actual future losses from uncollectible accounts may
differ from our estimates. If the financial condition of our customers were to deteriorate,
resulting in their inability to make payments, a large reserve might be required. The amount of
actual historical losses has not varied materially from our estimates for bad debts.
Catalog Expenses
We incur expenses for printing catalogs for our products to aid in our sales efforts. We
initially record these expenses as a prepaid item and charge it against selling, general and
administrative expenses over time as the catalog is used. Expenses are recognized at a rate that
approximates our historical experience with regard to the timing and amount of sales attributable
to a catalog distribution.
Inventory Valuation
We carry inventory on our balance sheet at the estimated lower of cost or market. Cost is
determined by the first-in, first-out, or FIFO, method for our inventories. We carry obsolete,
damaged, and excess inventory at the net realizable value, which we determine by assessing
historical recovery rates, current market conditions and our future marketing and sales plans.
Because our assessment of net realizable value is made at a point in time, there are inherent
uncertainties related to our value determination. Market factors and other conditions underlying
the net realizable value may change, resulting in further reserve requirements. A reduction in the
carrying amount of an inventory item from cost to market value creates a new cost basis for the
item that cannot be reversed at a later period. While we believe that adequate write-downs for
inventory obsolescence have been provided in the Consolidated Financial Statements, consumer tastes
and preferences will continue to change and we could experience additional inventory write-downs in
the future.
Rebates, discounts and other cash consideration received from a vendor related to inventory
purchases are reflected as reductions in the cost of the related inventory item, and are therefore
reflected in cost of sales when the related inventory item is sold.
Income Taxes
Deferred taxes are recognized for the future tax effects of temporary differences between
financial and
income tax reporting using tax rates in effect for the years in which the differences are
expected to reverse. We have recorded deferred taxes related to operating losses and capital loss
carryforwards. Realization of deferred tax assets is dependent on future taxable income in
specific jurisdictions, the amount and timing of which are uncertain, possible changes in tax laws
and tax planning strategies. If in our judgment it appears that we will not be able to generate
sufficient taxable income or capital gains to offset losses during the carryforward periods, we
have recorded valuation allowances to reduce those deferred tax assets to amounts expected to be
ultimately realized. An adjustment to income tax expense would be required in a future period if
we determine that the amount of deferred tax assets to be realized differs from the net recorded
amount. Prior to spin off on September 5, 2006, all income taxes were computed and reported on a
separate return basis as if we were not part of Sara Lee.
81
Federal income taxes are provided on that portion of our income of foreign subsidiaries that
is expected to be remitted to the United States and be taxable, reflecting the historical decisions
made by Sara Lee with regards to earnings permanently reinvested in foreign jurisdictions. In
periods after the spin off, we may make different decisions as to the amount of earnings
permanently reinvested in foreign jurisdictions, due to anticipated cash flow or other business
requirements, which may impact our federal income tax provision and effective tax rate.
We periodically estimate the probable tax obligations using historical experience in tax
jurisdictions and our informed judgment. There are inherent uncertainties related to the
interpretation of tax regulations in the jurisdictions in which we transact business. The judgments
and estimates made at a point in time may change based on the outcome of tax audits, as well as
changes to, or further interpretations of, regulations. Income tax expense is adjusted in the
period in which these events occur, and these adjustments are included in our Consolidated
Statements of Income. If such changes take place, there is a risk that our effective tax rate may
increase or decrease in any period. In July 2006, the Financial Accounting Standards Board (FASB)
issued Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48), which became
effective during the year ended December 29, 2007. FIN 48 addresses the determination of how tax
benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, a company must recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate resolution.
In conjunction with the spin off, we and Sara Lee entered into a tax sharing agreement, which
allocates responsibilities between us and Sara Lee for taxes and certain other tax matters. Under
the tax sharing agreement, Sara Lee generally is liable for all U.S. federal, state, local and
foreign income taxes attributable to us with respect to taxable periods ending on or before
September 5, 2006. Sara Lee also is liable for income taxes attributable to us with respect to
taxable periods beginning before September 5, 2006 and ending after September 5, 2006, but only to
the extent those taxes are allocable to the portion of the taxable period ending on September 5,
2006. We are generally liable for all other taxes attributable to us. Changes in the amounts
payable or receivable by us under the stipulations of this agreement may impact our tax provision
in any period.
Under the tax sharing agreement, within 180 days after Sara Lee filed its final consolidated
tax return for the period that included September 5, 2006, Sara Lee was required to deliver to us a
computation of the amount of deferred taxes attributable to our United States and Canadian
operations that would be included on our opening balance sheet as of September 6, 2006 (as finally
determined) which has been done. We have the right to participate in the computation of the amount
of deferred taxes. Under the tax sharing agreement, if substituting the amount of deferred taxes
as finally determined for the amount of estimated deferred taxes that were included on that balance
sheet at the time of the spin off causes a decrease in the net book value reflected on that balance
sheet, then Sara Lee will be required to pay us the amount of such decrease. If such substitution
causes an increase in the net book value reflected on that balance sheet, then we will be required
to pay Sara Lee the amount of such increase. For purposes of this computation, our deferred taxes
are the amount of deferred tax benefits (including deferred tax consequences attributable to
deductible temporary differences and carryforwards) that would be recognized as assets on the
Companys
balance sheet computed in accordance with GAAP, but without regard to valuation allowances,
less the amount of deferred tax liabilities (including deferred tax consequences attributable to
taxable temporary differences) that would be recognized as liabilities on our opening balance sheet
computed in accordance with GAAP, but without regard to valuation allowances. Neither we nor Sara
Lee will be required to make any other payments to the other with respect to deferred taxes.
Our computation of the final amount of deferred taxes for our opening balance sheet as of
September 6, 2006 is as follows:
|
|
|
|
|
|
|
(in thousands) |
|
Estimated deferred taxes subject to the tax sharing agreement included in
opening balance sheet on September 6, 2006 |
|
$ |
450,683 |
|
Final calculation of deferred taxes subject to the tax sharing agreement |
|
|
360,460 |
|
|
|
|
|
Decrease in deferred taxes as of opening balance sheet on September 6, 2006 |
|
|
90,223 |
|
Preliminary cash installment received from Sara Lee |
|
|
18,000 |
|
|
|
|
|
Amount due from Sara Lee |
|
$ |
72,223 |
|
|
|
|
|
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The amount that is expected to be collected from Sara Lee based on our computation of $72
million is included as a receivable in Other Current Assets in the Consolidated Balance Sheet as of
January 3, 2009.
Stock Compensation
We established the Hanesbrands Inc. Omnibus Incentive Plan of 2006, the (Omnibus Incentive
Plan) to award stock options, stock appreciation rights, restricted stock, restricted stock units,
deferred stock units, performance shares and cash to our employees, non-employee directors and
employees of our subsidiaries to promote the interest of our company and incent performance and
retention of employees. We account for stock-based compensation in accordance with Statement of
Financial Accounting Standards (SFAS) No 123(R), Share-Based Payment. Under SFAS 123R,
stock-based compensation is estimated at the grant date based on the awards fair value and is
recognized as expense over the requisite service period. Estimation of stock-based compensation for
stock options granted, utilizing the Black-Scholes option-pricing model, requires various highly
subjective assumptions including volatility and expected option life. We use a combination of the
volatility of our company and the volatility of peer companies for a period of time that is
comparable to the expected life of the option to determine volatility assumptions. We have utilized
the simplified method outlined in SEC Staff Accounting Bulletin No. 107 to estimate expected lives
of options granted during the period. SEC Staff Accounting Bulletin (SAB) No. 110, which was issued
in December 2007, amends SEC Staff Accounting Bulletin No. 107 and gives a limited extension on
using the simplified method for valuing stock option grants to eligible public companies that do
not have sufficient historical exercise patterns on options granted to employees. Further, as
required under SFAS No. 123R, we estimate forfeitures for stock-based awards granted, which are not
expected to vest. If any of these inputs or assumptions changes significantly, our stock-based
compensation expense could be materially different in the future.
Defined Benefit Pension Plans
For a discussion of our net periodic benefit cost, plan obligations, plan assets, and how we
measure the amount of these costs, see Note 16 titled Defined Benefit Pension Plans to our
Consolidated Financial Statements.
In conjunction with the spin off from Sara Lee which occurred on September 5, 2006, we
established the Hanesbrands Inc. Pension and Retirement Plan, which assumed the portion of the
underfunded liabilities and the portion of the assets of pension plans sponsored by Sara Lee that
relate to our employees. In addition, we assumed sponsorship of certain other Sara Lee plans and
continued sponsorship of the Playtex Apparel Inc. Pension Plan and the National Textiles, L.L.C.
Pension Plan. As of January 1, 2006, the benefits under these plans were frozen. Since the spin
off, we have voluntarily contributed $98 million to our pension plans. Additionally, during 2007 we
completed the separation of our pension plan assets and liabilities from those of Sara Lee in
accordance with governmental regulations, which resulted in a higher
total amount of pension plan assets of approximately $74 million being transferred to us than
originally was estimated prior to the spin off. As a result, our U.S. qualified pension plans are
approximately 75% funded as of January 3, 2009. We may elect to make voluntary contributions to
obtain an 80% funded level which will avoid certain benefit payment restrictions under the Pension
Protection Act. The funded status as of January 3, 2009 reflects a significant decrease in the fair
value of plan assets due to the stock markets performance during 2008.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans An Amendment of FASB No. 87, 88, 106 and 132(R) (SFAS
158). SFAS 158 requires that the funded status of defined benefit postretirement plans be
recognized on a companys balance sheet, and changes in the funded status be reflected in
comprehensive income, effective fiscal years ending after December 15, 2006, which we adopted as of
and for the six months ended December 30, 2006. The impact of adopting the funded status provisions
of SFAS 158 was an increase in assets of $1 million, an increase in liabilities of $26 million and
a pretax increase in the accumulated other comprehensive loss of $32 million. SFAS 158 also
requires companies to measure the funded status of the plan as of the date of its fiscal year end,
effective for fiscal years ending after December 15, 2008. We adopted the measurement date
provision during the year ended December 29, 2007, which had an immaterial impact on beginning
retained earnings, accumulated other comprehensive income and pension liabilities.
The net periodic cost of the pension plans is determined using projections and actuarial
assumptions, the most significant of which are the discount rate and the long-term rate of asset
return. The net periodic pension income or expense is recognized in the year incurred. Gains and
losses, which occur when actual experience differs from actuarial assumptions, are amortized over
the average future expected life of participants.
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Our policies regarding the establishment of pension assumptions are as follows:
|
|
|
In determining the discount rate, we utilized the Citigroup Pension Discount Curve
(rounded to the nearest 10 basis points) in order to determine a unique interest rate for
each plan and match the expected cash flows for each plan. |
|
|
|
|
Salary increase assumptions were based on historical experience and anticipated future
management actions. The salary increase assumption applies to the Canadian plans and
portions of the Hanesbrands nonqualified retirement plans, as benefits under these plans
are not frozen. |
|
|
|
|
In determining the long-term rate of return on plan assets we applied a proportionally
weighted blend between assuming the historical long-term compound growth rate of the plan
portfolio would predict the future returns of similar investments, and the utilization of
forward looking assumptions. |
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|
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|
Retirement rates were based primarily on actual experience while standard actuarial
tables were used to estimate mortality. |
Trademarks and Other Identifiable Intangibles
Trademarks and computer software are our primary identifiable intangible assets. We amortize
identifiable intangibles with finite lives, and we do not amortize identifiable intangibles with
indefinite lives. We base the estimated useful life of an identifiable intangible asset upon a
number of factors, including the effects of demand, competition, expected changes in distribution
channels and the level of maintenance expenditures required to obtain future cash flows. As of
January 3, 2009, the net book value of trademarks and other identifiable intangible assets was
$147 million, of which we are amortizing the entire balance. We anticipate that our amortization
expense for 2009 will be $12 million.
We evaluate identifiable intangible assets subject to amortization for impairment using a
process similar to that used to evaluate asset amortization described below under Depreciation
and Impairment of Property, Plant and Equipment. We assess identifiable intangible assets not
subject to amortization for impairment at least annually and more often as triggering events occur.
In order to determine the impairment of identifiable intangible assets not subject to amortization,
we compare the fair value of the intangible asset to its carrying amount. We recognize an
impairment loss for the amount by which an identifiable intangible assets carrying value exceeds
its fair value.
We measure a trademarks fair value using the royalty saved method. We determine the royalty
saved method by evaluating various factors to discount anticipated future cash flows, including
operating results, business plans, and present value techniques. The rates we use to discount cash
flows are based on interest rates and the cost of capital at a point in time. Because there are
inherent uncertainties related to these factors and our judgment in applying them, the assumptions
underlying the impairment analysis may change in such a manner that impairment in value may occur
in the future. Such impairment will be recognized in the period in which it becomes known.
Goodwill
As of January 3, 2009, we had $322 million of goodwill. We do not amortize goodwill, but we
assess for impairment at least annually and more often as triggering events occur. The timing of
our annual goodwill impairment testing is the first day of the third fiscal quarter.
In evaluating the recoverability of goodwill, we estimate the fair value of our reporting
units. We have determined that our reporting units are at the operating segment level. We rely on a
number of factors to determine the fair value of our reporting units and evaluate various factors
to discount anticipated future cash flows, including operating results, business plans, and present
value techniques. As discussed above under Trademarks and Other Identifiable Intangibles, there
are inherent uncertainties related to these factors, and our judgment in applying them and the
assumptions underlying the impairment analysis may change in such a manner that impairment in value
may occur in the future. Such impairment will be recognized in the period in which it becomes
known.
We evaluate the recoverability of goodwill using a two-step process based on an evaluation of
reporting units. The first step involves a comparison of a reporting units fair value to its
carrying value. In the second step, if the reporting units carrying value exceeds its fair value,
we compare the goodwills implied fair value and its carrying
84
value. If the goodwills carrying value exceeds its implied fair value, we recognize an
impairment loss in an amount equal to such excess.
Depreciation and Impairment of Property, Plant and Equipment
We state property, plant and equipment at its historical cost, and we compute depreciation
using the straight-line method over the assets life. We estimate an assets life based on
historical experience, manufacturers estimates, engineering or appraisal evaluations, our future
business plans and the period over which the asset will economically benefit us, which may be the
same as or shorter than its physical life. Our policies require that we periodically review our
assets remaining depreciable lives based upon actual experience and expected future utilization. A
change in the depreciable life is treated as a change in accounting estimate and the accelerated
depreciation is accounted for in the period of change and future periods. Based upon current levels
of depreciation, the average remaining depreciable life of our net property other than land is five
years.
We test an asset for recoverability whenever events or changes in circumstances indicate that
its carrying value may not be recoverable. Such events include significant adverse changes in
business climate, several periods of operating or cash flow losses, forecasted continuing losses or
a current expectation that an asset or asset group will be disposed of before the end of its useful
life. We evaluate an assets recoverability by comparing the asset or asset groups net carrying
amount to the future net undiscounted cash flows we expect such asset or asset group will generate.
If we determine that an asset is not recoverable, we recognize an impairment loss in the amount by
which the assets carrying amount exceeds its estimated fair value.
When we recognize an impairment loss for an asset held for use, we depreciate the assets
adjusted carrying amount over its remaining useful life. We do not restore previously recognized
impairment losses if circumstances change.
Insurance Reserves
We maintain insurance coverage for property, workers compensation and other casualty
programs. We are responsible for losses up to certain limits and are required to estimate a
liability that represents the ultimate exposure for aggregate losses below those limits. This
liability is based on managements estimates of the ultimate costs to be incurred to settle known
claims and claims not reported as of the balance sheet date. The estimated liability is not
discounted and is based on a number of assumptions and factors, including historical trends,
actuarial assumptions and economic conditions. If actual trends differ from the estimates, the
financial results could be impacted. Actual trends have not differed materially from the
estimates.
Assets and Liabilities Acquired in Business Combinations
We account for business acquisitions using the purchase method, which requires us to allocate
the cost of an acquired business to the acquired assets and liabilities based on their estimated
fair values at the acquisition date. We recognize the excess of an acquired businesss cost over
the fair value of acquired assets and liabilities as goodwill as discussed below under Goodwill.
We use a variety of information sources to determine the fair value of acquired assets and
liabilities. We generally use third-party appraisers to determine the fair value and lives of
property and identifiable intangibles, consulting actuaries to determine the fair value of
obligations associated with defined benefit pension plans, and legal counsel to assess obligations
associated with legal and environmental claims.
Recently Issued Accounting Pronouncements
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 was effective
for our financial assets and liabilities on December 30, 2007. The FASB approved a one-year
deferral of the adoption of SFAS 157 as it relates to non-financial assets and liabilities with the
issuance in February 2008 of FASB Staff Position FAS 157-2, Effective Date of FASB Statement
No. 157, as a result of which implementation by us is now required on January 4, 2009. The
85
partial adoption of SFAS 157 in the first quarter ended March 29, 2008 had no material impact
on our financial condition, results of operations or cash flows, but resulted in certain additional
disclosures reflected in Note 15 of our Consolidated Financial Statements. We are in the process of
evaluating the impact of SFAS 157 as it relates to our non-financial assets and liabilities.
SFAS 157 clarifies that fair value is an exit price, representing the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. We utilize market data or assumptions that market
participants would use in pricing the asset or liability. SFAS 157 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs about which little or no market data
exists, therefore requiring an entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation
techniques noted in SFAS 157. The three valuation techniques are as follows:
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Market approach prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities. |
|
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|
Cost approach amount that would be required to replace the service capacity of an
asset or replacement cost. |
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|
Income approach techniques to convert future amounts to a single present amount based
on market expectations, including present value techniques, option-pricing and other
models. |
We primarily apply the market approach for commodity derivatives and the income approach for
interest rate and foreign currency derivatives for recurring fair value measurements and attempt to
utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs.
As of January 3, 2009, we held certain financial assets and liabilities that are required to
be measured at fair value on a recurring basis. These consisted of our derivative instruments
related to interest rates and foreign exchange rates. The fair values of cotton derivatives are
determined based on quoted prices in public markets and are categorized as Level 1, however, we did
not have any outstanding cotton derivatives outstanding at January 3, 2009. The fair values of
interest rate and foreign exchange rate derivatives are determined based on inputs that are readily
available in public markets or can be derived from information available in publicly quoted markets
and are categorized as Level 2. We do not have any financial assets or liabilities measured at fair
value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 3
during the year ended January 3, 2009. There were no changes during the year ended January 3, 2009
to our valuation techniques used to measure asset and liability fair values on a recurring basis.
See Note 15 to our Consolidated Financial Statements for the amounts at fair value as of January 3,
2009.
As required by SFAS 157, assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect
the valuation of fair value assets and liabilities and their placement within the fair value
hierarchy levels. The determination of fair values incorporates various factors required under
SFAS 157. These factors include not only the credit standing of the counterparties involved and the
impact of credit enhancements, but also the impact of our nonperformance risk on our liabilities.
Business Combinations
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS 141R). The objective of SFAS 141R is to improve the relevance, representational
faithfulness, and comparability of the information that a company provides in its financial reports
about a business combination and its effects. Under SFAS 141R, a company would be required to
recognize the assets acquired, liabilities assumed, contractual contingencies and contingent
consideration measured at their fair value at the acquisition date. It further requires that
research and development assets acquired in a business combination that have no alternative future
use be measured at their acquisition-date fair value and then immediately charged to expense, and
that acquisition-related costs are to be recognized separately from the acquisition and expensed as
incurred. Among other changes, this statement would
86
also require that negative goodwill be recognized in earnings as a gain attributable to the
acquisition, and any deferred tax benefits resulting from a business combination be recognized in
income from continuing operations in the period of the combination. SFAS 141R is effective for
business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008.
Noncontrolling Interests in Consolidated Financial Statements
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS 160). The objective of this Statement
is to improve the relevance, comparability, and transparency of the financial information that a
company provides in its consolidated financial statements. SFAS 160 requires a company to clearly
identify and present ownership interests in subsidiaries held by parties other than the company in
the consolidated financial statements within the equity section but separate from the companys
equity. It also requires the amount of consolidated net income attributable to the parent and to
the noncontrolling interest be clearly identified and presented on the face of the consolidated
statement of income; that changes in ownership interest be accounted for similarly, as equity
transactions; and when a subsidiary is deconsolidated, that any retained noncontrolling equity
investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary
be measured at fair value. SFAS 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. We do not believe that the adoption of
SFAS 160 will have a material impact on our results of operations or financial position.
Disclosures About Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 expands the
disclosure requirements of FASB Statement No. 133 about an entitys derivative instruments and
hedging activities to include more detailed qualitative disclosures and expanded quantitative
disclosures. The provisions of SFAS 161 are effective for fiscal years and interim periods
beginning after November 15, 2008. The adoption of SFAS 161 will not have a material impact on our
results of operations.
Employers Disclosures about Postretirement Benefit Plan Assets
In December 2008, the FASB issued Staff Position No. FAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets (FSP 132(R)-1). FSP 132(R)-1 will require additional
disclosures about the major categories of plan assets and concentrations of risk, as well as
disclosure of fair value levels, similar to the disclosure requirements of SFAS 157. The enhanced
disclosures about plan assets required by FSP 132(R)-1 must be provided in our Annual Report on Form
10-K for the year ending January 2, 2010.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in foreign exchange rates, interest rates and
commodity prices. Our risk management control system uses analytical techniques including market
value, sensitivity analysis and value at risk estimations.
Foreign Exchange Risk
We sell the majority of our products in transactions denominated in U.S. dollars; however, we
purchase some raw materials, pay a portion of our wages and make other payments in our supply chain
in foreign currencies. Our exposure to foreign exchange rates exists primarily with respect to the
Canadian dollar, European euro, Mexican peso and Japanese yen against the U.S. dollar. We use
foreign exchange forward and option contracts to hedge material exposure to adverse changes in
foreign exchange rates. A sensitivity analysis technique has been used to evaluate the effect that
changes in the market value of foreign exchange currencies will have on our forward and option
contracts. At January 3, 2009, the potential change in fair value of foreign currency derivative
instruments, assuming a 10% adverse change in the underlying currency price, was $4.5 million.
87
Interest Rates
We are required under the Senior Secured Credit Facility and the Second Lien Credit Facility
to hedge a portion of our floating rate debt to reduce interest rate risk caused by floating rate
debt issuance. At January 3, 2009, we have outstanding hedging arrangements whereby we capped the
LIBOR interest rate component on $400 million of our floating rate debt at 3.50%. We also entered
into interest rate swaps tied to the 3-month and 6-month LIBOR rates whereby we fixed the LIBOR
interest rate component on an aggregate of $1.4 billion of our floating rate debt at a blended rate
of approximately 4.16%. Approximately 82% of our total debt outstanding at January 3, 2009 is at a
fixed or capped rate. After giving effect to these arrangements, a 25-basis point movement in the
annual interest rate charged on the outstanding debt balances as of January 3, 2009 would result in
a change in annual interest expense of $2.0 million.
Due to the recent significant changes in the credit markets, the fair values of our interest
rate hedging instruments have decreased approximately $66.7 million during the year ended January
3, 2009. This activity has been deferred into Accumulated Other Comprehensive Loss in our
Consolidated Balance Sheet until the hedged transactions impact our earnings.
Commodities
Cotton, which represents 8% of our cost of sales, is the primary raw material we use to
manufacture many of our products. While we attempt to protect our business from the volatility of
the market price of cotton through short-term supply agreements and hedges from time to time, our
business can be adversely affected by dramatic movements in cotton prices. The price of cotton
currently in our inventory is in the mid 60 cents per pound range which is the price that will
impact our operating results in the first half of 2009. The prices for the most recent cotton crop,
which will impact our operating results in the second half of 2009, have decreased to the low 50
cents per pound range. The ultimate effect of these pricing levels on our earnings cannot be
quantified, as the effect of movements in cotton prices on industry selling prices are uncertain,
but any dramatic increase in the price of cotton could have a material adverse effect on our
business, results of operations, financial condition and cash flows. In addition, fluctuations in
crude oil or petroleum prices may influence the prices of other raw materials we use to manufacture
our products, such as chemicals, dyestuffs, polyester yarn and foam. We generally purchase our raw
materials at market prices. We use commodity financial instruments to hedge the price of cotton,
for which there is a high correlation between costs and the financial instrument. We generally do
not use commodity financial instruments to hedge other raw material commodity prices. At January 3,
2009, we did not have any cotton commodity derivatives outstanding.
Item 8. Financial Statements and Supplementary Data
Our
financial statements required by this item are contained on pages F-1
through F-66 of
this Annual Report on Form 10-K. See Item 15(a)(1) for a listing of financial statements provided.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by Exchange Act Rule 13a-15(b), our management, including the Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure
controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective.
88
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f). Managements annual report on
internal control over financial reporting and the report of independent registered public
accounting firm are incorporated by reference to pages F-2 and F-3 of this Annual Report on
Form 10-K.
Changes in Internal Control over Financial Reporting
In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management,
including the Chief Executive Officer and Chief Financial Officer, concluded that no changes in our
internal control over financial reporting occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this Item 10 regarding our executive officers is included in Item 1C
of this Annual Report on Form 10-K. We will provide other information that is responsive to this
Item 10 in our definitive proxy statement or in an amendment to this Annual Report not later than
120 days after the end of the fiscal year covered by this Annual Report. That information is
incorporated in this Item 10 by reference.
Item 11. Executive Compensation
We will provide information that is responsive to this Item 11 in our definitive proxy
statement or in an amendment to this Annual Report not later than 120 days after the end of the
fiscal year covered by this Annual Report. That information is incorporated in this Item 11 by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
We will provide information that is responsive to this Item 12 in our definitive proxy
statement or in an amendment to this Annual Report not later than 120 days after the end of the
fiscal year covered by this Annual Report. That information is incorporated in this Item 12 by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We will provide information that is responsive to this Item 13 in our definitive proxy
statement or in an amendment to this Annual Report not later than 120 days after the end of the
fiscal year covered by this Annual Report. That information is incorporated in this Item 13 by
reference.
Item 14. Principal Accounting Fees and Services
We will provide information that is responsive to this Item 14 in our definitive proxy
statement or in an amendment to this Annual Report not later than 120 days after the end of the
fiscal year covered by this Annual Report. That information is incorporated in this Item 14 by
reference.
89
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1)-(2) Financial Statements and Schedules
The financial statements and schedules listed in the accompanying Index to Consolidated
Financial Statements on page F-1 are filed as part of this Report.
(a)(3) Exhibits
See Index to Exhibits beginning on page E-1, which is incorporated by reference herein. The
Index to Exhibits lists all exhibits filed with this Report and identifies which of those exhibits
are management contracts and compensation plans.
90
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 11th day of February, 2009.
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HANESBRANDS INC.
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/s/ Richard A. Noll
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Richard A. Noll |
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Chief Executive Officer |
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POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints jointly and severally, Richard A. Noll, E. Lee Wyatt Jr. and Joia M.
Johnson, and each one of them, his or her attorneys-in-fact, each with the power of substitution,
for him or her in any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all that each said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on
Form 10-K has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
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Signature |
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Capacity |
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Date |
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/s/ Richard A. Noll
Richard A. Noll
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Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)
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February 11, 2009 |
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/s/ E. Lee Wyatt Jr.
E. Lee Wyatt Jr.
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Executive Vice President,
Chief Financial Officer
(principal financial officer)
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February 11, 2009 |
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/s/ Dale W. Boyles
Dale W. Boyles
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Vice President,
Chief Accounting Officer and
Controller
(principal accounting
officer)
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February 11, 2009 |
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/s/ Lee A. Chaden
Lee A. Chaden
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Director
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February 11, 2009 |
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Signature |
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Capacity |
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Date |
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/s/ Bobby J. Griffin
Bobby J. Griffin
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Director
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February 11, 2009 |
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/s/ James C. Johnson
James C. Johnson
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Director
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February 11, 2009 |
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/s/ Jessica T. Mathews
Jessica T. Mathews
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Director
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February 11, 2009 |
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/s/ J. Patrick Mulcahy
J. Patrick Mulcahy
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Director
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February 11, 2009 |
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/s/ Ronald L. Nelson
Ronald L. Nelson
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Director
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February 11, 2009 |
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/s/ Alice M. Peterson
Alice M. Peterson
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Director
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February 11, 2009 |
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/s/ Andrew J. Schindler
Andrew J. Schindler
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Director
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February 11, 2009 |
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/s/ Ann E. Ziegler
Ann E. Ziegler
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Director
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February 11, 2009 |
92
INDEX TO EXHIBITS
References in this Index to Exhibits to the Registrant are to Hanesbrands
Inc. The Registrant will furnish you, without charge, a copy of any exhibit, upon
written request. Written requests to obtain any exhibit should be sent to Corporate
Secretary, Hanesbrands Inc., 1000 East Hanes Mill Road, Winston-Salem, North
Carolina 27105.
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Exhibit |
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Number |
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Description |
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3.1
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Articles of Amendment and Restatement of
Hanesbrands Inc. (incorporated by reference
from Exhibit 3.1 to the Registrants Current
Report on Form 8-K filed with the Securities
and Exchange Commission on September 5, 2006). |
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3.2
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Articles Supplementary (Junior Participating
Preferred Stock, Series A) (incorporated by
reference from Exhibit 3.2 to the Registrants
Current Report on Form 8-K filed with the
Securities and Exchange Commission on
September 5, 2006). |
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3.3
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Amended and Restated Bylaws of Hanesbrands
Inc. (incorporated by reference from Exhibit
3.1 to the Registrants Current Report on Form
8-K filed with the Securities and Exchange
Commission on December 15, 2008). |
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3.4
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Certificate of Formation of BA International,
L.L.C. (incorporated by reference from Exhibit
3.4 to the Registrants Registration Statement
on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
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3.5
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Limited Liability Company Agreement of BA
International, L.L.C. (incorporated by
reference from Exhibit 3.5 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
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3.6
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Certificate of Incorporation of Caribesock,
Inc., together with Certificate of Change of
Location of Registered Office and Registered
Agent (incorporated by reference from Exhibit
3.6 to the Registrants Registration Statement
on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
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3.7
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Bylaws of Caribesock, Inc. (incorporated by
reference from Exhibit 3.7 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
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3.8
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Certificate of Incorporation of Caribetex,
Inc., together with Certificate of Change of
Location of Registered Office and Registered
Agent (incorporated by reference from Exhibit
3.8 to the Registrants Registration Statement
on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
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3.9
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Bylaws of Caribetex, Inc. (incorporated by
reference from Exhibit 3.9 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
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3.10
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Certificate of Formation of CASA
International, LLC (incorporated by reference
from Exhibit 3.10 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
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3.11
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Limited Liability Company Agreement of CASA
International, LLC (incorporated by reference
from Exhibit 3.11 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
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3.12
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Certificate of Incorporation of Ceibena Del,
Inc., together with Certificate of Change of
Location of Registered Office and Registered
Agent (incorporated by reference from Exhibit
3.12 to the Registrants Registration
Statement on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
E-1
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Exhibit |
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Number |
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Description |
3.13
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Bylaws of Ceibena Del, Inc. (incorporated by
reference from Exhibit 3.13 to the
Registrants Registration Statement on Form
S-4 (Commission file number 333-142371) filed
with the Securities and Exchange Commission on
April 26, 2007). |
3.14
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Certificate of Formation of Hanes Menswear,
LLC, together with Certificate of Conversion
from a Corporation to a Limited Liability
Company Pursuant to Section 18-214 of the
Limited Liability Company Act and Certificate
of Change of Location of Registered Office and
Registered Agent (incorporated by reference
from Exhibit 3.14 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
3.15
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Limited Liability Company Agreement of Hanes
Menswear, LLC (incorporated by reference from
Exhibit 3.15 to the Registrants Registration
Statement on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.16
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Certificate of Incorporation of HPR, Inc.,
together with Certificate of Merger of Hanes
Puerto Rico, Inc. into HPR, Inc. (now known as
Hanes Puerto Rico, Inc.) (incorporated by
reference from Exhibit 3.16 to the
Registrants Registration Statement on Form
S-4 (Commission file number 333-142371) filed
with the Securities and Exchange Commission on
April 26, 2007). |
3.17
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Bylaws of Hanes Puerto Rico, Inc.
(incorporated by reference from Exhibit 3.17
to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371)
filed with the Securities and Exchange
Commission on April 26, 2007). |
3.18
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Articles of Organization of Sara Lee Direct,
LLC, together with Articles of Amendment
reflecting the change of the entitys name to
Hanesbrands Direct, LLC (incorporated by
reference from Exhibit 3.18 to the
Registrants Registration Statement on Form
S-4 (Commission file number 333-142371) filed
with the Securities and Exchange Commission on
April 26, 2007). |
3.19
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Limited Liability Company Agreement of Sara
Lee Direct, LLC (now known as Hanesbrands
Direct, LLC) (incorporated by reference from
Exhibit 3.19 to the Registrants Registration
Statement on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.20
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Certificate of Incorporation of Sara Lee
Distribution, Inc., together with Certificate
of Amendment of Certificate of Incorporation
of Sara Lee Distribution, Inc. reflecting the
change of the entitys name to Hanesbrands
Distribution, Inc. (incorporated by reference
from Exhibit 3.20 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
3.21
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Bylaws of Sara Lee Distribution, Inc. (now
known as Hanesbrands Distribution,
Inc.)(incorporated by reference from Exhibit
3.21 to the Registrants Registration
Statement on Form S-4 (Commission file number
333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.22
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Certificate of Formation of HBI Branded
Apparel Enterprises, LLC (incorporated by
reference from Exhibit 3.22 to the
Registrants Registration Statement on Form
S-4 (Commission file number 333-142371) filed
with the Securities and Exchange Commission on
April 26, 2007). |
3.23
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Operating Agreement of HBI Branded Apparel
Enterprises, LLC (incorporated by reference
from Exhibit 3.23 to the Registrants
Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the
Securities and Exchange Commission on April
26, 2007). |
3.24
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Certificate of Incorporation of HBI Branded
Apparel Limited, Inc. (incorporated by
reference from Exhibit 3.24 to the
Registrants Registration Statement on Form
S-4 (Commission file number 333-142371) filed
with the Securities and Exchange Commission on
April 26, 2007). |
3.25
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Bylaws of HBI Branded Apparel Limited, Inc.
(incorporated by reference from Exhibit 3.25
to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371)
filed with the Securities and Exchange
Commission on April 26, 2007). |
E-2
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Exhibit |
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Number |
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Description |
3.26
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Certificate of Formation of HbI International, LLC
(incorporated by reference from Exhibit 3.26 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.27
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Limited Liability Company Agreement of HbI International, LLC
(incorporated by reference from Exhibit 3.27 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.28
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Certificate of Formation of SL Sourcing, LLC, together with
Certificate of Amendment to the Certificate of Formation of
SL Sourcing, LLC reflecting the change of the entitys name
to HBI Sourcing, LLC (incorporated by reference from Exhibit
3.28 to the Registrants Registration Statement on Form S-4
(Commission file number 333-142371) filed with the Securities
and Exchange Commission on April 26, 2007). |
3.29
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Limited Liability Company Agreement of SL Sourcing, LLC (now
known as HBI Sourcing, LLC) (incorporated by reference from
Exhibit 3.29 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the
Securities and Exchange Commission on April 26, 2007). |
3.30
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Certificate of Formation of Inner Self LLC (incorporated by
reference from Exhibit 3.30 to the Registrants Registration
Statement on Form S-4 (Commission file number 333-142371)
filed with the Securities and Exchange Commission on April
26, 2007). |
3.31
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Limited Liability Company Agreement of Inner Self LLC
(incorporated by reference from Exhibit 3.31 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.32
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Certificate of Formation of Jasper-Costa Rica, L.L.C.
(incorporated by reference from Exhibit 3.32 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.33
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Amended and Restated Limited Liability Company Agreement of
Jasper-Costa Rica, L.L.C. (incorporated by reference from
Exhibit 3.33 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the
Securities and Exchange Commission on April 26, 2007). |
3.34
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Certificate of Formation of Playtex Dorado, LLC, together
with Certificate of Conversion from a Corporation to a
Limited Liability Company Pursuant to Section 18-214 of the
Limited Liability Company Act (incorporated by reference from
Exhibit 3.36 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the
Securities and Exchange Commission on April 26, 2007). |
3.35
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Amended and Restated Limited Liability Company Agreement of
Playtex Dorado, LLC (incorporated by reference from Exhibit
3.37 to the Registrants Registration Statement on Form S-4
(Commission file number 333-142371) filed with the Securities
and Exchange Commission on April 26, 2007). |
3.36
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Certificate of Incorporation of Playtex Industries, Inc.
(incorporated by reference from Exhibit 3.38 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
3.37
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Bylaws of Playtex Industries, Inc. (incorporated by reference
from Exhibit 3.39 to the Registrants Registration Statement
on Form S-4 (Commission file number 333-142371) filed with
the Securities and Exchange Commission on April 26, 2007). |
3.38
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Certificate of Formation of Seamless Textiles, LLC, together
with Certificate of Conversion from a Corporation to a
Limited Liability Company Pursuant to Section 18-214 of the
Limited Liability Company Act (incorporated by reference from
Exhibit 3.40 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the
Securities and Exchange Commission on April 26, 2007). |
3.39
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Limited Liability Company Agreement of Seamless Textiles, LLC
(incorporated by reference from Exhibit 3.41 to the
Registrants Registration Statement on Form S-4 (Commission
file number 333-142371) filed with the Securities and
Exchange Commission on April 26, 2007). |
E-3
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Exhibit |
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Number |
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Description |
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3.40
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Certificate of Incorporation of UPCR, Inc., together with Certificate of Change of Location of Registered
Office and Registered Agent (incorporated by reference from Exhibit 3.42 to the Registrants Registration
Statement on Form S-4 (Commission file number 333-142371) filed with the Securities and Exchange Commission on
April 26, 2007). |
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3.41
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Bylaws of UPCR, Inc. (incorporated by reference from Exhibit 3.43 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the Securities and Exchange Commission on April 26,
2007). |
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3.42
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Certificate of Incorporation of UPEL, Inc., together with Certificate of Change of Location of Registered
Office and Registered Agent (incorporated by reference from Exhibit 3.44 to the Registrants Registration
Statement on Form S-4 (Commission file number 333-142371) filed with the Securities and Exchange Commission on
April 26, 2007). |
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3.43
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Bylaws of UPEL, Inc. (incorporated by reference from Exhibit 3.45 to the Registrants Registration Statement on
Form S-4 (Commission file number 333-142371) filed with the Securities and Exchange Commission on April 26,
2007). |
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4.1
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Rights Agreement between Hanesbrands Inc. and Computershare Trust Company, N.A., Rights Agent. (incorporated by
reference from Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 5, 2006). |
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4.2
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Form of Rights Certificate (incorporated by reference from Exhibit 4.2 to the Registrants Current Report on
Form 8-K filed with the Securities and Exchange Commission on September 5, 2006). |
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4.3
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Placement Agreement, dated December 11, 2006, among Hanesbrands Inc., certain subsidiaries of Hanesbrands Inc.,
Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by
reference from Exhibit 4.1 to the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 15, 2006). |
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4.4
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Indenture, dated as of December 14, 2006, among Hanesbrands Inc., certain subsidiaries of Hanesbrands Inc., and
Branch Banking and Trust Company, as Trustee (incorporated by reference from Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on December 20, 2006). |
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4.5
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Registration Rights Agreement with respect to Floating Rate Senior Notes due 2014, dated as of December 14,
2006, among Hanesbrands Inc., certain subsidiaries of Hanesbrands Inc., and Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Barclays Capital Inc., Citigroup
Global Markets Inc., and HSBC Securities (USA) Inc. (incorporated by reference from Exhibit 4.2 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on December 20,
2006). |
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4.6
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Indenture, dated as of August 1, 2008, among the Registrant, certain subsidiaries of the Registrant, and Branch
Banking and Trust Company, as Trustee (incorporated by reference from Exhibit 4.3 to the Registrants
Registration Statement on Form S-3 (Commission file number 333-152733) filed with the Securities and Exchange
Commission on August 1, 2008). |
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10.1
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Hanesbrands Inc. Omnibus Incentive Plan of 2006 (incorporated by reference from Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5,
2006).* |
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10.2
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Form of Stock Option Grant Notice and Agreement under the Hanesbrands Inc. Omnibus Incentive Plan of 2006
(incorporated by reference from Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 5, 2006).* |
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10.3
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Form of Restricted Stock Unit Grant Notice and Agreement under the Hanesbrands Inc. Omnibus Incentive Plan of
2006. (incorporated by reference from Exhibit 10.4 to the Registrants Current Report on Form 8-K filed with
the Securities and Exchange Commission on September 5, 2006).* |
E-4
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Exhibit |
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Number |
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Description |
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10.4
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Form of Non-Employee Director Restricted Stock Unit Grant Notice and Agreement under the Hanesbrands Inc.
Omnibus Incentive Plan of 2006. * |
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10.5
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Form of Non-Employee Director Stock Option Grant Notice and Agreement under the Hanesbrands Inc. Omnibus
Incentive Plan of 2006 (incorporated by reference from Exhibit 10.5 to the Registrants Transition Report on
Form 10-K filed with the Securities and Exchange Commission on February 22, 2007).* |
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10.6
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Hanesbrands Inc. Retirement Savings Plan.* |
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10.7
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Hanesbrands Inc. Supplemental Employee Retirement Plan * |
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10.8
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Hanesbrands Inc. Performance-Based Annual Incentive Plan (incorporated by reference from Exhibit 10.7 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5,
2006).* |
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10.9
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Hanesbrands Inc. Executive Deferred Compensation Plan (incorporated by reference from Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on October 31,
2008).* |
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10.10
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Hanesbrands Inc. Executive Life Insurance Plan.* |
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10.11
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Hanesbrands Inc. Executive Long-Term Disability Plan.* |
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10.12
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Hanesbrands Inc. Employee Stock Purchase Plan of 2006 (incorporated by reference from Exhibit 10.11 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange Commission on September 5,
2006).* |
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10.13
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Hanesbrands Inc. Non-Employee Director Deferred Compensation Plan.* |
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10.14
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Severance/Change in Control
Agreement dated December 18, 2008 between the Registrant and Richard A. Noll.* |
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10.15
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Severance/Change in Control Agreement dated December 18, 2008 between the Registrant and Gerald W. Evans Jr.* |
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10.16
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Severance/Change in Control Agreement dated December 18, 2008 between the Registrant and E. Lee Wyatt Jr.* |
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10.17
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Severance/Change in Control
Agreement dated December 10, 2008 between the Registrant and Kevin W. Oliver.* |
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10.18
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Severance/Change in Control
Agreement dated December 17, 2008 between the Registrant and Joia M. Johnson.* |
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10.19
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Severance/Change in Control Agreement dated December 18, 2008 between the Registrant and William J. Nictakis.* |
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10.20
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Master Separation Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation (incorporated
by reference from Exhibit 10.21 to the Registrants Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 28, 2006). |
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10.21
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Tax Sharing Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation (incorporated by
reference from Exhibit 10.22 to the Registrants Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 28, 2006). |
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10.22
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Employee Matters Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation (incorporated
by reference from Exhibit 10.23 to the Registrants Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 28, 2006). |
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10.23
|
|
Master Transition Services Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation
(incorporated by reference from Exhibit 10.24 to the Registrants Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 28, 2006). |
|
10.24
|
|
Real Estate Matters Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation
(incorporated by reference from Exhibit 10.25 to the Registrants Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 28, 2006). |
E-5
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
10.25
|
|
Indemnification and Insurance Matters Agreement dated August 31, 2006 between the Registrant and Sara Lee
Corporation (incorporated by reference from Exhibit 10.26 to the Registrants Annual Report on Form 10-K filed
with the Securities and Exchange Commission on September 28, 2006). |
|
10.26
|
|
Intellectual Property Matters Agreement dated August 31, 2006 between the Registrant and Sara Lee Corporation
(incorporated by reference from Exhibit 10.27 to the Registrants Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 28, 2006). |
|
10.27
|
|
First Lien Credit Agreement dated September 5, 2006 (the Senior
Secured Credit Facility) among the Registrant the various financial
institutions and other persons from time to time party thereto, HSBC
Bank USA, National Association, LaSalle Bank National Association,
Barclays Bank PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley Senior Funding, Inc., Citicorp USA, Inc. and Citibank,
N.A. (incorporated by reference from Exhibit 10.28 to the Registrants
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on September 28, 2006). |
|
10.28
|
|
First Amendment dated February 22, 2007 to the Senior Secured Credit
Facility (incorporated by reference from Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 28, 2007). |
|
10.29
|
|
Second Amendment dated August 21, 2008 to the Senior Secured Credit
Facility (incorporated by reference from Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 27, 2008). |
|
10.30
|
|
Second Lien Credit Agreement dated September 5, 2006 (the Second Lien
Credit Agreement) among HBI Branded Apparel Limited, Inc., Hanesbrands
Inc., the various financial institutions and other persons from time to
time party thereto, HSBC Bank USA, National Association, LaSalle Bank
National Association, Barclays Bank PLC, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Morgan Stanley Senior Funding, Inc., Citicorp
USA, Inc. and Citibank, N.A. (incorporated by reference from Exhibit
10.29 to the Registrants Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 28, 2006). |
|
10.31
|
|
First Amendment dated August 21, 2008 to the Second Lien Credit
Agreement (incorporated by reference from Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 27, 2008). |
|
10.32
|
|
Receivables Purchase Agreement dated as of November 27, 2007 among HBI
Receivables LLC and the Registrant, JPMorgan Chase Bank, N.A., HSBC
Bank USA, National Association, Falcon Asset Securitization Company
LLC, Bryant Park Funding LLC, and HSBC Securities (USA) Inc.
(incorporated by reference from Exhibit 10.34 to the Registrants
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 19, 2008). |
|
12.1
|
|
Ratio of Earnings to Fixed Charges. |
|
21.1
|
|
Subsidiaries of the Registrant. |
|
23.1
|
|
Consent of PricewaterhouseCoopers LLP. |
|
24.1
|
|
Powers of Attorney (included on the signature pages hereto). |
|
31.1
|
|
Certification of Richard A. Noll, Chief Executive Officer. |
|
31.2
|
|
Certification of E. Lee Wyatt Jr., Chief Financial Officer. |
|
32.1
|
|
Section 1350 Certification of Richard A. Noll, Chief Executive Officer. |
|
32.2
|
|
Section 1350 Certification of E. Lee Wyatt Jr., Chief Financial Officer. |
|
|
|
* |
|
Agreement relates to executive compensation. |
|
|
|
Portions of this exhibit were redacted pursuant to a confidential treatment request filed
with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. |
E-6
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
HANESBRANDS
|
|
|
|
|
Page |
|
|
|
Consolidated Financial Statements |
|
|
|
|
F-2 |
|
|
F-3 |
|
|
F-4 |
|
|
F-5 |
|
|
F-6 |
|
|
F-7 |
|
|
F-8 |
F-1
Hanesbrands Inc.
Managements Report on Internal Control Over Financial Reporting
Management of Hanesbrands Inc. (Hanesbrands) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) under the
Securities and Exchange Act of 1934. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States. Hanesbrands system of internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of Hanesbrands; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with accounting principles
generally accepted in the United States, and that receipts and expenditures of Hanesbrands are
being made only in accordance with authorizations of management and directors of Hanesbrands; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of Hanesbrands assets that could have a material effect on the
financial statements.
Management has evaluated the effectiveness of Hanesbrands internal control over financial
reporting as of January 3, 2009, based upon criteria for effective internal control over financial
reporting described in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, management
determined that Hanesbrands internal control over financial reporting was effective as of January
3, 2009.
The effectiveness of our internal control over financial reporting as of January 3, 2009 has
been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which is included in Part II, Item 8 of this Annual Report on Form 10-K.
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Hanesbrands Inc.
In our opinion, the consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of Hanesbrands Inc. at January 3, 2009 and
December 29, 2007, and the results of its operations and its cash flows for each of the two years
in the period ended January 3, 2009, the six months ended December 30, 2006, and the year ended
July 1, 2006 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of January 3, 2009, based on criteria established in Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible for these financial statements, for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in Managements Report on
Internal Control over Financial Reporting. Our responsibility is to express opinions on these
financial statements and on the Companys internal control over financial reporting based on our
audits which were integrated audits in 2008 and 2007. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
As discussed in Notes 16 and 17 to the consolidated financial statements, the Company changed
the manner in which it accounts for its defined benefit pension and other postretirement plans
effective December 30, 2006, and changed the measurement date for its plan assets and benefit
obligations effective December 29, 2007.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Greensboro, North Carolina
February 11, 2009
F-3
HANESBRANDS
Consolidated Statements of Income
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
$ |
2,250,473 |
|
|
$ |
4,472,832 |
|
Cost of sales |
|
|
2,871,420 |
|
|
|
3,033,627 |
|
|
|
1,530,119 |
|
|
|
2,987,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,377,350 |
|
|
|
1,440,910 |
|
|
|
720,354 |
|
|
|
1,485,332 |
|
Selling, general and administrative expenses |
|
|
1,009,607 |
|
|
|
1,040,754 |
|
|
|
547,469 |
|
|
|
1,051,833 |
|
Gain on curtailment of postretirement
benefits |
|
|
|
|
|
|
(32,144 |
) |
|
|
(28,467 |
) |
|
|
|
|
Restructuring |
|
|
50,263 |
|
|
|
43,731 |
|
|
|
11,278 |
|
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
317,480 |
|
|
|
388,569 |
|
|
|
190,074 |
|
|
|
433,600 |
|
Other (income) expense |
|
|
(634 |
) |
|
|
5,235 |
|
|
|
7,401 |
|
|
|
|
|
Interest expense, net |
|
|
155,077 |
|
|
|
199,208 |
|
|
|
70,753 |
|
|
|
17,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
163,037 |
|
|
|
184,126 |
|
|
|
111,920 |
|
|
|
416,320 |
|
Income tax expense |
|
|
35,868 |
|
|
|
57,999 |
|
|
|
37,781 |
|
|
|
93,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
127,169 |
|
|
$ |
126,127 |
|
|
$ |
74,139 |
|
|
$ |
322,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.35 |
|
|
$ |
1.31 |
|
|
$ |
0.77 |
|
|
$ |
3.35 |
|
Diluted |
|
$ |
1.34 |
|
|
$ |
1.30 |
|
|
$ |
0.77 |
|
|
$ |
3.35 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
94,171 |
|
|
|
95,936 |
|
|
|
96,309 |
|
|
|
96,306 |
|
Diluted |
|
|
95,164 |
|
|
|
96,741 |
|
|
|
96,620 |
|
|
|
96,306 |
|
See accompanying notes to Consolidated Financial Statements.
F-4
HANESBRANDS
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
ASSETS
|
Cash and cash equivalents |
|
$ |
67,342 |
|
|
$ |
174,236 |
|
Trade accounts receivable less allowances of
$21,897 at January 3, 2009 and $31,642 at
December 29, 2007 |
|
|
404,930 |
|
|
|
575,069 |
|
Inventories |
|
|
1,290,530 |
|
|
|
1,117,052 |
|
Deferred tax assets |
|
|
181,850 |
|
|
|
172,909 |
|
Other current assets |
|
|
165,673 |
|
|
|
55,068 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,110,325 |
|
|
|
2,094,334 |
|
|
|
|
|
|
|
|
Property, net |
|
|
588,189 |
|
|
|
534,286 |
|
Trademarks and other identifiable intangibles, net |
|
|
147,443 |
|
|
|
151,266 |
|
Goodwill |
|
|
322,002 |
|
|
|
310,425 |
|
Deferred tax assets |
|
|
321,037 |
|
|
|
263,157 |
|
Other noncurrent assets |
|
|
45,053 |
|
|
|
86,015 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,534,049 |
|
|
$ |
3,439,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Accounts payable |
|
$ |
325,518 |
|
|
$ |
289,166 |
|
Accrued liabilities and other: |
|
|
|
|
|
|
|
|
Payroll and employee benefits |
|
|
82,815 |
|
|
|
115,133 |
|
Advertising and promotion |
|
|
69,102 |
|
|
|
85,359 |
|
Freight and duty |
|
|
31,153 |
|
|
|
36,894 |
|
Restructuring |
|
|
21,381 |
|
|
|
19,636 |
|
Other |
|
|
110,941 |
|
|
|
123,217 |
|
Notes payable |
|
|
61,734 |
|
|
|
19,577 |
|
Current portion of long-term debt |
|
|
45,640 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
748,284 |
|
|
|
688,982 |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,130,907 |
|
|
|
2,315,250 |
|
Pension and postretirement benefits |
|
|
294,095 |
|
|
|
38,657 |
|
Other noncurrent liabilities |
|
|
175,608 |
|
|
|
107,690 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,348,894 |
|
|
|
3,150,579 |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock (50,000,000 authorized shares;
$.01 par value) Issued and outstanding None |
|
|
|
|
|
|
|
|
Common stock (500,000,000 authorized shares;
$.01 par value) Issued and outstanding
93,520,132 at January 3, 2009 and 95,232,478
at December 29, 2007 |
|
|
935 |
|
|
|
954 |
|
Additional paid-in capital |
|
|
248,167 |
|
|
|
199,019 |
|
Retained earnings |
|
|
217,522 |
|
|
|
117,849 |
|
Accumulated other comprehensive loss |
|
|
(281,469 |
) |
|
|
(28,918 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
185,155 |
|
|
|
288,904 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
3,534,049 |
|
|
$ |
3,439,483 |
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
F-5
HANESBRANDS
Consolidated Statements of Stockholders or Parent Companies Equity and Comprehensive Income
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Companies |
|
|
|
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Equity |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Investment |
|
|
Total |
|
Balances at July 2, 2005 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(18,209 |
) |
|
$ |
2,620,571 |
|
|
$ |
2,602,362 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,493 |
|
|
|
322,493 |
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,518 |
|
|
|
|
|
|
|
13,518 |
|
Net unrealized loss on
qualifying cash flow hedges,
net of tax of $2,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,693 |
) |
|
|
|
|
|
|
(3,693 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
332,318 |
|
Net transactions with parent
companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,454 |
|
|
|
294,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at July 1, 2006 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(8,384 |
) |
|
$ |
3,237,518 |
|
|
$ |
3,229,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from July 2, 2006
through September 4, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,115 |
|
|
|
41,115 |
|
Net income from September 5,
2006 through December 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,024 |
|
|
|
|
|
|
|
|
|
|
|
33,024 |
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,989 |
) |
|
|
|
|
|
|
(5,989 |
) |
Net unrealized loss on
qualifying cash flow hedges,
net of tax of $453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(597 |
) |
|
|
|
|
|
|
(597 |
) |
Minimum pension and
postretirement liability from
September 6, 2006 through
December 30, 2006, net of tax
of $6,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,864 |
) |
|
|
|
|
|
|
(9,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,689 |
|
Net transactions with parent
companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(793,133 |
) |
|
|
(793,133 |
) |
Payments to Sara Lee
Corporation in connection with
the spin off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,400,000 |
) |
|
|
(2,400,000 |
) |
Consummation of spin off
transaction on September 5,
2006, including distribution of
Hanesbrands Inc. common stock
by Sara Lee Corporation |
|
|
96,306 |
|
|
|
963 |
|
|
|
84,537 |
|
|
|
|
|
|
|
|
|
|
|
(85,500 |
) |
|
|
|
|
Minimum pension and
postretirement liability from
July 2, 2006 through September
5, 2006, net of tax of $34,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,813 |
) |
|
|
|
|
|
|
(53,813 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
10,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,176 |
|
Exercise of stock options |
|
|
6 |
|
|
|
|
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139 |
|
Adoption of SFAS 158, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,079 |
|
|
|
|
|
|
|
19,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 30, 2006 |
|
|
96,312 |
|
|
$ |
963 |
|
|
$ |
94,852 |
|
|
$ |
33,024 |
|
|
$ |
(59,568 |
) |
|
$ |
|
|
|
$ |
69,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,127 |
|
|
|
|
|
|
|
|
|
|
|
126,127 |
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,114 |
|
|
|
|
|
|
|
20,114 |
|
Net unrealized loss on
qualifying cash flow hedges,
net of tax of $4,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,877 |
) |
|
|
|
|
|
|
(6,877 |
) |
Recognition of gain from
healthcare plan settlement,
net of tax of $12,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,639 |
) |
|
|
|
|
|
|
(19,639 |
) |
Net unrecognized loss from
pension and postretirement
plans, net of tax of $23,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,052 |
|
|
|
|
|
|
|
37,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,777 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
33,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,185 |
|
Exercise of stock options,
vesting of restricted stock
units and other |
|
|
533 |
|
|
|
7 |
|
|
|
3,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,435 |
|
Stock repurchases |
|
|
(1,613 |
) |
|
|
(16 |
) |
|
|
(2,006 |
) |
|
|
(42,451 |
) |
|
|
|
|
|
|
|
|
|
|
(44,473 |
) |
Final separation of pension
plan assets and liabilities |
|
|
|
|
|
|
|
|
|
|
74,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,189 |
|
Net
transactions related to spin off |
|
|
|
|
|
|
|
|
|
|
(4,629 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,629 |
) |
Adoption of SFAS 158, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,149 |
|
|
|
|
|
|
|
|
|
|
|
1,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 29, 2007 |
|
|
95,232 |
|
|
$ |
954 |
|
|
$ |
199,019 |
|
|
$ |
117,849 |
|
|
$ |
(28,918 |
) |
|
$ |
|
|
|
$ |
288,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,169 |
|
|
|
|
|
|
|
|
|
|
|
127,169 |
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,463 |
) |
|
|
|
|
|
|
(29,463 |
) |
Net unrealized loss on
qualifying cash flow hedges,
net of tax of $24,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,818 |
) |
|
|
|
|
|
|
(38,818 |
) |
Net unrecognized loss from
pension and postretirement
plans, net of tax of $117,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184,270 |
) |
|
|
|
|
|
|
(184,270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125,382 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
31,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,002 |
|
Exercise of stock options,
vesting of restricted stock
units and other |
|
|
456 |
|
|
|
2 |
|
|
|
10,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,078 |
|
Stock repurchases |
|
|
(1,224 |
) |
|
|
(12 |
) |
|
|
(2,767 |
) |
|
|
(27,496 |
) |
|
|
|
|
|
|
|
|
|
|
(30,275 |
) |
Net transactions related to spin off |
|
|
(944 |
) |
|
|
(9 |
) |
|
|
10,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 3, 2009 |
|
|
93,520 |
|
|
$ |
935 |
|
|
$ |
248,167 |
|
|
$ |
217,522 |
|
|
$ |
(281,469 |
) |
|
$ |
|
|
|
$ |
185,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
F-6
HANESBRANDS
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
|
|
|
Years Ended |
|
|
Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
127,169 |
|
|
$ |
126,127 |
|
|
$ |
74,139 |
|
|
$ |
322,493 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
103,126 |
|
|
|
125,471 |
|
|
|
69,946 |
|
|
|
105,173 |
|
Amortization of intangibles |
|
|
12,019 |
|
|
|
6,205 |
|
|
|
3,466 |
|
|
|
9,031 |
|
Restructuring |
|
|
5,133 |
|
|
|
(3,446 |
) |
|
|
(812 |
) |
|
|
(4,220 |
) |
Gain on curtailment of postretirement benefits |
|
|
|
|
|
|
(32,144 |
) |
|
|
(28,467 |
) |
|
|
|
|
Losses on early extinguishment of debt |
|
|
1,332 |
|
|
|
5,235 |
|
|
|
7,401 |
|
|
|
|
|
Gain on repurchase of Floating Rate Senior Notes |
|
|
(1,966 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs |
|
|
6,032 |
|
|
|
6,475 |
|
|
|
2,279 |
|
|
|
|
|
Stock compensation expense |
|
|
31,449 |
|
|
|
33,625 |
|
|
|
15,623 |
|
|
|
|
|
Deferred taxes |
|
|
(1,445 |
) |
|
|
28,069 |
|
|
|
3,485 |
|
|
|
(46,804 |
) |
Other |
|
|
(1,616 |
) |
|
|
(75 |
) |
|
|
1,693 |
|
|
|
1,456 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
163,687 |
|
|
|
(81,396 |
) |
|
|
22,004 |
|
|
|
59,403 |
|
Inventories |
|
|
(182,971 |
) |
|
|
96,338 |
|
|
|
23,191 |
|
|
|
69,215 |
|
Other assets |
|
|
(49,256 |
) |
|
|
19,212 |
|
|
|
(38,726 |
) |
|
|
21,169 |
|
Due to and from related entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,048 |
) |
Accounts payable |
|
|
34,046 |
|
|
|
67,038 |
|
|
|
17,546 |
|
|
|
(673 |
) |
Accrued liabilities and other |
|
|
(69,342 |
) |
|
|
(37,694 |
) |
|
|
(36,689 |
) |
|
|
(20,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
177,397 |
|
|
|
359,040 |
|
|
|
136,079 |
|
|
|
510,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(186,957 |
) |
|
|
(91,626 |
) |
|
|
(29,764 |
) |
|
|
(110,079 |
) |
Acquisitions of businesses, net of cash acquired |
|
|
(14,655 |
) |
|
|
(20,243 |
) |
|
|
(6,666 |
) |
|
|
(2,436 |
) |
Acquisition of trademark |
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
Proceeds from sales of assets |
|
|
25,008 |
|
|
|
16,573 |
|
|
|
12,949 |
|
|
|
5,520 |
|
Other |
|
|
(644 |
) |
|
|
(789 |
) |
|
|
450 |
|
|
|
(3,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(177,248 |
) |
|
|
(101,085 |
) |
|
|
(23,031 |
) |
|
|
(110,661 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on capital lease obligations |
|
|
(892 |
) |
|
|
(1,196 |
) |
|
|
(3,088 |
) |
|
|
(5,542 |
) |
Borrowings on notes payable |
|
|
602,627 |
|
|
|
66,413 |
|
|
|
10,741 |
|
|
|
7,984 |
|
Repayments on notes payable |
|
|
(560,066 |
) |
|
|
(88,970 |
) |
|
|
(3,508 |
) |
|
|
(93,073 |
) |
Issuance of debt under credit facilities |
|
|
|
|
|
|
|
|
|
|
2,600,000 |
|
|
|
|
|
Cost of debt issuance |
|
|
(69 |
) |
|
|
(3,266 |
) |
|
|
(50,248 |
) |
|
|
|
|
Payments to Sara Lee Corporation |
|
|
|
|
|
|
|
|
|
|
(2,424,606 |
) |
|
|
|
|
Borrowings on revolving loan facility |
|
|
791,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on revolving loan facility |
|
|
(791,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt under credit facilities |
|
|
(125,000 |
) |
|
|
(428,125 |
) |
|
|
(106,625 |
) |
|
|
|
|
Issuance of Floating Rate Senior Notes |
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
|
|
|
Repurchase of Floating Rate Senior Notes |
|
|
(4,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of bridge loan facility |
|
|
|
|
|
|
|
|
|
|
(500,000 |
) |
|
|
|
|
Borrowings on accounts receivable securitization |
|
|
20,944 |
|
|
|
250,000 |
|
|
|
|
|
|
|
|
|
Repayments on accounts receivable securitization |
|
|
(28,327 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock options exercised |
|
|
2,191 |
|
|
|
6,189 |
|
|
|
139 |
|
|
|
|
|
Stock repurchases |
|
|
(30,275 |
) |
|
|
(44,473 |
) |
|
|
|
|
|
|
|
|
Transaction with Sara Lee Corporation |
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
483 |
|
|
|
883 |
|
|
|
|
|
|
|
|
|
Increase (decrease) in bank overdraft, net |
|
|
|
|
|
|
(834 |
) |
|
|
(274,551 |
) |
|
|
275,385 |
|
Borrowings on notes payable to related entities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,898 |
|
Net transactions with parent companies |
|
|
|
|
|
|
|
|
|
|
193,255 |
|
|
|
(1,251,962 |
) |
Net transactions with related entities |
|
|
|
|
|
|
|
|
|
|
(195,381 |
) |
|
|
(259,026 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(104,738 |
) |
|
|
(243,379 |
) |
|
|
(253,872 |
) |
|
|
(1,182,336 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign exchange rates on cash |
|
|
(2,305 |
) |
|
|
3,687 |
|
|
|
(1,455 |
) |
|
|
(171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
(106,894 |
) |
|
|
18,263 |
|
|
|
(142,279 |
) |
|
|
(782,547 |
) |
Cash and cash equivalents at beginning of period |
|
|
174,236 |
|
|
|
155,973 |
|
|
|
298,252 |
|
|
|
1,080,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
67,342 |
|
|
$ |
174,236 |
|
|
$ |
155,973 |
|
|
$ |
298,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
F-7
HANESBRANDS
Notes
to Consolidated Financial Statements
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
On February 10, 2005, Sara Lee Corporation (Sara Lee) announced an overall transformation
plan which included spinning off Sara Lees apparel business in the Americas and Asia (the Branded
Apparel Americas and Asia Business). In connection with the spin off, Sara Lee incorporated
Hanesbrands Inc., a Maryland corporation (Hanesbrands and, together with its consolidated
subsidiaries, the Company), to which it would transfer the assets and liabilities related to the
Branded Apparel Americas and Asia Business. On August 31, 2006, Sara Lee transferred to the Company
substantially all the assets and liabilities, at historical cost, comprising the Branded Apparel
Americas and Asia Business.
On September 5, 2006, as a condition to the distribution to Sara Lees stockholders of all of
the outstanding shares of the common stock of Hanesbrands, the Company distributed to Sara Lee a
cash dividend payment of $1,950,000 and repaid a loan from Sara Lee in the amount of $450,000, and
Sara Lee distributed to its stockholders all of the outstanding shares of Hanesbrands common
stock, with each stockholder receiving one share of Hanesbrands common stock for each eight shares
of Sara Lees common stock that they held as of the August 18, 2006 record date. As a result of
such distribution, Sara Lee ceased to own any equity interest in the Company and the Company became
an independent, separately traded, publicly held company.
The Consolidated Financial Statements reflect the consolidated operations of Hanesbrands Inc.
and its subsidiaries as a separate, stand alone entity subsequent to September 5, 2006, in addition
to the historical operations of the Branded Apparel Americas and Asia Business which were operated
as part of Sara Lee prior to the spin off. Under Sara Lees ownership, certain of the Branded
Apparel Americas and Asia Businesss operations were divisions of Sara Lee and not separate legal
entities, while the Branded Apparel Americas and Asia Businesss foreign operations were
subsidiaries of Sara Lee. A direct ownership relationship did not exist among the various units
comprising the Branded Apparel Americas and Asia Business prior to the spin off on September 5,
2006. Subsequent to the spin off on September 5, 2006, the Company began accumulating its retained
earnings and recognized the par value and paid-in-capital in connection with the issuance of
approximately 96,306 shares of common stock.
Prior to the spin off on September 5, 2006, the Branded Apparel Americas and Asia Business
utilized the services of Sara Lee for certain functions. These services included providing working
capital, as well as certain legal, finance, internal audit, financial reporting, tax advisory,
insurance, global information technology, environmental matters and human resource services,
including various corporate-wide employee benefit programs. The cost of these services has been
allocated to the Company and included in the Consolidated Financial Statements for periods prior to
the spin off on September 5, 2006. The allocations were determined on the basis which Sara Lee and
the Branded Apparel Americas and Asia Business considered to be reasonable reflections of the
utilization of services provided by Sara Lee. A more detailed discussion of the relationship with
Sara Lee prior to the spin off on September 5, 2006, including a description of the costs which
have been allocated to the Branded Apparel Americas and Asia Business, as well as the method of
allocation, is included in Note 20 to the Consolidated Financial Statements.
Management believes the assumptions underlying the Consolidated Financial Statements for these
periods are reasonable. However, the Consolidated Financial Statements included herein for the
periods through September 5, 2006 do not necessarily reflect the Branded Apparel Americas and Asia
Businesss operations and cash flows in the future or what its results of operations and cash flows
would have been had the Branded Apparel Americas and Asia Business
been a stand alone company
during the periods presented.
In October 2006, the Companys Board of Directors approved a change in the Companys fiscal
year end from the Saturday closest to June 30 to the Saturday closest to December 31. As a result
of this change, the Consolidated Financial Statements include presentation of the transition period
beginning on July 2, 2006 and ending on December 30, 2006. Fiscal year 2008 included 53 weeks and
fiscal years 2007 and 2006 included 52 weeks. Unless otherwise stated, references to years relate
to fiscal years.
F-8
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The following table presents certain financial information for the six months ended December
30, 2006 and December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
December 30, 2006 |
|
|
December 31, 2005 |
|
|
|
|
|
|
|
(unaudited) |
|
Net sales |
|
$ |
2,250,473 |
|
|
$ |
2,319,839 |
|
Cost of sales |
|
|
1,530,119 |
|
|
|
1,556,860 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
720,354 |
|
|
|
762,979 |
|
Selling, general and administrative expenses |
|
|
547,469 |
|
|
|
505,866 |
|
Gain on curtailment of postretirement benefits |
|
|
(28,467 |
) |
|
|
|
|
Restructuring |
|
|
11,278 |
|
|
|
(339 |
) |
|
|
|
|
|
|
|
Operating profit |
|
|
190,074 |
|
|
|
257,452 |
|
Other expenses |
|
|
7,401 |
|
|
|
|
|
Interest expense, net |
|
|
70,753 |
|
|
|
8,412 |
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
111,920 |
|
|
|
249,040 |
|
Income tax expense |
|
|
37,781 |
|
|
|
60,424 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
74,139 |
|
|
$ |
188,616 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.77 |
|
|
$ |
1.96 |
|
Diluted |
|
$ |
0.77 |
|
|
$ |
1.96 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
96,309 |
|
|
|
96,306 |
|
Diluted |
|
|
96,620 |
|
|
|
96,306 |
|
(2) Summary of Significant Accounting Policies
(a) Consolidation
The Consolidated Financial Statements include the accounts of the Company, its controlled
subsidiary companies which in general are majority owned entities, and the accounts of variable
interest entities (VIEs) for which the Company is deemed the primary beneficiary, as defined by the
Financial Accounting Standards Boards (FASB) Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46-R) and related interpretations. Excluded from the accounts of the Company
are Sara Lee entities which maintained legal ownership of certain of the Companys divisions
(Parent Companies) until the spin off on September 5, 2006. The results of companies acquired or
disposed of during the year are included in the Consolidated Financial Statements from the
effective date of acquisition, or up to the date of disposal. All intercompany balances and
transactions have been eliminated in consolidation.
The Company consolidates one VIE, an Israeli manufacturer and supplier of yarn. The Company
has a 49% ownership interest in the Israeli joint venture, however, based upon certain terms of the
supply contract, the Company has a disproportionate share of expected losses and residual returns.
The effect of consolidating this VIE was the inclusion of $11,042 of total assets and $7,534 of
total liabilities at January 3, 2009 and $11,903 of total assets and $8,351 of total liabilities at
December 29, 2007 on the Consolidated Balance Sheets.
The Company reported a minority interest of $5,907 and $5,749 in the Other noncurrent
liabilities line of the Consolidated Balance Sheets at January 3, 2009 and December 29, 2007,
respectively.
F-9
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(b) Use of Estimates
The preparation of Consolidated Financial Statements in conformity with U.S. generally
accepted accounting principles requires management to make use of estimates and assumptions that
affect the reported amount of assets and liabilities, certain financial statement disclosures at
the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results may vary from these estimates.
(c) Foreign Currency Translation
Foreign currency-denominated assets and liabilities are translated into U.S. dollars at
exchange rates existing at the respective balance sheet dates. Translation adjustments resulting
from fluctuations in exchange rates are recorded as a separate component of accumulated other
comprehensive loss within stockholders equity. The Company translates the results of operations of
its foreign operations at the average exchange rates during the respective periods. Gains and
losses resulting from foreign currency transactions, the amounts of which are not material for any
of the periods presented, are included in the Selling, general and administrative expenses line
of the Consolidated Statements of Income.
(d) Sales Recognition and Incentives
The Company recognizes revenue when (i) there is persuasive evidence of an arrangement, (ii)
the sales price is fixed or determinable, (iii) title and the risks of ownership have been
transferred to the customer and (iv) collection of the receivable is reasonably assured, which
occurs primarily upon shipment. The Company records a sales reduction for returns and allowances
based upon historical return experience. The Company earns royalty revenues through license
agreements with manufacturers of other consumer products that incorporate certain of the Companys
brands. The Company accrues revenue earned under these contracts based upon reported sales from the
licensee. The Company offers a variety of sales incentives to resellers and consumers of its
products, and the policies regarding the recognition and display of these incentives within the
Consolidated Statements of Income are as follows:
Discounts, Coupons, and Rebates
The Company recognizes the cost of these incentives at the later of the date at which the
related sale is recognized or the date at which the incentive is offered. The cost of these
incentives is estimated using a number of factors, including historical utilization and redemption
rates. All cash incentives of this type are included in the determination of net sales. The Company
includes incentives offered in the form of free products in the determination of cost of sales.
Volume-Based Incentives
These incentives typically involve rebates or refunds of cash that are redeemable only if the
reseller completes a specified number of sales transactions. Under these incentive programs, the
Company estimates the anticipated rebate to be paid and allocates a portion of the estimated cost
of the rebate to each underlying sales transaction with the customer. The Company includes these
amounts in the determination of net sales.
Cooperative Advertising
Under these arrangements, the Company agrees to reimburse the reseller for a portion of the
costs incurred by the reseller to advertise and promote certain of the Companys products. The
Company recognizes the cost of cooperative advertising programs in the period in which the
advertising and promotional activity first takes place.
F-10
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
For the year ended December 29, 2007, the Company changed the manner in which it accounted for cooperative advertising that resulted in a
change in the classification from media, advertising and promotion expenses to a reduction in
sales. This change in classification was made in accordance with EITF 01-9, Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products),
because the estimated fair value of the identifiable benefit was no longer obtained beginning in 2007.
Fixtures and Racks
Store fixtures and racks are periodically used by resellers to display Company products. The
Company expenses the cost of these fixtures and racks in the period in which they are delivered to
the resellers. The Company includes the costs of fixtures and racks incurred by resellers and
charged back to the Company in the determination of net sales. Fixtures and racks purchased by the
Company and provided to resellers are included in selling, general and administrative expenses.
(e) Advertising Expense
Advertising costs, which include the development and production of advertising materials and
the communication of these materials through various forms of media, are expensed in the period the
advertising first takes place. The Company recognized advertising expense in the Selling, general
and administrative expenses caption in the Consolidated Statements of Income of $187,034 in the
year ended January 3, 2009 and $188,327 in the year ended December 29, 2007, $99,786 in the six
months ended December 30, 2006 and $190,934 in the year ended July 1, 2006.
(f) Shipping and Handling Costs
Revenue received for shipping and handling costs is included in net sales and was $24,244 in
the year ended January 3, 2009, $22,751 in the year ended December 29, 2007, $11,711 in the six
months ended December 30, 2006 and $20,405 in the year ended July 1, 2006. Shipping costs, that
comprise payments to third party shippers, and handling costs, which consist of warehousing costs
in the Companys various distribution facilities, were $238,340 in the year ended January 3, 2009,
$234,070 in the year ended December 29, 2007, $123,850 in the six months ended December 30, 2006
and $235,690 in the year ended July 1, 2006. The Company recognizes shipping, handling and
distribution costs in the Selling, general and administrative expenses line of the Consolidated
Statements of Income.
(g) Catalog Expenses
The Company incurs expenses for printing catalogs for products to aid in the Companys sales
efforts. The Company initially records these expenses as a prepaid item and charges it against
selling, general and administrative expenses over time as the catalog is used. Expenses are
recognized at a rate that approximates historical experience with regard to the timing and amount
of sales attributable to a catalog distribution.
(h) Research and Development
Research and development costs are expensed as incurred and are included in the Selling,
general and administrative expenses line of the Consolidated Statements of Income. Research and
development expense was $46,460 in the year ended January 3, 2009, $45,409 in the year ended
December 29, 2007, $23,460 in the six months ended December 30, 2006 and $54,571 in the year ended
July 1, 2006.
F-11
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(i) Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less at the time of purchase
are considered to be cash equivalents.
(j) Accounts Receivable Valuation
Accounts receivable are stated at their net realizable value. The allowance for doubtful
accounts reflects the Companys best estimate of probable losses inherent in the accounts
receivable portfolio determined on the basis of historical experience, specific allowances for
known troubled accounts and other currently available information.
(k) Inventory Valuation
Inventories are stated at the lower of cost or market. Rebates, discounts and other cash
consideration received from a vendor related to inventory purchases are reflected as reductions in
the cost of the related inventory item, and are therefore reflected in cost of sales when the
related inventory item is sold. During the six months ended December 30, 2006, the Company elected
to convert all inventory valued by the last-in, first-out, or LIFO, method to the first-in,
first-out, or FIFO, method. In accordance with the Statement of Financial Accounting Standards
(SFAS) No. 154, Accounting Changes and Error Corrections (SFAS 154), a change from the LIFO to FIFO
method of inventory valuation constitutes a change in accounting principle. Historically, inventory
valued under the LIFO method, which was 4% of total inventories, would have the same value if
measured under the FIFO method. Therefore, the conversion has no retrospective reporting impact.
(l) Property
Property is stated at historical cost and depreciation expense is computed using the
straight-line method over the estimated useful lives of the assets. Machinery and equipment is
depreciated over periods ranging from three to 25 years and buildings and building improvements
over periods of up to 40 years. A change in the depreciable life is treated as a change in
accounting estimate and the accelerated depreciation is accounted for in the period of change and
future periods. Additions and improvements that substantially extend the useful life of a
particular asset and interest costs incurred during the construction period of major properties are
capitalized. Repairs and maintenance costs are expensed as incurred. Upon sale or disposition of an
asset, the cost and related accumulated depreciation are removed from the accounts.
Property is tested for recoverability whenever events or changes in circumstances indicate
that its carrying value may not be recoverable. Such events include significant adverse changes in
the business climate, several periods of operating or cash flow losses, forecasted continuing
losses or a current expectation that an asset or an asset group will be disposed of before the end
of its useful life. Recoverability of property is evaluated by a comparison of the carrying amount
of an asset or asset group to future net undiscounted cash flows expected to be generated by the
asset or asset group. If these comparisons indicate that an asset is not recoverable, the
impairment loss recognized is the amount by which the carrying amount of the asset exceeds the
estimated fair value. When an impairment loss is recognized for assets to be held and used, the
adjusted carrying amount of those assets is depreciated over its remaining useful life. Restoration
of a previously recognized impairment loss is not permitted under U.S. generally accepted
accounting principles.
(m) Trademarks and Other Identifiable Intangible Assets
The primary identifiable intangible assets of the Company are trademarks and computer
software. Identifiable intangibles with finite lives are amortized and those with indefinite lives
are not amortized. The estimated useful life of a finite-lived intangible asset is based upon a
number of factors, including the effects of demand, competition, expected changes in distribution
channels and the level of maintenance expenditures required to obtain future cash
F-12
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
flows.Finite-lived trademarks are being amortized over periods ranging from five to 30 years, while
computer software is being amortized over periods ranging from two to ten years.
The Company capitalizes internal software development costs under the provisions of AICPA
Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. Capitalized computer software costs include the actual costs to purchase software
from vendors and generally include personnel and related costs for employees who were directly
associated with the enhancement and implementation of purchased computer software. Additions to
computer software are included in purchases of property and equipment in the Consolidated
Statements of Cash Flows.
Identifiable intangible assets that are subject to amortization are evaluated for impairment
using a process similar to that used in evaluating elements of property. Identifiable intangible
assets not subject to amortization are assessed for impairment at least annually and as triggering
events occur. The impairment test for identifiable intangible assets not subject to amortization
consists of comparing the fair value of the intangible asset to its carrying amount. An impairment
loss is recognized for the amount by which the carrying value exceeds the fair
value of the asset. In assessing fair value, management relies on a number of factors to
discount anticipated future cash flows including operating results, business plans and present
value techniques. Rates used to discount cash flows are dependent upon interest rates and the cost
of capital at a point in time. There are inherent uncertainties related to these factors and
managements judgment in applying them to the analysis of intangible asset impairment.
(n) Goodwill
Goodwill is the amount by which the purchase price exceeds the fair value of the assets
acquired and liabilities assumed in a business combination. When a business combination is
completed, the assets acquired and liabilities assumed are assigned to the reporting unit or units
of the Company given responsibility for managing, controlling and generating returns on these
assets and liabilities. The Company has determined that the reporting units are at the operating
segment level. In many instances, all of the acquired assets and assumed liabilities are assigned
to a single reporting unit and in these cases all of the goodwill is assigned to the same reporting
unit. In those situations in which the acquired assets and liabilities are allocated to more than
one reporting unit, the goodwill to be assigned to each reporting unit is determined in a manner
similar to how the amount of goodwill recognized in a business combination is determined.
Goodwill is not amortized; however, it is assessed for impairment at least annually and as
triggering events occur. The Companys annual measurement date is the first day of the third
fiscal quarter. The first step involves comparing the fair value of a reporting unit to its
carrying value. If the carrying value of the reporting unit exceeds its fair value, the second step
of the process involves comparing the implied fair value to the carrying value of the goodwill of
that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied
fair value of that goodwill, an impairment loss is recognized in an amount equal to such excess.
In evaluating the recoverability of goodwill, it is necessary to estimate the fair values of
the reporting units. In making this assessment, management relies on a number of factors to
discount anticipated future cash flows including operating results, business plans and present
value techniques. Rates used to discount cash flows are dependent upon interest rates and the cost
of capital at a point in time. There are inherent uncertainties related to these factors and
managements judgment in applying them to the analysis of goodwill impairment.
(o) Stock-Based Compensation
The employees of the Company participated in the stock-based compensation plans of Sara Lee
prior to the Companys spin off on September 5, 2006. In connection with the spin off, the Company
established the Hanesbrands Inc. Omnibus Incentive Plan of 2006, (the Hanesbrands OIP) to award
stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock
units, performance shares and cash to its employees, non-employee directors and employees of its
subsidiaries to promote the interests of the Company and incent performance and retention of
employees.
F-13
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
In accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment (SFAS No. 123(R)) the Company recognizes the cost of employee services received in
exchange for awards of equity instruments based upon the grant date fair value of those awards.
(p) Income Taxes
For the periods prior to the spin off on September 5, 2006, income taxes were prepared on a
separate return basis as if the Company had been a group of separate legal entities. As a result,
actual tax transactions that would not have occurred had the Company been a separate entity have
been eliminated in the preparation of Consolidated Financial Statements for such periods. Until the
Company entered into a tax sharing agreement with Sara Lee in connection with the spin off, there
was no formal tax sharing agreement between the Company and Sara Lee. The tax sharing agreement
allocates responsibilities between the Company and Sara Lee for taxes and certain other tax
matters. Under the tax sharing agreement, Sara Lee generally is liable for all U.S. federal, state,
local and foreign income taxes attributable to the Company with respect to taxable periods ending
on or before September 5, 2006. Sara Lee also is liable for income taxes attributable to the
Company with respect to taxable periods beginning before September 5, 2006 and ending after
September 5, 2006, but only to the extent those taxes are allocable to the portion of the taxable
period ending on September 5, 2006. The Company is generally liable for all other taxes
attributable to it. Changes in the amounts payable or receivable by the Company under the
stipulations of this agreement may impact the Companys financial position and cash flows in any
period.
Deferred taxes are recognized for the future tax effects of temporary differences between
financial and income tax reporting using tax rates in effect for the years in which the differences
are expected to reverse. Given continuing losses in certain jurisdictions in which the Company
operates on a separate return basis, a valuation allowance has been established for the deferred
tax assets in these specific locations. Net operating loss carryforwards, charitable contribution
carryforwards and capital loss carryforwards have been determined in these Consolidated Financial
Statements as if the Company had been a group of legal entities separate from Sara Lee, which
results in different carryforward amounts than those shown by Sara Lee. The Company periodically
estimates the probable tax obligations using historical experience in tax jurisdictions and
informed judgment. There are inherent uncertainties related to the interpretation of tax
regulations in the jurisdictions in which the Company transacts business. The judgments and
estimates made at a point in time may change based on the outcome of tax audits, as well as changes
to, or further interpretations of, regulations. Income tax expense is adjusted in the period in
which these events occur, and these adjustments are included in the Companys Consolidated
Statements of Income. If such changes take place, there is a risk that the Companys effective tax
rate may increase or decrease in any period. In July 2006, the Financial Accounting Standards Board
(FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48), which
became effective during the year ended December 29, 2007. FIN 48 addresses the determination of how
tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, a company must recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position are measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate resolution. The impact of the
reassessment of the Companys tax positions in accordance with FIN 48 did not have a material
impact on its results of operations, financial condition or liquidity.
(q) Financial Instruments
The Company uses financial instruments, including forward exchange, option and swap contracts,
to manage its exposures to movements in interest rates, foreign exchange rates and commodity
prices. The use of these financial instruments modifies the exposure of these risks with the intent
to reduce the risk or cost to the Company. The Company does not use derivatives for trading
purposes and is not a party to leveraged derivative contracts.
The Company formally documents its hedge relationships, including identifying the hedging
instruments and the hedged items, as well as its risk management objectives and strategies for
undertaking the hedge transaction.
F-14
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
This process includes linking derivatives that are designated as
hedges of specific assets, liabilities, firm commitments or forecasted transactions. The Company
also formally assesses, both at inception and at least quarterly thereafter, whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in
either the fair value or cash flows of the hedged item. If it is determined that a derivative
ceases to be a highly effective hedge, or if the anticipated transaction is no longer likely to
occur, the Company discontinues hedge accounting, and any deferred gains or losses are recorded in the Selling, general and
administrative expenses line of the Consolidated Financial Statements.
Derivatives are recorded in the Consolidated Balance Sheets at fair value in other assets and
other liabilities. The fair value is based upon either market quotes for actively traded
instruments or independent bids for nonexchange traded instruments.
On the date the derivative is entered into, the Company designates the type of derivative as a
fair value hedge, cash flow hedge, net investment hedge or a mark to market hedge, and accounts for
the derivative in accordance with its designation.
Mark to Market Hedge
A derivative used as a hedging instrument whose change in fair value is recognized to act as
an economic hedge against changes in the values of the hedged item is designated a mark to market
hedge. For derivatives designated as mark to market hedges, changes in fair value are reported in
earnings in the Selling, general and administrative expenses line of the Consolidated Statements
of Income. Forward exchange contracts are recorded as mark to market hedges when the hedged item is
a recorded asset or liability that is revalued in each accounting period, in accordance with SFAS
No. 52, Foreign Currency Translation.
Cash Flow Hedge
A hedge of a forecasted transaction or of the variability of cash flows to be received or paid
related to a recognized asset or liability is designated as a cash flow hedge. The effective
portion of the change in the fair value of a derivative that is designated as a cash flow hedge is
recorded in the Accumulated other comprehensive loss line of the Consolidated Balance Sheets.
When the hedged item affects the income statement, the gain or loss included in accumulated other
comprehensive income (loss) is reported on the same line in the Consolidated Statements of Income
as the hedged item. In addition, both the fair value of changes excluded from the Companys
effectiveness assessments and the ineffective portion of the changes in the fair value of
derivatives used as cash flow hedges are reported in the Selling, general and administrative
expenses line in the Consolidated Statements of Income.
(r) Recently Issued Accounting Pronouncements
Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 was effective
for the Companys financial assets and liabilities on December 30, 2007. The FASB approved a
one-year deferral of the adoption of SFAS 157 as it relates to non-financial assets and liabilities
with the issuance in February 2008 of FASB Staff Position FAS 157-2, Effective Date of FASB
Statement No. 157, as a result of which implementation by the Company is now required on January 4,
2009. The partial adoption of SFAS 157 in the first quarter ended March 29, 2008 had no material
impact on the financial condition, results of operations or cash flows of the Company, but resulted
in certain additional disclosures reflected in Note15. The Company is in the process of evaluating
the impact of SFAS 157 as it relates to its non-financial assets and liabilities.
F-15
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Business Combinations
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141R). The objective of SFAS 141R is to improve the relevance, representational faithfulness, and
comparability of the information that a company provides in its financial reports about a business
combination and its effects. Under SFAS 141R, a company would be required to recognize the assets
acquired, liabilities assumed, contractual contingencies and contingent consideration measured at their
fair value at the acquisition
date. It further requires that research and development assets acquired in a business combination
that have no alternative future use be measured at their acquisition-date fair value and then
immediately charged to expense, and that acquisition-related costs are to be recognized separately
from the acquisition and expensed as incurred. Among other changes, this statement would also
require that negative goodwill be recognized in earnings as a gain attributable to the
acquisition, and any deferred tax benefits resulting from a business combination be recognized in
income from continuing operations in the period of the combination. SFAS 141R is effective for
business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008.
Noncontrolling Interests in Consolidated Financial Statements
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS 160). The objective of this Statement
is to improve the relevance, comparability, and transparency of the financial information that a
company provides in its consolidated financial statements. SFAS 160 requires a company to clearly
identify and present ownership interests in subsidiaries held by parties other than the company in
the consolidated financial statements within the equity section but separate from the companys
equity. It also requires the amount of consolidated net income attributable to the parent and to
the noncontrolling interest be clearly identified and presented on the face of the consolidated
statement of income; that changes in ownership interest be accounted for similarly, as equity
transactions; and when a subsidiary is deconsolidated, that any retained noncontrolling equity
investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary
be measured at fair value. SFAS 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company does not believe that the
adoption of SFAS 160 will have a material impact on its results of operations or financial
position.
Disclosures About Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 expands the
disclosure requirements of FASB Statement No. 133 about an entitys derivative instruments and
hedging activities to include more detailed qualitative disclosures and expanded quantitative
disclosures. The provisions of SFAS 161 are effective for fiscal years and interim periods
beginning after November 15, 2008. The adoption of SFAS 161 will not have a material impact on the
Companys results of operations.
Employers Disclosures about Postretirement Benefit Plan Assets
In December 2008, the FASB issued Staff Position No. FAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets (FSP 132(R)-1). FSP 132(R)-1 will require additional
disclosures about the major categories of plan assets and concentrations of risk, as well as
disclosure of fair value levels, similar to the disclosure requirements of SFAS 157. The enhanced
disclosures about plan assets required by FSP 132(R)-1 must be provided in the Companys Annual
Report on Form 10-K for the year ending January 2, 2010.
F-16
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(s) Reclassifications
Certain prior year amounts in the Consolidated Financial Statements, none of which are
material, have been reclassified to conform with the current year presentation. These
reclassifications within the footnote disclosures, which relate to changes in the classification of
inventory, segment assets, segment depreciation and amortization expense and segment additions to
long-lived assets, had no impact on the Companys results of operations.
(3) Earnings Per Share
Basic earnings per share (EPS) was computed by dividing net income by the number of weighted
average shares of common stock outstanding during the period. Diluted EPS was calculated to give
effect to all potentially dilutive shares of common stock. The reconciliation of basic to diluted
weighted average shares for the years ended January 3, 2009 and December 29, 2007 and the six
months ended December 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
Basic weighted average shares |
|
|
94,171 |
|
|
|
95,936 |
|
|
|
96,309 |
|
Effect of potentially dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
100 |
|
|
|
278 |
|
|
|
31 |
|
Restricted stock units |
|
|
882 |
|
|
|
527 |
|
|
|
280 |
|
Employee stock purchase plan and other |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares |
|
|
95,164 |
|
|
|
96,741 |
|
|
|
96,620 |
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 3,735, 1,163 and 1,832 shares of common stock were excluded from the
diluted earnings per share calculation because their effect would be anti-dilutive for the years
ended January 3, 2009 and December 29, 2007 and six months ended December 30, 2006, respectively.
For the year ended July 1, 2006, basic and diluted EPS were computed using the number of
shares of Hanesbrands stock outstanding on September 5, 2006, the date on which Hanesbrands common
stock was distributed to stockholders of Sara Lee in connection with the spin off.
(4) Stock-Based Compensation
The Company established the Hanesbrands OIP to award stock options, stock appreciation rights,
restricted stock, restricted stock units, deferred stock units, performance shares and cash to its
employees, non-employee directors and employees of its subsidiaries to promote the interests of the
Company and incent performance and retention of employees.
Stock
Options
The exercise price of each stock option equals the closing market price of Hanesbrands stock
on the date of grant. Options can generally be exercised over a term of between five and 10 years.
Options vest ratably over two to three years with the exception of one category of award made in
September 2006 which vested immediately upon grant. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model. The following table
illustrates the assumptions for the Black-Scholes option-pricing model used in determining the fair
value of options granted during the years ended January 3, 2009 and December 29, 2007 and six
months ended December 30, 2006, respectively.
F-17
HANESBRANDS
Notes to
Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six
months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
Dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
1.68-2.64 |
% |
|
|
3.24-4.92 |
% |
|
|
4.52-4.59 |
% |
Volatility |
|
|
28-37 |
% |
|
|
26-28 |
% |
|
|
30 |
% |
Expected term (years) |
|
|
3.8-6.0 |
|
|
|
2.5-4.5 |
|
|
|
2.5-4.5 |
|
The dividend yield assumption is based on the Companys current intent not to pay dividends.
The Company uses a combination of the volatility of the Company and the volatility of peer
companies for a period of time that is comparable to the expected life of the option to determine
volatility assumptions due to the limited trading history of the Companys common stock since the
Companys spin off from Sara Lee on September 5, 2006. The Company utilized the simplified method
outlined in SEC Staff Accounting Bulletin No. 107 to estimate expected lives for options granted.
SEC Staff Accounting Bulletin No. 110, which was issued in December 2007, amends SEC Staff
Accounting Bulletin No. 107 and gives a limited extension on using the simplified method for
valuing stock option grants to eligible public companies that do not have sufficient historical
exercise patterns on options granted to employees.
A summary of the changes in stock options outstanding to the Companys employees under the
Hanesbrands OIP is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
Average |
|
|
Aggregate |
|
|
Contractual |
|
|
|
|
|
|
|
Exercise |
|
|
Intrinsic |
|
|
Term |
|
|
|
Shares |
|
|
Price |
|
|
Value |
|
|
(Years) |
|
Options outstanding at July 1, 2006 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Granted |
|
|
2,955 |
|
|
|
22.37 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(6 |
) |
|
|
22.37 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 30,
2006 |
|
|
2,949 |
|
|
$ |
22.37 |
|
|
$ |
3,686 |
|
|
|
5.99 |
|
Granted |
|
|
1,222 |
|
|
|
25.59 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(277 |
) |
|
|
22.37 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(249 |
) |
|
|
22.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 29,
2007 |
|
|
3,645 |
|
|
$ |
23.41 |
|
|
$ |
16,369 |
|
|
|
5.44 |
|
Granted |
|
|
2,624 |
|
|
|
19.81 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(98 |
) |
|
|
22.50 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(142 |
) |
|
|
23.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 3, 2009 |
|
|
6,029 |
|
|
$ |
21.86 |
|
|
$ |
|
|
|
|
5.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at January 3, 2009 |
|
|
2,276 |
|
|
$ |
22.89 |
|
|
$ |
|
|
|
|
4.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, after consultation with its compensation consultants, the Compensation Committee
of the Companys Board of Directors (the Compensation Committee) determined to make decisions
regarding 2009 compensation for executive officers at its meeting in December 2008, so that such
decisions could be made prior to the January 1, 2009 effective date for any changes in total
compensation opportunities rather than retroactively, and to approve equity grants simultaneously
with those decisions. Regarding 2008 compensation, the Compensation Committee made decisions and
approved equity grants at its meeting in January 2008. Therefore, two equity awards, including
awards of stock options, were made to executive officers and other employees during the year ended
January 3, 2009.
There were 968, 634 and 1,123 options that vested during the years ended January 3, 2009 and
December 29, 2007 and six months ended December 30, 2006, respectively. The total intrinsic value
of options that were exercised
F-18
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
during the years ended January 3, 2009 and December 29, 2007 and the six months ended December
30, 2006 was $1,057, $1,804 and $8, respectively. The weighted average fair value of individual
options granted during the years ended January 3, 2009 and December 29, 2007 and the six months
ended December 30, 2006 was $6.29, $7.83 and $6.55, respectively.
Cash received from option exercises under all share-based payment arrangements for the years
ended January 3, 2009 and December 29, 2007 and the six months ended December 30, 2006 was $2,191,
$6,189 and $139, respectively. The actual tax benefit realized for the tax deductions from option
exercise of the share-based payment arrangements totaled $806, $1,503 and $8 for the years ended
January 3, 2009 and December 29, 2007 and the six months ended December 30, 2006, respectively.
Stock Unit Awards
Restricted stock units (RSUs) of Hanesbrands stock are granted to certain Company employees
and non-employee directors to incent performance and retention over periods ranging from one to
three years. Upon vesting, the RSUs are converted into shares of the Companys common stock on a
one-for-one basis and issued to the grantees. All RSUs which have been granted under the
Hanesbrands OIP vest solely upon continued future service to the Company. The cost of these awards
is determined using the fair value of the shares on the date of grant, and compensation expense is
recognized over the period during which the grantees provide the requisite service to the Company.
A summary of the changes in the restricted stock unit awards outstanding under the Hanesbrands OIP
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
Average |
|
|
Aggregate |
|
|
Contractual |
|
|
|
|
|
|
|
Grant-Date |
|
|
Intrinsic |
|
|
Term |
|
|
|
Shares |
|
|
Fair Value |
|
|
Value |
|
|
(Years) |
|
Nonvested share units at July 1, 2006 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Granted |
|
|
1,546 |
|
|
|
22.37 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested share units at December 30, 2006 |
|
|
1,546 |
|
|
$ |
22.37 |
|
|
$ |
36,516 |
|
|
|
2.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
615 |
|
|
|
25.38 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(440 |
) |
|
|
22.37 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(143 |
) |
|
|
23.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested share units at December 29, 2007 |
|
|
1,578 |
|
|
$ |
23.47 |
|
|
$ |
43,922 |
|
|
|
1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,512 |
|
|
|
18.19 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(583 |
) |
|
|
23.28 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(105 |
) |
|
|
23.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested share units at January 3, 2009 |
|
|
2,402 |
|
|
$ |
20.19 |
|
|
$ |
31,652 |
|
|
|
1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested share units at January 3, 2009 |
|
|
1,023 |
|
|
$ |
22.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, after consultation with its compensation consultants, the Compensation Committee
determined to make decisions regarding 2009 compensation for executive officers at its meeting in December
2008, so that such decisions could be made prior to the January 1, 2009 effective date for any
changes in total compensation opportunities rather than retroactively, and to approve equity grants
simultaneously with those decisions. Regarding 2008 compensation, the Compensation Committee made
decisions and approved equity grants at its meeting in January 2008. Therefore, two equity awards,
including awards of restricted stock units, were made to executive officers and other employees
during the year ended January 3, 2009.
F-19
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The total fair value of shares vested during the years ended January 3, 2009 and December 29,
2007 and the six months ended December 30, 2006 was $13,560,
$9,853 and $0, respectively. Certain
participants elected to defer receipt of shares earned upon vesting. As of January 3, 2009, a total
of 73 shares of common stock are issuable in future years for such deferrals.
For all share-based payments under the Hanesbrands OIP, during the years ended January 3, 2009
and December 29, 2007 and the six months ended December 30, 2006, the Company recognized total
compensation expense of $31,002, $33,185 and $10,176 and recognized a deferred tax benefit of
$11,585, $12,360 and $3,842, respectively. At January 3, 2009, there was $34,485 of total
unrecognized compensation cost related to non-vested stock-based compensation arrangements, of
which $28,508, $4,861 and $1,116 is expected to be recognized in 2009, 2010 and 2011, respectively.
The Company satisfies the requirement for common shares for share-based payments to employees
pursuant to the Hanesbrands OIP by issuing newly authorized shares. The Hanesbrands OIP authorized
13,105 shares for awards of stock options and restricted stock units, of which 3,547 were available
for future grants as of January 3, 2009.
The employees of the Company participated in the stock-based compensation plans of Sara Lee
prior to the Companys spin off on September 5, 2006. As a result of the spin off and consistent
with the terms of the awards under Sara Lees plans, the outstanding Sara Lee stock options granted
expired six months after the spin off date. In connection with the spin off, vesting for all
nonvested service-based Sara Lee RSUs was accelerated to the spin off date resulting in the
recognition of $5,447 of additional compensation expense for the six months ended December 30,
2006. An insignificant number of performance-based Sara Lee RSUs remained unvested through the spin
off date.
Employee Stock Purchase Plan
During April 2007, the Company implemented the Hanesbrands Inc. Employee Stock Purchase Plan
of 2006 (the ESPP), which is qualified under Section 423 of the Internal Revenue Code. An
aggregate of up to 2,442 shares of Hanesbrands common stock may be purchased by eligible employees
pursuant to the ESPP. The purchase price for shares under the ESPP is equal to 85% of the stocks
fair market value on the purchase date. During the years ended January 3, 2009 and December 29,
2007, 129 and 78 shares, respectively, were purchased under the ESPP by eligible employees. The
Company had 2,235 shares of common stock available for issuance under the ESPP as of January 3, 2009. The
Company recognized $447 and $440 of stock compensation expense under the ESPP during the years
ended January 3, 2009 and December 29, 2007, respectively.
(5) Restructuring
Since becoming an independent company, the Company has undertaken a variety of restructuring
efforts in connection with its consolidation and globalization strategy designed to improve
operating efficiencies and lower
costs. As a result of this strategy, the Company expects to incur approximately $250,000 in
restructuring and related charges over the three year period following the spin off from Sara Lee
on September 5, 2006, of which approximately half is expected to be noncash. As of January 3, 2009,
the Company has recognized approximately $209,000 and announced approximately $219,000 in
restructuring and related charges related to this strategy since September 5, 2006. Of these
charges, approximately $84,000 relates to accelerated depreciation of buildings and equipment for
facilities that have been or will be closed, approximately $79,000 relates to employee termination
and other benefits, approximately $19,000 relates to write-offs of stranded raw materials and work
in process inventory determined not to be salvageable or cost-effective to relocate, approximately
$17,000 relates to lease termination and other costs and approximately $10,000 relates to
impairments of fixed assets. Accelerated depreciation related to the Companys manufacturing
facilities and distribution centers that have been or will be closed is reflected in the Cost of
sales and Selling, general and administrative expenses lines of the Consolidated Statements of
Income. The write-offs of stranded raw materials and work in process inventory are reflected in the
Cost of sales line of the Consolidated Statements of Income.
F-20
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The reported results for the years ended January 3, 2009 and December 29, 2007, the six months
ended December 30, 2006 and the year ended July 1, 2006 reflect amounts recognized for
restructuring actions, including the impact of certain actions that were completed for amounts more
favorable than previously estimated. The impact of restructuring efforts on income before income
tax expense is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Restructuring programs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January
3, 2009
restructuring
actions |
|
$ |
87,117 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Year ended December
30, 2007
restructuring
actions |
|
|
8,661 |
|
|
|
70,050 |
|
|
|
|
|
|
|
|
|
Six months ended
December 30, 2006
restructuring
actions |
|
|
(2,698 |
) |
|
|
13,128 |
|
|
|
33,289 |
|
|
|
|
|
Year ended July 1,
2006 and prior
restructuring
actions |
|
|
(273 |
) |
|
|
5 |
|
|
|
(812 |
) |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase)
in income before
income tax expense |
|
$ |
92,807 |
|
|
$ |
83,183 |
|
|
$ |
32,477 |
|
|
$ |
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table illustrates where the costs (income) associated with these actions are
recognized in the Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Cost of sales |
|
$ |
42,558 |
|
|
$ |
36,912 |
|
|
$ |
21,199 |
|
|
$ |
|
|
Selling, general
and administrative
expenses |
|
|
(14 |
) |
|
|
2,540 |
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
50,263 |
|
|
|
43,731 |
|
|
|
11,278 |
|
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in
income before
income tax
expense |
|
$ |
92,807 |
|
|
$ |
83,183 |
|
|
$ |
32,477 |
|
|
$ |
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of the restructuring actions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Accelerated depreciation |
|
$ |
23,848 |
|
|
$ |
39,452 |
|
|
$ |
21,199 |
|
|
$ |
|
|
Employee termination and other benefits |
|
|
34,409 |
|
|
|
31,780 |
|
|
|
11,278 |
|
|
|
456 |
|
Inventory write-offs |
|
|
18,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset impairment |
|
|
8,993 |
|
|
|
1,857 |
|
|
|
|
|
|
|
|
|
Noncancelable leases, other
contractual obligations and other |
|
|
6,861 |
|
|
|
10,094 |
|
|
|
|
|
|
|
(557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
92,807 |
|
|
$ |
83,183 |
|
|
$ |
32,477 |
|
|
$ |
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Rollforward of accrued restructuring is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Beginning accrual |
|
$ |
23,350 |
|
|
$ |
17,029 |
|
|
$ |
21,938 |
|
|
$ |
51,677 |
|
Restructuring expenses |
|
|
49,198 |
|
|
|
46,762 |
|
|
|
12,180 |
|
|
|
4,119 |
|
Cash payments |
|
|
(41,185 |
) |
|
|
(35,517 |
) |
|
|
(16,172 |
) |
|
|
(29,638 |
) |
Adjustments to restructuring expenses |
|
|
(9,570 |
) |
|
|
(4,924 |
) |
|
|
(917 |
) |
|
|
(4,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending accrual |
|
$ |
21,793 |
|
|
$ |
23,350 |
|
|
$ |
17,029 |
|
|
$ |
21,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accrual balance as of January 3, 2009 is comprised of $21,381 in current accrued
liabilities and $412 in other noncurrent liabilities. The $21,381 in current accrued liabilities
consists of $19,006 for employee termination and other benefits and $2,375 for noncancelable leases
and other contractual obligations. The $412 in other
noncurrent liabilities is related to noncancelable leases and other contractual obligations.
Adjustments to previous estimates resulted from actual costs to settle obligations being lower
than expected. The adjustments were reflected in the Restructuring line of the Consolidated
Statements of Income.
Year Ended January 3, 2009 Restructuring Actions
During the year ended January 3, 2009, the Company approved actions to close 11 manufacturing
facilities and three distribution centers and eliminate approximately 6,800 positions in Mexico,
the United States, Costa Rica, Honduras and El Salvador. The production capacity represented by the
manufacturing facilities has been relocated to lower cost locations in Asia, Central America and
the Caribbean Basin. The distribution capacity has been relocated to the Companys West Coast
distribution facility in California in order to expand capacity for goods the Company sources from
Asia. In addition, approximately 200 management and administrative positions were eliminated, with
the majority of these positions based in the United States. All actions are expected to be
completed within a 12-month period. The Company recorded charges of $87,117 in the year ended
January 3, 2009. The Company recognized $37,190 which represents employee termination and other
benefits recognized in accordance with benefit plans previously communicated to the affected
employee group, $18,696 for write-offs of stranded raw materials and work in process inventory
determined not to be salvageable or cost-effective to relocate related to the closure of certain
manufacturing facilities, $14,457 for accelerated depreciation of buildings and equipment, $8,495
for noncancelable leases, other contractual obligations and other charges related to the closure of
certain manufacturing facilities and $8,279 for fixed asset impairments related to the closure of
certain manufacturing facilities. These charges are reflected in the Restructuring, Cost of
sales and Selling, general and administrative expenses lines of the Consolidated Statement of
Income. As of January 3, 2009, 5,932 employees had been terminated and the severance obligation
remaining in accrued restructuring on the Consolidated Balance Sheet was $17,954. The lease
termination and other contractual obligations remaining in accrued restructuring on the
Consolidated Balance Sheet as of January 3, 2009 was $2,235.
F-22
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The following table summarizes planned and actual employee terminations by location as of
January 3, 2009:
|
|
|
|
|
Number of Employees |
|
Total |
|
Mexico |
|
|
1,958 |
|
United States |
|
|
1,909 |
|
Costa Rica |
|
|
1,710 |
|
Honduras |
|
|
1,193 |
|
El Salvador |
|
|
150 |
|
Other |
|
|
84 |
|
|
|
|
|
|
|
|
7,004 |
|
|
|
|
|
Actions completed |
|
|
5,932 |
|
Actions remaining |
|
|
1,072 |
|
|
|
|
|
|
|
|
7,004 |
|
|
|
|
|
Year Ended December 29, 2007 Restructuring Actions
During the year ended December 29, 2007, the Company, in connection with its consolidation and
globalization strategy, approved actions to close 16 manufacturing facilities and three
distribution centers in the Dominican Republic, Mexico, the United States, Brazil and Canada. All
actions are expected to be completed within a 12-month period. The net impact of these actions was
to reduce income before income tax expense by $70,050 in the year ended December 29, 2007. As of
January 3, 2009, 6,241 employees had been terminated and the severance obligation remaining in
accrued liabilities on the Consolidated Balance Sheet was $803. The lease termination and other
contractual obligations remaining in accrued restructuring on the Consolidated Balance Sheet as of
January 3, 2009 was $193.
During the year ended January 3, 2009, the Company recognized additional restructuring charges
associated with plant closures announced in the year ended December 29, 2007, resulting in a
decrease of $8,661 to net income before income tax expenses.
The Company recognized charges of $10,484 in the year ended January 3, 2009 for accelerated
depreciation of buildings and equipment associated with plant closures. The additional charges are
reflected in the Cost of sales and Selling, general and administrative expenses lines of the
Consolidated Statements of Income.
The Company recognized $661 in the year ended January 3, 2009, which represents charges for
lease termination costs, other contractual obligations and other restructuring related expenses.
These charges are reflected in the Restructuring line of the Consolidated Statements of Income.
During the year ended January 3, 2009, certain actions were completed for amounts more
favorable than originally estimated, resulting in an increase of $2,484 to income before income
taxes. The $2,484 consists of a credit for employee termination and other benefits and resulted
from actual costs to settle obligations being lower than expected. The adjustment is reflected in
the Restructuring line of the Consolidated Statements of Income.
F-23
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The following table summarizes planned and actual employee terminations by location as of
January 3, 2009:
|
|
|
|
|
Number of Employees |
|
Total |
|
Dominican Republic |
|
2,635 |
|
Mexico |
|
|
2,151 |
|
United States |
|
|
1,222 |
|
Brazil |
|
|
156 |
|
Canada |
|
|
93 |
|
|
|
|
|
|
|
|
6,257 |
|
|
|
|
|
Actions completed |
|
6,241 |
|
Actions remaining |
|
|
16 |
|
|
|
|
|
|
|
|
6,257 |
|
|
|
|
|
Six Months Ended December 30, 2006 Restructuring Actions
During the six months ended December 30, 2006, the Company, in connection with its plans to
migrate portions of its manufacturing operations to lower-cost manufacturing facilities, to improve
alignment of sewing operations with the flow of textiles and to consolidate production capacity,
approved various actions resulting in the closure of seven facilities. The seven facilities include
four textile and sewing plants in the United States, Puerto Rico and Mexico and the three
distribution centers in the United States. All actions were to be completed within a 12-month
period after being approved. In the six months ended December 30, 2006, these actions reduced
income before income tax expense by $33,289. As of January 3, 2009, all of the employees had been
terminated.
During the year ended December 29, 2007, the Company recognized additional restructuring
charges associated with plant closures announced in the six months ended December 30, 2006,
resulting in a decrease of $13,128 to income before income tax expense. The Company recognized
charges of $10,404 for lease termination costs associated with plant closures announced in the six
months ended December 30, 2006, for facilities which were exited in the year ended December 29,
2007. The additional charges are reflected in the Cost of sales and Restructuring lines of the
Consolidated Statements of Income.
During the year ended January 3, 2009, certain actions were completed for amounts more
favorable than originally estimated, resulting in an increase of $2,698 to income before income
taxes. The $2,698 consists of a credit of $24 for employee termination and other benefits resulting
from actual costs to settle obligations being lower than expected, a credit of $1,093 to
accelerated depreciation as a result of proceeds from sales of fixed assets to which accelerated
depreciation was previously charged exceeding previous estimates, a credit of $2,295 to lease
termination costs as a result of costs to settle the obligation being lower than expected and a
charge of $714 to fixed asset impairments related to the closure of certain manufacturing
facilities. The charges and adjustments are reflected in the Restructuring, Cost of sales and
Selling, general and administrative expenses lines of the Consolidated Statement of Income.
The following table summarizes planned and actual employee terminations by location as of
January 3, 2009:
|
|
|
|
|
Number of Employees |
|
Total |
|
United States |
|
|
967 |
|
Mexico |
|
|
1,781 |
|
|
|
|
|
|
|
|
2,748 |
|
|
|
|
|
Actions completed |
|
|
2,748 |
|
Actions remaining |
|
|
|
|
|
|
|
|
|
|
|
2,748 |
|
|
|
|
|
F-24
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(6) Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Raw materials |
|
$ |
172,494 |
|
|
$ |
176,758 |
|
Work in process |
|
|
116,800 |
|
|
|
122,724 |
|
Finished goods |
|
|
1,001,236 |
|
|
|
817,570 |
|
|
|
|
|
|
|
|
|
|
$ |
1,290,530 |
|
|
$ |
1,117,052 |
|
|
|
|
|
|
|
|
(7) Allowances for Trade Accounts Receivable
The changes in the Companys allowance for doubtful accounts and allowance for chargebacks and
other deductions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for |
|
|
|
|
|
|
Allowance for |
|
|
Chargebacks |
|
|
|
|
|
|
Doubtful |
|
|
and Other |
|
|
|
|
|
|
Accounts |
|
|
Deductions |
|
|
Total |
|
Balance at July 1, 2006: |
|
$ |
13,257 |
|
|
$ |
15,560 |
|
|
$ |
28,817 |
|
Charged to expenses |
|
|
(39 |
) |
|
|
24,083 |
|
|
|
24,044 |
|
Deductions and write-offs |
|
|
(2,556 |
) |
|
|
(22,596 |
) |
|
|
(25,152 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2006: |
|
|
10,662 |
|
|
|
17,047 |
|
|
|
27,709 |
|
|
|
|
|
|
|
|
|
|
|
Charged to expenses |
|
|
(363 |
) |
|
|
45,966 |
|
|
|
45,603 |
|
Deductions and write-offs |
|
|
(971 |
) |
|
|
(40,699 |
) |
|
|
(41,670 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2007: |
|
|
9,328 |
|
|
|
22,314 |
|
|
|
31,642 |
|
|
|
|
|
|
|
|
|
|
|
Charged to expenses |
|
|
8,074 |
|
|
|
5,366 |
|
|
|
13,440 |
|
Deductions and write-offs |
|
|
(4,847 |
) |
|
|
(18,338 |
) |
|
|
(23,185 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009: |
|
$ |
12,555 |
|
|
$ |
9,342 |
|
|
$ |
21,897 |
|
|
|
|
|
|
|
|
|
|
|
Charges to the allowance for doubtful accounts are reflected in the Selling, general and
administrative expenses line and charges to the allowance for customer chargebacks and other
customer deductions are primarily reflected as a reduction in the Net sales line of the
Consolidated Statements of Income. Deductions and write-offs, which do not increase or decrease
income, represent write-offs of previously reserved accounts receivables and allowed customer
chargebacks and deductions against gross accounts receivable.
F-25
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(8) Property, Net
Property is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Land |
|
$ |
29,633 |
|
|
$ |
37,969 |
|
Buildings and improvements |
|
|
413,375 |
|
|
|
412,326 |
|
Machinery and equipment |
|
|
952,301 |
|
|
|
1,014,112 |
|
Construction in progress |
|
|
106,043 |
|
|
|
33,746 |
|
Capital leases |
|
|
3,794 |
|
|
|
12,262 |
|
|
|
|
|
|
|
|
|
|
|
1,505,146 |
|
|
|
1,510,415 |
|
Less accumulated depreciation |
|
|
916,957 |
|
|
|
976,129 |
|
|
|
|
|
|
|
|
Property, net |
|
$ |
588,189 |
|
|
$ |
534,286 |
|
|
|
|
|
|
|
|
(9) Notes Payable
The Company had the following short-term obligations at January 3, 2009 and December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount |
|
|
|
Interest Rate as of |
|
|
January 3, |
|
|
December 29, |
|
|
|
January 3, 2009 |
|
|
2009 |
|
|
2007 |
|
Short-term revolving facility in El
Salvador |
|
|
7.38 |
% |
|
$ |
28,730 |
|
|
$ |
|
|
Short-term revolving facility in Thailand |
|
|
4.35 |
% |
|
|
15,472 |
|
|
|
1,338 |
|
Short-term revolving facility in China |
|
|
5.36 |
% |
|
|
8,203 |
|
|
|
6,334 |
|
Short-term revolving facility in India |
|
|
16.50 |
% |
|
|
5,300 |
|
|
|
6,245 |
|
Other |
|
|
7.31 |
% |
|
|
4,029 |
|
|
|
5,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
61,734 |
|
|
$ |
19,577 |
|
|
|
|
|
|
|
|
|
|
|
|
The Company has a short-term revolving facility arrangement with a Salvadoran branch of a U.S.
bank amounting to $45,000 of which $28,730 was outstanding at January 3, 2009 which accrues
interest at 7.38%. The Company was in compliance with the covenants contained in this facility at
January 3, 2009.
The Company has a short-term revolving facility arrangement with a Thai branch of a U.S. bank
amounting to THB 600 million ($17,251) of which $15,472 was outstanding at January 3, 2009 which
accrues interest at 4.35%. The Company was in compliance with the covenants contained in this
facility at January 3, 2009.
The Company has a short-term revolving facility arrangement with a Chinese branch of a U.S.
bank amounting to RMB 56 million ($8,203) of which $8,203 was outstanding at January 3, 2009 which
accrues interest at 5.36%. Borrowings under the facility accrue interest at the prevailing base
lending rates published by the Peoples Bank of China from time to time less 10%. The Company was
in compliance with the covenants contained in this facility at January 3, 2009.
The Company has a short-term revolving facility arrangement with an Indian branch of a U.S.
bank amounting to INR 260 million ($5,331) of which $5,300 was outstanding at January 3, 2009 which
accrues interest at 16.50%. The Company was in compliance with the covenants contained in this
facility at January 3, 2009.
The Company has other short-term obligations amounting to $4,029 which consisted of a
short-term revolving facility arrangement with a Japanese branch of a U.S. bank amounting to JPY
1,100 million ($12,123) of which $2,003 was outstanding at January 3, 2009 which accrues interest
at 2.42% and a short-term revolving facility
F-26
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
arrangement with a Vietnamese branch of a U.S. bank amounting to $14,000 of which $2,026 was
outstanding at January 3, 2009 which accrues interest at 12.14%. The Company was in compliance with
the covenants contained in the facilities at January 3, 2009.
In addition, the Company has short-term revolving credit facilities in various other locations
that can be drawn on from time to time amounting to $26,831 million of which $0 was outstanding at
January 3, 2009.
Total interest paid on notes payable was $2,208, $1,175, $308 and $2,588 in the years ended
January 3, 2009 and December 29, 2007, six months ended December 30, 2006 and year ended July 1,
2006, respectively.
(10) Long-term debt
The Company had the following long-term debt at January 3, 2009 and December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount |
|
|
|
|
|
|
Interest Rate |
|
|
January 3, |
|
|
December 29, |
|
|
|
|
|
|
January 3, 2009 |
|
|
2009 |
|
|
2007 |
|
|
Maturity Date |
|
Senior Secured
Credit Facility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term A |
|
|
5.02 |
% |
|
$ |
139,000 |
|
|
$ |
139,000 |
|
|
September 2012 |
Term B |
|
|
5.19 |
% |
|
|
851,250 |
|
|
|
976,250 |
|
|
September 2013 |
Revolving Loan
Facility |
|
|
3.75 |
% |
|
|
|
|
|
|
|
|
|
September 2011 |
Second Lien Credit Facility |
|
|
7.27 |
% |
|
|
450,000 |
|
|
|
450,000 |
|
|
March 2014 |
Floating Rate
Senior
Notes |
|
|
5.70 |
% |
|
|
493,680 |
|
|
|
500,000 |
|
|
December 2014 |
Accounts Receivable
Securitization |
|
|
2.10 |
% |
|
|
242,617 |
|
|
|
250,000 |
|
|
November 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,176,547 |
|
|
$ |
2,315,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the spin off on September 5, 2006, the Company entered into a $2,150,000
senior secured credit facility (the Senior Secured Credit Facility), a $450,000 senior secured
second lien credit facility (the Second Lien Credit Facility) and a $500,000 bridge loan facility
(the Bridge Loan Facility). The Bridge Loan Facility was paid off in full through the issuance of
$500,000 of floating rate senior notes (the Floating Rate Senior Notes) issued in December 2006.
On November 27, 2007, we entered into an accounts receivable securitization facility (the
Receivables Facility), which provides for up to $250,000 in funding accounted for as a secured
borrowing, limited to the availability of eligible receivables, and is secured by certain domestic
trade receivables. The outstanding balances at January 3, 2009 are reported in the Long-term debt
and Current portion of long-term debt lines of the Consolidated Balance Sheets.
Total cash paid for interest related to the long-term debt during the years ended January 3,
2009 and December 29, 2007 and the six months ended December 30, 2006 was $150,898, $165,331 and
$68,569, respectively.
Senior Secured Credit Facility
The Senior Secured Credit Facility initially provided for aggregate borrowings of $2,150,000,
consisting of: (i) a $250,000 Term A loan facility (the Term A Loan Facility); (ii) a $1,400,000
Term B loan facility (the Term B Loan Facility); and (iii) a $500,000 revolving loan facility
(the Revolving Loan Facility). The Senior Secured Credit Facility is guaranteed by substantially
all of Hanesbrands U.S. subsidiaries and is secured by equity interests in substantially all of
Hanesbrands direct and indirect U.S. subsidiaries and 65% of the voting securities of certain
F-27
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
foreign subsidiaries and substantially all present and future assets of Hanesbrands and the
guarantors. At the Companys option, borrowings under the Senior Secured Credit Facility may be
maintained from time to time as (a) Base Rate loans, which shall bear interest at the higher of (i)
1/2 of 1% in excess of the federal funds rate and (ii) the rate published in the Wall Street
Journal as the prime rate (or equivalent), in each case in effect from time to time, plus the
applicable margin in effect from time to time (which is currently 0.50% for the Term A Loan
Facility and the Revolving Loan Facility and 0.75% for the Term B Loan Facility), or (b) LIBOR
based loans, which shall bear interest at the LIBO Rate (as defined in the Senior Secured Credit
Facility and adjusted for maximum reserves), as determined by the administrative agent for the
respective interest period plus the applicable margin in effect from time to time (which is
currently 1.50% for the Term A Loan Facility and the Revolving Loan Facility and 1.75% for the Term
B Loan Facility). The final maturity of the Term A Loan Facility is September 5, 2012. The Term A
Loan Facility amortizes in an amount per annum equal to the following: year 1 5.00%; year 2
10.00%; year 3 15.00%; year 4 20.00%; year 5 25.00%; year 6 25.00%. The final maturity
of the Term B Loan Facility is September 5, 2013. The Term B Loan Facility is payable in equal
quarterly installments in an amount equal to 1% per annum, with the balance due on the maturity
date. The final maturity of the Revolving Loan Facility is September 5, 2011. As of January 3,
2009, the Company had $0 outstanding under the Revolving Loan Facility, $37,134 of standby and
trade letters of credit issued and outstanding under this facility and $462,866 of borrowing
availability. At January 3, 2009, the interest rates on the Term A Loan Facility and the Term B
Loan Facility were 5.02% and 5.19% respectively. Outstanding borrowings under the Senior Secured
Credit Facility are prepayable without penalty.
On February 22, 2007, the Company entered into a First Amendment (the First Amendment) to
the Senior Secured Credit Facility. Pursuant to the First Amendment, the applicable margin with
respect to the $1,400,000 Term B loan facility (Term B Loan Facility) that comprises a part of
the Senior Secured Credit Facility was reduced from 2.25% to 1.75% with respect to loans maintained
as LIBO Rate loans, and from 1.25% to 0.75% with respect to loans maintained as Base Rate
loans.
On August 21, 2008, the Company entered into an amendment (the Second Amendment) to the
Senior Secured Credit Facility. Pursuant to the Second Amendment, the amount of unsecured
indebtedness which the Company and its subsidiaries that are obligors pursuant to the Senior
Secured Credit Facility may incur under senior notes was increased from $500,000 to $1,000,000. The
provisions of the Senior Secured Credit Facility which require the proceeds of the issuance of any
such notes be applied to repay amounts due with respect to the Senior Secured Credit Facility, and
specify how any such proceeds will be applied, remain unchanged.
The Senior Secured Credit Facility requires the Company to comply with customary affirmative,
negative, and financial covenants, and includes customary events of default. As of January 3, 2009,
the Company was in compliance with all covenants.
Second Lien Credit Facility
The Second Lien Credit Facility provides for aggregate borrowings of $450,000 by Hanesbrands
wholly-owned subsidiary, HBI Branded Apparel Limited, Inc. The Second Lien Credit Facility is
unconditionally guaranteed by Hanesbrands and each entity guaranteeing the Senior Secured Credit
Facility. The Second Lien Credit Facility and the guarantees in respect thereof are secured on a
second-priority basis (subordinate only to the Senior Secured Credit Facility and any permitted
additions thereto or refinancings thereof) by substantially all of the assets that secure the
Senior Secured Credit Facility. Loans under the Second Lien Credit Facility bear interest in the
same manner as those under the Senior Secured Credit Facility, subject to a margin of 2.75% for
Base Rate loans and 3.75% for LIBOR based loans. The Second Lien Credit Facility matures on March
5, 2014, may not be prepaid prior to September 5, 2007, and includes premiums for prepayment of the
loan prior to September 5, 2009 based upon timing of the prepayments. The Second Lien Credit
Facility will not amortize and will be repaid in full on its maturity date. At January 3, 2009 the
interest rate on the Second Lien Credit Facility was 7.27%.
On August 21, 2008, the Company entered into an amendment (the Second Lien Amendment) to the
Second Lien Credit Facility. Pursuant to the Second Lien Amendment, the amount of unsecured
indebtedness which the
F-28
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Company and its subsidiaries that are obligors pursuant to the Second Lien Credit Facility may
incur under senior notes was increased from $500,000 to $1,000,000. The provisions of the Second
Lien Credit Facility which require the proceeds of the issuance of any such notes be applied to
repay amounts due with respect to the Second Lien Credit Facility, and specify how any such
proceeds will be applied, remain unchanged. The Second Lien Credit Facility requires the Company to
comply with customary affirmative, negative, and financial covenants, and includes customary events
of default. As of January 3, 2009, the Company was in compliance with all covenants.
Floating Rate Senior Notes
On December 14, 2006, the Company issued $500,000 aggregate principal amount of Floating Rate
Senior Notes due 2014. The Floating Rate Senior Notes are senior unsecured obligations that rank
equal in right of payment with all of the Companys existing and future unsubordinated
indebtedness. The Floating Rate Senior Notes bear interest at an annual rate, reset semi-annually,
equal to the London Interbank Offered Rate, or LIBOR, plus 3.375%. Interest is payable on the
Floating Rate Senior Notes on June 15 and December 15 of each year beginning on June 15, 2007. The
Floating Rate Senior Notes will mature on December 15, 2014. The net proceeds from the sale of the
Floating Rate Senior Notes were approximately $492,000. These proceeds, together with working
capital, were used to repay in full the $500,000 outstanding under the Bridge Loan Facility. The
Floating Rate Senior Notes are guaranteed by substantially all of the Companys domestic
subsidiaries. The Floating Rate Senior Notes are redeemable on or after December 15, 2008, subject
to premiums based upon timing of the prepayments. The Company repurchased $6,320 of the Floating
Rate Senior Notes for $4,354 resulting in a gain of $1,966 during the year ended January 3, 2009.
Accounts Receivable Securitization
On November 27, 2007, the Company entered into the Receivables Facility, which provides for up
to $250,000 in funding accounted for as a secured borrowing, limited to the availability of
eligible receivables, and is secured by certain domestic trade receivables. The Receivables
Facility will terminate on November 27, 2010. Under the terms of the Receivables Facility, the
company sells, on a revolving basis, certain domestic trade receivables to HBI Receivables LLC
(Receivables LLC), a wholly-owned bankruptcy-remote subsidiary that in turn uses the trade
receivables to secure the borrowings, which are funded through conduits that issue commercial paper
in the short-term market and are not affiliated with the Company or through committed bank
purchasers if the conduits fail to fund. The assets and liabilities of Receivables LLC are fully
reflected on our Consolidated Balance Sheet, and the securitization is treated as a secured
borrowing for accounting purposes. The borrowings under the Receivables Facility remain outstanding
throughout the term of the agreement subject to the Company maintaining sufficient eligible
receivables, by continuing to sell trade receivables to Receivables LLC, unless an event of default
occurs.
Availability of funding under the facility depends primarily upon the eligible outstanding
receivables balance. As of January 3, 2009, the Company had $242,617 outstanding under the
Receivables Facility. The outstanding balance under the Receivables Facility is reported on the
Companys Consolidated Balance Sheet in long-term debt based on the three-year term of the
agreement and the fact that remittances on the receivables do not automatically reduce the
outstanding borrowings. All of the proceeds from the Receivables Facility were used to make a
prepayment of principal under the Senior Secured Credit Facility. Unless the conduits fail to fund,
the yield on the commercial paper, which is the conduits cost to issue the commercial paper plus
certain dealer fees, is considered a financing cost and is included in interest expense on the
Consolidated Statement of Income. If the conduits fail to fund, the Receivables Facility would be
funded through committed bank purchasers, and the interest rate payable at the Companys option at
the rate announced from time to time by JPMorgan as its prime rate or at the LIBO Rate (as defined
in the Receivables Facility) plus the applicable margin in effect from time to time. The average
blended interest rate for the year ended January 3, 2009 was 3.50%.
The Receivables Facility contains customary events of default and requires the Company to
maintain the same interest coverage ratio and leverage ratio as required by the Senior Secured
Credit Facility. As of January 3, 2009, the Company was in compliance with all covenants.
F-29
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The total amount of receivables used as collateral for the credit facility was $331,470 at
January 3, 2009 and is reported on the Companys Consolidated Balance Sheet in trade accounts
receivable less allowances.
Future principal payments for all of the facilities described above are as follows: $45,640
due in 2009, $229,727 due in 2010, $46,875 due in 2011, $59,375 due in 2012, $851,250 due in 2013
and $943,680 thereafter. Reflected in these future principal payments were net principal payments
of $138,703, $178,125 and $106,625 made during the years ended January 3, 2009 and December 29,
2007 and six months ended December 30, 2006, respectively. The prepayments relieved any requirement
for the Company to make mandatory payments on the Term A and Term B Loan Facilities through 2009.
The Company incurred $69 and $3,266 in debt issuance costs in connection with entering into
the First Amendment and the Receivables Facility during the years ended January 3, 2009 and
December 29, 2007, respectively and $50,248 in debt issuance costs in connection with the issuance
of the Senior Secured Credit Facility, the Second Lien Facility, Bridge Loan Facility and the
Floating Rate Senior Notes during the six months ended December 30, 2006. Debt issuance costs are
amortized to interest expense over the respective lives of the debt instruments, which range from
five to eight years. As of January 3, 2009, the net carrying value was $24,776 which is included in
other noncurrent assets in the Consolidated Balance Sheet. The Companys debt issuance cost
amortization was $6,032, $6,475 and $2,279 for the years ended January 3, 2009 and December 29,
2007 and six months ended December 30, 2006, respectively.
The Company recognized $1,332 of losses on early extinguishment of debt during the year ended
January 3, 2009 which is comprised of a loss of $1,269 related to the prepayment of $125,000 on the
Senior Secured Credit Facility and $63 related to the repurchase of $6,320 of Floating Rate Senior
Notes. During the year ended December 29, 2007, the Company recognized $5,235 of losses on early
extinguishment of debt related to prepayments of $425,000 on the Senior Secured Credit Facility.
During the six months ended December 30, 2006, the Company recognized $7,401 of losses on early
extinguishment of debt which is comprised of a $6,125 loss for unamortized debt issuance costs on
the Bridge Loan Facility in connection with the issuance of the Floating Rate Senior Notes and a
$1,276 loss related to unamortized debt issuance costs on the Senior Secured Credit Facility for
the prepayment of $100,000 of principal in December 2006. As discussed above, the proceeds from the
issuance of the Floating Rate Senior Notes were used to repay the entire outstanding principal of
the Bridge Loan Facility.
(11) Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
F-30
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
Cumulative |
|
|
(Loss) |
|
|
Pension |
|
|
|
|
|
|
Other |
|
|
|
Translation |
|
|
on Cash Flow |
|
|
and |
|
|
Income |
|
|
Comprehensive |
|
|
|
Adjustment |
|
|
Hedges |
|
|
Postretirement |
|
|
Taxes |
|
|
Loss |
|
Balance at July 1, 2006 |
|
$ |
(4,895 |
) |
|
$ |
(5,576 |
) |
|
$ |
|
|
|
$ |
2,087 |
|
|
$ |
(8,384 |
) |
Other comprehensive
income (loss) activity |
|
|
(5,989 |
) |
|
|
(1,050 |
) |
|
|
(72,412 |
) |
|
|
28,267 |
|
|
|
(51,184 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30,
2006 |
|
$ |
(10,884 |
) |
|
$ |
(6,626 |
) |
|
$ |
(72,412 |
) |
|
$ |
30,354 |
|
|
$ |
(59,568 |
) |
Other comprehensive
income (loss) activity |
|
|
20,114 |
|
|
|
(11,268 |
) |
|
|
28,245 |
|
|
|
(6,441 |
) |
|
|
30,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29,
2007 |
|
$ |
9,230 |
|
|
$ |
(17,894 |
) |
|
$ |
(44,167 |
) |
|
$ |
23,913 |
|
|
$ |
(28,918 |
) |
Other comprehensive
income (loss) activity |
|
|
(29,463 |
) |
|
|
(63,501 |
) |
|
|
(301,282 |
) |
|
|
141,695 |
|
|
|
(252,551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009 |
|
$ |
(20,233 |
) |
|
$ |
(81,395 |
) |
|
$ |
(345,449 |
) |
|
$ |
165,608 |
|
|
$ |
(281,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the spin off on September 5, 2006, the Company assumed obligations relating
to the Companys current and former employees included within Sara Lee sponsored pension and
retirement plans, including $53,813 of additional minimum pension liability that has not been
reflected in comprehensive
income for the six months ended December 30, 2006 but is, however, included in accumulated other
comprehensive loss at December 30, 2006.
During the six months ended December 30, 2006, the Company adopted SFAS 158 which requires a
company to report the unfunded positions of employee benefit plans on the balance sheet while all
other deferred charges are reported as a component of accumulated other comprehensive income. The
impact of adopting the SFAS 158 provision was $19,079, net of tax, which is not reflected in
comprehensive income but is, however, included in accumulated other comprehensive loss at December
30, 2006.
(12) Commitments and Contingencies
The Company is a party to various pending legal proceedings, claims and environmental actions
by government agencies. In accordance with SFAS No. 5, Accounting for Contingencies, the Company
records a provision with respect to a claim, suit, investigation, or proceeding when it is probable
that a liability has been incurred and the amount of the loss can reasonably be estimated. Any
provisions are reviewed at least quarterly and are adjusted to reflect the impact and status of
settlements, rulings, advice of counsel and other information pertinent to the particular matter.
The recorded liabilities for these items were not material to the Consolidated Financial Statements
of the Company in any of the years presented. Although the outcome of such items cannot be
determined with certainty, the Companys legal counsel and management are of the opinion that the
final outcome of these matters will not have a material adverse impact on the consolidated
financial position, results of operations or liquidity.
Operating Leases
The Company leases certain buildings and equipment under agreements that are classified as
operating leases. Rental expense under operating leases was $53,072 in the year ended January 3,
2009, $47,366 in the year ended December 29, 2007, $27,590 in the six months ended December 30,
2006 and $54,874 in the year ended July 1, 2006.
F-31
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Future minimum lease payments under noncancelable operating leases (with initial or remaining
lease terms in excess of one year) are as follows: $43,488 in 2009, $39,720 in 2010, $32,119 in
2011, $24,635 in 2012, $17,004 in 2013 and $69,666 thereafter.
During the year ended January 3, 2009, the Company entered into sale-leaseback transactions
involving two distribution centers and one manufacturing facility. The facilities are being leased
back over terms ranging from one to four years and are classified as operating leases. The Company
received net proceeds on the sales of $18,782, resulting in deferred gains of $6,317 which will be
amortized over the lease terms.
License Agreements
The Company is party to several royalty-bearing license agreements for use of third-party
trademarks in certain of their products. The license agreements typically require a minimum
guarantee to be paid either at the commencement of the agreement, by a designated date during the
term of the agreement or by the end of the agreement period. When payments are made in advance of
when they are due, the Company records a prepayment and amortizes the expense in the Cost of sales line of the Consolidated Statements of
Income uniformly over the guaranteed period. For guarantees required to be paid at the completion
of the agreement, royalties are expensed through Cost of sales as the related sales are made.
Management has reviewed all license agreements and concluded that these guarantees do not fall
under Statement of Financial Accounting Standards Interpretation No. 45 Guarantors Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others,
and accordingly, there are no liabilities recorded at inception of the agreements.
For the years ended January 3, 2009 and December 29, 2007, the six months ended December 30,
2006 and the year ended July 1, 2006, the Company incurred royalty expense of approximately
$11,709, $11,583, $16,401 and $12,554, respectively. During the six months ended December 30, 2006,
the Company incurred expense of $9,675 in connection with the buy out of a license agreement and
the settlement of certain contractual terms relating to another license agreement. The $9,675 was
recorded in the Selling, general and administrative expenses line of the Consolidated Statement
of Income.
Minimum amounts due under the license agreements are approximately $7,712 in 2009, $7,642 in
2010, $1,145 in 2011, $1,296 in 2012 and $120 in 2013. In addition to the minimum guaranteed
amounts under license agreements, in the year ended December 29, 2007 the Company entered into a
partnership agreement which included a minimum fee of $6,300 for each year from 2008 through 2017.
(13) Intangible Assets and Goodwill
(a) Intangible Assets
The primary components of the Companys intangible assets and the related accumulated
amortization are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Gross |
|
|
Amortization |
|
|
Value |
|
Year ended January 3, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and brand names |
|
$ |
192,857 |
|
|
$ |
72,766 |
|
|
$ |
120,091 |
|
Computer software |
|
|
55,556 |
|
|
|
28,204 |
|
|
|
27,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
248,413 |
|
|
$ |
100,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value of intangible assets |
|
|
|
|
|
|
|
|
|
$ |
147,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Gross |
|
|
Amortization |
|
|
Value |
|
Year ended December 29, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and brand names |
|
$ |
188,300 |
|
|
$ |
63,157 |
|
|
$ |
125,143 |
|
Computer software |
|
|
51,893 |
|
|
|
25,770 |
|
|
|
26,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
240,193 |
|
|
$ |
88,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value of intangible assets |
|
|
|
|
|
|
|
|
|
$ |
151,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortization expense for intangibles subject to amortization was $12,019 for the year
ended January 3, 2009, $6,205 for the year ended December 29, 2007, $3,466 in the six months ended
December 30, 2006 and $9,031 for the year ended July 1, 2006. The estimated amortization expense
for the next five years, assuming no change in the estimated useful lives of identifiable
intangible assets or changes in foreign exchange rates is as follows: $12,244 in 2009, $11,080 in
2010, $8,227 in 2011, $7,999 in 2012 and $7,963 in 2013.
There was no impairment of trademarks in any of the periods presented. However, in prior years
as a result of the annual impairment reviews, the Company concluded that certain trademarks had
lives that were no longer indefinite. As a result of this conclusion, trademarks with a net book
value of $79,044 for the year ended July 1, 2006 were moved from the indefinite lived category and
amortization was initiated over a 30-year period.
(b) Goodwill
During the year ended January 3, 2009, the Company completed two business acquisitions: a
sewing operation in Thailand, and an embroidery and screen-printing production company in Honduras,
that resulted in the recognition of goodwill of $3,665 and $3,797, respectively.
During the year ended December 29, 2007, the Company completed two business acquisitions in El
Salvador: a textile manufacturing operation, and a sheer hosiery manufacturing company, that
resulted in the recognition of goodwill of $27,293 and $1,517, respectively. The Company
recognized $4,115 of additional goodwill for these acquisitions in the year ended January 3, 2009
upon completion of final purchase price allocations.
None of the preceding business acquisitions were determined by the Company to be material,
individually or in the aggregate, as set forth in SFAS No. 141, Accounting for Business
Combinations (SFAS 141). As a result, the disclosures and supplemental pro forma information
required by SFAS 141 are not presented.
F-33
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Goodwill and the changes in those amounts during the period are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
|
Outerwear |
|
|
International |
|
|
Hosiery |
|
|
Total |
|
Net book value at December
30, 2006 |
|
$ |
201,533 |
|
|
$ |
45,243 |
|
|
$ |
13,047 |
|
|
$ |
21,702 |
|
|
$ |
281,525 |
|
Acquisitions of businesses |
|
|
9,931 |
|
|
|
17,468 |
|
|
|
|
|
|
|
1,517 |
|
|
|
28,916 |
|
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December
29, 2007 |
|
|
211,464 |
|
|
|
62,711 |
|
|
|
13,031 |
|
|
|
23,219 |
|
|
|
310,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of businesses |
|
|
8,520 |
|
|
|
1,103 |
|
|
|
|
|
|
|
1,954 |
|
|
|
11,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at January 3,
2009 |
|
$ |
219,984 |
|
|
$ |
63,814 |
|
|
$ |
13,031 |
|
|
$ |
25,173 |
|
|
$ |
322,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There was no impairment of goodwill in any of the periods presented.
(14) Financial Instruments and Risk Management
(a) Interest Rate Derivatives
In connection with the spin off from Sara Lee on September 5, 2006, the Company incurred debt
of $2,600,000 plus an unfunded revolver with capacity of $500,000, all of which bears interest at
floating rates. During the years ended January 3, 2009 and December 29, 2007 and the six months
ended December 30, 2006, the Company has executed certain interest rate cash flow hedges in the
form of swaps and caps in order to mitigate the Companys exposure to variability in cash flows for
the future interest payments on a designated portion of borrowings.
The Company records gains and losses on these derivative instruments using hedge accounting.
Under this accounting method, gains and losses are deferred into accumulated other comprehensive
loss until the hedged transaction impacts the Companys earnings. However, on a quarterly basis
hedge ineffectiveness will be measured and any resulting ineffectiveness will be recorded as gains
or losses in the respective measurement period.
During the years ended January 3, 2009 and December 29, 2007 and the six months ended December
30, 2006, the Company deferred losses of $66,728, $16,357 and $2,743, respectively, into
accumulated other comprehensive loss. The tables below summarize our interest rate derivative
portfolio as of January 3, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
Interest Rates |
|
Interest Rate Swaps |
|
Amount |
|
|
Receive |
|
|
Pay |
|
3 year: Receive variable-pay fixed |
|
$ |
200,000 |
|
|
3-month LIBOR |
|
|
5.18 |
% |
4 year: Receive variable-pay fixed |
|
|
100,000 |
|
|
3-month LIBOR |
|
|
5.14 |
% |
5 year: Receive variable-pay fixed |
|
|
200,000 |
|
|
3-month LIBOR |
|
|
5.15 |
% |
4 year: Receive variable-pay fixed |
|
|
493,680 |
|
|
6-month LIBOR |
|
|
4.26 |
% |
2 year: Receive variable-pay fixed |
|
|
200,000 |
|
|
3-month LIBOR |
|
|
2.80 |
% |
2 year: Receive variable-pay fixed |
|
|
200,000 |
|
|
3-month LIBOR |
|
|
2.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
|
Interest Rates |
|
Interest Rate Caps |
|
Amount |
|
|
Receive |
|
|
Pay |
|
1 year: Receive excess of index over cap |
|
$ |
200,000 |
|
|
3-month LIBOR |
|
|
3.50 |
% |
1 year: Receive excess of index over cap |
|
|
200,000 |
|
|
3-month LIBOR |
|
|
3.50 |
% |
F-34
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(b) Foreign Currency Derivatives
The Company uses forward exchange and option contracts to reduce the effect of fluctuating
foreign currencies on short-term foreign currency-denominated transactions, foreign
currency-denominated investments, other known foreign currency exposures and to reduce the effect
of fluctuating commodity prices on raw materials purchased for production. Gains and losses on
these contracts are intended to offset losses and gains on the hedged transaction in an effort to
reduce the earnings volatility resulting from fluctuating foreign currency exchange rates and
fluctuating commodity prices. The Company also has foreign currency derivative instruments to which
hedge accounting is not applied. Gains and losses are recognized as the fair value of the
underlying derivatives changes and are reflected in Selling, general and administrative expenses in
the Companys Consolidated Statements of Income.
Historically, the principal currencies hedged by the Company include the European euro,
Mexican peso, Canadian dollar and Japanese yen. The following table summarizes by major currency
the contractual amounts of the Companys foreign exchange forward contracts in U.S. dollars. The
bought amounts represent the net U.S. dollar equivalent of commitments to purchase foreign
currencies, and the sold amounts represent the net U.S. dollar equivalent of commitments to sell
foreign currencies. The foreign currency amounts have been translated into a U.S. dollar equivalent
value using the exchange rate at the reporting date. Forward exchange contracts mature on the
anticipated cash requirement date of the hedged transaction, generally within one year. The table
below summarizes our foreign currency derivative portfolio as of January 3, 2009.
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Foreign currency bought (sold): |
|
|
|
|
|
|
|
|
Canadian dollar |
|
$ |
(29,430 |
) |
|
$ |
(20,577 |
) |
Canadian dollar |
|
|
40,537 |
|
|
|
|
|
Japanese yen |
|
|
(7,839 |
) |
|
|
(19,931 |
) |
European euro |
|
|
(25,749 |
) |
|
|
|
|
European euro |
|
|
5,347 |
|
|
|
|
|
Mexican peso |
|
|
(11,310 |
) |
|
|
|
|
The Company uses foreign exchange option contracts to reduce the foreign exchange fluctuations
on anticipated purchase and intercompany transactions. There were no open foreign exchange option
contracts at January 3, 2009 and December 29, 2007.
(c) Commodity Derivatives
Cotton is the primary raw material the Company uses to manufacture many of its products and is
purchased at market prices. In the year ended July 1, 2006, the Company started to use commodity
financial instruments to hedge the price of cotton, for which there is a high correlation between
the hedged item and the hedged instrument. There were no amounts outstanding under cotton futures
contracts at January 3, 2009 and December 29, 2007. The Company had no cotton option contracts
outstanding at January 3, 2009. The notional amounts outstanding under the options contracts at
December 29, 2007 were 41 bales of cotton.
F-35
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(d) Net Derivative Gain or Loss
For the interest rate swaps and caps and all forward exchange and option contracts, the
following table summarizes the net derivative gains or losses deferred into accumulated other
comprehensive loss and reclassified to earnings in the years ended January 3, 2009 and December 29,
2007, the six months ended December 30, 2006 and the year ended July 1, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Net accumulated
derivative gain
(loss) deferred at
beginning of year |
|
$ |
(17,894 |
) |
|
$ |
(6,626 |
) |
|
$ |
(5,576 |
) |
|
$ |
475 |
|
Deferral of net
derivative loss in
accumulated other
comprehensive loss |
|
|
(66,229 |
) |
|
|
(18,455 |
) |
|
|
(2,604 |
) |
|
|
(4,452 |
) |
Reclassification of
net derivative loss
(gain) to income |
|
|
2,728 |
|
|
|
7,187 |
|
|
|
1,554 |
|
|
|
(1,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net accumulated
derivative gain
(loss) at end of
year |
|
$ |
(81,395 |
) |
|
$ |
(17,894 |
) |
|
$ |
(6,626 |
) |
|
$ |
(5,576 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to reclassify into earnings during the next 12 months net loss from
accumulated other comprehensive loss of approximately $4,865 at the time the underlying hedged
transactions are realized. During the years ended January 3, 2009 and December 29, 2007, the six
months ended December 30, 2006 and the year ended July 1, 2006, the Company recognized income
(expense) of $(323), $80, $0 and $0, respectively, for hedge ineffectiveness related to cash flow
hedges. Amounts reported for hedge ineffectiveness are not included in accumulated other
comprehensive loss and therefore, not included in the above table.
There were no derivative losses excluded from the assessment of effectiveness or gains or
losses resulting from the disqualification of hedge accounting for the years ended January 3, 2009
and December 29, 2007, the six months ended December 30, 2006 and the year ended July 1, 2006. The
Company recognized derivative losses related to derivative instruments to which hedge accounting
was not applied of $6,691, $451, $0 and $0 for the years ended January 3, 2009 and December 29,
2007, the six months ended December 30, 2006 and the year ended July 1, 2006, respectively.
(e) Fair Values
The carrying amounts of cash and cash equivalents, trade accounts receivable, notes
receivable, accounts payable and long-term debt approximated fair value as of January 3, 2009 and
December 29, 2007. The fair value of long-term debt was approximately $1,753,885 as of January 3,
2009 and had a carrying value of $2,176,547; the fair value of
long-term debt at December 29, 2007 approximated the carrying value
as of that date. The fair value was determined
using market quotes. The carrying amounts of the Companys notes payable approximated fair value as
of January 3, 2009 and December 29, 2007, primarily due to the short-term nature of these
instruments. The fair values of the remaining financial instruments recognized in the Consolidated
Balance Sheets of the Company at the respective year ends were:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Interest rate swaps |
|
$ |
(83,011 |
) |
|
$ |
(16,590 |
) |
Foreign currency forwards and options |
|
|
2,615 |
|
|
|
196 |
|
Interest rate caps |
|
|
46 |
|
|
|
304 |
|
Commodity forwards and options |
|
|
|
|
|
|
266 |
|
F-36
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The fair value of the swaps is determined based upon externally developed pricing models,
using financial market data obtained from swap dealers. The fair value of the forwards and options
is based upon quoted market prices obtained from third-party institutions.
(f) Concentration of Credit Risk
Trade accounts receivable due from customers that the Company considers highly leveraged were
$124,281 at January 3, 2009, $115,233 at December 29, 2007, $107,783 at December 30, 2006 and
$121,870 at July 1, 2006. The financial position of these businesses has been considered in
determining allowances for doubtful accounts.
See Note 21 for disclosure of significant customer concentrations by segment.
(15) Fair Value of Financial Assets and Liabilities
The Company has adopted the provisions of SFAS 157 as of December 30, 2007 for its financial
assets and liabilities. Although having partially adopted SFAS 157 has had no material impact on
its financial condition, results of operations or cash flows, the Company is now required to
provide additional disclosures as part of its financial statements. SFAS 157 clarifies that fair
value is an exit price, representing the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
The Company utilizes market data or assumptions that market participants would use in pricing the
asset or liability. SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs
such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as
unobservable inputs about which little or no market data exists, therefore requiring an entity to
develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation
techniques noted in SFAS 157. The three valuation techniques are as follows:
|
|
|
Market approach prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities. |
|
|
|
|
Cost approach amount that would be required to replace the service capacity of an
asset or replacement cost. |
|
|
|
|
Income approach techniques to convert future amounts to a single present amount based
on market expectations, including present value techniques, option-pricing and other
models. |
The Company primarily applies the market approach for commodity derivatives and the income
approach for interest rate and foreign currency derivatives for recurring fair value measurements
and attempts to utilize valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs.
As of January 3, 2009, the Company held certain financial assets and liabilities that are
required to be measured at fair value on a recurring basis. These consisted of the Companys
derivative instruments related to interest rates and foreign exchange rates. The fair values of
cotton derivatives are determined based on quoted prices in public markets and are categorized as
Level 1, however, the Company did not have any outstanding cotton derivatives outstanding at
January 3, 2009. The fair values of interest rate and foreign exchange rate derivatives are
determined based on inputs that are readily available in public markets or can be derived from
information available in publicly quoted markets and are categorized as Level 2. The Company does
not have any financial assets or liabilities measured at fair value on a recurring basis
categorized as Level 3, and there were no transfers in or out of Level 3 during the year ended
January 3, 2009. There were no changes during year ended January 3, 2009 to the Companys valuation
techniques used to measure asset and liability fair values on a recurring basis.
F-37
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The following table sets forth by level within SFAS 157s fair value hierarchy the Companys
financial assets and liabilities accounted for at fair value on a recurring basis January 3, 2009.
As required by SFAS 157, assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement. The Companys assessment
of the significance of a particular input to the fair value measurement requires judgment, and may
affect the valuation of fair value assets and liabilities and their placement within the fair value
hierarchy levels.
|
|
|
|
|
|
|
|
|
|
|
|
Assets (Liabilities) at Fair Value as of January 3, 2009 |
|
|
Quoted Prices |
|
|
|
|
|
|
In Active |
|
Significant |
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
|
Identical |
|
Observable |
|
Unobservable |
|
|
Assets |
|
Inputs |
|
Inputs |
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
Derivative contracts, net
|
|
$ |
|
|
$ |
(80,350
|
) |
$ |
|
|
|
|
|
|
|
|
Total
|
|
$ |
|
|
$ |
(80,350
|
) |
$ |
|
|
|
|
|
|
|
|
The determination of fair values above incorporates various factors required under SFAS 157.
These factors include not only the credit standing of the counterparties involved and the impact of
credit enhancements, but also the impact of the Companys nonperformance risk on its liabilities.
(16) Defined Benefit Pension Plans
During the year ended December 29, 2007, the Company completed the separation of its pension
plan assets and liabilities from those of Sara Lee in accordance with governmental regulations,
which resulted in a higher total amount of pension plan assets being transferred to the Company
than originally was estimated prior to the spin off. Prior to spin off, the fair value of plan
assets included in the annual valuations represented a best estimate based upon a percentage
allocation of total assets of the Sara Lee trust. The separation resulted in a reduction to pension
liabilities of approximately $74,000 with a corresponding credit to additional paid-in capital and
resulted in a decrease of approximately $6,000 to pension expense for the year ended December 29,
2007.
Effective as of January 1, 2006, the Company created the Hanesbrands Inc. Pension and
Retirement Plan (the Hanesbrands Pension Plan), a new frozen defined benefit plan to receive
assets and liabilities accrued under the Sara Lee Pension Plan that are attributable to current and
former Company employees. In connection with the spin off on September 5, 2006, the Company assumed
Sara Lees obligations under the Sara Lee Corporation Consolidated Pension and Retirement Plan, the
Sara Lee Supplemental Executive Retirement Plan, the Sara Lee Canada Pension Plans and certain
other plans that related to the Companys current and former employees and assumed other Sara Lee
retirement plans covering only Company employees. Prior to the spin off the obligations were not
included in the Companys Consolidated Financial Statements. The Company also assumed two
noncontributory defined benefit plans, the Playtex Apparel, Inc. Pension Plan (the Playtex Plan)
and the National Textiles, L.L.C. Pension Plan (the National Textiles Plan). The obligations and
costs related to all of these plans are included in the Companys Consolidated Financial Statements
as of January 3, 2009 and December 29, 2007.
On September 29, 2006, SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans was issued. The objectives of SFAS 158 are for an employer to a)
recognize the overfunded status of a plan as an asset and the underfunded status of a plan as a
liability in the balance sheet and to recognize changes in the funded status in comprehensive
income or loss, and b) measure the funded status of a plan as of the
date of its balance sheet date. Additional minimum pension liabilities and related intangible
assets are also derecognized upon adoption of the new standard. SFAS 158 requires initial
application of the requirement to
F-38
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
recognize the funded status of a benefit plan and the related disclosure provisions as of the end
of fiscal years ending after December 15, 2006. SFAS 158 requires initial application of the
requirement to measure plan assets and benefit obligations as of the balance sheet date as of the
end of fiscal years ending after December 15, 2008. The Company adopted part (a) of the statement
as of December 30, 2006. The Company adopted part (b) of the statement as of December 29, 2007. The
following table summarizes the effect of required changes in the additional minimum pension
liabilities (AML) as of December 30, 2006 prior to the adoption of SFAS 158 as well as the impact
of the initial adoption of part (a) of SFAS 158:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to AML |
|
|
AML |
|
|
Post AML, |
|
|
SFAS 158 |
|
|
Post AML, |
|
|
|
|
|
and SFAS 158 |
|
|
Adjustment |
|
|
Pre SFAS 158 |
|
|
Adjustment |
|
|
Post SFAS 158 |
|
Prepaid pension asset |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,356 |
|
|
$ |
1,356 |
|
Accrued pension liability |
|
|
90,491 |
|
|
|
48,100 |
|
|
|
138,591 |
|
|
|
61,566 |
|
|
|
200,157 |
|
Intangible asset |
|
|
|
|
|
|
436 |
|
|
|
436 |
|
|
|
(436 |
) |
|
|
|
|
Accumulated other
comprehensive income,
net of tax |
|
|
|
|
|
|
(63,677 |
) |
|
|
(63,677 |
) |
|
|
(2,854 |
) |
|
|
(66,531 |
) |
Deferred tax asset |
|
|
|
|
|
|
40,541 |
|
|
|
40,541 |
|
|
|
1,238 |
|
|
|
41,779 |
|
Prior to the spin off from Sara Lee on September 5, 2006, employees who met certain
eligibility requirements participated in defined benefit pension plans sponsored by Sara Lee. These
defined benefit pension plans included employees from a number of domestic Sara Lee business units.
All obligations pursuant to these plans have historically been obligations of Sara Lee and as such,
were not included on the Companys historical Consolidated Balance Sheets, prior to September 5,
2006. The annual cost of the Sara Lee defined benefit plans was allocated to all of the
participating businesses based upon a specific actuarial computation which was followed
consistently.
The annual (income) cost incurred by the Company for these defined benefit plans is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Participation in Sara Lee sponsored
defined benefit plans |
|
$ |
|
|
|
$ |
|
|
|
$ |
725 |
|
|
$ |
30,835 |
|
Hanesbrands sponsored benefit plans |
|
|
(10,993 |
) |
|
|
(2,924 |
) |
|
|
2,182 |
|
|
|
|
|
Playtex Apparel, Inc. Pension Plan |
|
|
(289 |
) |
|
|
(127 |
) |
|
|
(30 |
) |
|
|
(234 |
) |
National Textiles L.L.C. Pension Plan |
|
|
(519 |
) |
|
|
(339 |
) |
|
|
(425 |
) |
|
|
(1,059 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension plan (income) cost |
|
$ |
(11,801 |
) |
|
$ |
(3,390 |
) |
|
$ |
2,452 |
|
|
$ |
29,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to plant closings during the year ended January 3, 2009, the Company recorded an expense
of $1,406 related to the partial plan termination of the National
Textiles L.L.C. Pension Plan in
September 2008, which is reported in the Restructuring line of the Consolidated Statements of
Income.
F-39
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The components of net periodic benefit cost and other amounts recognized in other
comprehensive loss of the Companys noncontributory defined benefit pension plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Service cost |
|
$ |
1,136 |
|
|
$ |
1,446 |
|
|
$ |
384 |
|
|
$ |
|
|
Interest cost |
|
|
51,412 |
|
|
|
49,494 |
|
|
|
17,848 |
|
|
|
5,291 |
|
Expected return on assets |
|
|
(64,549 |
) |
|
|
(55,588 |
) |
|
|
(17,011 |
) |
|
|
(6,584 |
) |
Asset allocation |
|
|
|
|
|
|
(1,867 |
) |
|
|
|
|
|
|
|
|
Settlement cost |
|
|
|
|
|
|
345 |
|
|
|
|
|
|
|
|
|
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition asset |
|
|
|
|
|
|
|
|
|
|
(98 |
) |
|
|
|
|
Prior service cost |
|
|
39 |
|
|
|
43 |
|
|
|
(1 |
) |
|
|
|
|
Net actuarial loss |
|
|
161 |
|
|
|
2,737 |
|
|
|
605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit (income) cost |
|
$ |
(11,801 |
) |
|
$ |
(3,390 |
) |
|
$ |
1,727 |
|
|
$ |
(1,293 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
Net (gain) loss |
|
$ |
300,127 |
|
|
$ |
(61,162 |
) |
Prior service credit |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive loss (income) |
|
|
299,987 |
|
|
|
(61,162 |
) |
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and
other comprehensive loss (income) |
|
$ |
288,186 |
|
|
$ |
(64,552 |
) |
|
|
|
|
|
|
|
The estimated net loss and prior service credit for the defined benefit pension plans that
will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the
next year are $8,324 and $26, respectively.
F-40
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The funded status of the Companys defined benefit pension plans at the respective year ends
was as follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation: |
|
|
|
|
|
|
|
|
Beginning of year |
|
$ |
837,416 |
|
|
$ |
885,531 |
|
Service cost |
|
|
1,136 |
|
|
|
1,445 |
|
Interest cost |
|
|
51,412 |
|
|
|
49,494 |
|
Benefits paid |
|
|
(54,318 |
) |
|
|
(53,576 |
) |
Plan curtailment |
|
|
1,123 |
|
|
|
(428 |
) |
Adoption of SFAS 158 |
|
|
|
|
|
|
(1,485 |
) |
Impact of exchange rate change |
|
|
(4,367 |
) |
|
|
4,526 |
|
Actuarial (gain) loss |
|
|
22,012 |
|
|
|
(48,091 |
) |
|
|
|
|
|
|
|
End of year |
|
|
854,414 |
|
|
|
837,416 |
|
|
|
|
|
|
|
|
Fair value of plan assets: |
|
|
|
|
|
|
|
|
Beginning of year |
|
|
834,214 |
|
|
|
686,730 |
|
Actual return on plan assets |
|
|
(213,491 |
) |
|
|
69,343 |
|
Separation of assets and liabilities from Sara Lee |
|
|
|
|
|
|
73,833 |
|
Employer contributions |
|
|
3,702 |
|
|
|
54,355 |
|
Benefits paid |
|
|
(54,319 |
) |
|
|
(53,576 |
) |
Adoption of SFAS 158 |
|
|
|
|
|
|
(761 |
) |
Impact of exchange rate change |
|
|
(5,401 |
) |
|
|
4,290 |
|
|
|
|
|
|
|
|
End of year |
|
|
564,705 |
|
|
|
834,214 |
|
|
|
|
|
|
|
|
Funded status |
|
$ |
(289,709 |
) |
|
$ |
(3,202 |
) |
|
|
|
|
|
|
|
The total accumulated benefit obligation and the accumulated benefit obligation and fair value
of plan assets for the Companys pension plans with accumulated benefit obligations in excess of
plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Accumulated Benefit Obligation |
|
$ |
854,414 |
|
|
$ |
837,416 |
|
Plans with Accumulated Benefit Obligation in excess of plan assets |
|
|
|
|
|
|
|
|
Accumulated Benefit Obligation |
|
$ |
854,414 |
|
|
$ |
139,363 |
|
Fair value of plan assets |
|
|
564,705 |
|
|
|
103,818 |
|
Amounts recognized in the Companys Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Noncurrent assets |
|
$ |
|
|
|
$ |
32,342 |
|
Current liabilities |
|
|
(2,919 |
) |
|
|
(2,775 |
) |
Noncurrent liabilities |
|
|
(286,790 |
) |
|
|
(32,769 |
) |
Accumulated other comprehensive loss |
|
|
(344,343 |
) |
|
|
(44,358 |
) |
F-41
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Amounts recognized in accumulated other comprehensive loss (income) consist of:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Prior service cost (credit)
|
|
$ |
191 |
|
|
$ |
(332 |
) |
Actuarial loss (gain)
|
|
|
344,152 |
|
|
|
(44,026 |
) |
|
|
|
|
|
|
|
|
|
$ |
344,343 |
|
|
$ |
(44,358 |
) |
|
|
|
|
|
|
|
Accrued benefit costs related to the Companys defined benefit pension plans are reported in
the Other noncurrent assets, Accrued liabilities Payroll and employee benefits and Pension
and postretirement benefits lines of the Consolidated Balance Sheets.
(a) Measurement Date and Assumptions
In accordance with the adoption of SFAS 158 part (b), a year end measurement date was used to
value plan assets and obligations for the Companys defined benefit pension plans for the years
ended January 3, 2009 and December 29, 2007. The impact of adopting part (b) is an adjustment of
$1,058 to increase retained earnings, with offsetting decreases to pension liability of $1,804 and
accumulated other comprehensive income of $747 for the year ended December 29, 2007. A measurement
date of September 30 was used for the six months ended December 30, 2006, and a March 31
measurement date for all previous periods. The weighted average actuarial assumptions used in
measuring the net periodic benefit cost and plan obligations for the periods presented were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.34 |
% |
|
|
5.80 |
% |
|
|
5.77 |
% |
|
|
5.60 |
% |
Long-term rate of return on plan assets |
|
|
8.03 |
|
|
|
7.59 |
|
|
|
7.57 |
|
|
|
7.76 |
|
Rate of compensation increase(1) |
|
|
3.63 |
|
|
|
3.63 |
|
|
|
3.60 |
|
|
|
4.00 |
|
Plan obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.11 |
% |
|
|
6.34 |
% |
|
|
5.77 |
% |
|
|
5.80 |
% |
Rate of compensation increase(1) |
|
|
3.38 |
|
|
|
3.63 |
|
|
|
3.60 |
|
|
|
4.00 |
|
|
|
|
(1) |
|
The compensation increase assumption applies to the non domestic plans and portions of the
Hanesbrands nonqualified retirement plans, as benefits under these plans are not frozen at
January 3, 2009, December 29, 2007, December 30, 2006, and July 1, 2006. |
(b) Plan Assets, Expected Benefit Payments, and Funding
The allocation of pension plan assets as of the respective period end measurement dates is as
follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Asset category: |
|
|
|
|
|
|
|
|
Equity securities |
|
|
53 |
% |
|
|
65 |
% |
Debt securities |
|
|
41 |
|
|
|
29 |
|
Cash and other |
|
|
6 |
|
|
|
6 |
|
The investment objectives for the pension plan assets are designed to generate returns that
will enable the pension plans to meet their future obligations. The asset target allocations
approximate the actual asset allocations noted above.
F-42
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Due to the current funded status of the plans, the Company is not required to make any
mandatory contributions to the pension plans in 2009. Expected benefit payments are as follows:
$59,354 in 2009, $50,732 in 2010, $49,397 in 2011, $48,648 in 2012, $48,757 in 2013 and $261,190
thereafter.
(17) Postretirement Healthcare and Life Insurance Plans
On December 1, 2007 the Company effectively terminated all retiree medical coverage.
Postretirement benefit income of $28,467 was recorded in the Consolidated Statement of Income for
the six months ended December 30, 2006, which represented the unrecognized amounts associated with
prior plan amendments that were being amortized into income over the remaining service period of
the participants prior to the December 2006 amendments. A gain on curtailment of $32,144 is
recorded in the Consolidated Statement of Income for the year ended December 29, 2007, which
represents the final settlement of the retirement plan.
In December 2006, the Company changed the postretirement plan benefits to (a) pass along a
higher share of retiree medical costs to all retirees effective February 1, 2007, (b) eliminate
company contributions toward premiums for retiree medical coverage effective December 1, 2007,
(c) eliminate retiree medical coverage options for all current and future retirees age 65 and older
and (d) eliminate future postretirement life benefits. Gains associated with these plan amendments
were amortized throughout the year ended December 29, 2007 in anticipation of the effective
termination of the medical plan on December 1, 2007.
On September 29, 2006, SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans was issued. The objectives of SFAS 158 are for an employer to
a) recognize the overfunded status of a plan as an asset and the underfunded status of a plan as a
liability in the balance sheet and to recognize changes in the funded status in comprehensive
income or loss, and b) measure the funded status of a plan as of the date of its balance sheet
date. Additional minimum pension liabilities and related intangible assets are also derecognized
upon adoption of the new standard. SFAS 158 requires initial application of the requirement to
recognize the funded status of a benefit plan and the related disclosure provisions as of the end
of fiscal years ending after December 15, 2006. SFAS 158 requires initial application of the
requirement to measure plan assets and benefit obligations as of the balance sheet date as of the
end of fiscal years ending after December 15, 2008. The Company adopted part (a) of the statement
as of December 30, 2006. The Company adopted part (b) of the statement as of December 29, 2007. The
following table summarizes the effect of the adoption of part (a) of SFAS 158 on the December 30,
2006 balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFAS 158 |
|
|
|
|
|
|
Pre-SFAS 158 |
|
|
Adjustment |
|
|
Post SFAS 158 |
|
Accrued Postretirement Liability |
|
$ |
44,358 |
|
|
$ |
(35,897 |
) |
|
$ |
8,461 |
|
Accumulated Other Comprehensive Income, net of tax |
|
|
|
|
|
|
21,933 |
|
|
|
21,933 |
|
Deferred Tax Liability |
|
|
|
|
|
|
13,964 |
|
|
|
13,964 |
|
Prior to the spin off from Sara Lee on September 5, 2006, employees who met certain
eligibility requirements participated in postretirement healthcare and life insurance sponsored by
Sara Lee. These plans included employees from a number of domestic Sara Lee business units. All
obligations pursuant to these plans have historically been obligations of Sara Lee and as such,
were not included on the Companys historical Consolidated Balance Sheets, prior to September 5,
2006. The annual cost of the Sara Lee defined benefit plans was allocated to all of the
participating businesses based upon a specific actuarial computation which was followed
consistently. In connection with the spin off on September 5, 2006, the Company assumed Sara Lees
obligations under the Sara Lee postretirement plans related to the Companys current and former
employees.
The postretirement plan expense incurred by the Company for these postretirement plans is as
follows:
F-43
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Hanesbrands
postretirement
healthcare and
life insurance
plans |
|
$ |
386 |
|
|
$ |
(5,410 |
) |
|
$ |
237 |
|
|
$ |
|
|
Participation in
Sara Lee sponsored
postretirement and
life insurance
plans |
|
|
|
|
|
|
|
|
|
|
214 |
|
|
|
6,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
386 |
|
|
$ |
(5,410 |
) |
|
$ |
451 |
|
|
$ |
6,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the Companys postretirement healthcare and life insurance plans
were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Service costs |
|
$ |
|
|
|
$ |
256 |
|
Interest cost |
|
|
393 |
|
|
|
835 |
|
Expected return on assets |
|
|
(7 |
) |
|
|
(7 |
) |
Amortization of: |
|
|
|
|
|
|
|
|
Transition asset |
|
|
|
|
|
|
(62 |
) |
Prior service cost |
|
|
|
|
|
|
(7,380 |
) |
Net actuarial loss |
|
|
|
|
|
|
948 |
|
|
|
|
|
|
|
|
Net periodic benefit (income) cost |
|
$ |
386 |
|
|
$ |
(5,410 |
) |
|
|
|
|
|
|
|
Other Changes in Plan Assets and Benefit Obligations Recognized
in Other Comprehensive Income |
|
|
|
|
|
|
|
|
Net (gain) loss |
|
$ |
1,298 |
|
|
$ |
(191 |
) |
Recognition of settlement of healthcare plan |
|
|
|
|
|
|
(32,144 |
) |
|
|
|
|
|
|
|
Total recognized loss (gain) in other comprehensive income |
|
|
1,298 |
|
|
|
(32,335 |
) |
|
|
|
|
|
|
|
Total recognized in net periodic benefit cost and other
comprehensive loss |
|
$ |
1,684 |
|
|
$ |
(37,745 |
) |
|
|
|
|
|
|
|
The funded status of the Companys postretirement healthcare and life insurance plans
at the respective year end was as follows:
F-44
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
January 3, 2009 |
|
|
December 29, 2007 |
|
Accumulated benefit obligation: |
|
|
|
|
|
|
|
|
Beginning of year |
|
$ |
6,598 |
|
|
$ |
8,647 |
|
Service cost |
|
|
|
|
|
|
256 |
|
Interest cost |
|
|
393 |
|
|
|
836 |
|
Benefits paid |
|
|
(175 |
) |
|
|
(2,261 |
) |
Actuarial (gain) loss |
|
|
1,133 |
|
|
|
(903 |
) |
SFAS 158 adjustment |
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
End of year |
|
|
7,949 |
|
|
|
6,598 |
|
Fair value of plan assets: |
|
|
|
|
|
|
|
|
Beginning of year |
|
|
173 |
|
|
|
186 |
|
Actual return on plan assets |
|
|
(173 |
) |
|
|
(13 |
) |
Employer contributions |
|
|
166 |
|
|
|
2,261 |
|
Benefits paid |
|
|
(166 |
) |
|
|
(2,261 |
) |
|
|
|
|
|
|
|
End of year |
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
|
Funded status and accrued benefit cost recognized |
|
$ |
(7,949 |
) |
|
$ |
(6,425 |
) |
|
|
|
|
|
|
|
Amounts recognized in the Companys Consolidated
Balance Sheet consist of: |
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
(645 |
) |
|
$ |
(351 |
) |
Noncurrent liabilities |
|
|
(7,304 |
) |
|
|
(6,074 |
) |
|
|
|
|
|
|
|
|
|
$ |
(7,949 |
) |
|
$ |
(6,425 |
) |
|
|
|
|
|
|
|
Amounts recognized in accumulated other
comprehensive income consist of: |
|
|
|
|
|
|
|
|
Actuarial (loss) gain |
|
|
(1,106 |
) |
|
|
191 |
|
|
|
|
|
|
|
|
|
|
$ |
(1,106 |
) |
|
$ |
191 |
|
|
|
|
|
|
|
|
Accrued benefit costs related to the Companys postretirement healthcare and life insurance
plans are reported in the Accrued liabilities Payroll and employee benefits and Pension and
postretirement benefits lines of the Consolidated Balance Sheets.
(a) Measurement Date and Assumptions
In accordance with the adoption of SFAS 158 part (b), a year end measurement date was
used to value plan assets and obligations for the Companys postretirement life insurance plans for
the years ended January 3, 2009 and December 29, 2007. The impact of adopting part (b) was an
adjustment of $131 to increase retained earnings, with an offsetting decrease to postretirement
liability at December 29, 2007. The weighted average actuarial assumptions used in measuring the
net periodic benefit cost and plan obligations for the plans at the respective measurement dates
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.20 |
% |
|
|
6.20 |
% |
|
|
5.58 |
% |
|
|
|
% |
Long-term rate of return on plan assets |
|
|
3.70 |
|
|
|
3.70 |
|
|
|
3.70 |
|
|
|
|
|
Plan obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.30 |
% |
|
|
6.20 |
% |
|
|
5.58 |
% |
|
|
|
% |
F-45
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(b) Contributions and Benefit Payments
The Company expects to make a contribution of $645 in 2009. Expected benefit payments are as
follows: $645 in 2009, $644 in 2010, $643 in 2011, $640 in 2012, $637 in 2013 and $3,086
thereafter.
(18) Income Taxes
The provision for income tax computed by applying the U.S. statutory rate to income before
taxes as reconciled to the actual provisions were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Income before income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
0.6 |
% |
|
|
6.0 |
% |
|
|
30.4 |
% |
|
|
23.4 |
% |
Foreign |
|
|
99.4 |
|
|
|
94.0 |
|
|
|
69.6 |
|
|
|
76.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense at U.S. statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Tax on remittance of foreign earnings |
|
|
(0.2 |
) |
|
|
8.9 |
|
|
|
8.1 |
|
|
|
3.3 |
|
Foreign taxes less than U.S. statutory rate |
|
|
(16.3 |
) |
|
|
(15.3 |
) |
|
|
(11.6 |
) |
|
|
(8.3 |
) |
Benefit of Puerto Rico foreign tax credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.5 |
) |
Change in
valuation allowance |
|
|
2.1 |
|
|
|
1.8 |
|
|
|
(0.2 |
) |
|
|
0.4 |
|
Other, net |
|
|
1.4 |
|
|
|
1.1 |
|
|
|
2.5 |
|
|
|
(3.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes at effective worldwide tax rates |
|
|
22.0 |
% |
|
|
31.5 |
% |
|
|
33.8 |
% |
|
|
22.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Current and deferred tax provisions (benefits) were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
Deferred |
|
|
Total |
|
Year ended January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
13,531 |
|
|
$ |
(3,672 |
) |
|
$ |
9,859 |
|
Foreign |
|
|
20,285 |
|
|
|
4,264 |
|
|
|
24,549 |
|
State |
|
|
3,497 |
|
|
|
(2,037 |
) |
|
|
1,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
37,313 |
|
|
$ |
(1,445 |
) |
|
$ |
35,868 |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
452 |
|
|
$ |
22,327 |
|
|
$ |
22,779 |
|
Foreign |
|
|
23,471 |
|
|
|
4,780 |
|
|
|
28,251 |
|
State |
|
|
6,007 |
|
|
|
962 |
|
|
|
6,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
29,930 |
|
|
$ |
28,069 |
|
|
$ |
57,999 |
|
|
|
|
|
|
|
|
|
|
|
Six Months ended December 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
17,918 |
|
|
$ |
5,848 |
|
|
$ |
23,766 |
|
Foreign |
|
|
14,711 |
|
|
|
(3,511 |
) |
|
|
11,200 |
|
State |
|
|
1,667 |
|
|
|
1,148 |
|
|
|
2,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
34,296 |
|
|
$ |
3,485 |
|
|
$ |
37,781 |
|
|
|
|
|
|
|
|
|
|
|
Year ended July 1, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
119,598 |
|
|
$ |
(27,103 |
) |
|
$ |
92,495 |
|
Foreign |
|
|
18,069 |
|
|
|
(1,911 |
) |
|
|
16,158 |
|
State |
|
|
2,964 |
|
|
|
(17,790 |
) |
|
|
(14,826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
140,631 |
|
|
$ |
(46,804 |
) |
|
$ |
93,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Cash payments for income taxes |
|
$ |
32,767 |
|
|
$ |
20,562 |
|
|
$ |
18,687 |
|
|
$ |
14,035 |
|
Cash payments above represent cash tax payments made by the Company primarily in
foreign jurisdictions. During the periods presented prior to September 5, 2006, tax payments made
in the U.S. were made by Sara Lee on the Companys behalf and were settled in the funding payable
with parent companies account.
F-47
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The deferred tax assets and liabilities at the respective year-ends were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Nondeductible reserves |
|
$ |
15,269 |
|
|
$ |
9,884 |
|
Inventories |
|
|
94,803 |
|
|
|
84,916 |
|
Property and equipment |
|
|
7,076 |
|
|
|
5,710 |
|
Intangibles |
|
|
155,248 |
|
|
|
165,792 |
|
Bad debt allowance |
|
|
12,439 |
|
|
|
13,937 |
|
Accrued expenses |
|
|
20,507 |
|
|
|
41,735 |
|
Employee benefits |
|
|
166,120 |
|
|
|
88,568 |
|
Tax credits |
|
|
1,903 |
|
|
|
9,309 |
|
Net operating loss and other tax carryforwards |
|
|
21,527 |
|
|
|
13,137 |
|
Derivatives |
|
|
31,614 |
|
|
|
6,931 |
|
Other |
|
|
2,796 |
|
|
|
9,539 |
|
|
|
|
|
|
|
|
Gross deferred tax assets |
|
|
529,302 |
|
|
|
449,458 |
|
Less valuation allowances |
|
|
(23,727 |
) |
|
|
(15,992 |
) |
|
|
|
|
|
|
|
Deferred tax assets |
|
|
505,575 |
|
|
|
433,466 |
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Prepaids |
|
|
3,443 |
|
|
|
8,188 |
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
3,443 |
|
|
|
8,188 |
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
502,132 |
|
|
$ |
425,278 |
|
|
|
|
|
|
|
|
The valuation allowance for deferred tax assets as of January 3, 2009 and December 29, 2007
was $23,727 and $15,992, respectively. The net change in the total valuation allowance for the
years ended January 3, 2009 and December 29, 2007 was $7,735 and $1,401, respectively.
The valuation allowance relates in part to deferred tax assets established under SFAS No. 109
for foreign loss carryforwards at January 3, 2009 and December 29, 2007 was $21,527 and $13,137,
and to foreign goodwill of $2,200 at January 3, 2009 and $2,855 and December 29, 2007.
The Company and Sara Lee entered into a tax sharing agreement in connection with the spin off
of the Company from Sara Lee on September 5, 2006. Under the tax sharing agreement, within
180 days after Sara Lee filed its final consolidated tax return for the period that included
September 5, 2006, Sara Lee was required to deliver to the Company a computation of the amount of
deferred taxes attributable to the Companys United States and Canadian operations that would be
included on the Companys opening balance sheet as of September 6, 2006 (as finally determined)
which has been done. The Company has the right to participate in the computation of the amount of
deferred taxes. Under the tax sharing agreement, if substituting the amount of deferred taxes as
finally determined for the amount of estimated deferred taxes that were included on that balance
sheet at the time of the spin off causes a decrease in the net book value reflected on that balance
sheet, then Sara Lee will be required to pay the Company the amount of such decrease. If such
substitution causes an increase in the net book value reflected on that balance sheet, then the
Company will be required to pay Sara Lee the amount of such increase. For purposes of this
computation, the Companys deferred taxes are the amount of deferred tax benefits (including
deferred tax
consequences attributable to deductible temporary differences and carryforwards) that would be
recognized as assets on the Companys balance sheet computed in accordance with GAAP, but without
regard to valuation allowances, less the amount of deferred tax liabilities (including deferred tax
consequences attributable to taxable temporary differences) that would be recognized as liabilities
on the Companys opening balance sheet computed in accordance with GAAP, but without regard to
valuation allowances. Neither the Company nor Sara Lee will be required to make any other payments
to the other with respect to deferred taxes.
F-48
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
The Companys computation of the final amount of deferred taxes for the Companys opening
balance sheet as of September 6, 2006 is as follows:
|
|
|
|
|
Estimated
deferred taxes subject to the tax sharing agreement included in opening balance sheet on September 6, 2006 |
|
$ |
450,683 |
|
Final calculation of deferred taxes subject to the tax sharing agreement |
|
|
360,460 |
|
|
|
|
|
Decrease in deferred taxes as of opening balance sheet on September 6, 2006 |
|
|
90,223 |
|
Preliminary cash installment received from Sara Lee |
|
|
18,000 |
|
|
|
|
|
Amount due from Sara Lee |
|
$ |
72,223 |
|
|
|
|
|
The amount that is expected to be collected from Sara Lee based on the Companys computation
of $72,223 is included as a receivable in Other current assets in the Consolidated Balance Sheet as
of January 3, 2009.
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will realize the benefits of
these deductible differences, net of the existing valuation allowances.
At January 3, 2009, the Company has net operating loss carryforwards of approximately $83,580
which will expire as follows:
|
|
|
|
|
Years Ending: |
|
|
|
|
January 2, 2010 |
|
$ |
4,963 |
|
January 1, 2011 |
|
|
2,704 |
|
December 31, 2011 |
|
|
4,825 |
|
December 29, 2012 |
|
|
4,065 |
|
December 28, 2013 |
|
|
6,197 |
|
Thereafter |
|
|
60,826 |
|
|
|
|
|
|
At January 3, 2009, applicable U.S. federal income taxes and foreign withholding taxes have
not been provided on the accumulated earnings of foreign subsidiaries that are expected to be
permanently reinvested. If these earnings had not been permanently reinvested, deferred taxes of
approximately $119,000 would have been recognized in the Consolidated Financial Statements.
As discussed in Note 2, the Company adopted FIN 48 in the year ended December 29, 2007. As a
result of the
implementation of FIN 48, the Company recognized no adjustment in the liability for
unrecognized income tax benefits as of the beginning of 2007. Although it is not reasonably
possible to estimate the amount by which these unrecognized tax benefits may increase or decrease
within the next twelve months due to uncertainties regarding the timing of examinations and the
amount of settlements that may be paid, if any, to tax authorities, the Company does not expect
unrecognized tax benefits to significantly change in the next twelve months. A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as follows:
F-49
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
Balance at December 30, 2006 |
|
$ |
3,267 |
|
Additions based on tax positions related to the current year |
|
|
10,350 |
|
Additions for tax positions of prior years |
|
|
|
|
Reductions for tax positions of prior years |
|
|
|
|
Settlements |
|
|
|
|
|
|
|
|
Balance at December 29, 2007 |
|
$ |
13,617 |
|
Additions based on tax positions related to the current year |
|
|
11,502 |
|
Additions for tax positions of prior years |
|
|
513 |
|
Reductions for tax positions of prior years |
|
|
(450 |
) |
Settlements |
|
|
|
|
|
|
|
|
Balance at January 3, 2009 |
|
$ |
25,182 |
|
|
|
|
|
The Companys policy is to recognize interest and/or penalties related to income tax matters
in income tax expense. The Company recognized $647 and $720 for interest and penalties classified
as income tax expense in the Consolidated Statement of Income for the years ended January 3, 2009
and December 29, 2007, respectively. At January 3, 2009, the Company had a total of $1,367 of
interest and penalties accrued related to unrecognized tax benefits.
In addition, a $248,118 valuation allowance existed for capital losses resulting from the sale
of U.S. apparel capital assets in 2001 and 2003. Of these capital losses $224,969 expired unused at
July 1, 2006. During the six months ended December 30, 2006, deferred tax assets and the related
valuation allowance were reduced by $23,149 for the remaining capital losses and $9,387 in foreign
net operating losses retained by Sara Lee.
(19) Stockholders Equity
The Company is authorized to issue up to 500,000 shares of common stock, par value $0.01 per
share, and up to 50,000 shares of preferred stock, par value $0.01 per share, and permits the
Companys board of directors, without stockholder approval, to increase or decrease the aggregate
number of shares of stock or the number of shares of stock of any class or series that the Company
is authorized to issue. At January 3, 2009 and December 29, 2007, 93,520 and 95,232 shares,
respectively, of common stock were issued and outstanding and no shares of preferred stock were
issued or outstanding. Included within the 50,000 shares of preferred stock, 500 shares are
designated Junior Participating Preferred Stock, Series A (the Series A Preferred Stock) and
reserved for issuance upon the exercise of rights under the rights agreement described below.
On February 1, 2007, the Company announced that the Board of Directors granted authority for
the repurchase of up to 10 million shares of the Companys common stock. Share repurchases are made
periodically in open-market transactions, and are subject to market conditions, legal requirements
and other factors. Additionally, management has been granted authority to establish a trading plan
under Rule 10b5-1 of the Exchange Act in connection with share repurchases, which will allow the
Company to repurchase shares in the open market during periods in which the stock trading window is
otherwise closed for our company and certain of the Companys officers and employees pursuant to
the Companys insider trading policy. During 2008, the Company purchased 1.2 million shares of
common stock at a cost of $30,275 (average price of $24.71). Since inception of the program, the
Company has
purchased 2.8 million shares of common stock at a cost of $74,747 (average price of $26.33).
The primary objective of the share repurchase program is to reduce the impact of dilution caused by
the exercise of options and vesting of stock unit awards.
F-50
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Preferred Stock Purchase Rights
Pursuant to a stockholder rights agreement entered into by the Company prior to the spin off,
one preferred stock purchase right will be distributed with and attached to each share of the
Companys common stock. Each right will entitle its holder, under the circumstances described
below, to purchase from the Company one one-thousandth of a share of the Series A Preferred Stock
at an exercise price of $75 per right. Initially, the rights will be associated with the Companys
common stock, and will be transferable with and only with the transfer of the underlying share of
common stock. Until a right is exercised, its holder, as such, will have no rights as a stockholder
with respect to such rights, including, without limitation, the right to vote or to receive
dividends.
The rights will become exercisable and separately certificated only upon the rights
distribution date, which will occur upon the earlier of: (i) ten days following a public
announcement by the Company that a person or group (an acquiring person) has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of its outstanding shares of
common stock (the date of the announcement being the stock acquisition date); or (ii) ten
business days (or later if so determined by our board of directors) following the commencement of
or public disclosure of an intention to commence a tender offer or exchange offer by a person if,
after acquiring the maximum number of securities sought pursuant to such offer, such person, or any
affiliate or associate of such person, would acquire, or obtain the right to acquire, beneficial
ownership of 15% or more of our outstanding shares of the Companys common stock.
Upon the Companys public announcement that a person or group has become an acquiring person,
each holder of a right (other than any acquiring person and certain related parties, whose rights
will have automatically become null and void) will have the right to receive, upon exercise, common
stock with a value equal to two times the exercise price of the right. In the event of certain
business combinations, each holder of a right (except rights which previously have been voided as
described above) will have the right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price of the right.
The Company may redeem the rights in whole, but not in part, at a price of $0.001 per right
(subject to adjustment and payable in cash, common stock or other consideration deemed appropriate
by the board of directors) at any time prior to the earlier of the stock acquisition date and the
rights expiration date. Immediately upon the action of the board of directors authorizing any
redemption, the rights will terminate and the holders of rights will only be entitled to receive
the redemption price. At any time after a person becomes an acquiring person and prior to the
earlier of (i) the time any person, together with all affiliates and associates, becomes the
beneficial owner of 50% or more of the Companys outstanding common stock and (ii) the occurrence
of a business combination, the board of directors may cause the Company to exchange for all or part
of the then-outstanding and exercisable rights shares of its common stock at an exchange ratio of
one common share per right, adjusted to reflect any stock split, stock dividend or similar
transaction.
(20) Relationship with Sara Lee and Related Entities
Effective upon the completion of the spin off on September 5, 2006, Sara Lee ceased to be a
related party to the Company. Prior to the spin off on September 5, 2006, the Company participated
in a number of Sara Lee administered programs such as cash funding systems, insurance programs,
employee benefit programs and workers compensation programs. In connection with the spin off from
Sara Lee, the Company assumed $299,000 in unfunded employee benefit liabilities for pension,
postretirement and other retirement benefit qualified and
nonqualified plans, and $37,554 of liabilities in connection with property insurance, workers
compensation, and other programs. The Company paid a dividend to Sara Lee of $1,950,000 and repaid
a loan in the amount of $450,000 during the six months ended December 30, 2006 which is reflected
in the Consolidated Statement of Stockholders Equity. An additional payment of approximately
$26,306 was paid to Sara Lee during the six months ended December 30, 2006 in order to satisfy all
outstanding payables from the Company to Sara Lee and Sara Lee subsidiaries.
F-51
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Included in the historical information (prior to September 5, 2006) are costs of certain
services such as business insurance, medical insurance, and employee benefit plans and allocations
for certain centralized administration costs for treasury, real estate, accounting, auditing, tax,
risk management, human resources and benefits administration. Centralized administration costs were
allocated to the Company based upon a proportional cost allocation method. These allocated costs
are included in the Selling, general and administrative expenses line of the Consolidated
Statement of Income. For the years ended January 3, 2009 and December 29, 2007, the total amount
allocated for centralized administration costs by Sara Lee was $0.
In connection with the spin off, the Company entered into the following agreements with Sara
Lee:
|
|
|
Master Separation Agreement. This agreement governs the contribution of Sara Lees
branded apparel Americas/Asia business to the Company, the subsequent distribution of
shares of Hanesbrands common stock to Sara Lee stockholders and other matters related to
Sara Lees relationship with the Company. To effect the contribution, Sara Lee agreed to
transfer all of the assets of the branded apparel Americas/Asia business to the Company and
the Company agreed to assume, perform and fulfill all of the liabilities of the branded
apparel Americas/Asia division in accordance with their respective terms, except for
certain liabilities to be retained by Sara Lee. |
|
|
|
|
Tax Sharing Agreement. This agreement governs the allocation of U.S. federal, state,
local, and foreign tax liability between the Company and Sara Lee, provides for
restrictions and indemnities in connection with the tax treatment of the distribution, and
addresses other tax-related matters. This agreement also provides that the Company is
liable for taxes incurred by Sara Lee that arise as a result of the Company taking or
failing to take certain actions that result in the distribution failing to meet the
requirements of a tax-free distribution under Sections 355 and 368(a)(1)(D) of the Internal
Revenue Code. The Company therefore has generally agreed that, among other things, it will
not take any actions that would result in any tax being imposed on the spin off. |
|
|
|
|
Employee Matters Agreement. This agreement allocates responsibility for employee
benefit matters on the date of and after the spin off, including the treatment of existing
welfare benefit plans, savings plans, equity-based plans and deferred compensation plans as
well as the Companys establishment of new plans. |
|
|
|
|
Master Transition Services Agreement. Under this agreement, the Company and Sara Lee
agreed to provide each other, for varying periods of time, with specified support services
related to among others, human resources and financial shared services, tax-shared services
and information technology services. Each of these services is provided for a fee, which
differs depending upon the service. |
|
|
|
|
Real Estate Matters Agreement. This agreement governs the manner in which Sara Lee will
transfer to or share with the Company various leased and owned properties associated with
the branded apparel business. |
|
|
|
|
Indemnification and Insurance Matters Agreement. This agreement provides general
indemnification provisions pursuant to which the Company and Sara Lee have agreed to
indemnify each other and their respective affiliates, agents, successors and assigns from
certain liabilities. This agreement also contains provisions governing the recovery by and
payment to the Company of insurance proceeds related to its business and arising on or
prior to the date of the distribution and its insurance coverage. |
|
|
|
|
Intellectual Property Matters Agreement. This agreement provides for the license by
Sara Lee to the Company of certain software, and governs the wind-down of the Companys use
of certain of Sara Lees trademarks (other than those being transferred to the Company in
connection with the spin off). |
The following is a discussion of the relationship with Sara Lee, the services provided and how
they have been accounted for in the Companys financial statements.
F-52
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(a) Allocation of Corporate Costs
Prior to the six months ended December 30, 2006, the costs of certain services that were
provided by Sara Lee to the Company were reflected in the Companys financial statements. Beginning
with the six months ended December 30, 2006, there were no costs allocated as the Companys
infrastructure was in place and did not significantly benefit from these services from Sara Lee.
The costs reflected in the financial statements for periods prior to the six months ended December
30, 2006 included charges for services such as business insurance, medical insurance and employee
benefit plans and allocations for certain centralized administration costs for treasury, real
estate, accounting, auditing, tax, risk management, human resources and benefits administration.
These allocations of centralized administration costs were determined using a proportional cost
allocation method on bases that the Company and Sara Lee considered to be reasonable, including
relevant operating profit, fixed assets, sales, and payroll. Allocated costs are included in the
Selling, general and administrative expenses line of the Consolidated Statements of Income. The
total amount allocated for centralized administration costs by Sara Lee in the years ended January
3, 2009 and December 29, 2007, the six months ended December 30, 2006 and the year ended July 1,
2006 was $0, $0, $0, and $37,478, respectively. These costs represent managements reasonable
allocation of the costs incurred. However, these amounts may not be representative of the costs
necessary for the Company to operate as a separate stand alone company. The Net transactions with
parent companies line item in the Consolidated Statements of Parent Companies Equity primarily
reflects dividends paid to parent companies and costs paid by Sara Lee on behalf of the Company.
(b) Other Transactions with Sara Lee Related Entities
During all periods presented prior to the spin off on September 5, 2006, the Companys
entities engaged in certain transactions with other Sara Lee businesses that are not part of the
Company, which included the purchase and sale of certain inventory, the exchange of services, and
royalty arrangements involving the use of trademarks or other intangibles.
Transactions with related entities are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
|
|
|
Ended |
|
|
Year Ended |
|
|
|
December 30, |
|
|
July 1, |
|
|
|
2006 |
|
|
2006 |
|
Sales to related entities |
|
$ |
5 |
|
|
$ |
1,630 |
|
Net royalty income |
|
|
2,026 |
|
|
|
1,554 |
|
Net service expense |
|
|
7 |
|
|
|
4,449 |
|
Interest expense |
|
|
7,878 |
|
|
|
23,036 |
|
Interest income |
|
|
4,926 |
|
|
|
5,807 |
|
Interest income and expense with related entities are reported in the Interest expense, net
line of the Consolidated Statements of Income. The remaining balances included in this line
represent interest with third parties.
(21) Business Segment Information
The Companys operations are managed and reported in five operating segments, each of which is
a reportable segment for financial reporting purposes: Innerwear, Outerwear, International, Hosiery
and Other. These segments are organized principally by product category and geographic location.
Management of each segment is responsible for the operations of these businesses but share a common
supply chain and media and marketing platforms.
The types of products and services from which each reportable segment derives its revenues are
as follows:
F-53
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
Innerwear sells basic branded products that are replenishment in nature under the
product categories of womens intimate apparel, mens underwear, kids underwear, socks,
thermals and sleepwear. Our direct-to-consumer retail operations are included within the
Innerwear segment. |
|
|
|
|
Outerwear sells basic branded products that are seasonal in nature under the product
categories of casualwear and activewear. |
|
|
|
|
International relates to the Latin America, Asia, Canada and Europe geographic locations
which sell products that span across the Innerwear, Outerwear and Hosiery reportable
segments. |
|
|
|
|
Hosiery sells products in categories such as panty hose and knee highs. |
|
|
|
|
Other is comprised of sales of nonfinished products such as yarn and certain other
materials in the United States and Latin America that maintain asset utilization at certain
manufacturing facilities and are expected to generate break even margins. |
The Company evaluates the operating performance of its segments based upon segment operating
profit, which is defined as operating profit before general corporate expenses, amortization of
trademarks and other identifiable intangibles and restructuring and related accelerated
depreciation charges and inventory write-offs. The accounting policies of the segments are
consistent with those described in Note 2, Summary of Significant Accounting Policies.
Certain prior year segment assets, depreciation and amortization expense and additions to
long-lived assets disclosures have been revised to conform to the current year presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
|
|
|
|
December 30, |
|
|
|
|
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
2006 |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
2,402,831 |
|
|
$ |
2,556,906 |
|
|
|
|
|
|
$ |
1,295,868 |
|
|
|
|
|
|
$ |
2,627,101 |
|
Outerwear |
|
|
1,180,747 |
|
|
|
1,221,845 |
|
|
|
|
|
|
|
616,298 |
|
|
|
|
|
|
|
1,140,703 |
|
International |
|
|
460,085 |
|
|
|
421,898 |
|
|
|
|
|
|
|
197,729 |
|
|
|
|
|
|
|
398,157 |
|
Hosiery |
|
|
227,924 |
|
|
|
266,198 |
|
|
|
|
|
|
|
144,066 |
|
|
|
|
|
|
|
290,125 |
|
Other |
|
|
21,724 |
|
|
|
56,920 |
|
|
|
|
|
|
|
19,381 |
|
|
|
|
|
|
|
62,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment net sales(1) |
|
|
4,293,311 |
|
|
|
4,523,767 |
|
|
|
|
|
|
|
2,273,342 |
|
|
|
|
|
|
|
4,518,895 |
|
Intersegment(2) |
|
|
(44,541 |
) |
|
|
(49,230 |
) |
|
|
|
|
|
|
(22,869 |
) |
|
|
|
|
|
|
(46,063 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
4,248,770 |
|
|
$ |
4,474,537 |
|
|
|
|
|
|
$ |
2,250,473 |
|
|
|
|
|
|
$ |
4,472,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
277,486 |
|
|
$ |
305,959 |
|
|
$ |
172,008 |
|
|
$ |
344,643 |
|
Outerwear |
|
|
68,769 |
|
|
|
71,364 |
|
|
|
21,316 |
|
|
|
74,170 |
|
International |
|
|
57,070 |
|
|
|
53,147 |
|
|
|
15,236 |
|
|
|
37,003 |
|
Hosiery |
|
|
71,596 |
|
|
|
76,917 |
|
|
|
36,205 |
|
|
|
39,069 |
|
Other |
|
|
(472 |
) |
|
|
(1,361 |
) |
|
|
(288 |
) |
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit |
|
|
474,449 |
|
|
|
506,026 |
|
|
|
244,477 |
|
|
|
495,012 |
|
Items not included in segment operating
profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses |
|
|
(52,143 |
) |
|
|
(60,213 |
) |
|
|
(46,927 |
) |
|
|
(52,482 |
) |
Amortization of trademarks and other
identifiable intangibles |
|
|
(12,019 |
) |
|
|
(6,205 |
) |
|
|
(3,466 |
) |
|
|
(9,031 |
) |
Gain on curtailment of postretirement
benefits |
|
|
|
|
|
|
32,144 |
|
|
|
28,467 |
|
|
|
|
|
Restructuring |
|
|
(50,263 |
) |
|
|
(43,731 |
) |
|
|
(11,278 |
) |
|
|
101 |
|
Inventory write-off included in cost of sales |
|
|
(18,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated depreciation included in cost of
sales |
|
|
(23,862 |
) |
|
|
(36,912 |
) |
|
|
(21,199 |
) |
|
|
|
|
Accelerated depreciation included in
selling, general and administrative expenses |
|
|
14 |
|
|
|
(2,540 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
|
|
317,480 |
|
|
|
388,569 |
|
|
|
190,074 |
|
|
|
433,600 |
|
Other (income) expense |
|
|
634 |
|
|
|
(5,235 |
) |
|
|
(7,401 |
) |
|
|
|
|
Interest expense, net |
|
|
(155,077 |
) |
|
|
(199,208 |
) |
|
|
(70,753 |
) |
|
|
(17,280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
$ |
163,037 |
|
|
$ |
184,126 |
|
|
$ |
111,920 |
|
|
$ |
416,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 29, |
|
|
|
2009 |
|
|
2007 |
|
Assets: |
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
1,310,416 |
|
|
$ |
1,247,441 |
|
Outerwear |
|
|
813,803 |
|
|
|
754,178 |
|
International |
|
|
192,741 |
|
|
|
232,142 |
|
Hosiery |
|
|
88,042 |
|
|
|
97,804 |
|
Other |
|
|
9,118 |
|
|
|
16,807 |
|
|
|
|
|
|
|
|
|
|
|
2,414,120 |
|
|
|
2,348,372 |
|
Corporate(3) |
|
|
1,119,929 |
|
|
|
1,091,111 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,534,049 |
|
|
$ |
3,439,483 |
|
|
|
|
|
|
|
|
F-55
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Depreciation and amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
43,970 |
|
|
$ |
41,700 |
|
|
$ |
26,335 |
|
|
$ |
59,787 |
|
Outerwear |
|
|
24,904 |
|
|
|
25,553 |
|
|
|
13,821 |
|
|
|
26,693 |
|
International |
|
|
2,257 |
|
|
|
4,306 |
|
|
|
1,678 |
|
|
|
3,735 |
|
Hosiery |
|
|
5,788 |
|
|
|
10,144 |
|
|
|
5,461 |
|
|
|
13,322 |
|
Other |
|
|
811 |
|
|
|
1,700 |
|
|
|
1,089 |
|
|
|
2,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,730 |
|
|
|
83,403 |
|
|
|
48,384 |
|
|
|
105,694 |
|
Corporate |
|
|
37,415 |
|
|
|
48,273 |
|
|
|
25,028 |
|
|
|
8,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and
amortization expense |
|
$ |
115,145 |
|
|
$ |
131,676 |
|
|
$ |
73,412 |
|
|
$ |
114,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Additions to long-lived assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear |
|
$ |
81,221 |
|
|
$ |
38,758 |
|
|
$ |
12,764 |
|
|
$ |
43,820 |
|
Outerwear |
|
|
85,178 |
|
|
|
26,881 |
|
|
|
7,775 |
|
|
|
52,230 |
|
International |
|
|
2,789 |
|
|
|
1,997 |
|
|
|
1,025 |
|
|
|
6,210 |
|
Hosiery |
|
|
765 |
|
|
|
2,029 |
|
|
|
1,749 |
|
|
|
5,500 |
|
Other |
|
|
47 |
|
|
|
693 |
|
|
|
147 |
|
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,000 |
|
|
|
70,358 |
|
|
|
23,460 |
|
|
|
108,369 |
|
Corporate |
|
|
16,957 |
|
|
|
26,268 |
|
|
|
6,304 |
|
|
|
1,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions to long-lived assets |
|
$ |
186,957 |
|
|
$ |
96,626 |
|
|
$ |
29,764 |
|
|
$ |
110,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes sales between segments. Such sales are at transfer prices that are at cost plus
markup or at prices equivalent to market value. |
|
(2) |
|
Intersegment sales included in the segments net sales are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
January 3, |
|
|
December 29, |
|
|
December 30, |
|
|
July 1, |
|
|
|
2009 |
|
|
2007 |
|
|
2006 |
|
|
2006 |
|
Innerwear |
|
$ |
7,093 |
|
|
$ |
6,529 |
|
|
$ |
2,287 |
|
|
$ |
5,293 |
|
Outerwear |
|
|
24,348 |
|
|
|
23,154 |
|
|
|
9,671 |
|
|
|
16,062 |
|
International |
|
|
1,121 |
|
|
|
2,757 |
|
|
|
1,355 |
|
|
|
3,406 |
|
Hosiery |
|
|
11,979 |
|
|
|
16,790 |
|
|
|
9,575 |
|
|
|
21,302 |
|
Other |
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
44,541 |
|
|
$ |
49,230 |
|
|
$ |
22,869 |
|
|
$ |
46,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Principally cash and equivalents, certain fixed assets, net deferred tax assets, goodwill,
trademarks and other identifiable intangibles, and certain other noncurrent assets. |
F-56
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
Sales to Wal-Mart, Target and Kohls were substantially in the Innerwear and Outerwear
segments and represented 27%, 16% and 6% of total sales in the year ended January 3, 2009,
respectively.
Worldwide sales by product category for Innerwear, Outerwear, Hosiery and Other were
$2,705,723, $1,321,582, $244,282 and $21,724, respectively, in the year ended January 3, 2009.
(22) Geographic Area Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended or at |
|
|
Six Months Ended or at |
|
|
Year Ended or at |
|
|
|
January 3, 2009 |
|
|
December 29, 2007 |
|
|
December 30, 2006 |
|
|
July 1, 2006 |
|
|
|
|
|
|
|
Long-Lived |
|
|
|
|
|
|
Long-Lived |
|
|
|
|
|
|
Long-Lived |
|
|
|
|
|
|
Long-Lived |
|
|
|
Sales |
|
|
Assets |
|
|
Sales |
|
|
Assets |
|
|
Sales |
|
|
Assets |
|
|
Sales |
|
|
Assets |
|
United States |
|
$ |
3,748,382 |
|
|
$ |
657,735 |
|
|
$ |
4,013,738 |
|
|
$ |
776,113 |
|
|
$ |
2,058,506 |
|
|
$ |
718,489 |
|
|
$ |
4,105,168 |
|
|
$ |
862,280 |
|
Mexico |
|
|
68,453 |
|
|
|
20,254 |
|
|
|
73,427 |
|
|
|
12,844 |
|
|
|
38,920 |
|
|
|
19,194 |
|
|
|
77,516 |
|
|
|
35,376 |
|
Central America
and the Caribbean
Basin |
|
|
13,550 |
|
|
|
269,837 |
|
|
|
26,851 |
|
|
|
255,319 |
|
|
|
23,793 |
|
|
|
185,371 |
|
|
|
3,185 |
|
|
|
120,161 |
|
Japan |
|
|
98,251 |
|
|
|
1,391 |
|
|
|
83,606 |
|
|
|
1,116 |
|
|
|
43,707 |
|
|
|
16,302 |
|
|
|
85,898 |
|
|
|
4,979 |
|
Canada |
|
|
139,971 |
|
|
|
4,961 |
|
|
|
124,500 |
|
|
|
8,902 |
|
|
|
57,898 |
|
|
|
6,008 |
|
|
|
118,798 |
|
|
|
6,828 |
|
Europe |
|
|
93,560 |
|
|
|
966 |
|
|
|
70,364 |
|
|
|
954 |
|
|
|
21,797 |
|
|
|
752 |
|
|
|
49,374 |
|
|
|
661 |
|
China |
|
|
9,397 |
|
|
|
73,043 |
|
|
|
6,561 |
|
|
|
11,863 |
|
|
|
2,028 |
|
|
|
252 |
|
|
|
1,680 |
|
|
|
158 |
|
Other |
|
|
77,206 |
|
|
|
39,530 |
|
|
|
75,490 |
|
|
|
13,035 |
|
|
|
3,824 |
|
|
|
29,204 |
|
|
|
29,583 |
|
|
|
1,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,248,770 |
|
|
$ |
1,067,717 |
|
|
|
4,474,537 |
|
|
$ |
1,080,146 |
|
|
|
2,250,473 |
|
|
$ |
975,572 |
|
|
|
4,471,202 |
|
|
$ |
1,032,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,248,770 |
|
|
|
|
|
|
$ |
4,474,537 |
|
|
|
|
|
|
$ |
2,250,473 |
|
|
|
|
|
|
$ |
4,472,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net sales by geographic region is attributed by customer location.
(23) Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
|
Total |
|
Year ended January
3, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
987,847 |
|
|
$ |
1,072,171 |
|
|
$ |
1,153,635 |
|
|
$ |
1,035,117 |
|
|
$ |
4,248,770 |
|
Gross profit |
|
|
344,964 |
|
|
|
380,956 |
|
|
|
341,784 |
|
|
|
309,646 |
|
|
|
1,377,350 |
|
Net income |
|
|
36,024 |
|
|
|
57,344 |
|
|
|
15,920 |
|
|
|
17,881 |
|
|
|
127,169 |
|
Basic earnings
per share |
|
|
0.38 |
|
|
|
0.61 |
|
|
|
0.17 |
|
|
|
0.19 |
|
|
|
1.35 |
|
Diluted earnings
per share |
|
|
0.38 |
|
|
|
0.60 |
|
|
|
0.17 |
|
|
|
0.19 |
|
|
|
1.34 |
|
Year ended December
29, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,039,894 |
|
|
$ |
1,121,907 |
|
|
$ |
1,153,606 |
|
|
$ |
1,159,130 |
|
|
$ |
4,474,537 |
|
Gross profit |
|
|
339,679 |
|
|
|
380,357 |
|
|
|
361,019 |
|
|
|
359,855 |
|
|
|
1,440,910 |
|
Net income |
|
|
12,004 |
|
|
|
25,434 |
|
|
|
38,896 |
|
|
|
49,793 |
|
|
|
126,127 |
|
Basic earnings
per share |
|
|
0.12 |
|
|
|
0.26 |
|
|
|
0.41 |
|
|
|
0.52 |
|
|
|
1.31 |
|
Diluted earnings
per share |
|
|
0.12 |
|
|
|
0.26 |
|
|
|
0.40 |
|
|
|
0.52 |
|
|
|
1.30 |
|
The amounts above include the impact of restructuring and curtailment as described in Notes 5
and 17, respectively, to the Consolidated Financial Statements. In the fourth quarter of the year
ended January 3, 2009, the Company recognized a one-time out of period adjustment to increase gross
profit approximately $8,000 related to the capitalization of certain inventory supplies to be on a
consistent basis across all business lines. The inconsistent application of the policy was not
material to prior years or quarterly periods.
F-57
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
(24) Consolidating Financial Information
In accordance with the indenture governing the Companys $500,000 Floating Rate Senior Notes
issued on December 14, 2006, certain of the Companys subsidiaries have guaranteed the Companys
obligations under the Floating Rate Senior Notes. The following presents the condensed
consolidating financial information separately for:
(i) Parent Company, the issuer of the guaranteed obligations. Parent Company includes
Hanesbrands Inc. and its 100% owned operating divisions which are not legal entities, and
excludes its subsidiaries which are legal entities;
(ii) For the period prior to the spin off from Sara Lee, divisional entities, on a combined
basis, representing operating divisions (not legal entities) 100% owned by Sara Lee Corporation
(former parent company);
(iii) Guarantor subsidiaries, on a combined basis, as specified in the indenture governing
the Floating Rate Senior Notes;
(iv) Non-guarantor subsidiaries, on a combined basis;
(v) Consolidating entries and eliminations representing adjustments to (a) eliminate
intercompany transactions between or among Parent Company, the guarantor subsidiaries and the
non-guarantor subsidiaries, (b) eliminate intercompany profit in inventory, (c) eliminate the
investments in our subsidiaries and (d) record consolidating entries; and
(vi) Parent Company, on a consolidated basis.
As described in Note 1, a separate legal entity did not exist for Hanesbrands Inc. prior to
the spin off from Sara Lee because a direct ownership relationship did not exist among the various
units comprising the Branded Apparel Americas and Asia Business. In connection with the spin off
from Sara Lee, each guarantor subsidiary became a 100% owned direct or indirect subsidiary of
Hanesbrands Inc. as of September 5, 2006. Therefore, a parent company entity is not presented for
periods prior to the spin off, but divisional entities of Sara Lee are presented.
The Floating Rate Senior Notes are fully and unconditionally guaranteed on a joint and several
basis by each guarantor subsidiary, each of which is wholly owned, directly or indirectly, by
Hanesbrands Inc. Each entity in the consolidating financial information follows the same accounting
policies as described in the consolidated financial statements, except for the use by the Parent
Company and guarantor subsidiaries of the equity method of accounting to reflect ownership
interests in subsidiaries which are eliminated upon consolidation.
Certain prior period amounts have been reclassified to conform to the current year
presentation and legal entity structure relating to the classification of the investment in
subsidiary balances and related equity in earnings of subsidiaries. Prior period presentation has
been revised to combine Parent and Divisional Entities columns for periods after the spin off from
Sara Lee on September 5, 2006.
F-58
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Income Year Ended January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidating |
|
Net sales |
|
$ |
4,456,838 |
|
|
$ |
432,209 |
|
|
$ |
2,839,424 |
|
|
$ |
(3,479,701 |
) |
|
$ |
4,248,770 |
|
Cost of sales |
|
|
3,520,096 |
|
|
|
169,115 |
|
|
|
2,537,883 |
|
|
|
(3,355,674 |
) |
|
|
2,871,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
936,742 |
|
|
|
263,094 |
|
|
|
301,541 |
|
|
|
(124,027 |
) |
|
|
1,377,350 |
|
Selling, general and
administrative expenses |
|
|
839,023 |
|
|
|
76,139 |
|
|
|
94,281 |
|
|
|
164 |
|
|
|
1,009,607 |
|
Restructuring |
|
|
34,313 |
|
|
|
375 |
|
|
|
15,575 |
|
|
|
|
|
|
|
50,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
|
63,406 |
|
|
|
186,580 |
|
|
|
191,685 |
|
|
|
(124,191 |
) |
|
|
317,480 |
|
Other income |
|
|
(634 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(634 |
) |
Equity in earnings (loss)
of subsidiaries |
|
|
170,714 |
|
|
|
128,359 |
|
|
|
|
|
|
|
(299,073 |
) |
|
|
|
|
Interest expense, net |
|
|
103,919 |
|
|
|
33,462 |
|
|
|
17,696 |
|
|
|
|
|
|
|
155,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income tax expense |
|
|
130,835 |
|
|
|
281,477 |
|
|
|
173,989 |
|
|
|
(423,264 |
) |
|
|
163,037 |
|
Income tax expense |
|
|
3,666 |
|
|
|
9,312 |
|
|
|
22,890 |
|
|
|
|
|
|
|
35,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
127,169 |
|
|
$ |
272,165 |
|
|
$ |
151,099 |
|
|
$ |
(423,264 |
) |
|
$ |
127,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Income Year Ended December 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidating |
|
Net sales |
|
$ |
4,421,464 |
|
|
$ |
875,358 |
|
|
$ |
2,532,886 |
|
|
$ |
(3,355,171 |
) |
|
$ |
4,474,537 |
|
Cost of sales |
|
|
3,527,794 |
|
|
|
640,341 |
|
|
|
2,240,203 |
|
|
|
(3,374,711 |
) |
|
|
3,033,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
893,670 |
|
|
|
235,017 |
|
|
|
292,683 |
|
|
|
19,540 |
|
|
|
1,440,910 |
|
Selling, general and
administrative expenses |
|
|
923,127 |
|
|
|
4,096 |
|
|
|
112,332 |
|
|
|
1,199 |
|
|
|
1,040,754 |
|
Gain on curtailment of
postretirement benefits |
|
|
(32,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,144 |
) |
Restructuring |
|
|
39,625 |
|
|
|
72 |
|
|
|
4,034 |
|
|
|
|
|
|
|
43,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
|
(36,938 |
) |
|
|
230,849 |
|
|
|
176,317 |
|
|
|
18,341 |
|
|
|
388,569 |
|
Other expenses |
|
|
5,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,235 |
|
Equity in earnings (loss)
of subsidiaries |
|
|
339,034 |
|
|
|
137,571 |
|
|
|
|
|
|
|
(476,605 |
) |
|
|
|
|
Interest expense, net |
|
|
154,367 |
|
|
|
42,299 |
|
|
|
2,544 |
|
|
|
(2 |
) |
|
|
199,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income tax expense |
|
|
142,494 |
|
|
|
326,121 |
|
|
|
173,773 |
|
|
|
(458,262 |
) |
|
|
184,126 |
|
Income tax expense |
|
|
16,367 |
|
|
|
13,380 |
|
|
|
28,252 |
|
|
|
|
|
|
|
57,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
126,127 |
|
|
$ |
312,741 |
|
|
$ |
145,521 |
|
|
$ |
(458,262 |
) |
|
$ |
126,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Income Six Months Ended December 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
2,239,788 |
|
|
$ |
298,380 |
|
|
$ |
1,197,146 |
|
|
$ |
(1,484,841 |
) |
|
$ |
2,250,473 |
|
Cost of sales |
|
|
1,583,683 |
|
|
|
412,274 |
|
|
|
1,042,006 |
|
|
|
(1,507,844 |
) |
|
|
1,530,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
656,105 |
|
|
|
(113,894 |
) |
|
|
155,140 |
|
|
|
23,003 |
|
|
|
720,354 |
|
Selling, general and
administrative expenses |
|
|
452,483 |
|
|
|
57,249 |
|
|
|
60,291 |
|
|
|
(22,554 |
) |
|
|
547,469 |
|
Gain on curtailment of
postretirement benefits |
|
|
(28,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,467 |
) |
Restructuring |
|
|
2,970 |
|
|
|
2,036 |
|
|
|
6,272 |
|
|
|
|
|
|
|
11,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
|
229,119 |
|
|
|
(173,179 |
) |
|
|
88,577 |
|
|
|
45,557 |
|
|
|
190,074 |
|
Other expenses |
|
|
7,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,401 |
|
Equity in earnings (loss)
of subsidiaries |
|
|
(62,193 |
) |
|
|
87,559 |
|
|
|
|
|
|
|
(25,366 |
) |
|
|
|
|
Interest expense, net |
|
|
56,234 |
|
|
|
15,043 |
|
|
|
(524 |
) |
|
|
|
|
|
|
70,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income tax expense |
|
|
103,291 |
|
|
|
(100,663 |
) |
|
|
89,101 |
|
|
|
20,191 |
|
|
|
111,920 |
|
Income tax expense |
|
|
29,152 |
|
|
|
3,113 |
|
|
|
5,516 |
|
|
|
|
|
|
|
37,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
74,139 |
|
|
$ |
(103,776 |
) |
|
$ |
83,585 |
|
|
$ |
20,191 |
|
|
$ |
74,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Income Year Ended July 1, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Divisional |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Entities |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
4,645,494 |
|
|
$ |
947,083 |
|
|
$ |
2,453,589 |
|
|
$ |
(3,573,334 |
) |
|
$ |
4,472,832 |
|
Cost of sales |
|
|
3,687,964 |
|
|
|
791,992 |
|
|
|
2,075,249 |
|
|
|
(3,567,705 |
) |
|
|
2,987,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
957,530 |
|
|
|
155,091 |
|
|
|
378,340 |
|
|
|
(5,629 |
) |
|
|
1,485,332 |
|
Selling, general and
administrative expenses |
|
|
774,972 |
|
|
|
162,128 |
|
|
|
113,508 |
|
|
|
1,225 |
|
|
|
1,051,833 |
|
Restructuring |
|
|
701 |
|
|
|
(201 |
) |
|
|
(601 |
) |
|
|
|
|
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
|
181,857 |
|
|
|
(6,836 |
) |
|
|
265,433 |
|
|
|
(6,854 |
) |
|
|
433,600 |
|
Equity in earnings (loss)
of subsidiaries |
|
|
|
|
|
|
234,515 |
|
|
|
|
|
|
|
(234,515 |
) |
|
|
|
|
Interest expense, net |
|
|
1,605 |
|
|
|
8,820 |
|
|
|
6,855 |
|
|
|
|
|
|
|
17,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income tax expense |
|
|
180,252 |
|
|
|
218,859 |
|
|
|
258,578 |
|
|
|
(241,369 |
) |
|
|
416,320 |
|
Income tax expense |
|
|
|
|
|
|
83,291 |
|
|
|
10,536 |
|
|
|
|
|
|
|
93,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
180,252 |
|
|
$ |
135,568 |
|
|
$ |
248,042 |
|
|
$ |
(241,369 |
) |
|
$ |
322,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Non |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
16,210 |
|
|
$ |
2,355 |
|
|
$ |
48,777 |
|
|
$ |
|
|
|
$ |
67,342 |
|
Trade accounts receivable |
|
|
(4,956 |
) |
|
|
6,096 |
|
|
|
406,305 |
|
|
|
(2,515 |
) |
|
|
404,930 |
|
Inventories |
|
|
1,078,048 |
|
|
|
49,581 |
|
|
|
295,946 |
|
|
|
(133,045 |
) |
|
|
1,290,530 |
|
Deferred tax assets and other
current assets |
|
|
288,208 |
|
|
|
10,158 |
|
|
|
49,734 |
|
|
|
(577 |
) |
|
|
347,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,377,510 |
|
|
|
68,190 |
|
|
|
800,762 |
|
|
|
(136,137 |
) |
|
|
2,110,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, net |
|
|
208,844 |
|
|
|
13,914 |
|
|
|
365,431 |
|
|
|
|
|
|
|
588,189 |
|
Trademarks and other
identifiable intangibles, net |
|
|
27,199 |
|
|
|
114,630 |
|
|
|
5,614 |
|
|
|
|
|
|
|
147,443 |
|
Goodwill |
|
|
232,882 |
|
|
|
16,934 |
|
|
|
72,186 |
|
|
|
|
|
|
|
322,002 |
|
Investments in subsidiaries |
|
|
545,866 |
|
|
|
649,513 |
|
|
|
|
|
|
|
(1,195,379 |
) |
|
|
|
|
Deferred tax assets and other
noncurrent assets |
|
|
91,401 |
|
|
|
397,802 |
|
|
|
(37,980 |
) |
|
|
(85,133 |
) |
|
|
366,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,483,702 |
|
|
$ |
1,260,983 |
|
|
$ |
1,206,013 |
|
|
$ |
(1,416,649 |
) |
|
$ |
3,534,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
161,734 |
|
|
$ |
3,980 |
|
|
$ |
74,157 |
|
|
$ |
85,647 |
|
|
$ |
325,518 |
|
Accrued liabilities |
|
|
229,631 |
|
|
|
30,875 |
|
|
|
57,555 |
|
|
|
(2,669 |
) |
|
|
315,392 |
|
Notes payable |
|
|
|
|
|
|
|
|
|
|
61,734 |
|
|
|
|
|
|
|
61,734 |
|
Current portion of long-term debt |
|
|
|
|
|
|
|
|
|
|
45,640 |
|
|
|
|
|
|
|
45,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
391,365 |
|
|
|
34,855 |
|
|
|
239,086 |
|
|
|
82,978 |
|
|
|
748,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,483,930 |
|
|
|
450,000 |
|
|
|
196,977 |
|
|
|
|
|
|
|
2,130,907 |
|
Other noncurrent liabilities |
|
|
423,252 |
|
|
|
7,344 |
|
|
|
34,968 |
|
|
|
4,139 |
|
|
|
469,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,298,547 |
|
|
|
492,199 |
|
|
|
471,031 |
|
|
|
87,117 |
|
|
|
3,348,894 |
|
Stockholders equity |
|
|
185,155 |
|
|
|
768,784 |
|
|
|
734,982 |
|
|
|
(1,503,766 |
) |
|
|
185,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity |
|
$ |
2,483,702 |
|
|
$ |
1,260,983 |
|
|
$ |
1,206,013 |
|
|
$ |
(1,416,649 |
) |
|
$ |
3,534,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-61
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet December 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
Non |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
84,476 |
|
|
$ |
6,329 |
|
|
$ |
83,431 |
|
|
$ |
|
|
|
$ |
174,236 |
|
Trade accounts receivable |
|
|
(13,135 |
) |
|
|
4,389 |
|
|
|
586,327 |
|
|
|
(2,512 |
) |
|
|
575,069 |
|
Inventories |
|
|
827,312 |
|
|
|
47,443 |
|
|
|
281,224 |
|
|
|
(38,927 |
) |
|
|
1,117,052 |
|
Deferred tax assets and
other current assets |
|
|
196,451 |
|
|
|
3,888 |
|
|
|
30,013 |
|
|
|
(2,375 |
) |
|
|
227,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,095,104 |
|
|
|
62,049 |
|
|
|
980,995 |
|
|
|
(43,814 |
) |
|
|
2,094,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, net |
|
|
286,081 |
|
|
|
6,979 |
|
|
|
241,226 |
|
|
|
|
|
|
|
534,286 |
|
Trademarks and other
identifiable intangibles,
net |
|
|
25,955 |
|
|
|
119,682 |
|
|
|
5,629 |
|
|
|
|
|
|
|
151,266 |
|
Goodwill |
|
|
232,882 |
|
|
|
16,934 |
|
|
|
60,609 |
|
|
|
|
|
|
|
310,425 |
|
Investments in subsidiaries |
|
|
424,746 |
|
|
|
585,168 |
|
|
|
|
|
|
|
(1,009,914 |
) |
|
|
|
|
Deferred tax assets and
other noncurrent assets |
|
|
386,070 |
|
|
|
249,621 |
|
|
|
(232,117 |
) |
|
|
(54,402 |
) |
|
|
349,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,450,838 |
|
|
$ |
1,040,433 |
|
|
$ |
1,056,342 |
|
|
$ |
(1,108,130 |
) |
|
$ |
3,439,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
127,887 |
|
|
$ |
4,344 |
|
|
$ |
71,288 |
|
|
$ |
85,647 |
|
|
$ |
289,166 |
|
Accrued liabilities |
|
|
299,078 |
|
|
|
22,537 |
|
|
|
61,294 |
|
|
|
(2,670 |
) |
|
|
380,239 |
|
Notes payable |
|
|
|
|
|
|
|
|
|
|
19,577 |
|
|
|
|
|
|
|
19,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
426,965 |
|
|
|
26,881 |
|
|
|
152,159 |
|
|
|
82,977 |
|
|
|
688,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,615,250 |
|
|
|
450,000 |
|
|
|
250,000 |
|
|
|
|
|
|
|
2,315,250 |
|
Other noncurrent liabilities |
|
|
119,719 |
|
|
|
1,773 |
|
|
|
19,854 |
|
|
|
5,001 |
|
|
|
146,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,161,934 |
|
|
|
478,654 |
|
|
|
422,013 |
|
|
|
87,978 |
|
|
|
3,150,579 |
|
Stockholders equity |
|
|
288,904 |
|
|
|
561,779 |
|
|
|
634,329 |
|
|
|
(1,196,108 |
) |
|
|
288,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity |
|
$ |
2,450,838 |
|
|
$ |
1,040,433 |
|
|
$ |
1,056,342 |
|
|
$ |
(1,108,130 |
) |
|
$ |
3,439,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
|
|
Year Ended January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by (used in) operating activities |
|
$ |
18,786 |
|
|
$ |
139,463 |
|
|
$ |
319,393 |
|
|
$ |
(300,245 |
) |
|
$ |
177,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(32,129 |
) |
|
|
(10,813 |
) |
|
|
(144,015 |
) |
|
|
|
|
|
|
(186,957 |
) |
Acquisitions of businesses, net of cash
acquired |
|
|
|
|
|
|
|
|
|
|
(14,655 |
) |
|
|
|
|
|
|
(14,655 |
) |
Proceeds from sales of assets |
|
|
20,612 |
|
|
|
38 |
|
|
|
4,358 |
|
|
|
|
|
|
|
25,008 |
|
Other |
|
|
2,047 |
|
|
|
(91 |
) |
|
|
(1,772 |
) |
|
|
(828 |
) |
|
|
(644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(9,470 |
) |
|
|
(10,866 |
) |
|
|
(156,084 |
) |
|
|
(828 |
) |
|
|
(177,248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on capital lease obligations |
|
|
(878 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
(892 |
) |
Borrowings on notes payable |
|
|
|
|
|
|
|
|
|
|
602,627 |
|
|
|
|
|
|
|
602,627 |
|
Repayments on notes payable |
|
|
|
|
|
|
|
|
|
|
(560,066 |
) |
|
|
|
|
|
|
(560,066 |
) |
Cost of debt issuance |
|
|
(48 |
) |
|
|
(10 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
(69 |
) |
Borrowings on revolving loan facility |
|
|
791,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
791,000 |
|
Repayments on revolving loan facility |
|
|
(791,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(791,000 |
) |
Repayment of debt under credit facilities |
|
|
(125,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125,000 |
) |
Repurchase of floating rate senior notes |
|
|
(4,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,354 |
) |
Borrowings on accounts receivable
securitization |
|
|
|
|
|
|
|
|
|
|
20,944 |
|
|
|
|
|
|
|
20,944 |
|
Repayments on accounts receivable
securitization |
|
|
|
|
|
|
|
|
|
|
(28,327 |
) |
|
|
|
|
|
|
(28,327 |
) |
Proceeds from stock options exercised |
|
|
2,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,191 |
|
Stock repurchases |
|
|
(30,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,275 |
) |
Transaction with Sara Lee Corporation |
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
Other |
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483 |
|
Net transactions with related entities |
|
|
62,299 |
|
|
|
(132,561 |
) |
|
|
(230,811 |
) |
|
|
301,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities |
|
|
(77,582 |
) |
|
|
(132,571 |
) |
|
|
(195,658 |
) |
|
|
301,073 |
|
|
|
(104,738 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
(2,305 |
) |
|
|
|
|
|
|
(2,305 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
(68,266 |
) |
|
|
(3,974 |
) |
|
|
(34,654 |
) |
|
|
|
|
|
|
(106,894 |
) |
Cash and cash equivalents at beginning of year |
|
|
84,476 |
|
|
|
6,329 |
|
|
|
83,431 |
|
|
|
|
|
|
|
174,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
16,210 |
|
|
$ |
2,355 |
|
|
$ |
48,777 |
|
|
$ |
|
|
|
$ |
67,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
|
|
Year Ended December 29, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by (used in)
operating activities |
|
$ |
1,021,014 |
|
|
$ |
138,162 |
|
|
$ |
(323,563 |
) |
|
$ |
(476,573 |
) |
|
$ |
359,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant
and equipment |
|
|
(43,206 |
) |
|
|
(9,588 |
) |
|
|
(38,832 |
) |
|
|
|
|
|
|
(91,626 |
) |
Acquisitions of businesses,
net of cash acquired |
|
|
|
|
|
|
|
|
|
|
(20,243 |
) |
|
|
|
|
|
|
(20,243 |
) |
Acquisition of trademark |
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
(5,000 |
) |
Proceeds from sales of assets |
|
|
9,180 |
|
|
|
5,396 |
|
|
|
1,997 |
|
|
|
|
|
|
|
16,573 |
|
Other |
|
|
(1,962 |
) |
|
|
566 |
|
|
|
(541 |
) |
|
|
1,148 |
|
|
|
(789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) investing
activities |
|
|
(35,988 |
) |
|
|
(8,626 |
) |
|
|
(57,619 |
) |
|
|
1,148 |
|
|
|
(101,085 |
) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on
capital lease obligations |
|
|
(1,170 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
(1,196 |
) |
Borrowings on notes payable |
|
|
|
|
|
|
|
|
|
|
66,413 |
|
|
|
|
|
|
|
66,413 |
|
Repayments on notes payable |
|
|
|
|
|
|
|
|
|
|
(88,970 |
) |
|
|
|
|
|
|
(88,970 |
) |
Cost of debt issuance |
|
|
(3,135 |
) |
|
|
(131 |
) |
|
|
|
|
|
|
|
|
|
|
(3,266 |
) |
Repayment of debt under
credit facilities |
|
|
(428,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(428,125 |
) |
Borrowings on accounts
receivable securitization |
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
Proceeds from stock options
exercised |
|
|
6,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,189 |
|
Stock repurchases |
|
|
(44,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,473 |
) |
Other |
|
|
883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
883 |
|
Decrease in bank overdraft,
net |
|
|
|
|
|
|
|
|
|
|
(834 |
) |
|
|
|
|
|
|
(834 |
) |
Net transactions with
related entities |
|
|
(491,679 |
) |
|
|
(121,799 |
) |
|
|
138,053 |
|
|
|
475,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing
activities |
|
|
(961,510 |
) |
|
|
(121,956 |
) |
|
|
364,662 |
|
|
|
475,425 |
|
|
|
(243,379 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign
exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
3,687 |
|
|
|
|
|
|
|
3,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
and cash equivalents |
|
|
23,516 |
|
|
|
7,580 |
|
|
|
(12,833 |
) |
|
|
|
|
|
|
18,263 |
|
Cash and cash equivalents at
beginning of year |
|
|
60,960 |
|
|
|
(1,251 |
) |
|
|
96,264 |
|
|
|
|
|
|
|
155,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year |
|
$ |
84,476 |
|
|
$ |
6,329 |
|
|
$ |
83,431 |
|
|
$ |
|
|
|
$ |
174,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
|
|
Six Months Ended December 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Company |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by (used in)
operating activities |
|
$ |
275,160 |
|
|
$ |
(538,152 |
) |
|
$ |
123,226 |
|
|
$ |
275,845 |
|
|
$ |
136,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant
and equipment |
|
|
(14,077 |
) |
|
|
(2,527 |
) |
|
|
(13,160 |
) |
|
|
|
|
|
|
(29,764 |
) |
Acquisition of businesses,
net of cash acquired |
|
|
|
|
|
|
|
|
|
|
(6,666 |
) |
|
|
|
|
|
|
(6,666 |
) |
Proceeds from sales of assets |
|
|
1,269 |
|
|
|
4,123 |
|
|
|
7,557 |
|
|
|
|
|
|
|
12,949 |
|
Other |
|
|
132,988 |
|
|
|
(114,692 |
) |
|
|
(16,760 |
) |
|
|
(1,086 |
) |
|
|
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) investing
activities |
|
|
120,180 |
|
|
|
(113,096 |
) |
|
|
(29,029 |
) |
|
|
(1,086 |
) |
|
|
(23,031 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on
capital lease obligations |
|
|
(3,046 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
(3,088 |
) |
Borrowings on notes payable |
|
|
|
|
|
|
|
|
|
|
10,741 |
|
|
|
|
|
|
|
10,741 |
|
Repayments on notes payable |
|
|
|
|
|
|
|
|
|
|
(3,508 |
) |
|
|
|
|
|
|
(3,508 |
) |
Issuance of debt under
credit facilities |
|
|
2,150,000 |
|
|
|
450,000 |
|
|
|
|
|
|
|
|
|
|
|
2,600,000 |
|
Cost of debt issuance |
|
|
(41,958 |
) |
|
|
(8,290 |
) |
|
|
|
|
|
|
|
|
|
|
(50,248 |
) |
Payments to Sara Lee
Corporation |
|
|
(1,974,606 |
) |
|
|
(450,000 |
) |
|
|
|
|
|
|
|
|
|
|
(2,424,606 |
) |
Repayment of debt under
credit facilities |
|
|
(106,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106,625 |
) |
Issuance of Floating Rate
Senior Notes |
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
Repayment of bridge loan
facility |
|
|
(500,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500,000 |
) |
Proceeds from stock options
exercised |
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139 |
|
Increase (decrease) in bank
overdraft, net |
|
|
|
|
|
|
(275,385 |
) |
|
|
834 |
|
|
|
|
|
|
|
(274,551 |
) |
Net transactions with parent
companies |
|
|
(771,890 |
) |
|
|
1,523,794 |
|
|
|
(283,890 |
) |
|
|
(274,759 |
) |
|
|
193,255 |
|
Net transactions with
related entities |
|
|
152,551 |
|
|
|
(321,841 |
) |
|
|
(26,091 |
) |
|
|
|
|
|
|
(195,381 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing
activities |
|
|
(595,435 |
) |
|
|
918,236 |
|
|
|
(301,914 |
) |
|
|
(274,759 |
) |
|
|
(253,872 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign
exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
(1,455 |
) |
|
|
|
|
|
|
(1,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
and cash equivalents |
|
|
(200,095 |
) |
|
|
266,988 |
|
|
|
(209,172 |
) |
|
|
|
|
|
|
(142,279 |
) |
Cash and cash equivalents at
beginning of period |
|
|
261,055 |
|
|
|
(268,239 |
) |
|
|
305,436 |
|
|
|
|
|
|
|
298,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period |
|
$ |
60,960 |
|
|
$ |
(1,251 |
) |
|
$ |
96,264 |
|
|
$ |
|
|
|
$ |
155,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-65
HANESBRANDS
Notes to Consolidated Financial Statements (Continued)
Years ended January 3, 2009 and December 29, 2007, six months ended December 30, 2006
and year ended July 1, 2006
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
|
|
Year Ended July 1, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating |
|
|
|
|
|
|
Divisional |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
Entries and |
|
|
|
|
|
|
Entities |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net cash provided by (used in)
operating activities |
|
$ |
1,014,001 |
|
|
$ |
(312,762 |
) |
|
$ |
427,471 |
|
|
$ |
(618,089 |
) |
|
$ |
510,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant
and equipment |
|
|
(60,878 |
) |
|
|
(5,900 |
) |
|
|
(43,301 |
) |
|
|
|
|
|
|
(110,079 |
) |
Acquisition of businesses,
net of cash acquired |
|
|
|
|
|
|
(2,436 |
) |
|
|
|
|
|
|
|
|
|
|
(2,436 |
) |
Proceeds from sales of assets |
|
|
4,731 |
|
|
|
84 |
|
|
|
705 |
|
|
|
|
|
|
|
5,520 |
|
Other |
|
|
(4,433 |
) |
|
|
(4,636 |
) |
|
|
1,741 |
|
|
|
3,662 |
|
|
|
(3,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) investing
activities |
|
|
(60,580 |
) |
|
|
(12,888 |
) |
|
|
(40,855 |
) |
|
|
3,662 |
|
|
|
(110,661 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on
capital lease obligations
|
|
|
(5,227 |
) |
|
|
(315 |
) |
|
|
|
|
|
|
|
|
|
|
(5,542 |
) |
Borrowings on notes payable |
|
|
|
|
|
|
|
|
|
|
7,984 |
|
|
|
|
|
|
|
7,984 |
|
Repayments on notes payable |
|
|
|
|
|
|
|
|
|
|
(93,073 |
) |
|
|
|
|
|
|
(93,073 |
) |
Increase in bank overdraft,
net |
|
|
|
|
|
|
275,385 |
|
|
|
|
|
|
|
|
|
|
|
275,385 |
|
Borrowings (repayments) on
notes payable to related
entities, net |
|
|
119,012 |
|
|
|
(1,205 |
) |
|
|
26,091 |
|
|
|
|
|
|
|
143,898 |
|
Net transactions with parent
companies |
|
|
(537,505 |
) |
|
|
(1,192,887 |
) |
|
|
(135,997 |
) |
|
|
614,427 |
|
|
|
(1,251,962 |
) |
Net transactions with
related entities |
|
|
(259,026 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(259,026 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing
activities |
|
|
(682,746 |
) |
|
|
(919,022 |
) |
|
|
(194,995 |
) |
|
|
614,427 |
|
|
|
(1,182,336 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign
exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
(171 |
) |
|
|
|
|
|
|
(171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
and cash equivalents |
|
|
270,675 |
|
|
|
(1,244,672 |
) |
|
|
191,450 |
|
|
|
|
|
|
|
(782,547 |
) |
Cash and cash equivalents at
beginning of year |
|
|
(9,620 |
) |
|
|
976,433 |
|
|
|
113,986 |
|
|
|
|
|
|
|
1,080,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year |
|
$ |
261,055 |
|
|
$ |
(268,239 |
) |
|
$ |
305,436 |
|
|
$ |
|
|
|
$ |
298,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-66
EX-10.4
Exhibit 10.4
HANESBRANDS INC. OMNIBUS INCENTIVE PLAN OF 2006
NON-EMPLOYEE DIRECTOR
RESTRICTED STOCK UNIT GRANT NOTICE AND AGREEMENT
To: [Name] (referred to as you or Grantee, in this agreement)
Hanesbrands Inc. (the Company) is pleased to confirm that you have been awarded a Restricted
Stock Unit ( RSU) Award (this Award). This Award is subject to the terms of this Restricted
Stock Unit Grant Notice and Agreement (this Agreement) and is made under the Hanesbrands Inc.
Omnibus Incentive Plan of 2006 (the Plan) which is incorporated into this Agreement by reference.
1. Grant of Restricted Stock Units. Subject to the restrictions, limitations, terms and
conditions specified in the Plan, the Participation Guide/Prospectus for the Hanesbrands Inc.
Omnibus Incentive Plan of 2006 (the Plan Prospectus), and this Agreement, the Company hereby
Awards to you effective [date] (the Award Date), [number] RSUs which are considered Stock Awards
under the Plan. This Award represents your equity retainer for service as a member of the Board of
Directors of Hanesbrands Inc. (the Board) in [year].
2. Dividend Equivalents. Subject to the restrictions, limitations and conditions described in
the Plan, dividend equivalents payable on the RSUs into which they are to be converted will be
accrued on behalf of the Grantee at the time that cash dividends are otherwise paid to owners of
Hanesbrands Inc. common stock. Interest will be credited on accrued dividend equivalent balances
and will vest and will be paid to the Grantee when the RSUs vest.
3. Vesting. The RSUs will vest and become payable, together with a payment in cash equal to
the value of any fractional shares, in shares of common stock on a one-for-one basis on the first
anniversary of the Award Date (the Vesting Date) if you are continuing to serve as a member of
the Board on such one-year anniversary; provided that (i) if your service as a member of the Board
is terminated prior to such one-year anniversary due to your death or permanent and total
disability, all unvested RSUs will vest as of the date on which the Company is notified in writing
of your death or the date on which the Company determines that you are permanently and totally
disabled, and will become payable, together with a payment in cash equal to the value of any
fractional shares, in shares of common stock as soon as reasonably practicable thereafter, and (ii)
if your service as a member of the Board is terminated prior to such one-year anniversary for any
other reason, that number of RSUs determined by (A) dividing the number of RSUs granted by twelve,
and (B) multiplying the result by the number of months that have passed in the calendar year for
which the RSUs represent your equity retainer (including any portion of a month that has passed)
as of the date of termination (the Pro Rata RSUs) will vest as of the date of termination, and
will become payable, together with a payment in cash equal to the value of any fractional shares,
in shares of common stock as soon as reasonably practicable thereafter, and all RSUs other than the
Pro Rata RSUs shall be forfeited. The RSUs are not transferable by you by means of sale,
assignment, exchange, pledge, or otherwise until vested. You are personally responsible for the
payment of all taxes related to vesting of the RSUs.
4. Adjustments. If the number of outstanding shares of Company common stock is changed as a
result of a stock split or the like without additional consideration to the Company, the number of
RSUs subject to this Award shall be adjusted to correspond to the change in the outstanding shares
of common stock.
5. Rights as a Stockholder. Except as provided in Paragraph 2 above (regarding dividends),
You shall have no rights as a stockholder of the Company in respect of the RSUs, including the
right to vote, until and unless the ownership of Shares represented by the RSUs has been
distributed to you.
6. No Rights to Continued Service. Nothing in this Agreement, the Plan Prospectus, or the
Plan confers on any Grantee any right to continue on the Board. You further acknowledge that this
Award is for future services to the Company and is not under any circumstances to be considered
compensation for past services.
7. Miscellaneous.
a. Interpretations. Any dispute, disagreement or question which arises under, or as a
result of, or in any way relates to the interpretation, construction or application of this
Agreement, the Plan Prospectus, or the Plan will be determined and resolved by the
Compensation Committee of the Companys Board of Directors (Committee). Such
determination or resolution by the Committee will be final, binding and conclusive for all
purposes.
b. Modification. The Committee may amend or modify this Award in any manner to the
extent that the Committee would have had the authority under the Plan initially to award
such Award, provided that no such amendment or modification shall impair your rights under
this Agreement without your consent. This Agreement generally may be amended, modified or
supplemented only by an instrument in writing signed by both parties hereto.
Notwithstanding anything in this Agreement, the Plan Prospectus, or the Plan to the
contrary, this Award may be amended by the Company without the consent of the Grantee,
including but not limited to modifications to any of the rights awarded to the Grantee
under this Agreement, at such time and in such manner as the Company may consider necessary
or desirable to reflect changes in law. In addition, the Grantee understands that the
Company may amend, resubmit, alter, change, suspend, cancel, or discontinue the Plan at any
time without limitation.
c. Conformity with the Plan. This Award is intended to conform in all respects with,
and is subject to, all applicable provisions of the Plan. Any capitalized terms used herein
that are otherwise undefined shall have the same meaning provided in the Plan. Any
inconsistencies between this Agreement, the Plan Prospectus or the Plan shall be resolved
in accordance with the terms of the Plan.
d. Governing Law. All matters regarding or affecting the relationship of the Company
and its stockholders shall be governed by the General Corporation Law of the State of
Maryland. All other matters arising under this Agreement including matters of validity,
construction and interpretation, shall be governed by the internal laws of the State of
North Carolina, without regard to any states conflict of law principles. You and the
Company agree that all claims in respect of any action or proceeding arising out of or
relating to this Agreement shall be heard or determined in any state or federal court
sitting in North Carolina, and you agree to submit to the jurisdiction of such courts, to
bring all such actions or proceedings in such courts and to waive any defense of
inconvenient forum to such actions or proceedings. A final judgment in any action or
proceeding so brought shall be conclusive and may be enforced in any manner provided by
law.
2
e. Successors and Assigns. Except as otherwise provided herein, this Agreement will
bind and inure to the benefit of the respective successors and permitted assigns of the
parties hereto whether so expressed or not.
f. Severability. Whenever feasible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
8. Plan Documents. The Plan Prospectus is available by contacting Dreama Douglas at
336/519-4556.
9. Acceptance of Terms and Conditions. By accepting this Award, you agree that the Award is
made at the discretion of the Committee and that acceptance of this Award is no guarantee that
future Awards will be made under the Plan. You agree to be bound by the terms and conditions
herein, the Plan, and any and all conditions established by the Company in connection with Awards
issued under the Plan, and understand that this Award does not confer any legal or equitable right
(other than those rights constituting the Award itself) against the Company or any Subsidiary
directly or indirectly, or give rise to any cause of action at law or in equity against the
Company.
3
EX-10.6
Exhibit
10.6
HANESBRANDS INC.
RETIREMENT SAVINGS PLAN
Conformed
through December 31, 2008
TABLE OF CONTENTS
|
|
|
|
|
PAGE |
SECTION 1 |
|
1 |
1.01 Background; Purpose of Plan |
|
1 |
1.02 Effective Date; Plan Year |
|
2 |
1.03 Plan Administration |
|
2 |
1.04 Plan Supplements |
|
2 |
1.05 Trustee; Trust |
|
2 |
|
|
|
SECTION 2 |
|
3 |
Definitions |
|
3 |
2.01 Account |
|
3 |
2.02 Accounting Date |
|
3 |
2.03 Actual Deferral Percentage |
|
3 |
2.04 Adjusted Net Worth |
|
3 |
2.05 After-Tax Account |
|
3 |
2.06 Alternate Payee |
|
3 |
2.07 Annual Addition |
|
4 |
2.08 Annual Company Contribution |
|
4 |
2.09 Annual Company Contribution Account |
|
4 |
2.10 Appeal Committee |
|
4 |
2.11 Before-Tax Contribution |
|
4 |
2.12 Before-Tax Contribution Account |
|
4 |
2.13 Beneficiary |
|
4 |
2.14 Catch-Up Contribution |
|
4 |
2.15 Code |
|
5 |
2.16 Committee |
|
5 |
2.17 Company |
|
5 |
2.18 Compensation |
|
5 |
2.19 Contribution Percentage |
|
6 |
2.20 Controlled Group Member |
|
6 |
2.21 Covered Group |
|
6 |
2.22 Direct Rollover |
|
6 |
2.23 Distributee |
|
6 |
2.24 Effective Date |
|
6 |
2.25 Elective Deferral |
|
7 |
2.26 Eligible Employee |
|
7 |
2.27 Eligible Retirement Plan |
|
7 |
2.28 Eligible Rollover Distribution |
|
7 |
2.29 Employee |
|
8 |
2.30 Employer |
|
8 |
2.31 Employer Contributions |
|
8 |
2.32 ERISA |
|
9 |
TABLE OF CONTENTS
(continued)
|
|
|
|
|
PAGE |
2.33 Excess Contribution |
|
9 |
2.34 Excess Deferral |
|
9 |
2.35 Excess Matching Contribution |
|
9 |
2.36 Fair Market Value |
|
9 |
2.37 Forfeiture |
|
9 |
2.38 Hanesbrands Stock |
|
9 |
2.39 Highly Compensated Employee |
|
10 |
2.40 Hour of Service |
|
10 |
2.41 Investment Committee |
|
10 |
2.42 Leased Employee |
|
10 |
2.43 Leave of Absence |
|
10 |
2.44 Limitation Year |
|
11 |
2.45 Matching Contributions |
|
11 |
2.46 Matching Contribution Account |
|
11 |
2.47 Maternity or Paternity Absence |
|
11 |
2.48 Normal Retirement Age |
|
11 |
2.49 One-Year Break in Service |
|
11 |
2.50 Participant |
|
12 |
2.51 Period of Service |
|
12 |
2.52 Plan |
|
12 |
2.53 Plan Year |
|
13 |
2.54 Predecessor Company |
|
13 |
2.55 Predecessor Company Account |
|
13 |
2.56 Predecessor Plan |
|
13 |
2.57 Required Commencement Date |
|
13 |
2.58 Rollover Contribution |
|
13 |
2.59 Rollover Contribution Account |
|
13 |
2.60 Sara Lee Plan |
|
14 |
2.61 Sara Lee Stock |
|
14 |
2.62 Separation Date |
|
14 |
2.63 Service |
|
14 |
2.64 Spin-Off, Spin-Off Date |
|
14 |
2.65 Totally Disabled or Total Disability |
|
14 |
2.66 Transferred Participants |
|
14 |
2.67 Trust Agreement |
|
15 |
2.68 Trust Fund |
|
15 |
2.69 Trustees |
|
15 |
2.70 Year of Service |
|
15 |
|
|
|
SECTION 3 |
|
17 |
Participation |
|
17 |
3.01 Eligibility to Participate |
|
17 |
3.02 Covered Group |
|
18 |
-ii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
PAGE |
3.03 Leave of Absence |
|
18 |
3.04 Leased Employees |
|
18 |
|
|
|
SECTION 4 |
|
20 |
Before-Tax Contributions |
|
20 |
4.01 Before-Tax Contributions |
|
20 |
4.02 Catch-Up Contributions |
|
21 |
4.03 Change in Election |
|
21 |
4.04 Direct Transfers and Rollovers |
|
21 |
|
|
|
SECTION 5 |
|
23 |
Employer Contributions |
|
23 |
5.01 Before-Tax Contributions |
|
23 |
5.02 Annual Company Contribution |
|
23 |
5.03 Matching Contributions |
|
24 |
5.04 Transition Contribution |
|
24 |
5.05 Allocation of Annual Company Contribution |
|
25 |
5.06 Payment of Matching Contributions |
|
25 |
5.07 Allocation of Matching Contributions |
|
25 |
5.08 Payment of Employer Contributions |
|
25 |
5.09 Limitations on Employer Contributions |
|
25 |
5.10 Verification of Employer Contributions |
|
25 |
|
|
|
SECTION 6 |
|
27 |
Contribution Limits |
|
27 |
6.01 Actual Deferral Percentage Limitations |
|
27 |
6.02 Limitation on Matching Contributions |
|
27 |
6.03 Dollar Limitation |
|
28 |
6.04 Allocation of Earnings to Distributions of
Excess Deferrals, Excess Contributions and Excess Matching
Contributions |
|
29 |
6.05 Contribution Limitations |
|
29 |
|
|
|
SECTION 7 |
|
31 |
Period of Participation |
|
31 |
7.01 Separation Date |
|
31 |
7.02 Restricted Participation |
|
31 |
|
|
|
SECTION 8 |
|
33 |
Accounting |
|
33 |
8.01 Separate Accounts |
|
33 |
8.02 Adjustment of Participants Accounts |
|
33 |
8.03 Crediting of 401(k) Contributions |
|
34 |
-iii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
PAGE |
8.04 Charging Distributions |
|
35 |
8.05 Statement of Account |
|
35 |
|
|
|
SECTION 9 |
|
36 |
The Trust Fund and Investment of Trust Assets |
|
36 |
9.01 The Trust Fund |
|
36 |
9.02 The Investment Funds |
|
36 |
9.03 Investment of Contributions |
|
36 |
9.04 Change in Investment of Contributions |
|
36 |
9.05 Elections to Transfer Balances Between Accounts; Diversification |
|
37 |
9.06 Voting of Stock; Tender Offers |
|
37 |
9.07 Confidentiality of Participant Instructions |
|
38 |
|
|
|
SECTION 10 |
|
39 |
Payment of Account Balances |
|
39 |
10.01 Payments to Participants |
|
39 |
10.02 Distributions in Shares |
|
42 |
10.03 Beneficiary |
|
42 |
10.04 Missing Participants and Beneficiaries |
|
44 |
10.05 Rollovers |
|
44 |
10.06 Forfeitures |
|
45 |
10.07 Recovery of Benefits |
|
45 |
10.08 Dividend Pass-Through Election |
|
46 |
10.09 Minimum Distributions |
|
46 |
|
|
|
SECTION 11 |
|
50 |
11.01 Loans to Participants |
|
50 |
11.02 After-Tax Withdrawals |
|
52 |
11.03 Hardship Withdrawals |
|
52 |
11.04 Age 59-1/2 Withdrawals |
|
54 |
11.05 Additional Rules for Withdrawals |
|
54 |
|
|
|
SECTION 12 |
|
56 |
Reemployment |
|
56 |
12.01 Reemployed Participants |
|
56 |
12.02 Calculation of Service Upon Reemployment |
|
56 |
|
|
|
SECTION 13 |
|
59 |
Special Rules for Top-Heavy Plans |
|
59 |
13.01 Purpose and Effect |
|
59 |
13.02 Top Heavy Plan |
|
59 |
13.03 Key Employee |
|
59 |
-iv-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
PAGE |
13.04 Minimum Employer Contribution |
|
60 |
13.05 Aggregation of Plans |
|
60 |
13.06 No Duplication of Benefits |
|
60 |
13.07 Compensation |
|
60 |
|
|
|
SECTION 14 |
|
61 |
General Provisions |
|
61 |
14.01 Committees Records |
|
61 |
14.02 Information Furnished by Participants |
|
61 |
14.03 Interests Not Transferable |
|
61 |
14.04 Domestic Relations Orders |
|
61 |
14.05 Facility of Payment |
|
62 |
14.06 No Guaranty of Interests |
|
62 |
14.07 Rights Not Conferred by the Plan |
|
62 |
14.08 Gender and Number |
|
62 |
14.09 Committees Decisions Final |
|
63 |
14.10 Litigation by Participants |
|
63 |
14.11 Evidence |
|
63 |
14.12 Uniform Rules |
|
63 |
14.13 Law That Applies |
|
63 |
14.14 Waiver of Notice |
|
63 |
14.15 Successor to Employer |
|
63 |
14.16 Application for Benefits |
|
63 |
14.17 Claims Procedure |
|
64 |
14.18 Action by Employers |
|
64 |
|
|
|
SECTION 15 |
|
65 |
No Interest in Employers |
|
65 |
|
|
|
SECTION 16 |
|
66 |
Amendment or Termination |
|
66 |
16.01 Amendment |
|
66 |
16.02 Termination |
|
66 |
16.03 Effect of Termination |
|
66 |
16.04 Notice of Amendment or Termination |
|
66 |
16.05 Plan Merger, Consolidation, Etc. |
|
67 |
|
|
|
SECTION 17 |
|
68 |
Relating to the Plan Administrator and Committees |
|
68 |
17.01 The Employee Benefits Administrative Committee |
|
68 |
17.02 The ERISA Appeal Committee |
|
69 |
17.03 Secretary of the Committee |
|
70 |
17.04 Manner of Action |
|
70 |
-v-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
PAGE |
17.05 Interested Party |
|
71 |
17.06 Reliance on Data |
|
71 |
17.07 Committee Decisions |
|
71 |
|
|
|
SECTION 18 |
|
72 |
Adoption of Plan by Controlled Group Members |
|
72 |
|
|
|
SECTION 19 |
|
73 |
Supplements to the Plan |
|
73 |
|
|
|
EXHIBIT A |
|
74 |
Accounts Transferred from the Sara Lee Plan |
|
74 |
|
|
|
SUPPLEMENT A |
|
|
Provisions Relating to the Merger of the National Textiles,
L.L.C. 401(k) Plan into the
Hanesbrands Inc. Retirement Savings Plan |
|
|
|
|
|
SUPPLEMENT B |
|
|
Special Participation Provisions |
|
|
-vi-
HANESBRANDS INC.
RETIREMENT SAVINGS PLAN
(Effective as of July 24, 2006)
SECTION 1
1.01 Background; Purpose of Plan
The purpose of the Plan is to permit Eligible Employees of Hanesbrands Inc. (the Company)
and the other Employers to accumulate their retirement savings on a tax-favored basis. A portion of
the Plan (that portion of the Plan invested in the Sara Lee Corporation Common Stock Fund prior to
the Spin-Off date and that portion of the Plan invested in the Hanesbrands Inc. Common Stock Fund
thereafter) is designed to invest primarily in qualifying employer securities and is intended to
satisfy the requirements of an employee stock ownership plan (as defined in Section 4975(e)(7) of
the Code) (the ESOP component); up to 100% of Plan assets may be invested in qualifying employer
securities. The remaining portion of the Plan is a profit sharing plan intended to satisfy all
requirements of Section 401(a) of the Code and includes a cash or deferred arrangement intended to
satisfy the requirements of Section 401(k) of the Code (the 401(k) component). For each Plan Year,
the 401(k) component shall include all of a Participants Before-Tax Contributions, the Employers
Matching Contributions, the Additional Company Contribution and, for the 2006 Plan Year, the
Transition Contribution allocable to the Participant with respect to that Plan Year, for all
purposes of the Plan.
As of the Effective Date, the benefits of each Transferred Participant shall be transferred
from the Sara Lee Plan, and continued in the form of, the Plan. As soon as administratively
practicable on or after the Effective Date, (i) liabilities equal to the aggregate Account
balances, as adjusted through the Effective Date, of each Transferred Participant shall be
transferred from the Sara Lee Plan to the Plan and credited to the appropriate Plan accounts of
each Transferred Participant and subject to the terms and conditions of the Plan, and (ii) the
assets of the trust funding the Sara Lee Plan attributable to Transfer Participants benefits shall
be transferred (in kind) to the Trustee of the Trust. The transfer of the Transferred
Participants benefits from the Sara Lee Plan into the Plan and the transfer of assets to the Trust
shall comply with Sections 401(a)(12), 411(d)(6), and 414(l) of the Code and the regulations
thereunder.
After the Effective Date, if a Transferred Participant becomes entitled to an additional
allocation under the Sara Lee Plan, then assets and liabilities equal to the additional amount so
allocable shall be transferred from the Sara Lee Plan to the Plan as soon as administratively
practicable after the allocable amount has been determined and shall be invested pursuant to the
Transferred Participants current investment elections. In addition, if a Transferred Participant
transfers to employment with an Employer after the Effective Date but before the Spin-Off Date,
then assets and liabilities equal to the Transferred Participants account balance in the Sara Lee
Plan shall be transferred to the Plan and invested in accordance with the Transferred Participants
current investment elections. The transfers described in this paragraph shall comply with Sections
401(a)(12), 411(d)(6) and 414(l) of the Code and the regulations thereunder.
1
1.02 Effective Date; Plan Year
Except as otherwise required to comply with applicable law or as specifically provided herein,
the Plan is effective July 24, 2006 (the Effective Date). The first Plan Year is a short plan
year beginning as of July 24, 2006 and ending December 31, 2006. Thereafter, the Plan Year shall
be the twelve month period from each January 1 through December 31.
1.03 Plan Administration
As described in Subsection 17.01, the Committee shall be the administrator (as that term is
defined in Section 3(16)(A) of ERISA) of the Plan and shall be responsible for the administration
of the Plan; provided, however, that the Committee may delegate all or any part of its powers,
rights, and duties under the Plan to such person or persons as it may deem advisable.
1.04 Plan Supplements
The provisions of the Plan may be modified by Supplements to the Plan. The terms and
provisions of each Supplement are a part of the Plan and supersede the other provisions of the Plan
to the extent necessary to eliminate inconsistencies between such other Plan provisions and such
Supplement.
1.05 Trustee; Trust
Amounts contributed under the Plan are held and invested, until distributed, by the Trustee.
The Trustee acts in accordance with the terms of the Trust, which implements and forms a part of
the Plan. The provisions of and benefits under the Plan are subject to the terms and provisions of
the Trust.
2
SECTION 2
Definitions
The following terms, when used herein, unless the context clearly indicates otherwise, shall
have the following respective meanings:
2.01 Account
Except as may be stated elsewhere in the Plan, Account and Accounts mean all accounts and
subaccounts maintained for a Participant (or for a Beneficiary after a Participants death or for
an Alternate Payee).
2.02 Accounting Date
Accounting Date means each day the value of an Investment Fund is adjusted for
contributions, withdrawals, distributions, earnings, gains, losses or expenses, any date designated
by the Committee as an Accounting Date, and an Accounting Date occurring under SECTION 8. It is
anticipated that each Investment Fund will be valued as of each day on which the New York Stock
Exchange is open for trading and the Trustee is open for business.
2.03 Actual Deferral Percentage
Actual Deferral Percentage for a group of Eligible Employees for a Plan Year means the
average of the deferral ratios (determined separately for each Eligible Employee in such group) of:
(a) the Eligible Employees Before-Tax Contributions for the Plan Year; to (b) the Eligible
Employees compensation (determined in accordance with Code Section 414(s)) for such Plan Year.
2.04 Adjusted Net Worth
Adjusted Net Worth of an Investment Fund as of any Accounting Date means the then net worth
of that Investment Fund as determined by the Trustee in accordance with the provisions of the Trust
Agreement.
2.05 After-Tax Account
After-Tax Account means an Account maintained pursuant to Subparagraph 8.01(d).
2.06 Alternate Payee
Alternate Payee means a spouse, former spouse, child or other dependent of a Participant
entitled to receive payment of a portion of the Participants vested Plan benefits under a
qualified domestic relations order, as defined in Section 414(p) of the Code.
3
2.07 Annual Addition
Annual Addition for any Limitation Year means the sum of annual additions to a Participants
Account for the Limitation Year. Notwithstanding any Plan provision to the contrary, a
Participants Annual Addition shall be determined in accordance with Code Section 415 and
applicable Treasury regulations issued thereunder.
2.08 Annual Company Contribution
Annual Company Contribution means a contribution made by an Employer on behalf of each
Annual Company Contribution Participant pursuant to Subsection 5.02.
2.09 Annual Company Contribution Account
Annual Company Contribution Account means an Account maintained pursuant to Subparagraph
8.01(c).
2.10 Appeal Committee
Appeal Committee means an ERISA Appeal Committee as described in Subsection 17.02 of the
Plan.
2.11 Before-Tax Contribution
Before-Tax Contribution means the compensation deferrals under Code Section 401(k) a
Participant elects to make pursuant to Subsection 4.01. Notwithstanding the foregoing, for
purposes of implementing the required limitations of Code Sections 401(k), 402(g), and 415
contained in Subsections 6.01, 6.03 and 6.05, Before-Tax Contributions shall not include Catch-Up
Contributions or deferrals made pursuant to Code Section 414(u) by reason of an Eligible Employees
qualified military service.
2.12 Before-Tax Contribution Account
Before-Tax Contribution Account means the Account maintained by the Committee pursuant to
Subparagraph 8.01(a).
2.13 Beneficiary
Beneficiary means any person or persons (who may be designated contingently, concurrently or
successively) to whom a Participants Account balances are to be paid if the Participant dies
before he or she receives his or her entire vested Account.
2.14 Catch-Up Contribution
Catch-Up Contribution means the deferrals of Compensation under Code Section 414(v) an
eligible Participant elects to make pursuant to Subsection 4.02.
4
2.15 Code
Code means the Internal Revenue Code of 1986, as amended from time to time.
2.16 Committee
Committee means the Committee appointed by the Company to administer the Plan as described
in SECTION 17 of the Plan.
2.17 Company
Company means Hanesbrands Inc. or any successor organization or entity that assumes the
Plan.
2.18 Compensation
Compensation for a Plan Year means the total wages (as defined in Section 3401(a) of the
Code) paid to an individual by an Employer for the period in question for services rendered as an
Employee of an Employer, which are subject to income tax withholding at the source, determined
without regard to any exceptions to the withholding rules that limit the remuneration included in
such wages and that are based on the nature or location of the employment or the services
performed, determined in accordance with the following:
|
(a) |
|
Including (i) elective contributions made on behalf of the
Employee pursuant to the Employees salary
reduction agreement under Sections 125, 401(k),
and 132(f)(4) of the Code; and (ii) any differential wage payment
(as defined in Section 3401(h)(2) of the Code). |
|
|
(b) |
|
Excluding the following: |
|
(i) |
|
Nonqualified stock option exercise income; |
|
|
(ii) |
|
Stock awards; |
|
|
(iii) |
|
Gains attributable to the sale of stock within the two (2)
year period beginning on the date of grant under an employee stock purchase
plan as described in Section 423 of the Code; |
|
|
(iv) |
|
Reimbursements or other expense allowances; |
|
|
(v) |
|
Fringe benefits (cash and non-cash); |
|
|
(vi) |
|
Moving expenses; |
|
|
(vii) |
|
Deferred compensation when earned or paid; |
|
|
(viii) |
|
Welfare benefits; and |
5
For purposes of (A) determining and allocating contributions under Subsections 4.02, 5.02, 5.03 and
5.04, (B) applying the maximum percentage limitation specified in Subsection 4.01, and (C) applying
the limitations of Subsections 6.01 and 6.02, the annual Compensation taken into account under the
Plan for any Participant for a Plan Year shall not exceed $220,000 (as adjusted by the Secretary of
the Treasury pursuant to Code Section 401(a)(17)(B)).
2.19 Contribution Percentage
Contribution Percentage of a group of Eligible Employees for a Plan Year means the average
of the ratios (determined separately for each Eligible Employee in such group) of: (a) the Matching
Contributions made on behalf of such Eligible Employee for such Plan Year; to (b) the Eligible
Employees compensation (determined in accordance with Code Section 414(s)) for such Plan Year.
2.20 Controlled Group Member
Controlled Group Member means the Company and any affiliated or related corporation that is
a member of a controlled group of corporations (within the meaning of Section 1563(a) of the Code)
that includes the Company or any trade or business (whether or not incorporated) which is under the
common control of the Company (within the meaning of Section 414(b), (c) or (m) of the Code).
2.21 Covered Group
Covered Group means a group or class of Employees to which the Plan has been and continues
to be extended by an Employer pursuant to Subsection 3.02. A listing of the Covered Groups under
the Plan is included in Exhibit A to the Plan.
2.22 Direct Rollover
Direct Rollover means a payment by the Plan to an Eligible Retirement Plan specified by the
Distributee.
2.23 Distributee
Distributee means a Participant (including a Participant described in Subsection 7.02 of the
Plan) or Beneficiary. In addition, the Participants surviving spouse and the Participants spouse
or former spouse who is an Alternate Payee are Distributees with regard to the interest of the
spouse or former spouse.
2.24 Effective Date
Effective Date of the Plan means July 24, 2006 as defined in Subsection 1.02.
6
2.25 Elective Deferral
Elective Deferral means, with respect to any calendar year, each elective deferral as
defined in Code Section 402(g).
2.26 Eligible Employee
Eligible Employee means an Employee who is a member of a Covered Group and is otherwise
eligible to participate in the Plan pursuant to either Subsection 3.01 or Subsection 12.01.
2.27 Eligible Retirement Plan
Eligible Retirement Plan means the following:
|
(a) |
|
An individual retirement account described in Section 408(a) of the Code; |
|
|
(b) |
|
An annuity contract described in Section 403(b) of the Code; |
|
|
(c) |
|
An eligible plan under Section 457(b) of the Code which is maintained by a
state, political subdivision of a state or an agency or instrumentality of a state or
political subdivision of a state and which agrees to separately account for amounts
transferred to such plan from this Plan; |
|
|
(d) |
|
An individual retirement annuity described in Section 408(b) of the Code; |
|
|
(e) |
|
An annuity plan described in Section 403(a) of the Code; or |
|
|
(f) |
|
A qualified trust described in Section 401(a) of the Code that accepts the
Distributees Eligible Rollover Distribution. |
2.28 Eligible Rollover Distribution
Eligible Rollover Distribution means any distribution of all or any portion of the balance
to the credit of the Distributee, except that an Eligible Rollover Distribution does not include
the following:
|
(a) |
|
Any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or life expectancies) of the Distributee and the
Distributees designated beneficiary, or for a specified period of ten (10) years or
more; |
|
|
(b) |
|
Any distribution to the extent such distribution is required under Section
401(a)(9) of the Code; |
|
|
(c) |
|
Hardship withdrawals; and |
7
|
(d) |
|
Any distribution excluded from the definition of Eligible Rollover
Distribution under the Code or applicable Treasury Regulations. |
A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because
the portion includes After-Tax Contributions that are not includible in gross income; provided,
however, such portion may be transferred only to an individual retirement account or annuity
described in Code Section 408(a) or (b), a qualified retirement plan (either a defined contribution
plan or a defined benefit plan) described in Code Section 401(a) or 403(a), or an annuity contract
described in Code Section 403(b) that agrees to separately account for amounts so transferred.
2.29 Employee
Employee means any person employed by one or more of the Employers who is on the regular
payroll of an Employer and whose wages from the Employer are reported for Federal income tax
purposes on Internal Revenue Service Form W-2 (or successor or equivalent form). Notwithstanding
any provision of the Plan to the contrary, an individual who performs services for a Controlled
Group Member but who is paid by an Employer under a common paymaster arrangement with such
Controlled Group Member shall not be considered an Employee for purposes of the Plan. An
Employers classification as to whether an individual constitutes an Employee shall be
determinative for purposes of an individuals eligibility under the Plan. An individual who is
classified as an independent contractor (or other non-employee classification) shall not be
considered an Employee and shall not be eligible for participation in the Plan, regardless of any
subsequent reclassification of such individual as an Employee or employee of an Employer by an
Employer, any government agency, court, or other third-party. Any such reclassification shall not
have a retroactive effect for purposes of the Plan. Notwithstanding any other provision of the
Plan to the contrary, nonresident alien individuals receiving no U.S.-source income from any
Employer are not considered Employees under the Plan.
2.30 Employer
Employer means the Company and each Controlled Group Member that adopts the Plan in
accordance with SECTION 18.
2.31 Employer Contributions
Employer Contributions means the following contributions made by an Employer on behalf of a
Participant:
|
(a) |
|
Annual Company Contributions; |
|
|
(b) |
|
Matching Contributions; |
|
|
(c) |
|
Transition Contributions; and |
|
|
(d) |
|
Any contributions that are made by an Employer in lieu of the contributions
described in Subparagraphs (a), (b) or (c) above. |
8
2.32 ERISA
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
2.33 Excess Contribution
Excess Contribution means the amount by which Before-Tax Contributions (determined without
regard to the Participants Catch-Up Contributions) for a Plan Year made by Highly Compensated
Employees exceed the limitations of Subsection 6.01, as determined in accordance with Treasury
Regulation Section 1.401(k)-2(b).
2.34 Excess Deferral
Excess Deferral means the amount by which a Participants Before-Tax Contributions
(determined without regard to the Participants Catch-Up Contributions) exceed the limitations of
Code Section 402(g)(4), as provided in Subsection 6.03.
2.35 Excess Matching Contribution
Excess Matching Contribution means the amount by which Matching Contributions for a Plan
Year made by or on behalf of Highly Compensated Employees exceed the limitations of Subsection
6.02, as determined in accordance with Treasury Regulation Section 1.401(m)-2(b).
2.36 Fair Market Value
Fair Market Value means (a) with respect to Sara Lee Stock or Hanesbrands Stock held in the
Plan, the closing price per share on the New York Stock Exchange as of any date or (b) in the case
of any other stock for which there is no generally recognized market, the value determined as of a
particular date in accordance with Treasury Regulation Section 54.4975-11(d)(5) and based upon an
evaluation by an independent appraiser meeting the requirements of the regulations prescribed under
Section 401(a)(28)(C) of the Code or, in the absence of such regulations, requirements similar to
the requirements of the regulations prescribed under Section 170(a)(1) of the Code and having
expertise in rendering such evaluations.
2.37 Forfeiture
Forfeiture means the amount by which a Participants Annual Company Contribution Account,
Transition Contribution Account, Matching Contribution Account and Predecessor Company Account (or
other Employer Contribution Account under any applicable Supplement to the Plan) is reduced under
Subsections 6.01, 6.02, 6.03, 10.01 or any applicable Supplement.
2.38 Hanesbrands Stock
Hanesbrands Stock means shares of common stock of Hanesbrands Inc.; provided, however, that,
after the Spin-Off Date, such term shall include only such shares as constitute both employer
securities as defined in Section 409(l) of the Code and qualifying employer securities as
defined in Section 407(d)(5) of ERISA.
9
2.39 Highly Compensated Employee
Highly Compensated Employee means a highly compensated employee as defined in Code Section
414(q) and the regulations thereunder. Generally, a Highly Compensated Employee means any Employee
who: (a) during the immediately preceding Plan Year received annual compensation from the Employers
(determined in accordance with Subsection 6.05 of the Plan) of more than $95,000 (or such greater
amount as may be determined by the Commissioner of Internal Revenue) and, at the Companys
discretion for such preceding year, was in the top-paid twenty percent (20%) of the Employees for
that year; or (b) was a five percent (5%) owner of an Employer during the current Plan Year or the
immediately preceding Plan Year.
A former Participant shall be treated as a Highly Compensated Employee if such Participant was
a Highly Compensated Employee when such Participant separated from service from a Controlled Group
Member or such Participant was a Highly Compensated Employee at any time after attaining age
fifty-five (55) years.
2.40 Hour of Service
Hour of Service means any hour for which an Employee is compensated by an Employer, directly
or indirectly, or is entitled to compensation from an Employer for the performance of duties and
for reasons other than the performance of duties, and each previously uncredited hour for which
back pay has been awarded or agreed to by an Employer, irrespective of mitigation of damages.
Hours of Service shall be credited to the period for which duties are performed (or for which
payment is made if no duties were performed), except that Hours of Service for which back pay is
awarded or agreed to by an Employer shall be credited to the period to which the back pay award or
agreement pertains. The rules for crediting Hours of Service set forth in Section 2530.200b-2 of
Department of Labor regulations are incorporated by reference. References in this Subsection to an
Employer shall include any Controlled Group Member.
2.41 Investment Committee
Investment Committee means the committee appointed by the Company to manage the assets of
the Plan and Trust.
2.42 Leased Employee
Leased Employee means any person who is not an Employee of an Employer, but who has provided
services to an Employer under the primary direction or control of the Employer, on a substantially
full-time basis for a period of at least one year, pursuant to an agreement between the Employer
and a leasing organization.
2.43 Leave of Absence
Leave of Absence for Plan purposes means an absence from work which is not treated by the
Participants Employer as a termination of employment or which is required by law to be
10
treated as a Leave of Absence. A Totally Disabled Employee shall not be considered to be on a
Leave of Absence for purposes of the Plan.
2.44 Limitation Year
Limitation Year means the Plan Year.
2.45 Matching Contributions
Matching Contribution means the amount of a Participants Before-Tax Contributions for which
a Matching Contribution is payable pursuant to Subsection 5.03. Notwithstanding the foregoing, for
purposes of implementing the required limitations of Code Sections 401(m) and 415 contained in
Subsections 6.02 and 6.05, Matching Contributions shall not include employer contributions made
pursuant to Code Section 414(u) by reason of an Eligible Employees qualified military service.
2.46 Matching Contribution Account
Matching Contribution Account means an Account maintained pursuant to Subparagraph 8.01(b).
2.47 Maternity or Paternity Absence
Maternity or Paternity Absence means an Employees absence from work because of the
pregnancy of the Employee or birth of a child of the Employee, the placement of a child with the
Employee, or for purposes of caring for the child immediately following such birth or placement.
The Committee may require the Employee to furnish such information as the Committee considers
necessary to establish that the Employees absence was for one of the reasons specified above.
2.48 Normal Retirement Age
Normal Retirement Age means the date upon which a Participant attains age sixty-five (65)
years.
2.49 One-Year Break in Service
One-Year Break in Service means each twelve (12) consecutive month period commencing on an
Employees or Participants Separation Date and on each anniversary of such date during which the
Employee or Participant does not perform an Hour of Service. In the case of a Maternity or
Paternity Absence, the twelve (12) consecutive month periods beginning on the first day of such
absence and the first anniversary thereof shall not constitute a One-Year Break in Service.
11
2.50 Participant
Participant means each Eligible Employee who satisfies the requirements of Subsection 3.01
or 12.01, as applicable.
2.51 Period of Service
Period of Service means a period beginning on the date an Employee enters Service (or
reenters Service) and ending on his or her Separation Date with respect to such period, subject to
the following special rules:
|
(a) |
|
An Employee shall be deemed to enter Service on the date he or she first
completes an Hour of Service. |
|
(b) |
|
An Employee shall be deemed to reenter Service on the date following a
Separation Date when he or she again completes an Hour of Service. |
|
|
(c) |
|
An Employee shall be deemed to have continued in Service (and thus not to have
incurred a Separation Date) for the following periods: |
|
(i) |
|
Any period for which he or she is required to be given credit
for Service under any laws of the United States; and |
|
|
(ii) |
|
The period (referred to herein as Medical Leave) prior to his
or her Separation Date during which he or she is unable, by reason of physical
or mental infirmity, or both, to perform satisfactorily the duties then
assigned to him or her or which an Employer or Controlled Group Member is
willing to assign to him or her, as determined by the Committee pursuant to a
medical examination by a medical doctor selected or approved by the Committee.
Such period shall end with the earlier of his or her Separation Date, or the
date of cessation of such inability. |
|
(d) |
|
Subject to the rehire rules of Subsection 12.02, all periods of Service of an
Employee shall be aggregated in determining his or her Service. |
|
|
(e) |
|
If an Employee is absent from work because he or she quits, is discharged or
retires, and he or she reenters Service before the first anniversary of the date of
such absence, such date shall not constitute a Separation Date and the period of such
absence shall be included as Service. |
2.52 Plan
Plan means the Hanesbrands Inc. Retirement Savings Plan, as amended from time to time.
12
2.53 Plan Year
The first Plan Year is a short plan year beginning as of July 24, 2006 and ending December
31, 2006. Thereafter, the Plan Year shall be the twelve (12) month period beginning each January
1 and ending on the next following December 31 as defined in Subsection 1.02.
2.54 Predecessor Company
Predecessor Company means any corporation or other entity (other than Sara Lee Corporation),
the stock, assets or business of which was acquired by an Employer or another Controlled Group
Member prior to the Effective Date, or is acquired by an Employer or another Controlled Group
Member on or after the Effective Date, whether by merger, consolidation, purchase of assets or
otherwise, and any predecessor thereto designated by the Plan or by the Committee.
2.55 Predecessor Company Account
Predecessor Company Account means an Account maintained pursuant to Subparagraph 8.01(f).
2.56 Predecessor Plan
Predecessor Plan means a plan formerly maintained by a Controlled Group Member or a
Predecessor Company (other than the Sara Lee Plan) that has been merged into and continued in the
form of this Plan.
2.57 Required Commencement Date
Required Commencement Date means the April 1 of the calendar year next following the later
of the calendar year in which the Participant attains age seventy and one-half (70-1/2) or the
calendar year in which his or her Separation Date occurs; provided, however, that the Required
Commencement Date of a Participant who is a five percent (5%) owner (as defined in Code Section
416) of an Employer or a Controlled Group Member with respect to the Plan Year ending in the
calendar year in which he or she attains age seventy and one-half (70-1/2) shall be April 1 of the
next following calendar year.
2.58 Rollover Contribution
Rollover Contribution means a Participants contribution pursuant to Subsection 4.04.
2.59 Rollover Contribution Account
Rollover Contribution Account means the Account maintained pursuant to Subparagraph 8.01(e).
13
2.60 Sara Lee Plan
Sara Lee Plan means the Sara Lee Corporation 401(k) Plan.
2.61 Sara Lee Stock
Sara Lee Stock means shares of common stock of Sara Lee Corporation.
2.62 Separation Date
Separation Date means the earlier of (a) the date on which an Employee or Participant is no
longer employed by an Employer or a Controlled Group Member because he or she quits, retires, is
discharged or dies; or (b) the first anniversary of the first day of any period during which an
Employee or Participant remains absent from service with all Controlled Group Members for any
reason other than quit, retirement, discharge or death.
2.63 Service
Service means the number of completed calendar years and months during a Participants
Periods of Service.
2.64 Spin-Off, Spin-Off Date
Spin-Off means Sara Lee Corporations distribution of all of its interest in Hanesbrands
Inc. The actual date of the Spin-Off shall be known as the Spin-Off Date.
2.65 Totally Disabled or Total Disability
Totally
Disabled or Totally Disabled when used in reference to a Participant means that
condition of the Participant resulting from injury or illness which:
|
(a) |
|
Results in such Participants entitlement to and receipt of monthly disability
insurance benefits under the Federal Social Security Act; or |
|
|
(b) |
|
Results in such Participants entitlement to and receipt of (or would result in
receipt of but for any applicable benefit waiting period) long-term disability benefits
under a long-term disability income plan maintained or adopted by such Participants
Employer. |
2.66 Transferred Participants
Transferred Participant means:
|
(a) |
|
any participant who has an account in the Sara Lee Plan and is employed by
Hanesbrands Inc. or a Sara Lee Corporation division listed on Exhibit A on the
Effective Date; |
14
|
(b) |
|
any participant who (i) has an account in the Sara Lee Plan on the Effective
Date, and (ii) after the Effective Date but before the Spin-Off Date is transferred
from employment with Sara Lee Corporation (or a subsidiary) to employment as an
Eligible Employee of Hanesbrands Inc. or of a Sara Lee Corporation division listed on
Exhibit A; and |
|
|
(c) |
|
any participant in the Sara Lee Plan who was not employed by any controlled
group member of Sara Lee Corporation on the Effective Date but who was last employed by
Hanesbrands Inc., the Sara Lee Branded Apparel division of Sara Lee Corporation, or a
Sara Lee Corporation division listed in Exhibit A. |
2.67 Trust Agreement
Trust Agreement means the Hanesbrands Inc. Retirement Savings Plan Trust, which implements
and forms a part of the Plan.
2.68 Trust Fund
Trust Fund means all assets held or acquired by the Trustee in accordance with the Plan and
the Trust.
2.69 Trustees
Trustees mean the person or persons appointed to act as Trustees under the Trust Agreement.
2.70 Year of Service
Year of Service means an Employees continuous employment by one or more of the Employers or
other Controlled Group Members for the twelve (12) month period beginning on the Employees date of
hire or on any anniversary of that date, subject to the provisions of Subsection 12.01 and the
following:
|
(a) |
|
A period of concurrent Service with two (2) or more of the Employers and the
other Controlled Group Members will be considered as employment with only one of them
during that period. |
|
|
(b) |
|
If an Employee is on a Leave of Absence authorized by his or her Employer, his
or her period of continuous employment shall include such Leave of Absence, except for
any portion thereof for which he or she is not granted rights as to reemployment by an
Employer or a Controlled Group Member under any applicable statute. |
|
|
(c) |
|
If and to the extent the Committee so provides, part or all of the last
continuous period of employment of an Employee with an Employer or any Predecessor |
15
|
|
|
Company prior to the date of coverage hereunder shall be included in determining
Years of Service; except that: |
|
(i) |
|
All service of a Transferred Participant that was recognized
under the Sara Lee Plan as of the Effective Date shall be recognized and taken
into account under the Plan to the same extent as if such service had been
completed under the Plan, subject to any applicable break in service rules
under the Sara Lee Plan and the Plan. |
|
|
(ii) |
|
If an individual (A) was previously employed by the Sara Lee
Corporation (referred to as the prior employers for purposes of this
Subparagraph), and (B) subsequently becomes an Employee of an Employer or a
Controlled Group Member; all of the individuals service with the prior
employers shall be recognized and taken into account under the Plan to the same
extent as if such service had been completed under the Plan, subject to any
applicable break in service rules under the applicable prior employers plans
and the Plan. |
|
(d) |
|
The foregoing provisions of this Subsection shall not be applied so as to allow
an Employee to become a Participant in the Plan prior to the Employees actual
employment by an Employer and his or her becoming a member of a Covered Group of
Employees. |
16
SECTION 3
Participation
3.01 Eligibility to Participate
|
(a) |
|
Eligible Participants. |
|
(i) |
|
Each Transferred Participant shall become a Participant on the
Effective Date or, if later, on the date of a transfer of employment described
in Subparagraph 2.66(b), subject to the terms and conditions of the Plan. Each
other Eligible Employee hired prior to January 1, 2008 shall become a
Participant on the first date of the first payroll period following the date he
or she attains age twenty-one (21) or on January 1, 2008, if earlier; except
that Eligible Employees hired prior to January 1, 2008 and described in
Supplement B to the Plan shall become Participants on their dates of hire
without regard to their then attained age. Notwithstanding the foregoing, each
Eligible Employee hired prior to January 1, 2008 must have attained age
twenty-one (21) before becoming eligible for Annual Company Contributions
provided under Subsection 5.02. An Eligible Employee may become a Participant
only if he or she is a member of a Covered Group. |
|
|
(ii) |
|
Each Eligible Employee hired on or after January 1, 2008 shall
become a Participant as follows: |
|
(A) |
|
With respect to Before-Tax Contributions,
Catch-Up Contributions, and Matching Contributions, immediately
following the date the Eligible Employee has completed at least 30 days
of Service; and |
|
|
(B) |
|
With respect to Annual Company Contributions,
upon his or her date of hire as an Eligible Employee or the date he or
she attains age twenty-one (21), if later; |
|
|
|
in each case, provided the Eligible Employee is then a member of a Covered
Group. |
|
(b) |
|
Special Participation Rules. Notwithstanding any provision of the Plan
to the contrary, the following special participation rules shall apply: |
|
(i) |
|
Participants only for purposes of Subsection 4.04. For
purposes of transferred amounts or Rollover Contributions made pursuant to
Subsection 4.04, the term Participant shall include an Employee of an
Employer who is not yet a Participant in the Plan, but such Participant |
17
|
|
|
may not make Before-Tax Contributions or receive any Employer Contributions
before satisfying the requirements of this Section. |
|
|
(ii) |
|
Transfer Between Covered Groups. In the event an
Employee or Participant transfers employment from one Covered Group to a
different Covered Group that is not eligible for the same contributions and
benefits under the Plan, such individual shall be treated as terminating
employment and simultaneously being reemployed under Subsection 12.01 solely
for purposes of determining his or her eligibility for contributions and
benefits under the Plan during his or her employment with the new Covered
Group. |
|
|
(iii) |
|
Inactive Transferred Participants. Transferred
Participants who are not actively employed by an Employer in a Covered Group
shall be treated as terminated or restricted participants under Subsection 7.02
of the Plan. |
3.02 Covered Group
Designation of a Covered Group when made by the Company shall be effected by action of the
Committee or by a person or persons authorized by said Committee. Designation of a Covered Group
when made by any other Employer shall be effected by action of that Employers Board of Directors
or a person or persons so authorized by that Board. Notwithstanding the foregoing, Employees who
are or who become members of a group or class of Employees included in a collective bargaining unit
covered by a collective bargaining agreement between an Employer and the collective bargaining
representative of such Employees and who, as a consequence of good faith bargaining between the
Employer and such representative, are excluded from participation in the Plan shall not be
considered as belonging to a Covered Group.
3.03 Leave of Absence
A Leave of Absence will not interrupt continuity of participation in the Plan. Leaves of
Absence will be granted under an Employers rules applied uniformly to all Participants similarly
situated. Notwithstanding any provision of the Plan to the contrary, (i) contributions, benefits, and service
credit with respect to qualified military service will be provided in accordance with Section 414(u)
of the Code, and (ii) in the case of a Participant who dies while performing qualified military
service (as defined in Section 414(u) of the Code) on or after January 1, 2007, the survivors of
the Participant will be entitled to any benefits (other than benefit accruals relating to the period
of qualified military service) provided under the plan had the Participant resumed and then terminated
employment on account of death. In any case where a Participant is on a Leave of Absence or is a
Totally Disabled Participant and his or her employment with an Employer and its Subsidiaries is
terminated for any other reason, then his or her employment with the Employers for purposes of the
Plan will be considered terminated on the same date and for the same reason.
3.04 Leased Employees
A Leased Employee shall not be eligible to participate in the Plan. The period during which a
Leased Employee performs services for an Employer shall be taken into account for purposes of
Subsection 10.01 of the Plan, unless (a) such Leased Employee is a participant in a money purchase
pension plan maintained by the leasing organization which provides a non-integrated employer
contribution rate of at least 10 percent (10%) of compensation, immediate
18
participation for all employees and full and immediate vesting, and (b) Leased Employees do
not constitute more than 20 percent (20%) of the Employers nonhighly compensated workforce.
19
SECTION 4
Before-Tax Contributions
4.01 Before-Tax Contributions
|
(a) |
|
Before-Tax Contribution Election. Each full-time and part-time, exempt
and non-exempt salaried or hourly Participant may elect to defer a portion of his or
her Compensation for any Plan Year by electing to have a percentage (in multiples of
one percent (1%) not to exceed fifty percent (50%)) of his or her Compensation
contributed to the Plan on his or her behalf by his or her Employer as Before-Tax
Contributions. A Participant may elect to make such Before-Tax Contributions beginning
as soon as administratively possible following the date he or she becomes a
Participant, subject to Subparagraph (b) below. Notwithstanding any Plan provision to
the contrary, a Participant may make a Before-Tax Contribution election only with
respect to amounts that are compensation within the meaning of Code Section 415 and
Treasury Regulations Section 1.415(c)-2. |
|
|
(b) |
|
Automatic Deferral Election. Notwithstanding Subparagraph (a) above,
each Participant as of January 1, 2008 who has not previously made an affirmative
election under the Plan and each individual who becomes an Eligible Employee on or
after January 1, 2008 will be deemed to have automatically elected to have four percent
(4%) of his or her Compensation contributed to the Plan as Before-Tax Contributions
beginning on January 1, 2008 or as soon as administratively possible after the Eligible
Employee becomes a Participant under Subparagraph 3.01(a), if later. Each such
Participants deferral percentage shall increase automatically by one percent (1%) each
Plan Year thereafter, up to six percent (6%) of Compensation; provided, however, that
the automatic deferral percentage for an Eligible Employee who becomes a Participant
during the last three months of a Plan Year shall not increase until the beginning of
the second Plan Year following his or her participation date; and further provided that
automatic increases under this Subparagraph shall not apply once a Participant has made
an affirmative election to change his or her deferral percentage, including an
affirmative election to cease all deferrals. Prior to the date an automatic deferral
election is effective, the Committee shall provide the Eligible Employee with a notice
that explains the automatic deferral feature, the Eligible Employees right to elect
not to have his or her Compensation automatically reduced and contributed to the Plan
or to have another percentage contributed, and the procedure for making an alternate
election. An automatic deferral election shall be treated for all purposes of the Plan
as a voluntary deferral election. |
|
|
(c) |
|
Reduction of Compensation. Before-Tax Contributions shall be made by a
reduction of such items of the Participants Compensation as each Employer shall
determine (on a uniform basis) for each payroll period by the applicable percentage
(not to exceed the maximum percentage determined by the Committee for any payroll
period). The amount deferred by a Participant will be withheld |
20
|
|
|
from the Participants Compensation and contributed to the Plan on the Participants
behalf by the Participants Employer in accordance with Subsection 5.01. |
4.02 Catch-Up Contributions
A Participant who has attained age fifty (50) years (or will attain age fifty (50) years by
the end of the Plan Year) may elect to defer an additional amount of Compensation as Before-Tax
Contributions for such Plan Year in accordance with and subject to the limitations of Section
414(v) of the Code (Catch-Up Contributions). Before-Tax Contributions shall not include Catch-Up
Contributions for purposes of implementing the required limitations of Code Sections 401(k),
402(g), and 415 contained in Subsections 6.01, 6.03, and 6.05, respectively.
4.03 Change in Election
Each Participant who has made an election for any Plan Year pursuant to Subsection 4.01 or
4.02 (if applicable) may subsequently make an election to discontinue the deferral of his or her
Compensation (but not retroactively) as of the beginning of any payroll period. If a Participant
discontinues his or her deferrals, he or she may subsequently elect under Subsection 4.01 or 4.02
(if applicable) to have a deferral resumed as of any subsequent payroll period. A Participant also
may elect to change (but not retroactively) the rate of his or her Tax-Deferred Contributions and
the amount of his or her Catch-Up Contributions (if applicable) as of the beginning of any payroll
period, within the limits specified in Subsection 4.01 and 4.02 (if applicable). Elections under
this Subsection shall be made in such manner and in accordance with such rules as the Committee
determines. If the Committee in its discretion determines that elections under this Subsection
shall be made in a manner other than in writing, any Participant who makes an election pursuant to
such method may receive written confirmation of such election; further, any such election and
confirmation will be the equivalent of a writing for all purposes.
4.04 Direct Transfers and Rollovers
The Committee in its discretion may direct the Trustee to accept:
|
(a) |
|
From a trustee or insurance company a direct transfer (or an Eligible Rollover
Distribution) of a Participants benefit (or portion thereof) under any other Eligible
Retirement Plan; |
|
|
(b) |
|
From a Participant as a Rollover Contribution an amount (or portion thereof)
received by the Participant as an Eligible Rollover Distribution from another Eligible
Retirement Plan; or |
|
|
(c) |
|
From a Participant as a Rollover Contribution the entire amount received by the
Participant as a distribution from an individual retirement account or an individual
retirement annuity where such amount is attributable to a rollover contribution of a
qualified total distribution pursuant to Section 408(d)(3)(A) of the Code; |
21
|
|
|
provided, however, that any such Rollover Contribution made by a Participant shall be in cash only
and comply with the provisions of the Code and the rules and regulations thereunder applicable to
tax-free rollovers and shall be exclusive of after-tax employee contributions. If after a Rollover
Contribution has been made the Committee learns that such contribution did not meet those
provisions, the Committee may direct the Trustee to make a distribution to the Participant of the
entire amount of the Rollover Contribution received. Any amount so transferred or contributed to
the Trustee will be credited to the Account of the Participant as determined by the Committee. If
any portion of a Participants benefits under the Plan is attributable to amounts which were
transferred to the Plan, directly or indirectly (but not in a direct rollover as defined in Section
401(a)(31) of the Code), from a Plan which is subject to the requirements of Section 401(a)(11) of
the Code, then the provisions of said Section 401(a)(11) shall apply to the benefits of such
Participant. The Committee in its discretion may direct the Trustee to transfer Account balances
of a group or class of Participants, by means of a trust-to-trust transfer, to the trustee (or
insurance company) of any other individual account, profit sharing or stock bonus plan intended to
meet the requirements of Section 401(a) of the Code. |
22
SECTION 5
Employer Contributions
5.01 Before-Tax Contributions
Subject to the limitations of this SECTION 5, the Employers will contribute to the Trustee on
behalf of each Participant the amount of such Participants Before-Tax Contributions under
Subsection 4.01. Such Before-Tax Contributions shall be paid to the Trustee as soon as practicable
after being withheld, but no later than the fifteenth (15th) business day of the next following
month, and allocated to Participants Current Year Before-Tax Contribution Subaccounts.
5.02 Annual Company Contribution
For that portion of the first Plan Year that follows the Spin-Off Date and for each Plan Year
thereafter, the Employers shall contribute to the Plan as follows:
|
(a) |
|
For Participants who are exempt and non-exempt salaried employees,
an amount determined by the Company each year in its discretion, which amount
shall not be in excess of four percent (4%) of such Participants Compensation
for that portion of the Plan Year during which he or she was a salaried employee
and a Participant in the Plan. |
|
|
(b) |
|
For Participants who are hourly, non-union employees or are New York-based
sample department union Employees, an amount determined by the Company each year in its
discretion, which amount shall not be in excess of two percent (2%) of such
Participants Compensation for that portion of the Plan Year during which he or she was
an hourly employee and a Participant in the Plan. |
For 2006, the Employers shall make an additional contribution on behalf of each Participant
who is an exempt or non-exempt salaried employee. Such contribution shall equal two percent (2%)
of the Participants Compensation for that portion of the period beginning on January 1, 2006 (or
the date the Participant was transferred to employment with Hanesbrands Inc. or a Sara Lee
Corporation division listed on Exhibit A, if later) and ending on the Spin-Off Date during which
the Participant was a salaried employee; provided that no contribution shall be made with respect
to any period during which the employee was not a participant in the Plan or the Sara Lee Plan.
For purposes of determining the amount of a Participants contributions under this Subsection 5.02
for 2006, the Code Section 401(a)(17)(B) limit shall be applied to the sum of the Participants
Compensation paid from the Company and the Sara Lee Corporation during that year.
Annual Company
Contributions under this Subsection 5.02 to be made for Plan Years beginning on or after January 1, 2008
shall be funded in either cash or shares of Hanesbrands Stock (which may be shares purchased
in the open market or authorized-but-unissued shares), as determined by the Committee. If shares of
Hanesbrands Stock are contributed, they shall be valued for allocation purposes at their Fair Market
Value as of the date of allocation. The Annual Company Contributions under this Subsection 5.02 shall
be immediately invested in accordance with the Participants current investment election. Notwithstanding the
foregoing, Participants shall be eligible to receive a contribution under this Subsection only if
they are employed with the Employer on the last day of the Plan Year (and for this purpose, any
Participant who is employed on the last business day of the Plan Year shall be considered to be
23
employed on the last day of the Plan Year), or if their employment ended during the Plan Year
as a result of retirement (Separation Date after age fifty-five (55) with ten (10) Years of
Service, or after age sixty-five (65)), death or Total Disability.
5.03 Matching Contributions
|
(a) |
|
As of the end of each quarter (or on a more frequent basis as
determined by the Employers), the Employers will make a Matching
Contribution on behalf of each Participant equal to one hundred
percent (100%) of the Participants Before-Tax Contributions (including
Catch-Up Contributions) made since the last Employer Matching Contribution
that do not exceed four percent (4%) of the Participants Compensation. |
|
|
(b) |
|
As of the end of each Plan Year, a true up
Matching Contribution for each Participant who did not
receive the full Matching Contribution under Subparagraph (a)
for the Plan Year based on the amount of his or her Before-Tax
Contributions
(including Catch-Up Contributions) for such Plan Year. Such true up Matching
Contribution will be equal to the difference between the Matching Contribution
actually made on behalf of such Participant for the Plan Year under Subparagraph (a),
and the full Matching Contribution that the Participant would have been entitled to
receive under Subparagraph (a) for the Plan Year if such Matching Contributions were
determined as of the end of the Plan Year instead of on a quarterly (or more frequent) basis. |
|
|
(c) |
|
Matching Contributions for Plan Years beginning in 2009
shall be made in either cash or shares of Hanesbrands Stock (which may be shares
purchased in the open market or authorized-but-unissued shares), as determined by
the Committee. If shares of Hanesbrands Stock are contributed, they shall be valued
for allocation purposes at their Fair Market Value as of the date of allocation. The Matching Contributions under this Subsection 5.03 shall be
immediately invested in accordance with the Participants current investment election. |
5.04 Transition Contribution
Subject to the conditions and limitations of the Plan, solely for the Plan Year ending on
December 31, 2006, for any Participant who, on January 1, 2006:
|
(a) |
|
Was an exempt or non-exempt salaried employee of Sara Lee Corporations Branded
Apparel division; and |
|
|
(b) |
|
Had attained age fifty (50) and completed ten (10) Years of Service; and |
who is not eligible for a transition credit allocation under the Hanesbrands Inc. Supplemental
Employee Retirement Plan (the SERP) (other than the salaried employee transition credit set forth
in Subsection 2.32 of the SERP); the Employers shall contribute, in cash, to the Annual Company
Contribution Account of such Participant an amount equal to ten percent (10%) of such eligible
Participants Compensation for calendar year 2006 (including Compensation paid prior to the
Effective Date); provided, however, that Participants shall be eligible to receive a contribution
under this Subsection only if they are employed on the last business day of the Plan Year(and for
this purpose, any Participant who is employed on the last business day of the Plan Year shall be
considered to be employed on the last day of the Plan Year), or if their employment ended during
the Plan Year as a result of retirement (Separation Date after age fifty-five (55) with ten (10)
Years of Service, or after age sixty-five (65)), death or Total Disability.
24
5.05 Allocation of Annual Company Contribution
The amount of the contribution made by the Employers for each Plan Year pursuant to Subsection
5.02 for each eligible Participant in the amounts specified in Subparagraph 5.02(a) or 5.02(b) as
the case may be, shall be allocated to each such Participants Annual Company Contribution Account
as of the last day of the Plan Year.
5.06 Payment of Matching Contributions
Matching Contributions under Subparagraph 5.03(a) of the Plan for any Plan Year shall be made
each calendar quarter (or on a more frequent basis as
determined by the Employers) based on the matchable Before-Tax Contributions that have been posted to the
Participants Accounts for such period. Matching Contributions under Subparagraph 5.03(b)
of the Plan for any Plan Year shall be made as soon as practicable after the end of the Plan Year.
5.07 Allocation of Matching Contributions
Subject
to Subsections 6.02 and 6.05, the Matching Contribution under Subparagraph 5.03(a) shall be allocated and credited to the Current Year Matching Contribution
Subaccounts of those Participants entitled to share in such Matching Contributions, pro rata,
according to the matchable Before-Tax Contributions made by them, respectively, during that period
and posted to the Participants Current Year Before-Tax
Contribution Subaccount as
of such Accounting Date. Matching Contributions under Subparagraph
5.03(b) of the Plan for any Plan Year shall be similarly allocated
and credited as soon as practicable after the end of the Plan Year.
5.08 Payment of Employer Contributions
In no event shall any Employer Contribution required to be made to the Plan for any Plan Year
under this SECTION 5 be contributed later than the time prescribed by law for filing the Employers
federal income tax return for such year, including extensions thereof.
5.09 Limitations on Employer Contributions
The Employers total contribution for a Plan Year is conditioned on its deductibility under
Section 404 of the Code in that year, and shall comply with the contribution limitations set forth
in Subsection 6.05 and the allocation limitations contained in Subsections 6.01 and 5.04 of the
Plan, and shall not exceed an amount equal to the maximum amount deductible on account thereof by
the Employers for that year for purposes of federal taxes on income.
5.10 Verification of Employer Contributions
If for any reason the Employer decides to verify the correctness of any amount or calculation
relating to its contribution for any Plan Year, the certificate of an independent
25
accountant selected by the Employer as to the correctness of any such amount or calculation
shall be conclusive on all persons.
26
SECTION 6
Contribution Limits
6.01 Actual Deferral Percentage Limitations
In no event shall the Actual Deferral Percentage of the Highly Compensated Employees for any
Plan Year exceed the greater of the:
|
(a) |
|
Actual Deferral Percentage of all other Eligible Employees for the Plan Year
multiplied by 1.25; or |
|
|
(b) |
|
Actual Deferral Percentage of all other Eligible Employees for the Plan Year
multiplied by 2.0; provided that the Actual Deferral Percentage of the Highly
Compensated Employees does not exceed that of all other Eligible Employees by more than
two (2) percentage points. |
From time to time during the Plan Year, the Committee shall determine whether the limitation
of this Subsection will be satisfied and, to the extent necessary to ensure compliance with such
limitation, may limit the Before-Tax Contributions to be withheld on behalf of Highly Compensated
Employees or may refund Before-Tax Contributions previously withheld. If, at the end of the Plan
Year, the limitation of this Subsection is not satisfied, the Committee shall refund Before-Tax
Contributions previously withheld on behalf of Highly Compensated Employees. If Before-Tax
Contributions made on behalf of Highly Compensated Employees must be refunded to satisfy the
limitation of this Subsection, the Committee shall determine the amount of Excess Contributions and
shall refund such amount on the basis of the Highly Compensated Employees contribution amounts,
beginning with the highest such contribution amounts. Excess Contributions previously withheld
(and any income allocable thereto determined in accordance with Subsection 6.04) may be distributed
within two and one-half (2-1/2) months after the close of the Plan Year to which such Excess
Contributions relate, but in any event no later than the end of the Plan Year following the Plan
Year in which such Excess Contributions were made. Matching Contributions attributable to Excess
Contributions shall be treated as Forfeitures under Subsection 10.06. For Plan Years beginning on
and after January 1, 2008, the Plan shall satisfy the nondiscrimination requirements of Code
Section 401(k) in accordance with the safe harbor method based on Matching Contributions, as
described in Code Section 401(k)(13)(D), and the foregoing provisions of this Subsection shall be
inapplicable.
6.02 Limitation on Matching Contributions
In no event shall the Contribution Percentage of the Highly Compensated Employees for any Plan
Year exceed the greater of the:
|
(a) |
|
Contribution Percentage of all other Eligible Employees for the Plan Year
multiplied by 1.25; or |
27
|
(b) |
|
Contribution Percentage of all other Eligible Employees for the Plan Year
multiplied by two (2.0); provided that the Contribution Percentage of such Highly
Compensated Employees does not exceed that of all other Participants by more than two
(2) percentage points. |
From time to time during the Plan Year, the Committee shall determine whether the limitation
of this Subsection will be satisfied and, to the extent necessary to ensure compliance with such
limitation, shall refund a portion of the Matching Contributions previously credited to Highly
Compensated Employees. If Matching Contributions made on behalf of Highly Compensated Employees
must be refunded to satisfy the limitation of this Subsection, the Committee shall determine the
amount of Excess Matching Contributions and shall refund such amount on the basis of the Highly
Compensated Employees contribution amounts, beginning with the highest such contribution amounts.
At the Committees discretion, if the Excess Matching Contributions are attributable to non-vested
Matching Contributions, such Excess Matching Contributions may be forfeited in accordance with
Subsection 10.06 and applied in the same manner as any other Forfeiture under the Plan. Excess
Matching Contributions previously credited (and any income allocable thereto determined in
accordance with Subsection 6.04) may be distributed or forfeited within twelve (12) months after
the close of the Plan Year to which such Excess Matching Contributions relate, but in any event no
later than the end of the Plan Year following the Plan Year in which such Excess Matching
Contributions were made. For Plan Years beginning on and after January 1, 2008, the Plan shall
satisfy the nondiscrimination requirements of Code Section 401(m) in accordance with the safe
harbor method based on Matching Contributions, as described in Code Section 401(m)(12), and the
foregoing provisions of this Subsection shall be inapplicable.
6.03 Dollar Limitation
Notwithstanding the provisions of Subsection 6.01, no Participant shall make a Before-Tax
Contribution election which will result in his or her Elective Deferrals for any calendar year
exceeding $15,000 (or such greater amount as may be prescribed by the Secretary of Treasury to take
into account cost-of-living increases pursuant to Code Section 402(g)), except to the extent
permitted with respect to Catch-Up Contributions, if applicable. If a Participants total Elective
Deferrals under this Plan and any other plan of another employer for any calendar year exceed the
annual dollar limit prescribed above, the Participant may notify the Committee, in writing on or
before March 1 of the next following calendar year, of his or her election to have all or a portion
of such Excess Deferrals (and the income allocable thereto determined in accordance with Subsection
6.04) allocated under this Plan and distributed in accordance with this Subsection. In such event,
or in the event that the Committee otherwise becomes aware of any Excess Deferrals, the Committee
shall, without regard to any other provision of the Plan, direct the Trustee to distribute to the
Participant by the following April 15 the Participants Excess Deferrals (and any income
attributable thereto determined in accordance with Subsection 6.04) so allocated under the Plan.
Distributions to be made in accordance with the preceding sentence shall be made as soon as is
practicable following receipt by the Committee of written notification of Excess Deferrals, and the
Committee shall make every effort to meet the April 15 distribution deadline for all written
notifications received by the preceding March 1.
28
The amount of such Excess Deferrals distributed to a Participant in accordance with this
Subsection shall be treated as a contribution for purposes of the limitations referred to under
Subsection 6.05, and shall continue to be treated as Before-Tax Contributions for purposes of the
Actual Deferral Percentage test described in Subsection 6.01; however, Excess Deferrals by
non-Highly Compensated Employees shall not be taken into account under Subsection 6.01 to the
extent such Excess Deferrals are made under this Plan or any other plan maintained by an Employer
or Controlled Group Member. In addition, any Matching Contributions attributable to amounts
distributed under this Subsection (and any income allocable thereto determined in accordance with
Subsection 6.04) shall be forfeited in accordance with Subsection 10.06.
6.04 |
|
Allocation of Earnings to Distributions of Excess Deferrals, Excess Contributions and Excess
Matching Contributions |
The earnings allocable to distributions of Excess Deferrals under Subsection 6.03, Excess
Contributions under Subsection 6.01, and Excess Matching Contributions under Subsection 6.02 shall
be determined by multiplying the earnings attributable to the applicable excess amounts (for the
calendar and/or Plan Year, whichever is applicable) by a fraction, the numerator of which is the
applicable excess amount, and the denominator of which is the balance attributable to such
contributions in the Participants Account or Accounts, as of the beginning of such year, plus the
contributions allocated to the applicable account for such year. Gap period income (i.e., income
allocable to Excess Contributions and Excess Matching Contributions for the period after the close
of the Plan Year and prior to the distribution) shall be allocated as described in Treasury
Regulation Sections 1.401(k)-2(b)(2)(iv) and 1.401(m)-2(b)(iv). Gap period income (i.e., income
allocable to Excess Deferrals, Excess Contributions and Excess Matching Contributions for the
period after the close of the Plan Year and prior to the distribution) shall be allocated as
described in Treasury Regulation Sections 1.402(g)-1(e)(5), 1.401(k)-2(b)(2)(iv) and
1.401(m)-2(b)(2)(iv), respectively.
6.05 Contribution Limitations
For each Limitation Year, the Annual Addition to a Participants Accounts under the Plan and
under any other defined contribution plan maintained by any Employer shall not exceed the lesser of
$45,000 (as adjusted for cost-of-living increases under Code Section 415(d)) or 100% of the
Participants compensation for the Limitation Year. For purposes of this Subsection 6.05,
compensation for a Limitation Year means a Participants compensation within the meaning of Code
Section 415(c)(3) and Treasury Regulations Section 1.415(c)-2(b) and (c) that is actually paid or
made available during the Limitation Year, subject to the following:
|
(a) |
|
Compensation shall include elective amounts that are not includible in the
gross income of the Participant by reason of Code Sections 125, 132(f) and 402(g)(3). |
|
|
(b) |
|
Compensation for a Limitation Year shall include compensation paid by the later
of 2-1/2 months after a Participants severance from employment with the Employers or
the end of the Limitation Year that includes the date of the Participants severance
from employment with the Employers, if: |
29
|
(i) |
|
The payment is regular compensation for services during the
Participants regular working hours, or compensation for services outside the
Participants regular working hours (such as overtime or shift differential),
commissions, bonuses, or other similar payments, and absent a severance from
employment, the payments would have been paid to the Participant while the
Participant continued in employment with the Employers; or |
|
|
(ii) |
|
The payment is for unused accrued bona fide sick, vacation or
other leave that the Participant would have been able to use if employment had
continued. |
Any payment not described above shall not be considered compensation if paid after
severance from employment, even if paid by the later of 2-1/2 months after the date
of severance from employment or the end of the Limitation Year that includes the
date of severance from employment, except for payments to an individual who does not
currently perform services for the Employers by reason of qualified military service
(within the meaning of Code Section 414(u)(1)) to the extent these payments do not
exceed the amounts the individual would have received if the individual had
continued to perform services for the Employers rather than entering qualified
military service.
|
(c) |
|
A Participants compensation for a Limitation Year shall not include
compensation in excess of the limitation under Code Section 401(a)(17) in effect for
the Limitation Year. |
The Committee shall take any actions it deems advisable to avoid an Annual Addition in excess
of Code Section 415 of the Code; provided, however, if a Participants Annual Addition for a
Limitation Year actually exceeds the limitations of this Subsection, the Committee shall correct
such excess in accordance with applicable guidance issued by the Internal Revenue Service. Annual
Additions shall be subject to Code Section 415 and applicable Treasury regulations issued
thereunder, the requirements of which are incorporated herein by reference to the extent not
specifically provided in this Subsection 6.05.
30
SECTION 7
Period of Participation
7.01 Separation Date
If a Participant is transferred from employment with an Employer to employment with a
Controlled Group Member (other than an Employer), then, for the purpose of determining when his or
her Separation Date occurs under this Subsection, his or her employment with such Controlled Group
Member (or any Controlled Group Member to which he or she is subsequently transferred) shall be
considered as employment with the Employers. If a Participant who was an Eligible Employee of an
Employer becomes a Leased Employee of an Employer, then his or her change in status shall not be
considered a termination of employment for purposes of determining when his or her Separation Date
occurs under this Subsection. A Participants termination of employment with all of the Employers
at any age while Totally Disabled shall be deemed a termination on account of Total Disability.
7.02 Restricted Participation
When payment of all of a Participants Account balances is not made at his or her Separation
Date, or if a Participant transfers to the employ of a Controlled Group Member which is not an
Employer or continues in the employ of an Employer but ceases to be employed in a Covered Group,
the Participant or his or her Beneficiary will continue to be considered as a Participant for all
purposes of the Plan, except as follows:
|
(a) |
|
He or she will not make any Before-Tax Contributions, and his or her Employer
will not make any Employer Contributions on his or her behalf, for any period beginning
after his or her Separation Date occurs or for any subsequent Plan Year unless he or
she is reemployed and again becomes a Participant in the Plan; provided, however, that
his or her Employer shall contribute: |
|
(i) |
|
His or her Before-Tax Contributions, as provided in Subsection
5.01, with respect to Compensation paid through his or her Separation Date; and |
|
|
(ii) |
|
If applicable, an Annual Company Contribution and/or a
Transition Contribution for the Plan Year in which his or her Separation Date
occurs, based on his or her Compensation paid during that portion of the Plan
Year in which he or she was a Participant eligible for such contributions. |
|
(b) |
|
He or she will not make any Before-Tax Contributions, and his or her Employer
will not make any Employer Contributions on his or her behalf, for any period in which
he or she is in the employ of an Employer but is not an Eligible Employee. |
|
|
(c) |
|
He or she will not make any Before-Tax Contributions, and his or her Employer
will not make any Employer Contributions on his or her behalf, for any period in |
31
|
|
|
which he or she is employed by a Controlled Group Member that is not an Employer
under the Plan. |
|
|
(d) |
|
The Participant may not apply for loans under Subsection 11.01. |
|
|
(e) |
|
A Participant whose Separation Date occurs, or a Beneficiary or Alternate Payee
of a Participant, may not apply for a withdrawal under Section 11. |
32
SECTION 8
Accounting
8.01 Separate Accounts
The Committee will maintain the following Accounts in the name of each Participant:
|
(a) |
|
A Before-Tax Contribution Account, which will reflect his or her Before-Tax
Contributions, if any, made under the Plan, and the income, losses, appreciation and
depreciation attributable thereto. This Account shall include a Current Year
Before-Tax Contribution Subaccount, which will reflect only the Before-Tax
Contributions made by the Participant during the current Plan Year. |
|
|
(b) |
|
A Matching Contribution Account, which will reflect his or her share of
Matching Contributions, if any, made under the Plan, and the income, losses,
appreciation and depreciation attributable thereto. This Account shall include a
Current Year Matching Contribution Subaccount, which will reflect only the Matching
Contributions allocated to the Participant during the current Plan Year. |
|
|
(c) |
|
An Annual Company Contribution Account, which will reflect his or her share
of the Annual Company Contributions under the Plan, and the income, losses,
appreciation and depreciation attributable thereto. This Account shall include a
Current Year Annual Company Contribution Subaccount, which will reflect only the
Annual Company Contributions allocated to the Participant during the current Plan Year. |
|
|
(d) |
|
An After-Tax Account, which will reflect his or her after-tax contributions,
and the income, losses, appreciation and depreciation attributable to all after-tax
contributions made to the Plan or a Predecessor Plan. |
|
|
(e) |
|
A Rollover Contribution Account, which will reflect his or her Rollover
Contributions to the Plan, and the income, losses, appreciation and depreciation
attributable thereto. |
|
|
(f) |
|
A Predecessor Company Account, which will reflect the contributions made by a
Participant, or on his or her behalf, under a Predecessor Plan, and the income, losses,
appreciation and depreciation attributable thereto. |
8.02 Adjustment of Participants Accounts
As of each Accounting Date, the Accounts of Participants shall be adjusted to reflect the
following:
|
(a) |
|
Transfers, if any, made between Investment Funds; |
33
|
(b) |
|
Before-Tax Contributions, Employer Contributions and Rollover Contributions, if
any, and payments of principal and interest on any loans made from a Participants
Account; |
|
|
(c) |
|
Distributions and withdrawals that have been made but not previously charged to
the Participants Account; and |
|
|
(d) |
|
Changes in the Adjusted Net Worth of the Investment Funds in which such Account
is invested. |
As of each Accounting Date, the Committee shall establish the value of each Participants
Account, which value shall reflect the transactions posted to the Participants Account as they
occurred during the preceding calendar month. As of the first day of each Plan Year, the balance
in each Participants Current Year Before-Tax Contribution Subaccount, Current Year Matching
Contribution Subaccount, Current Year Annual Company Contribution Subaccount, Current Year
Transition Contribution Subaccount, if any, shall be reflected in the Participants Before-Tax
Contribution Account, Matching Contribution Account, Annual Company Contribution Account,
Transition Contribution Account, and After-Tax Account, respectively and the balances of such
Current Year Before-Tax Contribution Subaccount, Current Year Matching Contribution Subaccount,
Current Year Annual Company Contribution Subaccount and Current Year Transition Contribution
Subaccount shall be reduced to zero. If a Special Accounting Date occurs, the accounting rules set
forth above in this Subsection and elsewhere in this SECTION 8 shall be appropriately adjusted to
reflect the resulting shorter accounting period ending on that Special Accounting Date.
Notwithstanding the foregoing, the Committee may establish separate rules to be applied on a
uniform basis in adjusting any portion of Participants Accounts that is invested in the Sara Lee
Corporation Common Stock Fund or the Hanesbrands Inc. Common Stock Fund for such accounting period,
including the treatment of any dividends or stock splits with respect to the securities held in
such funds. Such rules may include provisions for (i) allocating earnings from short-term
investments during an accounting period to the Subaccounts of Participants; (ii) allocating
dividends or stock splits to Participants Subaccounts invested in the applicable Fund (or to a
separate Account or Subaccount, as applicable); (iii) allocating shares of Sara Lee Stock or
Hanesbrands Stock to Participants Subaccounts based on the average purchase price per share
purchased by the Trustee during such accounting period; and (iv) allocating shares of stock (or
other securities) to Participants Subaccounts based on the applicable stock split or stock
dividend factor or other similar basis.
8.03 Crediting of 401(k) Contributions
Subject to the provisions of SECTION 4, each Participants Before-Tax Contributions will be
credited to his or her Current Year Before-Tax Contribution Subaccount no later than the Accounting
Date which ends the accounting period of the Plan during which such contributions were received by
the Trustee.
34
8.04 Charging Distributions
All payments made to a Participant or his or her Beneficiary during the accounting period
ending on each Accounting Date will be charged to the proper Accounts of the Participant in
accordance with Subsection 8.02.
8.05 Statement of Account
At such times during each Plan Year as the Committee may determine, each Participant will be
furnished with a statement reflecting the condition of his or her Account in the Trust Fund as of
the most recent Accounting Date. No Participant shall have the right to inspect the records
reflecting the Accounts of any other Participant.
35
SECTION 9
The Trust Fund and Investment of Trust Assets
9.01 The Trust Fund
The Trust Fund will consist of all money, stocks, bonds, securities and other property of any
kind held and acquired by the Trustees in accordance with the Plan and the Trust Agreement.
9.02 The Investment Funds
The Investment Committee, in its discretion, may designate one or more funds, referred to
collectively as Investment Funds, for the investment of Participants Accounts. The Investment
Committee, in its discretion, may from time to time establish new Investment Funds or eliminate
existing Investment Funds. The available Investment Funds shall include the Hanesbrands Inc.
Common Stock Fund, the assets of which are primarily invested in shares of Hanesbrands Stock. A
portion of each Investment Fund may be invested from time to time in the short-term investment fund
(STIF) of a custodian bank.
9.03 Investment of Contributions
In accordance with rules established by the Committee, a Participant may elect to have
contributions to his or her Accounts invested in one or more of the Investment Funds in even
multiples of one percent (1%). If a Participant does not make such an election within such period
as may be determined by the Committee, he or she shall be deemed to have elected that all eligible
contributions to his or her Accounts be invested in the default investment arrangement specified by
the Investment Committee in accordance with ERISA Section 404(c)(5) and accompanying regulations.
Elections under this Subsection and Subsections 9.04 and 9.05 shall be made in such manner and
in accordance with such rules as the Committee determines. If the Committee determines in its
discretion that elections under this Subsection and Subsections 9.04 and 9.05 shall be made in a
manner other than in writing, any Participant who makes an election pursuant to such method may
receive written confirmation of such request; further, any such request and confirmation shall be
the equivalent of a writing for all purposes.
9.04 Change in Investment of Contributions
Effective as of any payroll period, a Participant may elect to change his or her investment
election under Subsection 9.03. Such change shall apply only with respect to contributions made by
or on behalf of the Participant that are received by the Trustee after the effective date of the
change.
36
9.05 Elections to Transfer Balances Between Accounts; Diversification
On any Accounting Date, a Participant may elect to transfer or reallocate the balances in his
or her Accounts in an Investment Fund to one or more other Investment Funds, subject to the trading
restrictions of the Investment Fund; any such election shall be made in accordance with rules
established by the Committee, and may include an election to automatically reallocate the
Participants Accounts on such dates as the Participant may specify in the election. The
Participants Accounts in the Investment Fund from which a fund transfer or reallocation is made
will be charged, and his or her Accounts in the Investment Fund to which such fund transfer or
reallocation is made will be credited, with the amount so transferred or reallocated in accordance
with rules established by the Committee. Such transfers or reallocations shall be made as soon as
administratively feasible following the Participants election or, in the event of an automatic
reallocation, on the date elected by the Participant in accordance with procedures established by
the Committee. The foregoing provisions of this Subsection are contingent upon the availability of
fund transfers and reallocations between Investment Funds under the terms of the investments made
by each Investment Fund. A Participants Account may be charged a redemption fee for frequent
transfers into and out of an Investment Fund within a restricted time period established by the
Investment Fund. Additionally, Participants may be restricted from initiating fund transfers or
reallocations into or out of an Investment Fund if the Committee or an Investment Fund determines
that the Participants transfer activity would be detrimental to that Investment Fund.
9.06 Voting of Stock; Tender Offers
With respect to Hanesbrands Stock (and Sara Lee Stock for as long as it is held in the Plan),
the Committee shall notify Participants of each meeting of the shareholders of Sara Lee Corporation
or Hanesbrands Inc. and shall furnish to them copies of the proxy statements and other
communications distributed to shareholders in connection with any such meeting. The Committee also
shall notify the Participants that they are entitled to give the Trustee voting instructions as to
Sara Lee Stock or Hanesbrands Stock credited to their Accounts. If a Participant furnishes timely
instructions to the Trustee, the Trustee (in person or by proxy) shall vote the Sara Lee Stock or
Hanesbrands Stock (including fractional shares) credited to the Participants Accounts in
accordance with the directions of the Participant. The Trustee shall vote the Sara Lee Stock or
Hanesbrands Stock for which it has not received timely direction, in the same proportion as
directed shares are voted.
Similarly, the Committee shall notify Participants of any tender offer for, exchange of, or a
request or invitation for tenders of Sara Lee Stock or Hanesbrands Stock and shall request from
each Participant instructions for the Trustee as to the tendering of Sara Lee Stock or Hanesbrands
Stock credited to his or her Accounts. The Trustee shall tender or exchange such Sara Lee Stock or
Hanesbrands Stock as to which it receives (within the time specified in the notification)
instructions to tender or exchange. Any Sara Lee Stock or Hanesbrands Stock credited to the
Accounts of Participants as to which instructions not to tender or exchange are received and as to
which no instructions are received shall not be tendered or exchanged.
37
9.07 Confidentiality of Participant Instructions
The instructions received by the Trustee from Participants or Beneficiaries with respect to
purchase, sale, voting or tender of Sara Lee Stock or Hanesbrands Stock credited to such
Participants or Beneficiaries Accounts shall be held in confidence and shall not be divulged or
released to any person, including the Committee, officers or Employees of the Company or any
Controlled Group Member.
38
SECTION 10
Payment of Account Balances
10.01 Payments to Participants
(a) Vesting.
|
(i) |
|
Before-Tax Contribution, After-Tax, and Rollover
Contribution Accounts. A Participant shall at all times be fully vested in
and have a nonforfeitable right to the balance in his or her Before-Tax
Contribution Account and his or her After-Tax and Rollover Contribution
Accounts, if any. |
|
|
(ii) |
|
Annual Company Contribution and Transition Contribution
Account. If a Participants Separation Date occurs on or after his or her
Normal Retirement Age, on the date he or she dies, or on or after the date he
or she becomes Totally Disabled, then the Participant shall be fully vested in
his or her Annual Company Contribution Account and Transition Contribution
Account. If a Participants Separation Date occurs under any other
circumstances, the balances in his or her Annual Company Contribution Account
and Transition Contribution Account shall be calculated in accordance with the
vesting schedule outlined below: |
|
|
|
If the Participants |
|
The Vested Percentage of |
Number of Years of |
|
His or Her Applicable |
Service is: |
|
Accounts will be: |
Less than 1 year
|
|
0% |
1 year but less than 2 years
|
|
20% |
2 years but less than 3 years
|
|
40% |
3 years but less than 4 years
|
|
60% |
4 years but less than 5 years
|
|
80% |
5 years or more
|
|
100% |
|
|
|
The resulting balance in his or her Annual Company Contribution Account and
Transition Contribution Account will be distributable to him or her, or, in
the event of his or her death, to his or her Beneficiary, in accordance with
this Subsection and Subsection 10.02. |
|
|
(iii) |
|
Matching Contribution Account. If a Participants
Separation Date occurs on or after his or her Normal Retirement Age, on the
date he or she dies, or on or after the date he or she becomes Totally
Disabled, then the |
39
|
|
|
Participant shall be fully vested in his or her Matching
Contribution Account. If a Participants Separation Date occurs under
any other circumstances on or after January 1, 2008, the Participant shall be
fully vested in his or her Matching Contribution Account balance provided he or
she has completed at least two Years of Service. Notwithstanding the
foregoing, if the Participant is an active employee and has a Matching
Contribution Account balance on December 31, 2007, he or she shall be fully
vested in his or her Matching Contribution Account (including future
contributions thereto) on and after January 1, 2008. If a Participants
Separation Date occurs prior to January 1, 2008, he or she shall be vested in
his or her Matching Contribution Account balance to the same extent that he or
she was vested at his or her Separation Date, subject to the provisions of
Subparagraph 12.02(a)(i). The balance in the Participants Matching
Contribution Account after application of the foregoing vesting rules will be
distributable to him or her, or, in the event of his or her death, to his or
her Beneficiary, in accordance with this Subsection and Subsection 10.02 |
|
|
(iv) |
|
Special Provisions to Certain Participants. In
addition, a Participant who was subject to special vesting rules under the Sara
Lee Plan shall be fully vested in his or her Accounts to the extent provided in
the Sara Lee Plan. |
|
(b) |
|
Time of Payment. Except as provided in Subsection 10.03 below, payment of
a Participants benefits will be made or commence within the time determined by the
Committee after his or her Separation Date, but not later than sixty (60) days after
(i) the end of the Plan Year in which his or her Separation Date occurs, or (ii) such
later date on which the amount of the payment can be ascertained by the Committee. In
the event a Participant receives a lump sum distribution of his or her entire vested
Accounts and additional contributions are subsequently credited to his or her Accounts,
his or her entire remaining vested Account balance shall be distributed in an immediate
lump sum to the extent such vested Account balance does not exceed $1,000 as of the
date of such distribution. Except as provided in the preceding sentence or in
Subparagraph 10.01(f) below, distributions may not be made to the Participant before
his or her Normal Retirement Age without his or her consent. |
|
|
(c) |
|
Method of Distribution. A Participants vested Accounts will be
distributed to him or her (or, in the event of his or her death, to his or her
Beneficiary) in a lump sum unless the Participant (or, in the event of his or her
death, the Participants Beneficiary) elects, in accordance with procedures established
by the Committee, to receive such distribution by any one or more of the following
methods, if applicable: |
|
(i) |
|
Partial Distributions. A Participant (or, in the event
of his or her death, his or her Beneficiary) may elect to receive a partial
distribution of the vested |
40
|
|
|
Account balance (but not less than the lesser of his
or her total Account balance or $250.00) as of any Accounting Date after the
Participants Separation Date. All partial distributions under this
Subparagraph shall be made in cash only. Notwithstanding any Plan provision to
the contrary, a partial distribution under this Subparagraph shall not be
available once a Participant or his or her surviving spouse has begun to
receive installments under Subparagraph (ii) below. |
|
|
(ii) |
|
Installments. If the vested portion of a Participants
Accounts exceeds $5,000, the Participant (or, in the event of his or her death,
his or her surviving spouse) may elect to receive substantially equal
installments over a period not to exceed five (5) Plan Years, commencing in any
year designated but no later than the applicable Required Commencement Date,
with final distribution of all vested Accounts by the fifth year. All
installment distributions shall be made in cash. A Participant or his or her
surviving spouse who is receiving installments may subsequently elect to
receive a lump sum distribution of all remaining installment payments. No
Beneficiary other than a Participants surviving spouse may elect to receive
installments. |
|
|
(iii) |
|
Special Distribution Provisions for Certain
Participants. Notwithstanding the foregoing, a Participant who had an
account balance in a Predecessor Plan may elect distribution under any other
method available to such Participant to the extent provided in the Sara Lee
Plan. |
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(iv) |
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Order of Accounts. Distributions under this
Subparagraph shall be charged to the Participants vested Accounts (if
applicable) in such order as shall be determined by the Committee and applied
uniformly. |
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(v) |
|
Special Provisions Applicable to Dividends.
Notwithstanding Subparagraph (a)(ii), dividends attributable to Sara Lee Stock
or Hanesbrands Stock in a Participants Accounts shall be one hundred percent
(100%) vested. |
|
(d) |
|
Fees. The Committee may, on an annual or more frequent basis, charge
the Accounts of any Alternate Payee, any Beneficiary, or any Participant whose
Separation Date has occurred for a reason other than Retirement, for reasonable and
necessary administrative fees incurred in the ongoing maintenance of such Accounts in
the Plan, in accordance with uniform rules and procedures applicable to all
Participants similarly situated. Retirement means Separation from Service on or
after the earlier of: (i) the attainment of age fifty-five (55) and ten (10) Years of
Service, or (ii) Normal Retirement Age. |
|
|
(e) |
|
No Payments Due to Spin-Off. Notwithstanding any Plan provision to the
contrary, no Separation Date shall have occurred and no distribution of Accounts shall
be made to a Participant solely on account of the Spin-Off.
|
41
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(f) |
|
Vested Accounts Not in Excess of $1,000. Notwithstanding any Plan
provision to the contrary, if the Participants vested Accounts equal $1,000 or less on
or after the Participants Separation Date, the method of distribution as to that
Participant shall be as a lump sum cash distribution of the Participants vested
Accounts. Such distribution shall be made as soon as practicable following the
Participants Separation Date. If the Participants vested benefit under the Plan is
zero, the Participant shall be deemed to have received a distribution of such vested
benefit. |
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(g) |
|
Special Distribution Rules for Certain Military Service
Leaves. Notwithstanding the foregoing, in accordance with Section
414(u)(12) of the Code, a Participant receiving a differential wage
payment (as defined in Section 3401(h)(2) of the Code) shall be
treated as having been severed from employment with the employer for
purposes of taking a distribution of his pre-tax compensation
deferral contributions account during any period the Participant
performs service in the uniformed services while on active duty for a
period of more than 30 days. If a Participant elects to receive a
distribution pursuant to the preceding sentence, such Participant
shall not be permitted to make pre-tax compensation deferral
contributions under Section 3 of the Plan during the six-month period
beginning on the date of the distribution. |
10.02 Distributions in Shares
Distributions of amounts invested in the Hanesbrands Inc. Common Stock Fund (or the Sara Lee
Corporation Common Stock Fund while such fund is maintained under the Plan) may be made in cash or
in shares, as elected by the Participant, provided such shares are distributed at their Fair Market
Value, as determined by the Trustee. If a Participant elects a stock distribution of amounts
invested in the Hanesbrands Inc. Common Stock Fund or the Sara Lee Corporation Common Stock Fund
and the Participant subsequently has additional contributions allocated to either of said funds,
the Participant shall receive such additional contributions, to the extent vested, in shares of
stock in accordance with Subsection 10.01, unless such additional contributions do not exceed
$1,000 as of the date of distribution. If an election is made by the Participant to direct the
Trustee to distribute the balance of his or her Accounts invested in the Sara Lee Corporation
Common Stock Fund or the Hanesbrands Inc. Common Stock Fund in cash, the Participant shall receive
cash equal to the Fair Market Value of the balance of his or her Accounts. For purposes of this
Subsection, the rights extended to a Participant hereunder shall also apply to any Beneficiary or
Alternate Payee of such Participant. All other distributions shall be made in cash.
10.03 Beneficiary
|
(a) |
|
Designation of Beneficiary. Each Participant from time to time, in
accordance with procedures established by the Committee, may name or designate a
Beneficiary. A Beneficiary designation will be effective only when properly provided
to the Committee in accordance with its procedures while the Participant is alive and,
when effective, will cancel all earlier Beneficiary designations made by the
Participant. Notwithstanding the foregoing, a deceased Participants surviving spouse
will be his or her sole, primary Beneficiary unless: (i) the spouse had consented in
writing to the Participants election to designate another person or persons as a
primary Beneficiary or Beneficiaries, (ii) such election designates a Beneficiary which
may not be changed without spousal consent (or the consent of the spouse expressly
permits designations by the Participant without any further consent by the spouse) and
(iii) the spouses consent acknowledges the effect of such election and is witnessed by
a notary public. |
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|
(b) |
|
No Beneficiary Designation at Death. If a deceased Participant failed
to name or designate a Beneficiary, if the Participants Beneficiary designation is
ineffective for any reason, or if all of the Participants Beneficiaries die before the |
42
|
|
|
Participant, the Committee will direct the Trustee to pay the Participants Account
balance in accordance with the following: |
|
(i) |
|
To the Participants surviving spouse; |
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(ii) |
|
If the Participant does not have a surviving spouse, to the
Participants beneficiary or beneficiaries (if any) designated by the
Participant under the Hanesbrands Inc. Life Insurance Plan; |
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(iii) |
|
If the Participant does not have a surviving spouse and failed
to designate a beneficiary under the Hanesbrands Inc. Life Insurance Plan, to
or for the benefit of the legal representative or representatives of the
Participants estate; and |
|
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(iv) |
|
If the appropriate payee is not identified pursuant to
Subparagraphs (i) through (iii) above, then to or for the benefit of one or
more of the Participants relatives by blood, adoption or marriage in such
proportions as the Committee (or its delegate) determines. |
|
(c) |
|
Death of Beneficiary Prior to Participants Death. In the event that
the Participant has named multiple Beneficiaries, and one of the Beneficiaries dies
before the Participant, the remaining Beneficiaries shall be entitled to the deceased
Beneficiarys share, pro rata in accordance with their share of the Account balance as
of the date of the Participants death (or such other date as the Committee may
determine is administratively practicable), subject to the Participants right to
change his or her beneficiary designation at any time in accordance with Subparagraph
(a). The Committee reserves the right, on a uniform basis for similarly situated
Beneficiaries, to make distribution of a Beneficiarys Account balance in whole or in
part at any time notwithstanding any election to the contrary by the Beneficiary. |
|
|
(d) |
|
Death of Beneficiary After Participants Death. Each Beneficiary, in
accordance with procedures established by the Committee, may name or designate an
individual to receive the Beneficiarys share of the Account balance (a Recipient)
any time after the Participants death. In the event a Beneficiary dies before
complete payment of his or her share of the Account balance, such Beneficiarys share
shall be paid to the Recipient designated by the Beneficiary. If a deceased
Beneficiary failed to name or designate a Recipient, if the Beneficiarys designation
is ineffective for any reason, or if the Recipient dies before the Beneficiary or
before complete payment of the Beneficiarys share of the Account balance, the
Committee will direct the Trustee to pay the Beneficiarys share in accordance with the
following: |
|
(i) |
|
To the Beneficiarys surviving spouse;
|
43
|
(ii) |
|
If the Beneficiary does not have a surviving spouse, to or for
the benefit of the legal representative or representatives of the Beneficiarys
estate; |
|
|
(iii) |
|
If the Beneficiary does not have a surviving spouse and an
estate is not opened on behalf of the Beneficiary, to or for the benefit of one
or more of the Beneficiarys relatives by blood, adoption or marriage in such
proportions as the Committee (or its delegate) determines. |
Notwithstanding anything contained herein to the contrary, all payments under this
Subparagraph shall comply with the requirements of Code Section 401(a)(9).
10.04 Missing Participants and Beneficiaries
While a Participant is alive, he or she must file with the Committee from time to time his or
her own and each of his or her named Beneficiaries post office addresses and each change of post
office address. After the Participants death, the Participants Beneficiary or Beneficiaries
shall be responsible for filing such information with the Committee. A communication, statement or
notice addressed to a Participant or Beneficiary at his or her last post office address filed with
the Committee, or if no address is filed with the Committee, then at his or her last post office
address as shown on the Employers records, will be binding on the Participant and his or her
Beneficiary for all purposes of the Plan. Neither the Trustee nor any of the Employers is required
to search for or locate a Participant or Beneficiary. If the Committee notifies a Participant or
Beneficiary that he or she is entitled to a payment and also notifies him or her of the effect of
this Subsection, and the Participant or Beneficiary fails to claim his or her Account balances or
make his or her whereabouts known to the Committee within three (3) years after the notification,
the Account balances of the Participant or Beneficiary may be disposed of in an equitable manner
permitted by law under rules adopted by the Committee, including the Forfeiture of such balances,
if the value of the Account is equal to or less than the administrative fees, if any, applicable to
the Participants or Beneficiarys Account balance pursuant to Subsection 10.01.
10.05 Rollovers
|
(a) |
|
General Rule. Notwithstanding any Plan provision to the contrary, a
Distributee under the Plan who receives an Eligible Rollover Distribution may elect, at
the time and in the manner prescribed by the Committee, to have any portion of the
distribution paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover. |
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|
(b) |
|
Non-Spouse Beneficiary Rollovers. To the extent permitted under Code
Section 402(c)(11) and related regulations and guidance, if a direct trustee-to-trustee
transfer is made to an individual retirement plan described in Code Section
402(c)(8)(B)(i) or (ii), which individual retirement plan is established for the
purposes of receiving a distribution on behalf of a non-spouse beneficiary (as
defined by Code Section 401(a)(9)(E)), the transfer shall be treated as an Eligible
Rollover Distribution for purposes of the Plan and Code Section 402(c). |
44
|
(c) |
|
Qualified Rollover Contributions to Roth IRAs. Effective as of January
1, 2008, solely to the extent permitted in Code Sections 408A(c)(3)(B), (d)(3) and (e)
and the regulations and other guidance issued thereunder, an eligible Distributee may
elect to roll over any portion of an Eligible Rollover Distribution to a Roth IRA (as
defined by Code Section 408A) in a qualified rollover contribution (as defined in Code
Section 408A(e)), provided that the requirements of Code Section 402(c) are met.
Notwithstanding any provisions of the Plan to the contrary, a Distributee under the
Plan who receives an Eligible Rollover Distribution may elect, at the time and in the
manner prescribed by the Committee, to have any portion of the distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover. |
10.06 Forfeitures
A Forfeiture shall be treated as a separate Account (which is not subject to adjustment under
Subsection 8.02) until the next following Accounting Date on which Forfeitures will be allocated. On
that date, all Forfeitures arising during the period preceding the Accounting Date which have not
been previously allocated shall be allocated among and credited to the Accounts of Participants
reemployed to the extent required under Subsection 12.01, shall be used to reduce Employer Matching
Contributions required by Subsection 5.03 or any applicable Supplement to the Plan for the current
Plan Year or succeeding Plan Years, or shall be used to reduce administrative expenses of the Plan,
as determined by the Committee.
The portion of a Participants Annual Company Contribution, Transition Contribution and
Matching Contribution Accounts that is not distributable by reason of the provisions of Subsection
10.01 shall be credited to a Forfeiture Account established and caused to be maintained by the
Trustee in the Participants name as of the Accounting Date coincident with or next following his
Separation Date (before adjustments then required under the Plan have been made). If the
Participant does not return to employment with an Employer or a related Company by the last day of
the month following sixty (60) days from his Separation Date or upon the earlier distribution of
his or vested Accounts, the balance in his Forfeiture Account (after all adjustments then required
under the Plan have been made) will be a Forfeiture.
If a Participant returns to employment with an Employer or a Related Company before incurring
five consecutive One Year Breaks in Service, the amount previously forfeited from his Forfeiture
Account, if any, will be restored to his Forfeiture Account out of Forfeitures occurring in the
year of restoration or out of a restoration contribution made by the Employer for restoration
purposes only.
10.07 Recovery of Benefits
In the event a Participant or Beneficiary receives a benefit payment under the Plan which is
in excess of the benefit payment which should have been made, the Committee shall have the
right to recover the amount of such excess from such Participant or Beneficiary on behalf of
the Plan, or from the person that received such benefit payments. The Committee may, however, at
45
its option, deduct the amount of such excess from any subsequent benefits payable to, or for, the
Participant or Beneficiary.
10.08 Dividend Pass-Through Election
With respect to a Participants interest in the ESOP component of the Plan (as defined in
Subsection 1.01 from time to time) , each Participant has the right to elect either (a) to have
dividends paid on such shares reinvested in shares of Sara Lee Stock or Hanesbrands Stock (as
applicable), or (b) to receive a distribution in cash of such dividends in accordance with
procedures established by the Committee. To the extent such dividends are reinvested, they shall
be one hundred percent (100%) vested. Such distributions shall be made as soon as administratively
practicable following each March 31, June 30, September 30 and December 31 Plan Year quarter, and
shall not constitute Eligible Rollover Distributions. Notwithstanding the foregoing, on and after
the Spin-Off Date, dividends attributable to Sara Lee Stock shall be fully vested and shall
automatically be reinvested in the Sara Lee Common Stock Fund.
10.09 Minimum Distributions
Distribution of a Participants benefits shall be made or commence by his or her Required
Commencement Date. Notwithstanding the foregoing, the Committee may establish procedures to begin
minimum distribution payments in the calendar year in which the Participant attains age seventy and
one-half (70-1/2). Distributions to a Participant after his or her Required Commencement Date shall
be made in installment payments equal to the minimum amount necessary to meet the requirements of
Section 401(a)(9) of the Code. All distributions under the Plan shall comply with the requirements
of Section 401(a)(9) of the Code and the regulations thereunder, and shall further comply with the
rules described below:
|
(a) |
|
The Participants Accounts will be distributed, or begin to be distributed, to
the Participant no later than the Participants Required Commencement Date. If the
Participant dies before distributions begin, the Participants Accounts will be
distributed, or begin to be distributed, no later than as follows: |
|
(i) |
|
If the Participants surviving spouse is the Participants sole
Designated Beneficiary, then distributions to the surviving spouse will begin
by December 31 of the calendar year immediately following the calendar year in
which the Participant died, or by December 31 of the calendar year in which the
Participant would have attained age seventy and one-half (70-1/2), if later; |
|
|
(ii) |
|
If the Participants surviving spouse is not the Participants
sole Designated Beneficiary, then distributions to the Designated Beneficiary
will begin by December 31 of the calendar year immediately following the
calendar year in which the Participant died; |
|
|
(iii) |
|
If there is no Designated Beneficiary as of September 30 of
the year following the year of the Participants death, the Participants
entire |
46
|
|
|
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Participants death; or |
|
|
(iv) |
|
If the Participants surviving spouse is the Participants sole
Designated Beneficiary and the surviving spouse dies after the Participant but
before distributions to the surviving spouse have begun, this Subparagraph (a),
other than Subparagraph (a)(i), will apply as if the surviving spouse were the
Participant. |
|
|
|
For purposes of this Subparagraph (a) and Subparagraph (c), unless Subparagraph
(a)(iv) applies, distributions will be considered to have begun on the Participants
Required Commencement Date. If Subparagraph (a)(iv) applies, distributions will be
considered to have begun on the date distributions are required to begin to the
surviving spouse under Subparagraph (a)(i). Unless the Participants interest is
distributed in a single sum on or before the Required Commencement Date,
distributions will be made as of the first Distribution Calendar Year in accordance
with Subparagraphs (b) and (c) below. |
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|
(b) |
|
Required Minimum Distributions During Participants Lifetime. During
the Participants lifetime, the minimum amount that will be distributed for each
Distribution Calendar Year is the lesser of: (i) the quotient obtained by dividing the
Participants Account Balance by the distribution period in the Uniform Lifetime Table
set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participants
age as of the Participants birthday in the Distribution Calendar Year; or (ii) if the
Participants sole Designated Beneficiary for the Distribution Calendar Year is the
Participants spouse, the quotient obtained by dividing the Participants Account
Balance by the number in the Joint and Last Survivor Table set forth in Section
1.401(a)(9)-9 of the Treasury Regulations, using the Participants and spouses
attained ages as of the Participants and spouses birthdays in the Distribution
Calendar Year. Required minimum distributions will be determined under this
Subparagraph (b) beginning with the first Distribution Calendar Year and up to and
including the Distribution Calendar Year that includes the Participants date of death. |
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|
(c) |
|
Required Minimum Distributions After Participants Death. |
|
(i) |
|
Death on or After Date Distributions Begin. If the
Participant dies on or after the date distributions have begun and there is a
Designated Beneficiary, the minimum amount that will be distributed for each
Distribution Calendar Year after the year of the Participants death is the
quotient obtained by dividing the Participants Account Balance by the longer
of the remaining Life Expectancy of the Participant or the remaining Life
Expectancy of the Participants Designated Beneficiary, determined as follows: |
47
|
(A) |
|
The Participants remaining Life Expectancy is
calculated using the age of the Participant in the year of death,
reduced by one for each subsequent year; |
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|
(B) |
|
The Participants surviving spouse is the
Participants sole Designated Beneficiary, the remaining Life
Expectancy of the surviving spouse is calculated for each Distribution
Calendar Year after the year of the Participants death using the
surviving spouses age as of the spouses birthday in that year. For
Distribution Calendar Years after the year of the surviving spouses
death, the remaining Life Expectancy of the surviving spouse is
calculated using the age of the surviving spouse as of the spouses
birthday in the calendar year of the spouses death, reduced by one for
each subsequent calendar year; and |
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(C) |
|
The Participants surviving spouse is not the
Participants sole Designated Beneficiary, the Designated Beneficiarys
remaining Life Expectancy is calculated using the age of the
beneficiary in the year following the year of the Participants death,
reduced by one for each subsequent year. |
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|
If the Participant dies on or after the date distributions begin and
there is no Designated Beneficiary as of September 30 of the year
after the year of the Participants death, the minimum amount that
will be distributed for each Distribution Calendar Year after the
year of the Participants death is the quotient obtained by dividing
the Participants Account Balance by the Participants remaining Life
Expectancy calculated using the age of the Participant in the year of
death, reduced by one for each subsequent year. |
|
(ii) |
|
Death Before Date Distributions Begin. If the
Participant dies before the date distributions have begun and there is a
Designated Beneficiary, the minimum amount that will be distributed for each
Distribution Calendar Year after the year of the Participants death is the
quotient obtained by dividing the Participants Account Balance by the
remaining Life Expectancy of the Participants Designated Beneficiary,
determined as provided in Subparagraph (c)(i). If the Participant dies before
the date distributions have begun and there is no Designated Beneficiary as of
September 30 of the year following the year of the Participants death,
distribution of the Participants entire interest will be completed by December
31 of the calendar year containing the fifth anniversary of the Participants
death. If the Participant dies before the date distributions have begun, the
Participants surviving spouse is the Participants sole Designated
Beneficiary, and the surviving spouse dies before distributions are required to
have begun to the surviving spouse under Subparagraph |
48
|
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(a)(i), this Subparagraph will apply as if the surviving spouse were the
Participant. |
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(d) |
|
Definitions. For purposes of this Subsection, the following
definitions shall apply: |
|
(i) |
|
Designated Beneficiary means the Participants Beneficiary
who is the designated beneficiary for purposes of Code Section 401(a)(9). |
|
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(ii) |
|
Distribution Calendar Year means a calendar year for which a
minimum distribution is required. For distributions beginning before the
Participants death, the first Distribution Calendar Year is the calendar year
immediately preceding the calendar year that contains the Participants
Required Commencement Date. For distributions beginning after the
Participants death, the first Distribution Calendar Year is the calendar year
in which distributions are required to begin under Subparagraph (a). The
required minimum distribution for the Participants first Distribution Calendar
Year will be made on or before the Participants Required Commencement Date.
The required minimum distribution for other Distribution Calendar Years,
including the required minimum distribution for the Distribution Calendar Year
in which the Participants Required Commencement Date occurs, will be made on
or before December 31 of that Distribution Calendar Year. |
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|
(iii) |
|
Life Expectancy means life expectancy as computed by use of
the Single Life Table in Treasury Regulation Section 1.401(a)(9)-9. |
|
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(iv) |
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Participants Account Balance means the balance of the
Participants Accounts as of the Valuation Calendar Year, increased by the
amount of any contributions made and allocated to the Participants Accounts as
of dates in the Valuation Calendar Year after the valuation date and decreased
by distributions made in the Valuation Calendar Year after the valuation date.
The balance of the Participants Accounts for the Valuation Calendar Year
includes any amounts rolled over or transferred to the Plan either in the
Valuation Calendar Year or in the Distribution Calendar Year if distributed or
transferred in the Valuation Calendar Year. |
|
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(v) |
|
Valuation Calendar Year means the last valuation date in the
calendar year immediately preceding the Distribution Calendar Year. |
49
SECTION 11
11.01 Loans to Participants
While the primary purpose of the Plan is to allow Participants to accumulate funds for
retirement, it is recognized that under some circumstances it is in the best interests of
Participants to permit loans to be made to them while they continue in the active service of the
Employers. Accordingly, the Committee, pursuant to such rules as it may from time to time
establish, and upon application by a Participant supported by such evidence as the Committee
requests, may direct the Trustee to make a loan from the Participants Accounts under the Trust
Fund (with the exception of the Participants Matching Contribution Account, Annual Company
Contribution Account and Transition Contributions Account) to a Participant who is actively at work
in the employ of an Employer subject to the following:
|
(a) |
|
Amount of loans. The principal amount of any loan made to a
Participant shall not be less than $500 and, when added to the outstanding balance of
all other loans made to the Participant from all qualified plans maintained by the
Employers, shall not exceed the lesser of: |
|
(i) |
|
$50,000, reduced by the excess (if any) of the highest
outstanding balance under the Plan and all other qualified employer plans
during the one (1) year period ending on the day before the date of the loan,
over the outstanding balance on the date of the loan; or |
|
|
(ii) |
|
One-half (1/2) of the Participants vested Account balances
under the Plan. |
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(b) |
|
Terms and conditions of loans. Each loan must be evidenced by a
written note in a form approved by the Committee, shall bear interest at a reasonable
fixed rate, and shall require substantially level amortization (with payments at least
quarterly) over the term of the loan. Interest rates shall be determined monthly and
shall be based on the prevailing prime rate as published in The Wall Street
Journal; provided, however, that the rate shall not exceed six percent (6%) during
any period that the Participant is on military leave, in accordance with the Service
Members Civil Relief Act (SCRA) if the service member provides notification that he
or she will be entering military service as required under SCRA. |
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(c) |
|
Repayment of loans. Each loan for a purpose other than to purchase a
principal residence (a General Purpose Loan) shall specify a repayment period of not
less than six (6) months nor more than five (5) years, unless the proceeds of the loan
are used to purchase the Participants principal place of residence (a Principal
Residence Loan), in which case such loan must be repaid within ten (10) years after
the date the loan is made. |
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(d) |
|
Loans to Participants shall be made as soon as administratively feasible after
the Committee has received the Participants loan request and such information and |
50
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|
documents from the Participant as the Committee shall deem necessary. A
Participants Accounts may be charged a fee for processing each loan request. The
Participants loan request shall be made in such manner and in accordance with such
rules as the Committee determines. If the Committee determines in its discretion
that loan requests under this Subparagraph shall be made in a manner other than in
writing, any Participant who makes a request pursuant to such method may receive
written confirmation of such request; further, any such request and confirmation
shall be the equivalent of a writing for all purposes. |
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(e) |
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Each loan shall be secured by a pledge of the Participants Accounts (with the
exception of the Participants Annual Company Contribution Account, Transition
Contribution Account, and Matching Contribution Account). A Participants Annual
Company Contribution Account, Transition Contribution Account and Matching Contribution
Account shall be taken into account for purposes of determining the amount of the loan
available under Subparagraphs 11.01(a)(i) and 11.01(a)(ii), but shall not be available for liquidation and
conversion to cash as described in Subparagraph 11.01(f) below. |
|
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(f) |
|
A loan granted under this Subsection to a Participant from any Account
maintained in his or her name shall be made by liquidating and converting to cash his
or her appropriate Accounts, with the exception of his or her Annual Company
Contribution Account, Transition Contribution Account and Matching Contribution Account
(and the appropriate subaccounts, pro rata, in the various Investment Funds), in such
order as shall be determined by the Committee and applied uniformly. |
|
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(g) |
|
A Participant may have only two (2) loans outstanding at a time; provided that
a Participant may not have two (2) loans of the same type (Principal Residence or
General Purpose) outstanding at any given time. A Participant shall not be entitled to
take a second loan if the Participant is in default on a prior loan of the same type
and has not repaid the defaulted amount to the Plan. |
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(h) |
|
If, in connection with the granting of a loan to a Participant, a portion or
all of any of his or her Accounts has been liquidated, the Committee shall establish
temporary Counterpart Loan Accounts (not subject to
adjustment under Subsection 8.02)
corresponding to each such liquidated or partially liquidated Account to reflect the
current investment of that Before-Tax Contribution Account or Rollover Contribution
Account, for example, in such loan. In general, the initial credit balance in any such
Counterpart Loan Account shall be the amount by which the corresponding Account was
liquidated in order to make the loan. Interest accruing on such a loan shall be
allocated among and credited to the Participants Counterpart Loan Accounts established
in connection with the loan, in proportion to the then net credit balances in such
Counterpart Loan Accounts, as such interest accrues. Each repayment of principal and
interest shall be allocated among and charged to such Counterpart Loan Accounts, and
shall be |
51
|
|
|
allocated among and credited to the corresponding Accounts, on the same
proportionate basis; provided that all such repayments shall be credited in
accordance with the investment elections in effect on the date each repayment is
credited. The Committee may adopt rules and procedures for loan accounting and
repayment which differ from the foregoing provisions of this
Subparagraph (h), but
which are consistent with the general principle that a loan to a Participant under
this Subsection constitutes an investment of his or her Accounts rather than a
general investment of the Trust Fund. Repayments shall be required to be invested
during the month in which received or within such longer period as the Committee may
reasonably determine, but in any event within the time required by
Subsection 5.01.
Any such repayment shall be made by payroll deduction unless otherwise permitted by
the Committee. |
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(i) |
|
The Committee may establish uniform rules to apply where Participants fail to
repay any portion of loans made to them pursuant to this Subsection and accrued
interest thereon in accordance with the terms of the loans, or where any portion of any
loan and accrued interest thereon remains unpaid on a Participants Separation Date.
To the extent consistent with Internal Revenue Service rules and regulations, such
rules may include charging unpaid amounts against a Participants Accounts (in such
order as the Committee decides), and treating the amounts so charged as a payment to
the Participant for purposes of SECTION 10. The Committee may charge a Participants
Account for reasonable and necessary administrative fees incurred in administering any
loan under this Subsection in accordance with uniform rules and procedures applicable
to all Participants similarly situated. Loan repayments will be suspended under the
Plan as permitted under Section 414(u)(4) of the Code. |
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|
(j) |
|
Any loan which was being administered under a Predecessor Plan and which was
transferred to this Plan shall be governed by the applicable terms of this Plan on and
after the transfer date. |
11.02 After-Tax Withdrawals
A Participant may withdraw all or a portion of his or her After-Tax Account, if any. The
timing of such withdrawals shall be established by the Committee.
11.03 Hardship Withdrawals
In the event a Participant suffers a serious financial hardship, such Participant may withdraw
a portion of the vested balance in his or her Accounts (excluding his or her Annual Company
Contribution Account, his or her Transition Contribution Account, any portion of his or her
Before-Tax Contribution Account attributable to qualified non-elective contributions (if
applicable), and any earnings credited to his or her Before-Tax Contribution Account on or after
January 1, 1989), provided that the amount of the withdrawal is at least $250.00 and does not
exceed the amount required to meet the immediate financial need created by the serious financial
hardship. Notwithstanding the foregoing, the amount required to meet the immediate financial
52
need may include amounts necessary to pay Federal, state or local income taxes or penalties
that are reasonably anticipated to result from the hardship withdrawal.
|
(a) |
|
Immediate and Heavy Need. A hardship shall be deemed on account of
immediate and heavy financial need only if the withdrawal is on account of: |
|
(i) |
|
Tuition, related educational fees, and room and board expenses,
for up to the next twelve (12) months of post-secondary education for the
Participant or his or her spouse, children or dependents (determined under Code
Section 152 without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)); |
|
|
(ii) |
|
Costs directly related to the purchase of a primary residence
for the Participant (not including mortgage payments); |
|
|
(iii) |
|
Unreimbursed medical expenses that would be deductible by the
Participant for federal income tax purposes pursuant to Code Section 213, and
that are incurred by the Participant, the Participants spouse or any dependent
(as defined in Code Section 152 without regard to the change in the definition
under the Working Families Tax Relief Act of 2004) including any non-custodial
child who is subject to the special rule of Code Section 152(e); or amounts
necessary to obtain medical care or medically necessary equipment or services
for the Participant, the Participants spouse or a dependent described in this
Subparagraph (iii); |
|
|
(iv) |
|
The need to prevent eviction of the Participant from his or her
primary residence or foreclosure on the mortgage of the Participants principal
residence; |
|
|
(v) |
|
Payment for burial or funeral expenses for the Participants
deceased parent, spouse, children or dependents (as defined in Code Section 152
without regard to Section 152(d)(1)(B)); or |
|
|
(vi) |
|
Expenses for the repair of damage to the Participants
principal residence that would qualify for the casualty deduction under Code
Section 165 (determined without regard to whether the loss exceeds 10% of
adjusted gross income). |
|
(b) |
|
Necessary amount. A determination of whether the requirement that the
withdrawal not exceed the amount required to meet the immediate financial need created
by the serious financial hardship is satisfied shall be made on the basis of all
relevant facts and circumstances in a consistent and nondiscriminatory manner;
provided, however, that the Participant must provide the Committee with a statement on
which the Committee may reasonably rely, unless it has actual knowledge to the
contrary, certifying that the Participants financial need cannot be relieved by all of
the following means: |
53
|
(i) |
|
Through reimbursement or compensation by insurance or
otherwise, |
|
|
(ii) |
|
By reasonable liquidation of the Participants assets, to the
extent such liquidation would not itself cause an immediate and heavy financial
need, |
|
|
(iii) |
|
By cessation of elective contributions under this Plan, or
other distributions from this Plan, and |
|
|
(iv) |
|
By other distributions, such as the distribution of dividends
which are currently available to the Participant, or nontaxable (at the time of
the loan) loans from Plans maintained by the Employer or by any other employer,
or by borrowing from commercial sources on reasonable commercial terms. |
|
|
|
For purposes of this Subsection, the Participants resources shall be deemed to
include those assets of his or her spouse and minor children that are reasonably
available to the Participant. Property owned by the Participant and the
Participants spouse, whether as community property, joint tenants, tenants by the
entirety, or tenants in common, will be deemed a resource of the Participant.
However, property held for the Participants child under an irrevocable trust or
under the Uniform Gifts to Minors Act will not be treated as a resource of the
Participant. |
|
|
(c) |
|
A Participant may not request more than two (2) withdrawals per calendar year
under this Subsection. |
|
|
(d) |
|
To obtain a hardship withdrawal, a Participant must submit his withdrawal
request in accordance with procedures and within such time periods as may be determined
by the Committee. Hardship withdrawals shall be made as soon as administratively
feasible after the Committee has received the Participants withdrawal request and such
information and documents from the Participant as the Committee shall deem necessary. |
11.04 Age 59-1/2 Withdrawals
Upon making an application to the Committee, a Participant who has attained the age of
fifty-nine and one-half (59-1/2) may withdraw part or all of his or her vested Account balances
(excluding his or her Annual Company Contribution Account and his or her Transition Contribution
Account). The form and timing of such applications and withdrawals shall be established by the
Committee.
11.05 Additional Rules for Withdrawals
Withdrawals made pursuant to Subsections 11.02, 11.03 and 11.04 shall be made in cash and
shall be charged to the Participants vested Accounts (if applicable) in such order as shall be
determined by the Committee and applied uniformly. Requests for a withdrawal shall be made
54
in such manner and in accordance with such rules as the Committee determines. If the
Committee determines in its discretion that a withdrawal under this Subsection shall be made in a
manner other than in writing, any Participant who makes a request pursuant to such method may
receive written confirmation of such request; further, any such request and confirmation shall be
the equivalent of a writing for all purposes.
55
SECTION 12
Reemployment
12.01 Reemployed Participants
Except as provided below, if a Participant is reemployed by an Employer following a
termination of employment, such Participant shall resume participation in the Plan for all purposes
on the first day of the first payroll period following his rehire date that he is a member of a
Covered Group. If a former Employee or Eligible Employee is reemployed by an Employer, Service he
or she had accrued prior to his or her termination of employment will be reinstated for purposes of
determining his or her eligibility to participate in the Plan, and he or she shall become eligible
to participate in the Plan in accordance with the provisions of
Subsection 3.01.
12.02 Calculation of Service Upon Reemployment
|
(a) |
|
Reemployment with Vested Interest in Plan Accounts. If at the time the
Participant terminated employment, he or she had either (A) a vested interest in his or
her Before-Tax Contribution Account, Annual Company Contribution Account, Transition
Contribution Account, Matching Contribution Account or Predecessor Company Account, or
(B) amounts credited to his or her Before-Tax Contribution Account, the following rules
shall apply: |
|
(i) |
|
If the Participant is reemployed by a Controlled Group Member
before he or she incurs five (5) consecutive One-Year Breaks In Service, the
Participant may repay to the Trustee, within five (5) years of his or her
Reemployment Date, the total amount previously distributed to him or her from
his or her Plan Accounts subject to vesting as a result of his or her earlier
termination of employment. If a Participant makes such a repayment to the
Trustee, both the amount of the repayment and the Forfeiture that resulted from
the previous termination of employment shall be credited to his or her Accounts
as of the Accounting Date coincident with or next following the date of
repayment and he or she shall continue to vest in such amounts in accordance
with the vesting schedule in effect at the Participants reemployment. |
|
|
(ii) |
|
If a Participant is reemployed by a Controlled Group Member on
or after he or she incurs five (5) consecutive One-Year Breaks in Service, his
or her pre-break Service shall count as Service for purposes of vesting in
amounts credited to his or her Annual Company Contribution Account, Transition
Contribution Account, Matching Contribution Account or Predecessor Company
Account, as applicable, on or after such reemployment. However, pre-break
Forfeitures will not be restored to such Participants Accounts and such
Participants post-break Service shall be disregarded for purposes of vesting
in his or her pre-break Annual |
56
|
|
|
Company Contribution Account, Transition Contribution Account, Matching
Contribution Account or Predecessor Company Account, as applicable. |
|
(b) |
|
Reemployment with No Vested Interest in Plan Accounts. If at the time
the Participant terminated employment, he or she did not have either (A) a vested
interest in his or her Annual Company Contribution Account, Transition Contribution
Account, Matching Contribution Account, or Predecessor Company Account, or (B) amounts
credited to his or her Before-Tax Contribution Account, the following rules shall
apply: |
|
(i) |
|
If the Participant is reemployed by a Controlled Group Member
before he or she incurs five (5) consecutive One-Year Breaks In Service, the
amount of the Forfeiture that resulted from the previous termination of
employment shall be credited to his or her Accounts as of the Accounting Date
coincident with or next following the date of his or her reemployment or as
soon as administrative feasible thereafter and he or she shall continue to vest
in such amounts. |
|
|
(ii) |
|
If the Participant is reemployed by a Controlled Group Member
before he or she incurs five (5) consecutive One-Year Breaks In Service,
pre-break Forfeitures shall not be restored to his or her Accounts. In
addition, if the Participants number of consecutive One-Year Breaks In Service
exceeds the greater of five (5) of the aggregate number of such Participants
pre-break Service, such pre-break Service shall be disregarded for purposes of
vesting in amounts credited to his or her Employer Contribution Accounts after
such employment. |
|
(c) |
|
Forfeitures. Forfeitures that are credited to a Participants Accounts
under this Subsection shall be allocated from amounts forfeited under Subsection 10.01
or the applicable Supplement or, in the absence of such amounts, shall reduce income
and gains of the Fund to be credited under Subsection 8.02. |
|
|
(d) |
|
Transferred Participants. Notwithstanding any Plan provision to the
contrary, all service of a Transferred Participant that was recognized under the Sara
Lee Plan as of the Effective Date (or as of a subsequent transfer of employment
described in Subparagraph 2.66(b), if applicable) shall be recognized and taken into
account under the Plan to the same extent as if such service had been completed under
the Plan, subject to the provisions of this Section and any applicable break in service
rules under this Plan and the Sara Lee Plan. |
|
|
(e) |
|
Former NTX and Sara Lee Employees. If an individual (i) was previously
employed by the Sara Lee Corporation (referred to as the prior employers for purposes
of this Subparagraph), and (ii) subsequently becomes an Employee of an Employer or a
Controlled Group Member; all of the individuals service with the prior employers shall
be recognized and taken into account under the Plan to the |
57
|
|
|
same extent as of such service had been completed under the Plan, subject to the
provisions of this Section and any applicable break in service rules under the
applicable prior employers plans. |
58
SECTION 13
Special Rules for Top-Heavy Plans
13.01 Purpose and Effect
The purpose of this SECTION 13 is to comply with the requirements of Code Section 416. The
provisions of this SECTION 13 shall be effective for each Plan Year in which the Plan is a
Top-Heavy Plan within the meaning of Code Section 416(g).
13.02 Top Heavy Plan
In general, the Plan will be a Top-Heavy Plan for any Plan Year if, as of the last day of the
preceding Plan Year (the Determination Date), the aggregate Account balances of Participants in
this Plan who are Key Employees (as defined in Section 416(i)(1) of the Code) exceed sixty percent
(60%) of the aggregate Account balances of all Participants in the Plan. In making the foregoing
determination, the following special rules shall apply:
|
(a) |
|
A Participants Account balance shall be increased by the aggregate
distributions, if any, made with respect to the Participant during the one (1) year
period ending on the Determination Date (including distributions under a terminated
plan which, had it not been terminated, would have been aggregated with this Plan under
Section 416(g)(2)(A)(i) of the Code). In the case of a distribution made for a reason
other than separation from service, death or Total Disability, the one (1) year period
shall be replaced with a five (5) year period. |
|
|
(b) |
|
The Account balance of, and distributions to, a Participant who was previously
a Key Employee, but who is no longer a Key Employee, shall be disregarded. |
|
|
(c) |
|
The Account of a Beneficiary of a Participant shall be considered the Account
of a Participant. |
|
|
(d) |
|
The Account balances of a Participant who did not perform any services for the
Employers during the one (1) year period ending on the Determination Date shall be
disregarded. |
13.03 Key Employee
In general, a Key Employee is an Employee who, at any time during the Plan Year that
includes the Determination Date was:
|
(a) |
|
An officer of an Employer receiving annual Compensation greater than $140,000
(as adjusted under Section 416(i)(l) of the Code); |
|
|
(b) |
|
A five percent (5%) owner of an Employer; or |
59
|
(c) |
|
A one percent (1%) owner of an Employer receiving annual Compensation from any
of the Employers and the Controlled Group Members of more than $150,000. |
13.04 Minimum Employer Contribution
For any Plan Year in which the Plan is a Top-Heavy Plan, an Employers contribution, if any,
credited to each Participant who is not a Key Employee shall not be less than three percent (3%) of
such Participants Compensation for that year. For purposes of the foregoing, contributions under
Subsection 5.01 shall not be considered Employer contributions. In no event, however, shall an
Employer contribution credited in any year to a Participant who is not a Key Employee (expressed as
a percentage of such Participants Compensation) exceed the maximum Employer contribution credited
in that year to a Key Employee (expressed as a percentage of such Key Employees Compensation).
13.05 Aggregation of Plans
Each other defined contribution plan and defined benefit plan maintained by the Employers that
covers a Key Employee as a Participant or that is maintained by the Employers in order for a Plan
covering a Key Employee to qualify under Section 401(a)(4) and 410 of the Code shall be aggregated
with this Plan in determining whether this Plan is Top-Heavy. In addition, any other defined
contribution or defined benefit plan of the Employers may be included if all such plans which are
included when aggregated will continue to qualify under Section 401(a)(4) and 410 of the Code.
13.06 No Duplication of Benefits
If an Employer maintains more than one plan, the minimum Employer contribution otherwise
required under Subsection 13.04 above may be reduced in accordance with regulations of the
Secretary of the Treasury to prevent inappropriate duplications of minimum contributions or
benefits.
13.07 Compensation
For purposes of this Section 13, Compensation shall mean compensation as defined in
Subsection 6.05 of the Plan.
60
SECTION 14
General Provisions
14.01 Committees Records
The records of the Committee as to an Employees age, Separation Date, Leave of Absence,
reemployment and Compensation will be conclusive on all persons unless determined to the
Committees satisfaction to be incorrect.
14.02 Information Furnished by Participants
Participants and their Beneficiaries must furnish to the Committee such evidence, data or
information as the Committee considers desirable to carry out the Plan. The benefits of the Plan
for each person are on the condition that he or she furnish promptly true and complete evidence,
data and information requested by the Committee.
14.03 Interests Not Transferable
Except as otherwise provided in Subsection 14.04 and as may be required by application of the
tax withholding provisions of the Code or of a states income tax act, benefits under the Plan are
not in any way subject to the debts or other obligations of the persons entitled to such benefits
and may not be voluntarily or involuntarily sold, transferred, alienated, assigned, or encumbered.
14.04 Domestic Relations Orders
If the Committee receives a domestic relations order issued by a court pursuant to a states
domestic relations law, the Committee will direct the Trustee to make such payment of the
Participants vested benefits to an Alternate Payee or Payees as such order specifies, provided the
Committee first determines that such order is a qualified domestic relations order (QDRO) within
the meaning of Section 414(p) of the Code. The Committee will establish reasonable procedures for
determining whether or not a domestic relations order is a QDRO. Upon receiving a domestic
relations order, the Committee shall promptly notify the Participant and any Alternate Payee named
in the order that the Committee has received the order and any procedures for determining whether
the order is a QDRO. If, within eighteen (18) months after receiving the order, the Committee
makes a determination that the order is a QDRO, any direction to the Trustee to pay the benefits to
an Alternate Payee as specified in the QDRO will include a direction to pay any amounts that were
to be paid during the period prior to the date the Committee determines that the order is a QDRO.
If during the eighteen (18) month period the Committee determines that the order is not a QDRO or
no determination is made with respect to whether the order is a QDRO, the Committee will direct the
Trustee to pay the amounts that would have been paid to the Alternate Payee pursuant to the terms
of the order to the Participant if such amounts otherwise would have been payable to the
Participant under the terms of the Plan. The Committee in its discretion may maintain an Account
for an Alternate Payee to which any amount that is to be paid to such Alternate Payee from a
Participants Accounts will be
61
credited. The Alternate Payee for whom such Account is maintained may exercise the same
elections with respect to the fund or funds in which the Account will be invested as would be
permissible for a Participant in the Plan. Further, the Alternate Payee may name a Beneficiary, in
the manner provided in Subsection 10.03 to whom the balance in the Account is to be paid in the
event the Alternate Payee should die before complete payment of the Account has been made.
Distribution of the Alternate Payees Account shall be made in accordance with Subsections 10.01
and 10.02, and the Alternate Payee may exercise the same elections with respect to requesting a
distribution or partial distribution of his or her Account as would be permissible for a
Participant in the Plan; provided that the Alternate Payees Required Commencement Date shall be
the date on which the Participant attains (or, in the event of the Participants death, would have
attained) the Participants Required Commencement Date. The Committee may direct the Trustee to
distribute benefits to an Alternate Payee on the earliest date specified in a QDRO, without regard
to whether such distribution is made or commences prior to the Participants earliest retirement
age (as defined in Section 414(p)(4)(B) of the Code) or the earliest date that the Participant
could commence receiving benefits under the Plan.
14.05 Facility of Payment
When, in the Committees opinion, a Participant or Beneficiary is under a legal disability or
is incapacitated in any way so as to be unable to manage his or her financial affairs, the
Committee may direct the Trustee to make payments to his or her legal representative, or to a
relative or friend of the Participant or Beneficiary for his or her benefit, or the Committee may
direct the Trustee to apply the payment for the benefit of the Participant or Beneficiary in any
way the Committee considers advisable.
14.06 No Guaranty of Interests
Neither the Trustee nor the Employers in any way guarantee the Trust Fund from loss or
depreciation. The Employers do not guarantee any payment to any person. The liability of the
Trustee and the Employers to make any payment is limited to the available assets of the Trust Fund.
14.07 Rights Not Conferred by the Plan
The Plan is not a contract of employment, and participation in the Plan will not give any
Employee the right to be retained in an Employers employ, nor any right or claim to any benefit
under the Plan, unless the right or claim has specifically accrued under the Plan.
14.08 Gender and Number
Where the context admits, words denoting men include women, the plural includes the singular
and vice versa.
62
14.09 Committees Decisions Final
An interpretation of the Plan and a decision on any matter within the Committees discretion
made by it in good faith is binding on all persons. A misstatement or other mistake of fact shall
be corrected when it becomes known, and the Committee shall make such adjustment as it considers
equitable and practicable.
14.10 Litigation by Participants
If a legal action begun against the Trustee, the Committee or any of the Employers by or on
behalf of any person results adversely to that person, or if a legal action arises because of
conflicting claims to a Participants or Beneficiarys benefits, the cost to the Trustee, the
Committee or any of the Employers of defending the action will be charged to such extent as
possible to the sums, if any, involved in the action or payable to the Participant or Beneficiary
concerned.
14.11 Evidence
Evidence required of anyone under the Plan may be by certificate, affidavit, document or other
information which the person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
14.12 Uniform Rules
In managing the Plan, the Committee will apply uniform rules to all Participants similarly
situated.
14.13 Law That Applies
Except to the extent superseded by laws of the United States, the laws of North Carolina
(without regard to any states conflict of laws principles) shall be controlling in all matters
relating to the Plan.
14.14 Waiver of Notice
Any notice required under the Plan may be waived by the person entitled to such notice.
14.15 Successor to Employer
The term Employer includes any entity that agrees to continue the Plan under Subparagraph
16.02(c).
14.16 Application for Benefits
Each Participant or Beneficiary eligible for benefits under the Plan shall apply for such
benefits according to procedures and deadlines established by the Committee. In the event of
denial of any application for benefits, the procedure set forth in Subsection 14.17 shall apply.
63
14.17 Claims Procedure
Claims for benefits under the Plan shall be made in such manner as the Committee shall
prescribe. Claims for benefits and the appeal of denied claims under the Plan shall be
administered in accordance with Section 503 of ERISA, the regulations thereunder (and any other law
that amends, supplements or supersedes said Section of ERISA), and the claims and appeals
procedures adopted by the Committee and/or the Appeal Committee, as appropriate, for that purpose.
The Plan shall provide adequate notice to any claimant whose claim for benefits under the Plan has
been denied, setting forth the reasons for such denial, and shall afford a reasonable opportunity
to such claimant for a full and fair review by the Appeal Committee of the decision denying the
claim. No action at law or in equity shall be brought to recover benefits under the Plan until the
appeal rights described in this Subsection have been exercised and the Plan benefits requested in
such appeal have been denied in whole or in part. Any legal action subsequent to a denial of a
benefit appeal taken by a Participant against the Plan or its fiduciaries must be filed in a court
of law no later than ninety (90) days after the Appeal Committees final decision on review of an
appealed claim. All decisions and communications relating to claims by Participants, denials of
claims or claims appeals under this SECTION 14 shall be held strictly confidential by the
Participant, the Committees and the Employers during and at all times after the Participants claim
has been submitted in accordance with this Section.
14.18 Action by Employers
Any action required or permitted under the Plan of an Employer shall be by resolution of its
Board of Directors or by a duly authorized Committee of its Board of Directors, or by a person or
persons authorized by resolution of its Board of Directors or such Committee.
64
SECTION 15
No Interest in Employers
The Employers shall have no right, title or interest in the Trust Fund, nor will any part of
the Trust Fund at any time revert or be repaid to an Employer, unless:
|
(a) |
|
The Internal Revenue Service initially determines that the Plan does not meet
the requirements of Section 401(a) of the Code, in which event the assets of the Trust
Fund attributable to the contributions made to the Plan by the Employer or Employers
with respect to whom such determination is made shall be returned to them; or |
|
|
(b) |
|
Any portion of a contribution is made by an Employer by mistake of fact and
such portion is returned to the Employer within one year after payment to the Trustee;
or |
|
|
(c) |
|
A contribution conditioned on the deductibility thereof is disallowed as an
expense for federal income tax purposes and such contribution (to the extent
disallowed) is returned to the Employer within one year after the disallowance of the
deduction. |
The amount of any contribution that may be returned to an Employer pursuant to Subparagraph
(b) or (c) above must be reduced by any portion thereof previously distributed from the Trust Fund
to Participants or their Beneficiaries and by any losses of the Trust Fund allocable thereto, and
in no event may the return of such amount cause any Participants Account balance to be less than
the amount that such balance would have been had the contribution not been made under the Plan.
65
SECTION 16
Amendment or Termination
16.01 Amendment
While the Employers expect to continue the Plan, the Company reserves the right, subject to
SECTION 15, to amend the Plan from time to time, by resolution of the Board of Directors in
accordance with Subsection 14.18, or by resolution of a committee authorized to amend the Plan by
resolution of the Board of Directors of the Company. Notwithstanding the foregoing, no amendment
will reduce a Participants Account balance to less than an amount he or she would be entitled to
receive if he or she had terminated his or her association with the Employers on the day of the
amendment.
16.02 Termination
The Plan will terminate as to all Employers on any date specified by the Company, by
resolution of the Board of Directors in accordance with Subsection 14.18, if advance written notice
of the termination is given to the Trustee and the other Employers. The Plan will terminate as to
an individual Employer on the first to occur of the following:
|
(a) |
|
The date it is terminated by that Employer, by resolution of its Board of
Directors in accordance with Subsection 14.18, if advance written notice of the
termination is given to the Company and the Trustee; |
|
|
(b) |
|
The date the Employer permanently discontinues its contributions under the
Plan; and |
|
|
(c) |
|
The dissolution, merger, consolidation or reorganization of that Employer, or
the sale by that Employer of all or substantially all of its assets; provided, however,
that upon the occurrence of any of the foregoing events, arrangements may be made
whereby the Plan will be continued by a successor to such Employer, in which case the
successor will be substituted for such Employer under the Plan. |
16.03 Effect of Termination
On termination or partial termination of the Plan, the date of termination will be an
Accounting Date, and, after all adjustments then required have been made, each Participants
Account balance will be vested in him or her and distributed to him or her by one or more of the
methods described in Subsection 10.01 as the Committee decides. All appropriate accounting
provisions of the Plan will continue to apply until the Account balances of all Participants have
been distributed under the Plan.
16.04 Notice of Amendment or Termination
Participants will be notified of an amendment or termination within a reasonable time.
66
16.05 Plan Merger, Consolidation, Etc.
In the case of any merger or consolidation with, or transfer of assets or liabilities to, any
other Plan, each Participants benefits if the Plan terminated immediately after such merger,
consolidation or transfer shall be equal to or greater than the benefits he or she would have been
entitled to receive if the Plan had terminated immediately before the merger, consolidation or
transfer.
67
SECTION 17
Relating to the Plan Administrator and Committees
17.01 The Employee Benefits Administrative Committee
The Board of Directors of the Company has appointed the Committee, consisting of three (3) or
more individuals, to consolidate the powers and duties of administration of the employee benefit
plans and programs maintained by the Company. Each appointee to the Committee shall serve for as
long as is mutually agreeable to the Company and to the appointee. A majority of the members of
the Committee have the power to act on behalf of the Committee. The Committee may delegate any of
its responsibilities hereunder, by designating in writing other persons to advise it with regard to
any such responsibilities. Any person to whom the Committee has delegated any of its
responsibilities also may delegate any of its responsibilities hereunder, subject to the approval
of the Committee, by designating in writing other persons to carry out its responsibilities under
the Plan, and may retain other persons to advise it with regard to any of such responsibilities.
The Committee and any delegate of the Committee hereunder may serve in more than one fiduciary
capacity. The Committee and its delegates may allocate fiduciary responsibilities among themselves
in any reasonable and appropriate fashion, subject to the approval of the Committee. Except as
otherwise specifically provided and in addition to the powers, rights and duties specifically given
to the Committee elsewhere in the Plan and the Trust Agreement, the Committee shall have the
following discretionary powers, rights and duties:
|
(a) |
|
To approve the appointment and removal of the members of the Appeal Committee,
who shall have such powers, rights and duties as are specifically provided elsewhere in
the Plan in addition to those delegated by the Committee. |
|
|
(b) |
|
To act as Plan Administrator of the Plan, and to adopt such regulations and
rules of procedure as in its opinion may be necessary for the proper and efficient
administration of the Plan and as are consistent with the Plan and Trust Agreement.
The Committee shall be the fiduciary responsible for ensuring that procedures
safeguarding the confidentiality of all Participant decisions and directions relating
to purchase, sale, tendering and voting (as described in Subsection 9.06) of shares of
Sara Lee Stock and Hanesbrands credited to such Participants Accounts are sufficient
and are being followed. |
|
|
(c) |
|
To determine all questions arising under the Plan other than those
determinations that have been delegated to the Appeal Committee or the Investment
Committee, including the power to determine the rights or eligibility of Employees or
Participants and any other persons, and the amounts of their benefits under the Plan,
and to remedy ambiguities, inconsistencies or omissions, and to make factual
findings; such determinations shall be binding on all parties. Benefits under this
Plan will be paid only if the Committee decides in its discretion that the applicant is
entitled to them. |
68
|
(d) |
|
To enforce the Plan in accordance with its terms and the terms of the Trust
Agreement and in accordance with the rules and regulations adopted by the Committee. |
|
|
(e) |
|
To construe and interpret the Plan and Trust Agreement, to reconcile and
correct any errors or inconsistencies and to make adjustments for any mistakes or
errors made in the administration of the Plan. |
|
|
(f) |
|
To furnish the Employers with such information as may be required by them for
tax or other purposes. |
|
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(g) |
|
To employ agents, attorneys, accountants, actuaries or other organizations or
persons (who also may be employed by the Employers) and allocate or delegate to them
any of the powers, rights and duties of the Committee as the Committee may consider
necessary or advisable to properly administer the Plan. To the extent that the
Committee delegates to any person or entity the discretionary authority to manage and
control the administration of the Plan, such person or entity shall be a fiduciary as
defined in ERISA. As appropriate, references to the Committee herein with respect to
any delegated powers, rights and duties shall be considered references to the
applicable delegate. |
17.02 The ERISA Appeal Committee
The Committee has appointed the Appeal Committee primarily for the purpose of reviewing
decisions denying benefits under the Plan and reviewing requests for hardship withdrawals under
Subsection 11.03 of the Plan. The Appeal Committee shall consist of five (5) or more individuals,
and each such appointee shall serve for as long as is mutually agreeable to the Committee and to
the appointee. A majority of the members of the Appeal Committee will have the power to act on
behalf of the Appeal Committee. Except as otherwise specifically provided and in addition to the
powers, rights and duties specifically given to the Appeal Committee elsewhere in the Plan and the
Trust Agreement, the Appeal Committee shall have the following powers, rights and duties:
|
(a) |
|
To adopt such regulations and rules of procedure as in its opinion may be
necessary for the proper and efficient administration of the Plan and as are consistent
with the Plan and Trust Agreement. |
|
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(b) |
|
To have final review of appeals of decisions by the Committee or its delegates
denying benefits under the Plan, and to have final review of decisions by the Committee
or its delegates denying requests for hardship withdrawals under Subsection 11.03 of
the Plan, including the power to determine the rights or eligibility of Employees or
Participants and any other persons, and to remedy ambiguities, inconsistencies or
omissions. |
69
|
(c) |
|
To enforce the Plan in accordance with its terms and the terms of the Trust
Agreement, and in accordance with the rules and regulations adopted by the Committee. |
|
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(d) |
|
To construe the Plan and Trust Agreement, to reconcile and correct any errors
or inconsistencies and to make adjustments for any mistakes or errors made in the
administration of the Plan. |
The Committee and the Appeal Committee are sometimes referred to herein collectively as the
Committees.
17.03 Secretary of the Committee
Each of the Committees may appoint a secretary to act upon routine matters connected with the
administration of the Plan, to whom the Committee or the Appeal Committee, as the case may be, may
delegate such authorities and duties as it deems expedient.
17.04 Manner of Action
During
any period in which two (2) or more members of any of the Committees are acting, the
following provisions apply where the context admits:
|
(a) |
|
A member of the Committee or the Appeal Committee, as applicable, by writing
may delegate any or all of such members rights and duties to any other member, with
the consent of the latter. |
|
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(b) |
|
The Committee or the Appeal Committee, as applicable may act by meeting or by
writing signed without meeting, and may sign any document by signing one document or
concurrent documents. |
|
|
(c) |
|
An action or a decision of a majority of the members of the Committee or the
Appeal Committee, as the case may be, as to a matter shall be effective as if taken or
made by all members of the Committee or the Appeal Committee, as applicable. |
|
|
(d) |
|
If, because of the number qualified to act, there is an even division of
opinion among the members of the Committee or the Appeal Committee, as the case may be,
as to a matter, a disinterested party selected by the Committee or the Appeal
Committee, as applicable, may decide the matter and such partys decision shall
control. |
|
|
(e) |
|
The certificate of the secretary of the Committee or the Appeal Committee, as
applicable, of a majority of the members that the Committee or the Appeal Committee, as
the case may be, has taken or authorized any action shall be conclusive in favor of any
person relying on the certificate. |
70
17.05 Interested Party
If any member of the Committee or the Appeal Committee, as applicable also is a Participant in
the Plan, such individual may not decide or determine any matter or question concerning payments to
be made to such individual unless such decision or determination could be made by such individual
under the Plan if such individual were not a member of the applicable committees.
17.06 Reliance on Data
The Committee or the Appeal Committee, as applicable may rely upon data furnished by
authorized officers of any Employer as to the age, Service and Compensation of any Employee of such
Employer and as to any other information pertinent to any calculations or determinations to be made
under the provisions of the Plan, and the Committees shall have no duty to inquire into the
correctness thereof.
17.07 Committee Decisions
Subject to applicable law, any interpretation of the provisions of the Plan and any decisions
on any matter within the discretion of the Committee or the Appeal Committee, as applicable made by
such party in good faith shall be binding on all persons. A misstatement or other mistake of fact
shall be corrected when it becomes known, and the Committee or the Appeal Committee, as applicable
shall make such adjustments on account thereof as they consider equitable and practicable.
71
SECTION 18
Adoption of Plan by Controlled Group Members
With the consent of the Company, any Controlled Group Member of the Company may adopt the Plan
and become an Employer hereunder. The adoption of the Plan by any such Controlled Group Member
shall be effected by resolution of its Board of Directors, and the Companys consent thereto shall
be effected by resolution of the Committee.
72
SECTION 19
Supplements to the Plan
From time to time, the Company or the Committee may adopt Supplements to the Plan for the
purpose of modifying the provisions of the Plan as they apply to certain or all Participants in a
Covered Group or for the purpose of preserving benefits derived from another plan maintained by an
Employer or a Predecessor Company to an Employer. Such Supplements will form a part of the Plan as
applied to the Participants affected or covered thereby.
* * *
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by the undersigned officer
this 26th day of July, 2006.
|
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HANESBRANDS INC. |
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By:
|
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/s/ Kevin W. Oliver |
|
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Its:
|
|
Senior Vice President, Human Resources |
|
|
73
EXHIBIT A
Accounts Transferred from the Sara Lee Plan
The assets and liabilities of the Sara Lee Plan attributable to participants employed by the
following businesses/divisions were transferred from the Sara Lee Plan to the Plan as of the
Effective Date:
|
|
|
Business /Division |
|
Division Code |
Champion Athleticwear |
|
7800 |
Champion Jogbra |
|
9501 |
Champion Jogbra (Vermont) |
|
9500 |
Eden Yarn |
|
9225 |
Harwood |
|
9260 |
Hanes Printables |
|
9250 |
Henson Kicknerick |
|
9300 |
J. E. Morgan |
|
9265 |
OuterBanks |
|
9266 |
Playtex Apparel-Hourly |
|
9401 |
Playtex Apparel-Salary |
|
9400 |
Sara Lee Activewear/Hourly |
|
9221 |
Sara Lee Business Services |
|
9273
|
|
|
(except process level 12702) |
Sara Lee Casualwear |
|
9220
|
|
|
(except process level 19901 (Courtalds)) |
Sara Lee Direct |
|
9271 |
Sara Lee Hosiery |
|
9210 |
Sara Lee Intimate Apparel |
|
9200
|
|
|
(except process level 19901 (Courtalds)) |
Sara Lee Sock Company (previously
known as Adams-Millis
Corporation) |
|
7995 |
Sara Lee Underwear |
|
9240 |
Sara Lee Underwear Weston |
|
9260 |
Scotch Maid |
|
7975 |
Socks Galore |
|
9272 |
Spring City Knitting |
|
9230 |
74
Covered Groups
The following lists the Covered Groups under the Plan as of the Effective Date
1. |
|
Employees of Hanesbrands Inc. other than (a) employees employed in Puerto Rico, and (b)
employees covered by a collective bargaining agreement which agreement does not provide for
participation in the Plan; provided that participation in the Plan was the subject of good
faith bargaining. |
75
SUPPLEMENT A
TO
HANESBRANDS INC.
RETIREMENT SAVINGS PLAN
Provisions Relating to the Merger of the
National Textiles, L.L.C. 401(k) Plan
into the
Hanesbrands Inc. Retirement Savings Plan
A-1. Purpose. The provisions of this Supplement A apply to: (a) participants in the
National Textiles, L.L.C. 401(k) Plan (the NTX Plan) as of January 1, 2007 and (b) all other
individuals who are active employees of National Textiles, L.L.C. (NTX) on January 1, 2007; and
shall supersede the provisions of the Plan (except such Plan provisions as impose conditions or
limitations required by applicable law) to the extent necessary to eliminate any inconsistency
between the Plan and this Supplement A. Effective as of the close of business on January 1, 2007
(the Merger Date), the NTX Plan shall be merged into, and continued in the form of, this Plan.
The purpose of this Supplement A is to reflect the merger and resulting transfer of accounts of
participants in the NTX Plan as of the Merger Date (NTX Plan Participants) and to set forth
special provisions which shall apply with respect to NTX Plan Participants. The merger and the
transfer of assets and liabilities from the NTX Plan to this Plan shall be in accordance with the
applicable provisions of ERISA and Sections 401(a)(12), 411(d)(6), and 414(l) of the Code. In
addition to providing for the merger of the NTX Plan into this Plan, this Supplement A provides a
special vesting rule with respect to individuals who are not NTX Plan Participants but are active
employees of NTX on the Merger Date.
A-2. Participation. Subject to the conditions and limitations of the Plan, each NTX
Plan Participant on the Merger Date who is employed by NTX or Hanesbrands Inc. on and after the
Merger Date shall automatically become a Participant in this Plan on the Merger Date and shall be
covered by this Supplement A. Except as provided in this Supplement A, NTX Plan Participants
described in the preceding sentence:
Shall be eligible to make Before-Tax Contributions in accordance with Subparagraph 4.01(a)
(and Catch-Up Contributions, if applicable, in accordance with Subsection 4.02);
Shall not be deemed to have made an automatic deferral election under Subparagraph 4.01(b)
until such time as otherwise determined by the Committee; and
Shall be eligible to receive Annual Company Contributions in accordance with Subsection
5.02, and Matching Contributions in accordance with Subsection 5.03.
Each other NTX Plan Participant shall, on and after the Merger Date, be treated as a restricted
Participant or Beneficiary (as applicable) of the Plan pursuant to Subsection 7.02 and the
conditions and limitations of the Plan. Notwithstanding any provision of the Plan to the contrary,
NTX Plan Participants who have not met the requirements of Section 3.01 of the Plan prior to the
Merger Date shall be permitted to continue making and receiving Plan contributions
1
described in subparagraphs (a), (b) and (c) above on and after the Merger Date; provided, however,
that any employee of NTX or Hanesbrands Inc. on and after the Merger Date who did not meet the
requirements of Section 3.01 of the Plan as of the Merger Date and who was not an NTX Participant
as of the Merger Date, must meet the requirements of Section 3.01 of the Plan on or after the
Merger Date prior to becoming a Participant in the Plan.
A-3. Transfer of Assets. The assets of accounts held in the NTX Plan will be
transferred into and become assets of this Plan and will be held, invested and administered by the
Trustee with the other assets of the Trust Fund pursuant to the provisions of the Trust Agreement
and Plan.
A-4. Transfer of Accounts. All accounts maintained for NTX Plan Participants under
the NTX Plan on the Merger Date shall be adjusted as of that date in accordance with the provisions
of the NTX Plan. As soon as administratively practicable following such adjustment, assets and
liabilities of the NTX Plan equal to the net credit balances in such accounts, as adjusted, shall
be transferred to the Plan and credited to corresponding accounts established for each NTX Plan
Participant under the Plan as follows:
|
|
|
NTX Account
|
|
HBI Account |
Tax-Deferred 401(k) Contribution Account
|
|
Before-Tax Contribution Account |
After-Tax Account
|
|
After-Tax Account |
Rollover Account
|
|
Rollover Contribution Account |
Prior ESOP Account
|
|
Predecessor Company Account |
Matching Contribution Account
|
|
Predecessor Company Account |
Prior Company Account
|
|
Predecessor Company Account |
Effective as of the Merger Date, NTX Plan Participants accounts under the NTX Plan shall be paid
from the Plan in accordance with the terms of the Plan.
A-5. Plan Benefits for Participants Who Terminated Employment Prior to the Merger
Date. The benefits that would have been provided under the Plan with respect to any
Participant who retired or whose employment otherwise terminated prior to the Merger Date will be
provided from the Plan pursuant to the provisions thereof.
A-6. Vesting. As of the Merger Date, each NTX Plan Participant, employed by NTX or
the Employer on the Merger Date, shall be 100% vested in and have a nonforfeitable interest in all
contributions made to the Plan prior to the Merger Date and on and after the Merger Date. Each
other NTX Plan Participant who was not employed by NTX, the Employer or a Controlled Group Member
on the Merger Date shall be vested in his Account balance to the same extent that he was vested at
his Separation Date, subject to Section 12 of the Plan. Each individual who is actively employed
by NTX on the Merger Date but is not then an NTX Plan Participant shall be 100% vested in and have
a nonforfeitable interest in all contributions made to the Plan on his behalf on and after the
Merger Date.
A-7. Loans. Any loans from the NTX Plan to NTX Plan Participants that are outstanding
as of the Merger Date shall be transferred to the Plan and will be held and
2
administered hereunder pursuant to the terms of such loans, regulations under the Code and
ERISA, and rules established by the Committee.
A-8. Transfer of Records. On or as soon as practicable after the Merger Date, the
administrator of the NTX Plan shall transfer to the Plan Administrator all administrative records
maintained with respect to NTX Plan Participants.
A-9. Use of Terms. The provisions of this Supplement A shall supersede the provisions
of the Plan (except such Plan provisions that impose conditions or limitations required by
applicable law) to the extent necessary to eliminate any inconsistency between this Supplement A
and the Plan. Terms used in this Supplement A shall, unless defined in this Supplement A or
otherwise noted, have the meanings given to those terms elsewhere in the Plan.
3
SUPPLEMENT B
TO
HANESBRANDS INC.
RETIREMENT SAVINGS PLAN
Special Participation Provisions
The following individuals shall become Participants pursuant to Subsection 3.01(a)(i) of the Plan
without regard to age (except for purposes of the Annual Company Contribution):
|
|
|
|
|
EMPLOYEE ID |
|
BIRTHDATE |
|
STATUS DATE |
150720 |
|
2/26/1989 |
|
10/2/2007 |
150703 |
|
6/28/1987 |
|
9/30/2007 |
150710 |
|
11/12/1987 |
|
10/2/2007 |
150712 |
|
6/4/1988 |
|
10/2/2007 |
150575 |
|
9/10/1988 |
|
9/19/2007 |
150627 |
|
1/16/1987 |
|
9/23/2007 |
150574 |
|
10/21/1987 |
|
9/19/2007 |
150578 |
|
12/26/1988 |
|
9/19/2007 |
150637 |
|
10/24/1987 |
|
9/24/2007 |
150462 |
|
8/22/1987 |
|
9/11/2007 |
150401 |
|
9/17/1987 |
|
9/4/2007 |
150436 |
|
12/5/1987 |
|
9/11/2007 |
150468 |
|
5/26/1989 |
|
9/5/2007 |
150125 |
|
4/12/1989 |
|
8/28/2007 |
149971 |
|
6/17/1988 |
|
8/17/2007 |
149981 |
|
11/17/1987 |
|
8/19/2007 |
149953 |
|
11/10/1987 |
|
8/14/2007 |
150453 |
|
5/13/1989 |
|
9/10/2007 |
149540 |
|
5/18/1988 |
|
7/10/2007 |
149571 |
|
2/20/1988 |
|
7/9/2007 |
149337 |
|
3/15/1988 |
|
6/15/2007 |
149265 |
|
4/29/1988 |
|
6/11/2007 |
149263 |
|
8/12/1987 |
|
6/11/2007 |
149194 |
|
5/2/1987 |
|
5/31/2007 |
148964 |
|
4/29/1988 |
|
517/2007 |
148879 |
|
9/2/1987 |
|
4/30/2007 |
148830 |
|
10/14/1988 |
|
4/24/2007 |
148666 |
|
8/12/1988 |
|
12/27/2007 |
148669 |
|
3/12/1988 |
|
3/30/2007 |
148461 |
|
11/20/1988 |
|
2/27/2007 |
148508 |
|
5/29/1988 |
|
3/7/2007 |
148461 |
|
11/20/1988 |
|
2/27/2007 |
A-1
|
|
|
|
|
EMPLOYEE ID |
|
BIRTHDATE |
|
STATUS DATE |
148391 |
|
12/1/1988 |
|
2/15/2007 |
148203 |
|
7/5/1988 |
|
1/24/2007 |
148332 |
|
12/1/1990 |
|
2/6/2007 |
135548 |
|
5/5/1989 |
|
9/20/2006 |
135163 |
|
4/28/1988 |
|
8/28/2006 |
A-2
EX-10.7
Exhibit 10.7
HANESBRANDS INC.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
(Effective as of January 1, 2006)
(Conformed Through Third Amendment)
TABLE OF CONTENTS
|
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PAGE |
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|
SECTION 1 |
|
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1 |
|
Introduction |
|
|
1 |
|
1.1 |
|
Purpose |
|
|
1 |
|
1.2 |
|
Effective Date and Plan Year |
|
|
1 |
|
1.3 |
|
Employers |
|
|
2 |
|
1.4 |
|
Plan Administration |
|
|
2 |
|
1.5 |
|
Plan Supplements |
|
|
2 |
|
1.6 |
|
Plan Benefits for Participants who Terminated Employment |
|
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2 |
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|
SECTION 2 |
|
|
3 |
|
Definitions |
|
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3 |
|
2.1 |
|
2008 Special Election |
|
|
3 |
|
2.2 |
|
A&B Level Transition Credit |
|
|
3 |
|
2.3 |
|
Account |
|
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4 |
|
2.4 |
|
Annual Company Credit |
|
|
4 |
|
2.5 |
|
Beneficiary |
|
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4 |
|
2.6 |
|
Code |
|
|
5 |
|
2.7 |
|
Committee |
|
|
5 |
|
2.8 |
|
Controlled Group Member |
|
|
5 |
|
2.9 |
|
Corporation |
|
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5 |
|
2.10 |
|
[RESERVED.] |
|
|
5 |
|
2.11 |
|
Deferred Vested Participant |
|
|
5 |
|
2.12 |
|
[RESERVED.] |
|
|
5 |
|
2.13 |
|
Effective Date |
|
|
5 |
|
2.14 |
|
[RESERVED.] |
|
|
6 |
|
2.15 |
|
Employee |
|
|
6 |
|
2.16 |
|
Employer |
|
|
6 |
|
2.17 |
|
ERISA |
|
|
6 |
|
2.18 |
|
Matching Credit |
|
|
6 |
|
2.19 |
|
Normal Retirement Date |
|
|
6 |
|
2.20 |
|
Participant |
|
|
6 |
|
TABLE OF CONTENTS
(continued)
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PAGE |
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2.21 |
|
Pension Plan |
|
|
7 |
|
2.22 |
|
Pension SERP Benefit |
|
|
7 |
|
2.23 |
|
Pension SERP Interest Rate |
|
|
7 |
|
2.24 |
|
Plan |
|
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7 |
|
2.25 |
|
Plan Year |
|
|
7 |
|
2.26 |
|
Plan Year RSSERP Credit |
|
|
7 |
|
2.27 |
|
Present Value |
|
|
7 |
|
2.28 |
|
Residual Credit |
|
|
8 |
|
2.29 |
|
Retired Participant |
|
|
8 |
|
2.30 |
|
Retirement Savings Plan |
|
|
8 |
|
2.31 |
|
RSSERP Benefit |
|
|
8 |
|
2.32 |
|
Salaried Employee Transition Credit |
|
|
9 |
|
2.33 |
|
Sara Lee SERP |
|
|
9 |
|
2.34 |
|
Separation from Service |
|
|
9 |
|
2.35 |
|
SERP Benefit |
|
|
9 |
|
2.36 |
|
Specified Employee |
|
|
9 |
|
2.37 |
|
Supplemental Compensation |
|
|
10 |
|
2.38 |
|
Transferred Participant |
|
|
10 |
|
2.39 |
|
Total Disability |
|
|
10 |
|
2.40 |
|
Other Definitions |
|
|
11 |
|
|
|
|
|
|
|
|
SECTION 3 |
|
|
12 |
|
Participation |
|
|
12 |
|
3.1 |
|
Eligibility |
|
|
12 |
|
3.2 |
|
Period of Participation |
|
|
12 |
|
3.3 |
|
Reemployed Participants |
|
|
12 |
|
|
|
|
|
|
|
|
SECTION 4 |
|
|
14 |
|
SERP Benefits |
|
|
14 |
|
4.1 |
|
RSSERP Benefit |
|
|
14 |
|
4.2 |
|
Pension SERP Benefit |
|
|
16 |
|
4.3 |
|
Vesting of Benefits |
|
|
16 |
|
-ii-
TABLE OF CONTENTS
(continued)
|
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|
PAGE |
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|
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|
|
|
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|
4.4 |
|
Payment of Benefits |
|
|
17 |
|
4.5 |
|
Payments Upon Death |
|
|
23 |
|
4.6 |
|
Payment of FICA Tax on Pension SERP Benefit |
|
|
24 |
|
4.7 |
|
Benefits Provided by Employers |
|
|
25 |
|
4.8 |
|
Other Employment |
|
|
25 |
|
|
|
|
|
|
|
|
SECTION 5 |
|
|
26 |
|
General |
|
|
26 |
|
5.1 |
|
Committee |
|
|
26 |
|
5.2 |
|
Interests Not Transferable |
|
|
26 |
|
5.3 |
|
Facility of Payment |
|
|
27 |
|
5.4 |
|
Gender and Number |
|
|
27 |
|
5.5 |
|
Controlling Law |
|
|
27 |
|
5.6 |
|
Successors |
|
|
27 |
|
5.7 |
|
Rights Not Conferred by the Plan |
|
|
27 |
|
5.8 |
|
Litigation by Participants |
|
|
28 |
|
5.9 |
|
Uniform Rules |
|
|
28 |
|
5.10 |
|
Action by Employers |
|
|
28 |
|
5.11 |
|
Tax Effects |
|
|
28 |
|
|
|
|
|
|
|
|
SECTION 6 |
|
|
29 |
|
Amendment and Termination |
|
|
29 |
|
|
|
|
|
|
|
|
SUPPLEMENT A |
|
|
|
Provisions Relating to Transferred Participants Previously
Participating in the Earthgrains Company
Supplemental Executive Retirement Plan |
|
|
|
|
-iii-
HANESBRANDS INC.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
(Effective as of January 1, 2006)
SECTION 1
Introduction
1.1 Purpose
The Hanesbrands Inc. Supplemental Employee Retirement Plan (the Plan) is maintained by the
Corporation to provide retirement benefits that are otherwise limited under the Retirement Savings
Plan. In addition, the accrued benefits of any Transferred Participant shall be transferred from
the Sara Lee SERP to the Plan as of the Effective Date. On and after the Effective Date, all
benefits previously accrued by Transferred Participants under the Sara Lee SERP shall be provided
under the Plan, and Transferred Participants shall accrue no additional benefits under the Sara Lee
SERP.
The Plan shall constitute a top hat plan within the meaning of Section 201(2) of ERISA.
Notwithstanding any provision of the Plan to the contrary, the Plan is subject to the provisions of
Section 409A of the Code and at all times shall be interpreted and administered so that it is
consistent with such Code section; provided, however, that the vested benefits of each Transferred
Participant who terminated employment with Sara Lee Corporation and all of its Controlled Group
Members prior to January 1, 2005 shall be determined in accordance with Subsection 1.6 (and shall
not be subject to Code Section 409A), except as otherwise provided in Subsection 3.3.
1.2 Effective Date and Plan Year
The Plan is effective as of January 1, 2006. The Plan is administered on the basis of a Plan
Year.
1.3 Employers
The Corporation and each other Controlled Group Member that is a participating employer under
the Retirement Savings Plan shall be deemed to have adopted the Plan and shall be treated as an
Employer hereunder.
1.4 Plan Administration
As described in Subsection 5.1, the Committee shall be the administrator (as defined in
Section 3(16)(A) of ERISA) of the Plan; provided, however, that the Committee may delegate all or
any part of its powers, rights, and duties under the Plan to such person or persons as it may deem
advisable.
1.5 Plan Supplements
The provisions of the Plan may be modified by supplements to the Plan. The terms and
provisions of each supplement are a part of the Plan and supersede the other provisions of the Plan
to the extent necessary to eliminate inconsistencies between such other Plan provisions and such
supplement.
1.6 Plan Benefits for Participants who Terminated Employment
The benefits provided under the Plan with respect to any Participant whose employment with the
Employers has terminated shall, except as otherwise specifically provided in the Plan, be governed
in all respects by the terms of the Plan in effect as of the date of the Participants termination
of employment (or in the case of a Transferred Participant who Separated from Service prior to the
Effective Date, pursuant to the Sara Lee SERP).
-2-
SECTION 2
Definitions
2.1 2008 Special Election
If the Committee, in its discretion, decides to offer a 2008 Special Election, then the 2008
Special Election shall mean a Participants valid election, made prior to December 31, 2008 in
accordance with rules and procedures established by the Committee, to receive his or her RSSERP
Benefit and/or Pension SERP Benefit at a time and in a form specified in Subparagraphs 4.4(a)(iii)
and 4.4(b)(iv), respectively.
2.2 A&B Level Transition Credit
A&B Level Transition Credit means the annual credit, if any, made during the 2006-2010 Plan
Years to Participants who had (a) attained age 45 and (b) completed five or more years of credited
service as an A or B level executive as of January 1, 2006; provided, however, that S. Babu, K.
McAleer, K. Oliver, and C. Yaroch shall be treated as eligible to receive the A&B Level Transition
Credit.. A&B Level Transition Credits will be calculated as follows:
|
|
|
|
|
Credit |
Age Plus Years of A&B Level Service |
|
(as a percentage of the Participants |
(as of 1/1/06) |
|
Supplemental Compensation) |
50 to 54 |
|
4% |
55 to 59 |
|
8% |
60 to 64 |
|
12% |
65 to 69 |
|
14% |
70 or more |
|
15% |
In order to receive the A&B Level Transition Credit for any Plan Year, any Participant who meets
the requirements described herein must be an active Employee as of the last day of the Plan Year or
have retired, died, or become a Totally Disabled Participant during the Plan Year.
-3-
2.3 Account
Account means the notional accounts and subaccounts maintained for a Participant under the
Plan, as described in Subsection 4.1.
2.4 Annual Company Credit
Annual Company Credit means the annual company contribution made on behalf of a Participant
as described in the Retirement Savings Plan.
2.5 Beneficiary
Beneficiary means the person or persons designated by a Participant to receive payment of
his or her RSSERP Benefit (RSSERP Beneficiary) or Pension SERP Benefit (Pension SERP
Beneficiary) upon his or her death in accordance with Subsection 4.5. A beneficiary designation
shall be effective only when properly provided to the Committee in accordance with its rules and
procedures while the Participant is alive and, when effective, will cancel all prior beneficiary
designations. If the Participant does not have an effective RSSERP Beneficiary and/or Pension SERP
Beneficiary designation on the date of his or her death (because the Participant failed to
designate a beneficiary or the Participants named beneficiary died before the Participant), the
Committee will make the applicable payments described in Subsection 4.5 as follows:
|
(a) |
|
To the Participants surviving spouse; |
|
|
(b) |
|
If the Participant does not have a surviving spouse, to or for the benefit of
the legal representative or representatives of the Participants estate; |
|
|
(c) |
|
If the Participant does not have a surviving spouse and an estate is not opened
on behalf of the Participant, to or for the benefit of one or more of the Participants
relatives by blood, adoption or marriage in such proportions as the Committee (or its
delegate) determines. |
-4-
2.6 Code
Code means the Internal Revenue Code of 1986, as amended.
2.7 Committee
Committee means the Hanesbrands Inc. Employee Benefits Administrative Committee appointed by
the Corporation to administer the Plan.
2.8 Controlled Group Member
Controlled Group Member means the Corporation and any affiliated or related corporation
which is a member of a controlled group of corporations (within the meaning of Section 1563(a) of
the Code) which includes the Corporation or any trade or business (whether or not incorporated),
which is under common control with the Corporation (within the meaning of Section 414(c) of the
Code).
2.9 Corporation
Corporation means Hanesbrands Inc., a Maryland corporation.
2.10 [RESERVED.]
2.11 Deferred Vested Participant
Deferred Vested Participant means a Participant who has Separated from Service, is not a
Retired Participant, and is eligible for a monthly deferred vested pension under the Pension Plan.
2.12 [RESERVED.]
2.13 Effective Date
Effective Date means January 1, 2006, except as otherwise required to comply with applicable
law or as specifically provided herein.
-5-
2.14 [RESERVED.]
2.15 Employee
Employee means a person, including an officer of an Employer, who is in the employ of an
Employer. For all purposes of the Plan, an individual shall be an Employee of or be employed
by an Employer for any Plan Year only if such individual is treated by the Employer for such Plan
Year as its employee for purposes of employment taxes and wage withholding for Federal income
taxes, regardless of any subsequent reclassification of such individual as an Employee by an
Employer, any governmental agency, court, or other third party. Any such reclassification shall
not have a retroactive effect for purposes of the Plan.
2.16 Employer
Employer means the Corporation and each other Controlled Group Member that is a
participating employer under the Retirement Savings Plan.
2.17 ERISA
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
2.18 Matching Credit
Matching Credit means the employer matching contribution made on behalf of a Participant as
described in the Retirement Savings Plan.
2.19 Normal Retirement Date
Normal Retirement Date means the first day of the month coincident with or next following
the Participants attainment of age 65.
2.20 Participant
Participant means an Employee who satisfies the requirements of Subsection 3.1.
-6-
2.21 Pension Plan
Pension Plan means the Hanesbrands Inc. Pension and Retirement Plan, as amended from time to
time. No further benefits shall accrue under the Pension Plan on or after the Effective Date.
2.22 Pension SERP Benefit
Pension SERP Benefit means a Participants benefit described in Subsection 4.2.
2.23 Pension SERP Interest Rate
Pension SERP Interest Rate means an interest rate equal to 120% of the annual rate on
30-year Treasury securities published for the month that is three months prior to (i) the first day
of the month following the Participants Separation from Service, or (ii) the payment commencement
date, as applicable, rounded to the nearest 0.25%.
2.24 Plan
Plan means the Hanesbrands Inc. Supplemental Employee Retirement Plan, as amended from time
to time.
2.25 Plan Year
Plan Year means the 12-month period beginning each January 1 and ending the next following
December 31.
2.26 Plan Year RSSERP Credit
Plan Year RSSERP Credit means the credit described in Subparagraph 4.1(b).
2.27 Present Value
Present Value means the present value of a Participants Pension SERP Benefit, calculated as
if the Pension SERP Benefit were payable as an annuity under the Pension Plan using the Pension
Plans (a) early payment factors, as applicable, (b) the mortality table provided
-7-
under the Pension Plan as of December 31, 2007, and (c) the Pension SERP Interest Rate. For a
Retired Participants Present Value calculation, the assumed commencement date shall be the date of
the Participants retirement and the Present Value will be accumulated with interest at the Pension
SERP Interest Rate to the actual payment commencement date. For a Deferred Vested Participants
Present Value calculation, the assumed commencement date shall be the Participants Normal
Retirement Date and the Present Value shall be determined as of the date payment is to be made
under Subparagraph 4.4(b).
2.28 Residual Credit
Residual Credit means a credit to the Participants RSSERP Benefit made after the
Participants Separation from Service based on the Annual Company Credit, A&B Level Transition
Credit, and Salaried Employee Transition Credit.
2.29 Retired Participant
Retired Participant means a Participant who has Separated from Service after attaining age
55 and completing at least 10 years of vesting service (as defined in the Pension Plan) or after
age 65.
2.30 Retirement Savings Plan
Retirement Savings Plan means the Hanesbrands Inc. Retirement Savings Plan, as amended from
time to time; provided, however, that for the period from the Effective Date to the date the
Retirement Savings Plan first becomes effective, the term Retirement Savings Plan shall mean the
Sara Lee Corporation 401(k) Plan as applied to a Participant and Code limits referenced herein
shall be applied as if the Hanesbrands Inc. Retirement Savings Plan, and the Sara Lee Corporation
401(k) Plan were a single plan for the first Plan Year.
2.31 RSSERP Benefit
RSSERP Benefit means the Participants benefit described in Subsection 4.1.
-8-
2.32 Salaried Employee Transition Credit
In addition, a Salaried Employee Transition Credit will be made on behalf of any employee
who (a) had attained age 50; (b) had completed at least 10 years of vesting service (as defined in
the Pension Plan) with the Corporation as of January 1, 2006; and (c) notwithstanding any provision
of the Retirement Savings Plan, did not receive a Transition Contribution in the Retirement Savings
Plan equal to 10% of the employees 2006 Supplemental Compensation. The Salaried Employee
Transition Credit shall be reduced by the amount of any Transition Contribution the employee
received in the Retirement Savings Plan for 2006.
2.33 Sara Lee SERP
Sara Lee SERP means the Sara Lee Corporation Supplemental Executive Retirement Plan.
2.34 Separation from Service
Separation from Service occurs when a Participants terminates employment with the
Corporation and its Controlled Group Members by reason of a resignation, discharge, retirement, or
death. Separation from Service for purposes of the Plan shall be interpreted consistent with the
requirements of Code Section 409A(a)(2)(A)(i) and any IRS guidance issued thereunder.
2.35 SERP Benefit
SERP Benefit means the Participants RSSERP Benefit and/or Pension SERP Benefit, as
applicable.
2.36 Specified Employee
Specified Employee means an employee described in the Corporations Procedures for
Determining Top-50 Employees under Code Section 409A as adopted, and as amended from time to time,
by the Committee.
-9-
2.37 Supplemental Compensation
For purposes of the RSSERP Benefit, a Participants Supplemental Compensation means his or
her compensation as defined in the Retirement Savings Plan but including the following additional
amounts:
|
(a) |
|
Any amounts that cannot be recognized as compensation in the Retirement Savings
Plan due to the dollar limitation contained in Code Sections 401(a)(17) of the Code; |
|
|
(b) |
|
Deferrals of base salary and bonus compensation for the Plan Year in which
deferred; and |
|
|
(c) |
|
Any compensation required to be included as Supplemental Compensation pursuant
to an employment, severance or other written agreement with an Employer; provided,
however, that severance payments to Specified Employees that are delayed six months in
compliance with Code Section 409A shall be attributable to the year in which such
amounts were earned rather than the year in which they are paid. |
2.38 Transferred Participant
Transferred Participant means any participant in the Sara Lee SERP who was employed by the
Corporation on December 31, 2005 or who was last employed by the Corporations predecessor division
of Sara Lee Corporation; provided, however, that L. Chaden, D. Volz, and expatriate employees of
the Corporation on January 1, 2006 shall not be considered Transferred Participants, so that such
individuals benefits under the Sara Lee SERP shall remain payable exclusively by Sara Lee
Corporation under the Sara Lee SERP.
2.39 Total Disability
Total Disability means total disability, as defined in the Pension Plan. A Totally
Disabled Participant means a Participant who is subject to a Total Disability.
-10-
2.40 Other Definitions
Other defined terms used in the Plan shall have the meanings given such terms elsewhere in the
Plan, the Retirement Savings Plan and the Pension Plan.
-11-
SECTION 3
Participation
3.1 Eligibility
Transferred Participants shall be eligible to participate in the Plan on the Effective Date.
In addition, each other Employee of an Employer who is a participant in the Retirement Savings Plan
will become a Participant in the Plan upon the date that the contributions that he or she would
otherwise receive under the Retirement Savings Plan are limited by one or more of the following:
|
(i) |
|
By operation of Code Section 415; |
|
|
(ii) |
|
Because Supplemental Compensation is not taken into account
under the Retirement Savings Plan; or |
|
|
(iii) |
|
Because a period required to be included as service pursuant
to an employment, severance or other written agreement with an Employer is not
taken into account under the Retirement Savings Plan. |
3.2 Period of Participation
Each Employee who becomes a Participant in the Plan shall continue as a Participant until the
earlier of the date that all of his or her vested SERP Benefits (if any) have been distributed or
his or her death.
3.3 Reemployed Participants
|
(a) |
|
In the event a Participant who terminated employment with the Corporation and
all Controlled Group Members prior to January 1, 2005 is reemployed by the Controlled
Group Members on or after the Effective Date, the following rules shall apply: |
-12-
|
(i) |
|
The Participants SERP Benefits that were earned and vested as
of December 31, 2004 and that have been distributed or are in distribution
status as of his or her reemployment date shall continue to be distributed in
accordance with the terms of the Sara Lee SERP as in effect on his or her
earlier Separation from Service and shall not be subject to the requirements of
Code Section 409A; and |
|
(ii) |
|
The Participants SERP Benefits that either (i) were earned and
vested as of December 31, 2004 and (A) have not been distributed, or (B) are
not in distribution status, or (ii) were not earned and vested as of December
31, 2004, shall be subject to the applicable terms of this Plan document and
the requirements of Code Section 409A. |
|
(b) |
|
In the event a Participant who Separated from Service with the Corporation and
all Controlled Group Members on or after January 1, 2005 is reemployed by the
Controlled Group Members on or after the Effective Date, the SERP Benefits determined
as of the Participants initial Separation from Service shall be subject to the
applicable terms of this Plan document and the requirements of Code Section 409A and
distribution of those amounts shall not be impacted by the Participants reemployment. |
-13-
SECTION 4
SERP Benefits
4.1 RSSERP Benefit
Subject to Subsection 4.3, a Participants RSSERP Benefit shall be equal to the balance in the
Account maintained on behalf of the Participant under the Plan, which Account balance shall be
equal to the sum of (a) plus (b) plus (c) below, and as adjusted pursuant to (d) below:
|
(a) |
|
Pre-Effective Date Benefit. A Participants Account under the Plan shall be
credited with the amount of the Participants Sara Lee 401(k) SERP Benefit determined
under the Sara Lee SERP, if any, determined as of the date immediately preceding the
Effective Date. |
|
|
(b) |
|
Plan Year RSSERP Credits. A Participants Account under the Plan shall be
credited with the Plan Year RSSERP Credit equal to (i) plus (ii) plus (iii) below, if
any, as of the last day of each Plan Year: |
|
(i) |
|
Annual Company Credit. The amount equal to (A) minus (B)
below: |
|
(A) |
|
The annual company contribution that
would have been made on behalf of the Participant (if any)
under the Retirement Savings Plan (or, in 2006, under the Sara
Lee 401(k) Plan) for the applicable Plan Year based on the
Participants Supplemental Compensation and without regard to
Code Section 415; minus |
|
|
(B) |
|
The annual company contribution
actually made on behalf of the Participant under the Retirement
Savings Plan (or, in 2006, under the Sara Lee 401(k) Plan) for
such Plan Year. |
|
(ii) |
|
Matching Credit. The amount equal to the Matching Credit that
would have been made on behalf of the Participant under the Retirement Savings |
-14-
|
|
|
Plan for the Plan Year based on his or her Supplemental Compensation less
any matching contributions received (or deemed received as described below)
by the Participant under the Retirement Savings Plan for that Plan Year;
provided, however, that for purposes of determining the Matching Credit
under this Plan, the Participant will be deemed to (A) have made 401(k)
contributions (excluding catch-up contributions) of 4% of the Participants
Supplemental Compensation, and (B) have received the appropriate matching
contribution under the Retirement Savings Plan based upon such deemed 401(k)
contribution (regardless of the Participants actual contribution rate). |
|
(iii) |
|
The A&B Level Transition Credit, if any. |
|
|
(iv) |
|
The Salaried Employee Transition Credit, if any. |
|
(c) |
|
Forfeited Retirement Savings Plan Benefit. To the extent that service under a
separation agreement is included in SERP vesting service, a Participants Account under
the Plan shall be credited with any amount of the Participants Retirement Savings Plan
benefit that would be vested under the Retirement Savings Plan recognizing SERP vesting
service but that is forfeited due to his or her Separation from Service with the
Controlled Group Members prior to becoming fully vested under the Retirement Savings
Plan. |
|
|
(d) |
|
Adjustment of Account. The Account maintained on behalf of a Participant under
the Plan shall be adjusted from time to time to reflect a hypothetical investment in
the Hanesbrands Inc. Common Stock Fund under the Retirement Savings Plan; provided,
however, that for as long as the Corporation is a Controlled Group Member of Sara Lee
Corporation, the Account maintained on behalf of a Participant under the Plan shall be
adjusted from time to time to reflect a hypothetical investment in the Sara Lee
Corporation Common Stock Fund under the Sara Lee Corporation 401(k) Plan. The
Committee may establish such rules and procedures relating to the maintenance,
adjustment, and liquidation of |
-15-
|
|
|
Participants Accounts, the crediting of credits and the notional income, losses,
expenses, appreciation, and depreciation attributable thereto, as are considered
necessary or advisable. In addition to the Account described above, the Committee
may maintain such other Accounts as the Committee considers necessary or desirable. |
4.2 Pension SERP Benefit
Subject to Subsection 4.3, a Transferred Participants Pension SERP Benefit shall be equal to
the Transferred Participants Sara Lee Pension SERP Benefit determined under the Sara Lee SERP, if
any, determined as of the Effective Date.
In the case of a Participant in compensation band 3, 4 or 5 who is entitled to receive
severance benefits under the Hanesbrands Inc. Severance Pay Plan (previously known as the Sara Lee
Corporation Severance Pay Plan for Employees of Sara Lee Branded Apparel) , and who would satisfy
the requirements for early retirement under the Pension Plan if his/her severance period (as
defined in the separation agreement pursuant to which the severance benefits are paid) were a
period of actual employment under the Pension Plan, then to the extent provided in the
Participants separation agreement, the Participants SERP Benefit shall be increased to reflect
the difference between (i) the Pension Plan benefit that would be payable if the years of severance
period was recognized as years of vesting service as defined in the Pension Plan; and (ii) the
actual Pension Plan benefit; provided, however, that such Participants severance period shall not
be considered as credited service for purposes of determining the amount of the Participants
accrued Pension SERP Benefit.
4.3 Vesting of Benefits
A Participant shall have a nonforfeitable right to his or her SERP Benefit as provided in
Subparagraphs (a) and (b) below, as applicable.
|
(a) |
|
RSSERP Benefit. A Participants Annual Company Credits and Matching Credits
shall become nonforfeitable on the same basis and at the same time as his or her annual
company contributions and matching contributions, respectively, become |
-16-
|
|
|
nonforfeitable under the Retirement Savings Plan. A Participants A&B Level
Transition Credits or Salaried Employee Transition Credit, if any, shall be
nonforfeitable at all times. |
|
(b) |
|
Pension SERP Benefit. A Participants Pension SERP Benefit shall become
nonforfeitable on the same basis and at the same time as his or her benefit under the
Pension Plan. |
In determining whether a Participant is vested in his or her SERP Benefit, any period required to
be included as service pursuant to an employment, severance or other written agreement with an
Employer shall be considered service with an Employer under the Plan.
4.4 Payment of Benefits
A Participants SERP Benefit shall, subject to the further provisions of this Plan, be payable
to or on account of the Participant as follows:
|
(i) |
|
Balances Under $50,000. If the value of the Participants
vested RSSERP Benefit (determined without regard to any Residual Credit) is
less than $50,000 as of the Participants Separation from Service, then any
election made by the Participant under Subparagraph (iii) or (iv) below shall
be void, and the Participants vested RSSERP Benefit shall be paid in a lump
sum in the seventh month following the Participants Separation from Service. |
|
|
(ii) |
|
Balances of $50,000 or More. If the value of the Participants
vested RSSERP Benefit (determined without regard to any Residual Credit) is
$50,000 or more on the Participants Separation from Service, the Participants
vested RSSERP Benefit shall be paid in a lump sum in the seventh month
following the Participants Separation from Service, unless the Participant
made a valid election under Subparagraph (iii) or (iv) |
-17-
|
|
|
below, in which case the Participants RSSERP Benefit shall be paid in
accordance with the applicable election. |
|
(iii) |
|
Participant Elections. An active Participant may elect during
the 2008 Special Election period to receive his or her vested RSSERP Benefit as
follows: |
|
(A) |
|
In a lump sum to be paid at the later
of the seventh month following the Participants Separation
from Service or on a specified date that is not later than the
Participants 70th birthday; or |
|
|
(B) |
|
In annual installments over a period of
five or ten years (I) commencing as of the first day of the
seventh month following the Participants Separation from
Service, or (II) commencing at the later of the seventh month
following the Participants Separation from Service or a
specified date that is not later than the Participants 70th
birthday. |
|
|
|
Any election under this Subparagraph shall be irrevocable, subject to the
provisions of Subparagraph (iv) below. |
|
|
(iv) |
|
Changes in Participant Elections. After 2008, a Participant
may make a one-time, irrevocable election to delay commencement of his or her
RSSERP Benefit to a date not later than his or her 70th birthday, or to change
the form of payment of his or her RSSERP Benefit to one of the forms specified
in Subparagraph (iii) above, provided that no such election shall be effective
unless (A) the Committee receives the election not later than 12 months prior
to the previously scheduled distribution date, and (B) payment of the
Participants RSSERP Benefit is made not earlier than the fifth anniversary of
the previously scheduled distribution date. |
-18-
|
(v) |
|
Payment of Residual Credits. Notwithstanding any Plan
provision to the contrary, any Residual Credit to the Participants Account
after his or her Separation from Service shall be paid as follows: |
|
(A) |
|
If the Participant receives payment of
his or her RSSERP Account in a lump sum, any Residual Credit to
the Participants Account shall be paid in a lump sum as soon
as practicable but in no event later than the end of the
calendar year in which such amount is credited; provided,
however, that if the Participant has elected to receive his or
her lump sum payment later than seven months following
Separation from Service, any Residual Credit shall be paid on
the date elected by the Participant for payment of his or her
lump sum benefit. |
|
|
(B) |
|
If the Participant elects to receive
payment of his or her RSSERP Account in installments, any
Residual Credit shall be added to the Participants RSSERP
Account and shall be paid in installments over the remaining
installment period. |
|
(vi) |
|
2009/2010 Lump Sum Cashout. Notwithstanding the foregoing, an
active Participant may elect to receive distribution of his or her RSSERP
Benefit determined as of December 31, 2008, with such amount paid to the
Participant in a lump sum in 2009 or 2010, as elected by the Participant. For
this purpose, a Participants RSSERP Benefit as of December 31, 2008 shall
include his or her RSSERP Credits for the 2008 Plan Year; the lump sum paid in
2009 shall include gains/losses credited to the Participants RSSERP Account
through February 28, 2009; and the lump sum paid in 2010 shall include
gains/losses credited to the Participants RSSERP Account through December 31,
2009. If a Participant makes an election under this Subparagraph and is not
fully |
-19-
|
|
|
vested as of the specified payment date, then the Participant shall receive
payment of his or her vested December 31, 2008 RSSERP Benefit on the
specified payment date, and his or her remaining December 31, 2008 RSSERP
Benefit (as adjusted pursuant to Subparagraph 4.1(d)) shall be distributed
as it becomes vested, with payment of each vested portion made by no later
than 2-1/2 months after the end of the Plan Year in which it vests. |
|
(vii) |
|
Post-2008 RSSERP Credits. Notwithstanding any Plan provision
to the contrary, a Participants RSSERP Credits for 2009 and each subsequent
Plan Year shall be paid immediately to the Participant, to the extent vested,
with payment made by the end of the applicable Plan Year in which such amount
would otherwise be credited to the Participants Account. If any portion of a
Participants RSSERP Credit for a Plan Year is not then vested, such portion
(as adjusted pursuant to Subparagraph 4.1(d)) shall be distributable upon
vesting, with payment made of each newly vested portion by no later than 2-1/2
months after the end of the Plan Year in which it vests. |
|
(b) |
|
Pension SERP Benefit. |
|
(i) |
|
General Payment Rule. If (A) the Present Value of a
Participants vested Pension SERP Benefit is less than $50,000 as of the
Participants Separation from Service, or (B) the Present Value of the
Participants vested Pension SERP Benefit is $50,000 or more but the
Participant is not a Retired Participant, then any 2008 Special Election or
other election made by the Participant under Subparagraph (v) below shall be
void, and the Present Value of the Participants vested Pension SERP Benefit
shall be paid in a lump sum in the seventh month following the Participants
Separation from Service. |
-20-
|
(ii) |
|
Retired Participants with Benefits of $50,000 or More. If the
Present Value of a Participants vested Pension SERP Benefit is $50,000 or more
at the Participants Separation from Service and the Participant qualifies as a
Retired Participant, then the Present Value shall be paid in a lump sum in the
seventh month following the Participants Separation from Service, unless the
Participant made a 2008 Special Election or an election under Subparagraph (v)
below, in which case the Present Value of the Participants Pension SERP
benefit shall be paid in accordance with the applicable election. |
|
|
(iii) |
|
Totally Disabled Participants. Notwithstanding Subparagraph
(i) above, if a Participant qualifies as a Totally Disabled Participant, then
the Present Value of the Participants vested Pension SERP Benefit (determined
as if the Participant were a Retired Participant) shall be paid in a lump sum
on the Totally Disabled Participants 65th birthday. However, if the Present
Value of the Participants Pension SERP Benefit is $50,000 or more and the
Participant made a 2008 Special Election or an election under Subparagraph (v)
below, the Present Value of the Participants Pension SERP Benefit shall be
paid in accordance with the applicable election. |
|
|
(iv) |
|
2008 Special Elections. During the 2008 Special Election
period, an active Participant may elect to receive the Present Value of his or
her Pension SERP Benefit as follows: |
|
(A) |
|
In a lump sum to be paid at the later
of the seventh month following the Participants Separation
from Service or on a specified date that is not later than the
Participants 70th birthday; or |
|
|
(B) |
|
In monthly installments over a period
of five or ten years (I) commencing as of the first day of the
seventh month following the Participants Separation from
Service, or (II) |
-21-
|
|
|
commencing at the later of the seventh month following the
Participants Separation from Service or a specified date
that is not later than the Participants 70th birthday. |
|
(v) |
|
Changes in Participant Elections. After 2008, a Participant
may make a one-time, irrevocable election to delay commencement of his or her
Pension SERP Benefit to a date not later than his or her 70th birthday, or to
change the form of payment of his or her Pension SERP Benefit to one of the
forms specified in Subparagraph (iv) above, provided that no such election
shall be effective unless (A) the Committee receives the election not later
than 12 months prior to the previously scheduled distribution date, and (B)
payment of the Participants Pension SERP Benefit is made not earlier than the
fifth anniversary of the previously scheduled distribution date. |
|
|
(vi) |
|
2009/2010 Lump Sum Cashout. Notwithstanding the foregoing, an
active Participant may elect to receive the Present Value of his or her vested
Pension SERP Benefit in a lump sum in January 2009 or January 2010, as elected
by the Participant. For purposes of this Subparagraph 4.4(b)(vi), Present
Value shall be based on the Participants age at January 1 of the selected
distribution year, the Participants Pension SERP Benefit payable at age 65,
and an interest rate of 5.25%; provided that any lump sum cashout paid under
this Subparagraph after a Participants Separation from Service shall include
any early retirement subsidy to which the Participant is entitled as of his or
her Separation from Service. If a Participant receives a payment under this
Subparagraph, then the Participant shall not be entitled to any Pension SERP
Benefits upon his or her subsequent Separation from Service. |
|
(c) |
|
Pre-2009 Distribution Rules. Notwithstanding the foregoing, a Participant who
Separates from Service prior to 2009 shall receive payment of his or her RSSERP |
-22-
|
|
|
and Pension SERP Benefits, if any, pursuant to payment elections made and filed with
the Committee in accordance with applicable procedures established by the Committee,
and in accordance with applicable provisions of Code Section 409A and guidance
issued thereunder. |
|
(d) |
|
All elections under this Subsection 4.4 shall be made in accordance with rules
and procedures and within the time period specified by the Committee. |
4.5 Payments Upon Death
Notwithstanding any provision of Subsection 4.4 to the contrary, the following rules shall
apply upon a Participants death:
|
(a) |
|
RSSERP Benefit. If the Participant dies before complete payment of his or her
vested RSSERP Benefit under Subparagraph 4.4(a), payment of his or her remaining RSSERP
Benefit shall be made to his or her RSSERP Beneficiary in a lump sum in the fourth
month following the Participants death. |
|
|
(b) |
|
Pension SERP Benefit. |
|
(i) |
|
Death Before Commencement. |
|
(A) |
|
If a Participant Separates from Service
before qualifying as a Retired Participant and dies before
commencement of his or her Pension SERP Benefit, the Present
Value of the Participants vested Pension SERP Benefit shall be
paid to the Participants Pension SERP Beneficiary in a lump
sum in the fourth month following the Participants death, or
if earlier, the date determined pursuant to Subparagraph
4.4(b)(i). |
|
|
(B) |
|
If a Retired Participant dies before
commencement of his or her Pension SERP Benefit, the Present
Value of the |
-23-
|
|
|
Participants Pension SERP Benefit shall be paid to the
Participants Pension SERP Beneficiary in a lump sum in the
fourth month following the Participants death, or if
earlier, the date determined pursuant to Subparagraphs
4.4(b)(i) or (ii). |
|
(C) |
|
Death while Active. If a Participant
dies while actively employed by the Corporation, the Present
Value of the Participants Pension SERP Benefit attributable to
the active death benefit, as determined under the Pension Plan,
shall be paid to the Participants Pension SERP Beneficiary in
a lump sum in the fourth month following the Participants
death. If such benefit is payable to the Participants
surviving spouse, the Present Value shall be determined based
on the surviving spouses age on the date of the Participants
death. If such benefit is payable to a Pension SERP
Beneficiary other than the Participants surviving spouse, the
Present Value shall be determined as if such amount were
payable to a spouse the same age as the Participant. |
|
(ii) |
|
Death After Commencement. If the Participant dies after
commencement of his or her Pension SERP Benefit payments, the Present Value of
any unpaid portion of his or her Pension SERP Benefit shall be paid to his or
her Pension SERP Beneficiary in a lump sum in the fourth month following the
Participants death. |
4.6 Payment of FICA Tax on Pension SERP Benefit
Notwithstanding anything contained in the Plan to the contrary, an initial Pension SERP
Benefit payment may, in the discretion of the Committee, be made on behalf of the Participant in
the amount of the Federal Insurance Contributions Act (FICA) tax due from the Participant on
-24-
his or her Pension SERP Benefit, determined as of the date such FICA tax is due. If such
initial Pension SERP Benefit payment is made, then all later calculations and payments related to
the Participants Pension SERP Benefit shall be adjusted to reflect the initial payment.
4.7 Benefits Provided by Employers
Benefits payable under this Plan to a Participant or his or her surviving spouse, beneficiary
or estate shall be paid directly by the Participants Employer. No Employer shall be required to
segregate any assets to be applied for the payment of benefits under this Plan.
4.8 Other Employment
A Participant or his or her surviving spouse or beneficiary who is receiving SERP Benefits
hereunder will continue to be entitled thereto regardless of other employment or self-employment.
-25-
SECTION 5
General
5.1 Committee
This Plan will be administered by the Committee appointed by the Board of Directors of the
Corporation or a committee thereof. The Committee may delegate any of its authority hereunder to a
committee or to one or more individuals provided such delegation is in writing. Any such
delegation is incorporated herein by this reference. The Committee, and to the extent applicable
its delegates, shall have the discretionary authority to determine factual issues and eligibility
for Plan coverage and benefits, to interpret the provisions and terms of Plan and to decide claims
for benefits under the terms of the Plan. Subject to applicable law, any interpretation of the
provisions of the Plan (including any Supplement) and any decision on any matter within the
discretion of the Committee, or as applicable its delegates, made by it or them in good faith shall
be final and binding on all persons. A misstatement or other mistake of fact shall be corrected
when it becomes known, and the Committee or as applicable its delegates shall make such adjustment
on account thereof as it considers equitable and practicable. The Committee shall not be liable in
any manner for any determination of fact made in good faith. Any claim for benefits under the Plan
shall be handled by the Committee, or as applicable its delegates, pursuant to the claims
procedures under the Retirement Savings Plan or the Pension Plan, as applicable, and such
procedures are incorporated herein by this reference. No action at law or in equity may be brought
to recover benefits under the Plan until the Participant has exercised all appeal rights and the
Plan benefits requested in such appeal have been denied in whole or in part. Benefits under the
Plan shall be paid only if the Committee, or as applicable its delegates, in its or their
discretion, determines that a Participant (or other claimant) is entitled to them.
5.2 Interests Not Transferable
Except as provided under an agreement between the Participant and the Corporation or required
for purposes of withholding of any tax under the laws of the United States or any State
-26-
or locality, the interest of any Participant, his or her spouse or minor children under the
Plan is not subject to the claims of creditors and may not be voluntarily or involuntarily sold,
transferred, assigned, alienated or encumbered.
5.3 Facility of Payment
When, in the Committees opinion, a Participant or beneficiary is under a legal disability or
is incapacitated in any way so as to be unable to manage his or her financial affairs, the amounts
payable to such person may be paid to such persons legal representative, or to a relative or
friend of such person for his or her benefit, or such amounts may be applied for the benefit of
such person in any way the Committee considers advisable.
5.4 Gender and Number
Where the context admits, words denoting men include women, the plural includes the singular
and vice versa.
5.5 Controlling Law
To the extent not superseded by the laws of the United States, the laws of North Carolina
(without regard to any states conflict of law principles) shall be controlling in all matters
relating to the Plan.
5.6 Successors
This Plan is binding on each Employer and will inure to the benefit of any successor of an
Employer, whether by way of purchase, merger, consolidation or otherwise.
5.7 Rights Not Conferred by the Plan
The Plan is not a contract of employment, and participation in the Plan will not give any
Employee the right to be retained in an Employers employ, nor any right or claim to any benefit
under the Plan, unless the right or claim has specifically accrued under the Plan.
-27-
5.8 Litigation by Participants
If a legal action begun against the Committee or any of the Employers by or on behalf of any
person results adversely to that person, or if a legal action arises because of conflicting claims
to a Participants benefits, the cost to the Committee or any of the Employers of defending the
action will be charged to such extent as possible to the sums, if any, involved in the action or
payable to or on behalf of the Participant concerned.
5.9 Uniform Rules
In managing the Plan, the Committee will apply uniform rules to all Participants similarly
situated.
5.10 Action by Employers
Any action required or permitted under the Plan of an Employer shall be by resolution of its
Board of Directors or by a duly authorized Committee of its Board of Directors, or by a person or
persons authorized by resolution of its Board of Directors or such Committee.
5.11 Tax Effects
The Corporation, the Committee, the Controlled Group Members, and their representatives and
delegates do not in any way guarantee the tax treatment of benefits for any individual, and the
Corporation, the Committee, the Controlled Group Members, and their representatives and delegates
do not in any way guarantee or assume any responsibility or liability for the legal, tax, or other
implications or effects of the Plan. In the event of any legal, tax, or other change that may
affect the Plan, the Corporation, or the Controlled Group Members, the Corporation may, in its sole
discretion, take any actions it deems necessary or desirable as a result of such change.
-28-
SECTION 6
Amendment and Termination
While the Employers expect to continue the Plan indefinitely, the Corporation reserves the
right to amend or terminate the Plan by action of the Board of Directors of the Corporation or by
action of a committee or an individual authorized to amend or terminate the Plan, provided that in
no event shall any Participants SERP Benefit accrued to the date of such amendment or termination
be reduced or modified by such action.
Any amendment or termination of the Plan shall comply with the restrictions of Code Section
409A to the extent applicable. Specifically, no amendment or termination of the Plan may
accelerate a scheduled payment unless permitted by Treasury regulations section 1.409A-3(j)(4), nor
may any amendment permit a subsequent deferral unless such amendment complies with the requirements
of Treasury regulations section 1.409A-2(b).
-29-
SUPPLEMENT A
TO
HANESBRANDS INC.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
Provisions Relating to Transferred Participants Previously Participating in
the Earthgrains Company Supplemental Executive Retirement Plan
A-1. History and Purpose. The purpose of this Supplement A is to describe the benefits that
would have been payable under the Earthgrains SERP to each Supplement A Participant (defined below)
and to describe the benefits payable to each eligible Supplement A Participant under the Plan.
This Supplement A is intended to supersede the terms of the Earthgrains SERP as applied to any
Supplement A Participant. Accordingly, any benefit payable to or on behalf of a Supplement A
Participant under this Supplement shall be considered to have been provided under the Earthgrains
SERP for all purposes. A Supplement A Participant who receives the benefits described in this
Supplement shall be deemed to have received his or her entire Earthgrains SERP benefit. Except as
otherwise specifically provided herein, a Supplement A Participant is not intended to receive any
rights under this Supplement A in addition to his or her rights under the Earthgrains SERP.
Supplement A Participant means each Transferred Participant who was an active participant in the
Earthgrains SERP as of December 31, 2002.
A-2. Supplement A Pension SERP Benefit. In lieu of a Pension SERP Benefit, a Supplement A
Participant shall be entitled to the following:
|
(a) |
|
Amount of Supplement A Pension SERP Benefit. Subject to the requirements set
forth below, each Supplement A Participant who retires or terminates employment with
all Controlled Group Members shall be entitled to a benefit equal to the following: |
|
(i) |
|
The benefit which would be payable to the Supplement A
Participant under the Earthgrains supplement to the Pension Plan, determined
(A) without regard to the limitation of Code Section 401(a)(17), and (B) using |
A-1
|
|
|
the definition of Earthgrains Formula Compensation (as defined in the Sara
Lee SERP); minus |
|
|
(ii) |
|
The Supplement A Participants actual accrued benefit under the
Earthgrains supplement of the Pension Plan. |
|
(i) |
|
The benefit payable to a Supplement A Participant (the
Participants Supplement A SERP Benefit) shall be paid as follows: |
|
(A) |
|
Subject to Subparagraphs (B) through
(D) below, if the Participant did not make a valid 2008
Supplement A Special Election (as defined below), the
Participants vested Supplement A SERP Benefit shall be paid in
a lump sum in the seventh month following the Participants
Separation from Service. |
|
|
(B) |
|
If the Supplement A Participant made a
valid 2008 Supplement A Special Election, the Participants
vested Supplement A Benefit shall be paid in accordance with
such election. A 2008 Supplement A Special Election means a
Supplement A Participants valid election, made prior to
December 31, 2008 in accordance with rules and procedures
established by the Committee, to receive his or her Supplement
A Benefit in actuarially equivalent quarterly installments,
semi-annual installments or annual installments (as elected)
for a period not to exceed five years, commencing in the
seventh month after such Supplement A Participants Separation
from Service or commencing at the later of the seventh month
following the Supplement A Participants Separation from
Service or a |
A-2
|
|
|
specified date that is not later than the Supplement A
Participants 70th birthday. |
|
|
(C) |
|
After 2008, a Participant may make an
irrevocable election to receive his or her vested Supplement A
Benefit in actuarially equivalent quarterly installments,
semi-annual installments or annual installments (as elected)
for a period not to exceed five years, commencing at least five
years after the later of (I) the Participants Separation from
Service, or (II) the date the Participant otherwise would have
commenced payment of his or her Supplement A Benefit under
Subparagraphs (A) or (B) above, as applicable; provided,
however that an election under this Subparagraph (C) must be
made in accordance with rules and procedures established by the
Committee and must be received by the Committee at least one
year before the Participants previously scheduled distribution
date. |
|
|
(D) |
|
Notwithstanding the foregoing, a
Participant may elect to receive his or her vested Supplement A
Benefit attributable to his or her post-2002 service in a lump
sum in January 2009 or January 2010, as elected by the
Participant. For purposes of this Subparagraph (D), the lump
sum Present Value of the post-2002 Supplement A Benefit will be
based on the Participants age at January 1 of the selected
distribution year, the Participants Supplement A Benefit
payable at age 65, and an interest rate of 5.25%; provided that
this lump sum benefit shall include any applicable early
retirement subsidy if the Participant has a Separation from
Service before the lump sum benefit is paid. The Participant
may also elect to receive that portion of his or |
A-3
|
|
|
her Supplement A Benefit attributable to his or her pre-2003
service; if the Participant makes such an election, the
pre-2003 benefit shall be paid in a lump sum on the date such
benefit becomes vested, with a reduction in the benefit to
reflect the Participants then current age based on the early
retirement factors specified in Paragraph A-2(c)(ii) below.
All elections under this Subparagraph shall be made in
accordance with rules and procedures and within the time
period specified by the Committee. |
|
(c) |
|
Actuarial Factors. The following actuarial factors shall apply for purposes of
this Paragraph A-2: |
|
(i) |
|
Present Value. Present value shall be determined using the
factors set forth in the Pension Plan on December 31, 2007. |
|
|
(ii) |
|
Early Retirement Reduction. The Supplement A SERP Benefit
shall be reduced 4/12% per month for each of the first 60 months and 5/12% per
month for each of the next 60 months that payment commences before Normal
Retirement Date; provided, however, that no reduction shall apply if the
Supplement A Participant retires after attaining age 62 with 20 Years of
Service. |
|
|
(iii) |
|
Installment Payments. The actuarial factors for determining
installment payments shall be determined using the factors set forth in the
Pension Plan on December 31, 2007. |
A-3. Plan Provisions. All provisions of the Plan, to the extent that they are consistent with
the provisions of this Supplement, shall apply to Supplement A Participants; provided, however,
that a Supplement A Participant shall only be entitled to a benefit under the Plan to the extent
such benefit is specifically provided under this Supplement A.
A-4
EX-10.10
Exhibit
10.10
HANESBRANDS INC.
EXECUTIVE LIFE INSURANCE PLAN
(Conformed
through October 31, 2008)
TABLE OF CONTENTS
|
|
|
|
|
|
|
PAGE |
SECTION 1 |
|
|
1 |
|
Introduction and Definitions |
|
|
1 |
|
1.1 Introduction |
|
|
1 |
|
1.2 Definitions |
|
|
1 |
|
SECTION 2 |
|
|
5 |
|
Eligibility and Benefits |
|
|
5 |
|
2.1 Eligibility for Participation |
|
|
5 |
|
2.2 Acquisition of Insurance |
|
|
5 |
|
2.3 Additional Life Insurance Coverage |
|
|
5 |
|
2.4 Companys Payment of Premiums Prior to Retirement, Termination of
Employment, Disability or Death |
|
|
6 |
|
2.5 Companys Payment of Premiums after Retirement |
|
|
6 |
|
2.6 Companys Payment of Premiums after Disability |
|
|
6 |
|
2.7 Companys Payment of Premiums During Authorized Absences from Employment |
|
|
7 |
|
2.8 Cessation of Premium Payments |
|
|
7 |
|
2.9 Optional Premium Payments by Participants |
|
|
7 |
|
2.10 Loss of Benefits |
|
|
8 |
|
2.11 Tax Withholding |
|
|
8 |
|
SECTION 3 |
|
|
9 |
|
Administration |
|
|
9 |
|
3.1 Administration |
|
|
9 |
|
3.2 Decisions and Actions of the Committee |
|
|
9 |
|
3.3 Rules and Records of the Committee |
|
|
9 |
|
3.4 Employment of Agents |
|
|
9 |
|
3.5 Plan Expenses |
|
|
9 |
|
3.6 Indemnification |
|
|
10 |
|
SECTION 4 |
|
|
11 |
|
Claims Procedures |
|
|
11 |
|
4.1 Presentation of Claim |
|
|
11 |
|
4.2 Notification of Decision |
|
|
11 |
|
4.3 Review of a Denied Claim |
|
|
12 |
|
4.4 Decision on Review |
|
|
12 |
|
4.5 Legal Action |
|
|
12 |
|
4.6 Disability Determinations |
|
|
13 |
|
SECTION 5 |
|
|
14 |
|
Miscellaneous |
|
|
14 |
|
5.1 Binding Effect |
|
|
14 |
|
5.2 No Guarantee of Employment |
|
|
14 |
|
i
|
|
|
|
|
|
|
PAGE |
5.3 Applicable Law |
|
|
14 |
|
5.4 Non-Transferability |
|
|
14 |
|
5.5 Named Fiduciary |
|
|
14 |
|
5.6 Gender and Number |
|
|
14 |
|
5.7 Non-Assignability and Facility of Payment |
|
|
14 |
|
5.8 Mistake of Fact |
|
|
15 |
|
5.9 Information to be Furnished by Covered Employees |
|
|
15 |
|
5.10 Company and Committee Decision Final |
|
|
15 |
|
5.11 Action by Company or Employer |
|
|
15 |
|
5.12 Waiver of Notice |
|
|
15 |
|
5.13 Recovery of Benefits |
|
|
15 |
|
5.14 Additional Employers |
|
|
16 |
|
5.15 Uniform Rules |
|
|
16 |
|
5.16 Evidence |
|
|
16 |
|
SECTION 6 |
|
|
17 |
|
Amendment and Termination |
|
|
17 |
|
6.1 Amendment |
|
|
17 |
|
6.2 Termination |
|
|
17 |
|
6.3 Mergers and Acquisitions |
|
|
17 |
|
ii
HANESBRANDS INC.
EXECUTIVE LIFE INSURANCE PLAN
(Effective as of January 1, 2006)
SECTION 1
Introduction and Definitions
1.1 Introduction
The Hanesbrands Inc. Executive Life Insurance Plan, effective as of January 1, 2006 (the
Plan) is established by Hanesbrands Inc. (the Company) to provide life insurance benefits to a
select group of management or highly compensated Employees who contribute materially to the
continued growth, development and future business success of the Company. The Plan, as set forth
herein, is considered to be a Top-Hat Plan as defined in DOL Regulation Section 2520.104-24 for
purposes of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
1.2 Definitions
For purposes of this Plan, unless otherwise clearly apparent from the context, the following
phrases or terms shall have the following indicated meanings:
|
(a) |
|
Base Salary means the annual cash compensation relating to services
performed during any calendar year, excluding distributions from
nonqualified deferred compensation plans, bonuses, commissions,
overtime, fringe benefits, stock options, relocation expenses,
incentive payments, non-monetary awards, director fees and other fees,
and automobile and other allowances paid to a Participant for
employment services rendered (whether or not such allowances are
included in the Participants gross income). Base Salary shall be
calculated before reduction for compensation voluntarily deferred or
contributed by the Participant pursuant to all qualified or
non-qualified plans of the Company and shall be calculated to include
amounts not otherwise included in the Participants gross income under
Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans
established by the Company; provided, however, that all such amounts
will be included in compensation only to the extent that had there
been no such plan, the amount would have been payable in cash to the
Participant. |
|
|
|
|
For purposes of determining a Participants Base Salary for premium purposes pursuant to
Section 2 for any Policy Year, up to and including the Policy Year in which the
Participant Retires, becomes Disabled, or experiences a Termination of Employment, the
Participants Base Salary shall be measured and annualized as of the March 31 preceding
the date on which such Participant Retires, becomes Disabled or experiences a Termination
of Employment. If a Participants Base Salary increases after the Committee has
determined the amount of such |
1
|
|
|
Participants Base Salary for premium purposes for a particular Policy Year, the amount
of the Participants increased Base Salary shall not be considered for purposes of this
Plan until the next Policy Year. For purposes of determining a Participants Base Salary
for premium purposes pursuant to Section 2 after the Policy Year in which the Participant
Retires, becomes Disabled, or experiences a Termination of Employment, the Participants
Base Salary shall be measured and annualized as of the March 31 preceding the date on
which such Participant Retired, became Disabled, or experienced a Termination of
Employment. |
|
|
(b) |
|
Board means the Board of Directors of the Company. |
|
|
(c) |
|
Code means the Internal Revenue Code of 1986, as amended. |
|
|
(d) |
|
Committee means the Hanesbrands Inc. Employee Benefits
Administrative Committee appointed by the Board of Directors of the
Company to administer the Plan, which committee shall be a named
fiduciary of the Plan, as defined in Section 402 of ERISA. |
|
|
(e) |
|
Company means Hanesbrands Inc., a Maryland corporation, and any
successor thereto, including any corporation that is a successor to
all or substantially all of the Companys assets or business. |
|
|
(f) |
|
Disability or Disabled means a determination by the Committee, or
its delegate, in its sole discretion, that a Participant is disabled
in accordance with the terms of the Hanesbrands Inc. Long Term
Disability Plan. Upon request by the Committee, or its delegate, the
Participant must timely submit proof of continued disability. |
|
|
(g) |
|
Employee means a person who is an active full-time employee of the
Company who is in Salary Bands one through five and the Chief
Executive Officer and Chairman of the Board. Individuals classified by
the Company as independent contractors, consultants, leased employees
or similar types of non-employee positions are specifically excluded
from the Plan, even if retroactively classified as an employee by a
court, the Internal Revenue Service or another governmental agency. |
|
|
(h) |
|
Effective Date means January 1, 2006, the effective date of this Plan document. |
|
|
(i) |
|
Insurance Company means the applicable insurance company that has
issued the Policy(ies) providing benefits under the Plan for a
Participant. |
|
|
(j) |
|
Participant means an Employee of the Company who is selected to
participate in the Plan and who has satisfied the conditions for Plan
participation as set forth in Section 2. |
|
|
(k) |
|
Plan means this Hanesbrands Inc. Executive Life Insurance Plan,
effective as of January 1, 2006, as it may be amended from time to
time. |
2
|
(l) |
|
Plan Agreement means a written agreement, as may be amended from
time to time, which is entered into by and between the Company and a
Participant. Each Plan Agreement executed by a Participant and the
Company shall provide for the entire benefit to which such Participant
is entitled under the Plan; should there be more than one Plan
Agreement, the Plan Agreement bearing the latest date of acceptance by
the Company shall supersede all previous Plan Agreements in their
entirety and shall govern such entitlement. The terms of any Plan
Agreement may be different for any Participant, and any Plan Agreement
may provide additional benefits not set forth in the Plan or limit the
benefits otherwise provided under the Plan; provided, however, that
any such additional benefits or benefit limitations must be agreed to
by both the Company and the Participant. |
|
|
(m) |
|
Plan Year means the consecutive twelve (12) month period commencing
on January 1 of each year and ending on the next following December
31. |
|
|
(n) |
|
Policy means the life insurance policy (or life insurance policies
if more than one is required because of death benefit amounts or
otherwise) purchased on a Participants life that is subject to the
terms and conditions of this Plan. |
|
|
(o) |
|
Policy Year means the twelve (12) month period commencing on the
date the Policy is issued by the insurer, and every twelve (12) month
period commencing thereafter. |
|
|
(p) |
|
Projected Premium Payment Period means the number of Policy Years
projected to occur between the Policy issue date and the later of the
Participants (i) Projected Retirement Date, (ii) attainment of age
sixty (60), or (iii) attainment of ten (10) Years of Plan
Participation. For executives age sixty (60) and over as of November
1, 2008, the Projected Premium Payment Period is projected to be 10
years. |
|
|
(q) |
|
Projected Retirement Date means the date on which the Committee
assumes the Participant will retire, solely for purposes of this Plan;
provided, however, the Committee may use its discretion to revise this
assumption as necessary at any time during the Participants
participation in the Plan. |
|
|
(r) |
|
Retirement, Retire(s) or Retired means severance from employment
from the Company for any reason other than a leave of absence, death
or Disability on or after the date on which the Participant is
eligible for a retirement benefit under the Hanesbrands Inc. Pension
Plan, as determined by the Committee in its sole discretion. |
|
|
(s) |
|
Termination of Employment means the severing of employment with the
Company, voluntarily or involuntarily, for any reason other than
Retirement, Disability, death or an authorized leave of absence. A
Participants Termination of Employment will be deemed to occur when
the Participant ceases to be a full-time employee of the Company, even
though the Participant may continue to serve as a director of the
Company, or as a consultant or independent contractor. |
3
|
(t) |
|
Years of Plan Participation means the total number of full Plan
Years a Participant has been a Participant in the Plan prior to his or
her Termination of Employment. Any partial year shall not be counted
for purposes of the Plan. |
4
SECTION 2
Eligibility and Benefits
2.1 Eligibility for Participation
An Employee of the Company shall be eligible to participate in this Plan and become a
Participant in the Plan on the date he or she meets all five of the following requirements:
|
(a) |
|
Has been designated in writing by the Company, in its sole and absolute discretion, as a Participant; |
|
|
(b) |
|
Completes and returns to the Committee, no later than thirty (30) days
after he or she receives written notice of such designation, a Plan
Agreement, and such administrative and other forms as the Committee
may require for participation; |
|
|
(c) |
|
Completes such insurance forms, exams and questions as the Committee
may designate from time to time; |
|
|
(d) |
|
Timely completes any other participation conditions as may be
prescribed by the Committee from time to time; and |
|
|
(e) |
|
Is insurable. |
If an Employee fails to meet all of the above-listed requirements within a reasonable time, as
determined by the Committee in its sole discretion, the Committee shall provide that Employee with
written notice within thirty (30) days of such failure, and that person shall not be eligible to
become a Participant under this Plan.
2.2 Acquisition of Insurance
The Participant agrees to cooperate in applying for and obtaining an insurance policy on his
or her life. The selection of the life insurance policy used for this Plan shall be at the sole
discretion of the Company. The Policy shall be issued in the name of the Participant as the sole
and exclusive owner of the Policy. The Participant shall have the right to name the beneficiary of
the Policy proceeds. At the sole discretion of the Committee, the Participant may designate a
person or entity other than the Participant as the owner of the Policy, provided that such owner
agrees to be bound to the terms and conditions of this Plan. In no event will a death benefit be
payable to a Participant prior to the issuance of a Policy on the Participants life. A reduced
amount of death benefit coverage may be provided to a Participant under any Policy issued on a
rated basis.
2.3 Additional Life Insurance Coverage
During the term of this Plan, the death benefit coverage under the Policy may be increased
from time to time. The Participant agrees to cooperate in applying for and obtaining such
additional coverage. If the Participant does not so cooperate, and such coverage cannot be obtained
because of that, the Company shall have no obligation under this Plan to provide such
5
additional coverage. Further, if the Participant is not insurable on a guaranteed issue basis at
the time such additional coverage is sought, or if coverage is offered on a rated basis that is
higher than standard, nonsmoker, then the Company shall have no obligation under this Plan to
provide such additional coverage. A reduced amount of death benefit coverage may be provided to a
Participant under any Policy issued on a rated basis.
2.4 Companys Payment of Premiums Prior to Retirement, Termination of Employment, Disability or
Death
Subject to subsections 2.1 and 2.2 above, prior to the Participants Retirement, Disability,
Termination of Employment or death, the Company shall pay premiums to the Insurance Company on
behalf of the Participant during each Policy Year. The amount of the premiums due in each Policy
Year shall be determined based on the following assumptions regardless of whether such assumptions
are applicable at the time any premium is paid: (i) premiums shall be made over the Projected
Premium Payment Period, (ii) premiums shall assume current
carrier policy charges for a standard classification (tobacco user or non-tobacco
user, as the case may be)
in effect for that Policy Year, (iii) a death benefit equal to three (3) times Base Salary,
calculated in accordance with subparagraph 1.2(a), shall be provided until the end of the Policy
Year of the Participants Projected Retirement Date, and (iv) after the Projected Retirement Date,
the Policy shall have sufficient cash value (assuming an 8% gross
rate of return and current policy charges) to sustain a death
benefit equal to one (1) times the Participants Base Salary, calculated in accordance with
subparagraph 1.2(a), projected to maintain the death benefit to age 95.
2.5 Companys Payment of Premiums after Retirement
Subject to subsections 2.1 and 2.2 above, after a Participants Retirement, the Company shall
continue to pay premiums to the Insurance Company on behalf of the Participant during each Policy
Year until the later of the end of the Policy Year in which the Participant attains (i) age sixty
(60), or (ii) ten (10) Years of Plan Participation (or such longer period as the Committee deems
appropriate in its sole discretion). The amount of the premiums due in each Policy Year shall be
determined based on the following assumptions regardless of whether such assumptions are applicable
at the time any premium is paid: (i) premiums shall be made over the Projected Premium Payment
Period, (ii) premiums shall assume current carrier policy charges for a
standard classification (tobacco user or non-tobacco
user, as the case may be) in effect for
that Policy Year, (iii) a death benefit equal to one (1) times Base Salary, calculated in
accordance with subparagraph 1.2(a), shall be provided, and (iv) the Policy shall have sufficient
cash value (assuming an 8% gross
rate of return and current policy charges) to sustain a death benefit equal to one (1) times
the Participants Base Salary, calculated in accordance with subparagraph 1.2(a), projected to
maintain the death benefit to age 95.
2.6 Companys Payment of Premiums after Disability
Subject to subsections 2.1 and 2.2 above, if a Participant becomes Disabled, the Company shall
continue to pay premiums to the Insurance Company on behalf of the Participant during each Policy
Year until the later of (i) twenty-four (24) months following the date of such Participants
Disability, (ii) the end of the Policy Year in which the Participant attains age sixty (60), or
(ii) the end of the Policy Year in which the Participant attains ten (10) Years of Plan
Participation (or such longer period as the Committee deems appropriate in its sole discretion).
The amount of the premiums due in each Policy Year shall be determined based on the following
6
assumptions regardless of whether such assumptions are applicable at the time any premium is paid:
(i) premiums shall be made over the Projected Premium Payment Period, (ii) premiums shall assume
current carrier rates for a standard nonsmoker in effect for that Policy Year, (iii) a death
benefit equal to three (3) times Base Salary, calculated in accordance with subparagraph 1.2(a),
shall be provided for a period of twenty-four (24) months following the date of the Participants
Disability, and (iv) after the expiration of twenty-four (24) months following the Participants
Disability, the Policy shall have sufficient cash value (assuming standard nonsmoker rates) to
sustain a death benefit equal to one (1) times the Participants Base Salary, calculated in
accordance with subparagraph 1.2(a), projected to endow at age 95.
2.7 Companys Payment of Premiums During Authorized Absences from Employment
Subject to subsections 2.1 and 2.2 above, the Company shall continue to pay premiums to the
Insurance Company on behalf of the Participant during each Policy Year in which a Participant is
authorized by the Company to take (i) a paid or unpaid leave of absence from the employment of the
Company, or (ii) an authorized leave of absence from the employment of the Company pursuant to the
Family and Medical Leave Act. The amount of the premiums due in each Policy Year shall be
determined based on the following assumptions regardless of whether such assumptions are applicable
at the time any premium is paid: (i) premiums shall be made over the Projected Premium Payment
Period, (ii) premiums shall assume current carrier rates for a standard nonsmoker in effect for
that Policy Year, (iii) a death benefit equal to three (3) times Base Salary, calculated in
accordance with subparagraph 1.2(a), shall be provided until the end of the Policy Year of the
Participants Projected Retirement Date, and (iv) after the Projected Retirement Date, the Policy
shall have sufficient cash value (assuming standard nonsmoker) to sustain a death benefit equal to
one (1) times the Participants Base Salary, calculated in accordance with subparagraph 1.2(a),
projected to endow at age 95.
2.8 Cessation of Premium Payments
Notwithstanding the provisions of subsections 2.1, 2.2, 2.3, or 2.4 to the contrary, the
Companys payment of premiums to the Insurance Company for the benefit of any Participant shall
cease at the end of the Policy Year in which the earliest of the following occurs: (i) the
Participant borrows or withdraws all or any portion of the
Policys cash value attributable to the Companys premium
payments during the Participantss employment; (ii) the
Participants employment ends for any reason other than Disability or Retirement; (iii) the
Participant commences part-time employment; (iv) the Participant no longer meets the Plans
eligibility requirements; or (iv) the Company terminates the Plan.
2.9 Optional Premium Payments by Participants
If the Company ceases to pay premiums on a Policy for the benefit of any Participant in
accordance with subsection 3.5 of this Plan, such Participant may (i) continue to pay the premiums
on the Policy directly to the Insurance Company, if permitted by such Insurance Company, or (ii)
surrender the Policy.
7
2.10 Loss of Benefits
Notwithstanding any other provision of this Plan to the contrary, no benefits shall be payable
from any Policy covered by this Plan (i) if the Participant commits suicide within two (2) years
from the date on which a Policy is issued, (ii) the Participants death is determined to be from a
bodily or mental cause or causes, the information about which was withheld, knowingly concealed, or
falsely provided by the Participant at the time such Policy was issued, or (iii) if the terms of
the Policy are violated in any manner by the Participant.
2.11 Tax Withholding
Each premium payment paid by the Company shall be treated as a bonus payment to the
Participant and will be taxable to the Participant in the year in which such premium payment is
made. The Company shall withhold from the Participants compensation all federal, state and local
income, employment and other taxes required to be withheld by the Company in connection with the
premium payments, in amounts and in a manner to be determined in the sole discretion of the
Company.
8
SECTION 3
Administration
3.1 Administration
This Plan shall be administered by the Committee. The Committee shall have the full
discretionary authority to construe and interpret all of the provisions of this Plan, including
making factual determinations thereunder, to adopt procedures and practices concerning the
administration of this Plan, and to make any determinations necessary hereunder, which shall,
subject to Section 4 below, be binding and conclusive on all parties. The Committee may appoint one
or more individuals and delegate such of its power and duties as it deems desirable to any such
individual, in which case every reference herein made to the Committee shall be deemed to mean or
include the individuals as to matters within their jurisdiction. Notwithstanding the foregoing, the
Insurance Company insuring benefits under the applicable underlying insurance Policy(ies) shall
have the full discretionary authority to interpret the terms and provisions of such insurance
Policy(ies).
3.2 Decisions and Actions of the Committee
The Committee may act at a meeting or in writing without a meeting. All decisions and actions
of the Committee shall be made by vote of the majority, including actions in writing taken without
a meeting.
3.3 Rules and Records of the Committee
The Committee may make such rules and regulations in connection with its administration of
this Plan as are consistent with the terms and provisions hereof. The Committee shall keep a record
of each Participants name, address, social security number, benefit commencement date, and the
amount of benefit.
3.4 Employment of Agents
The Committee may employ agents, including without limitation, accountants, actuaries,
consultants, or attorneys, to exercise and perform the powers and duties of the Committee as the
Committee delegates to them, and to render such services to the Committee as the Committee may
determine, and the Committee may enter into agreements setting forth the terms and conditions of
such service.
3.5 Plan Expenses
The Company shall pay all expenses reasonably incurred in the administration of this Plan. The
members of the Committee shall serve without compensation for their services as such, but all
expenses of the Committee shall be paid by the Company. No employee of the Company shall receive
compensation from this Plan regardless of the nature of his or her services to this Plan.
9
3.6 Indemnification
To the extent permitted by law, the Committee, and all agents and representatives of the
Committee, shall be indemnified by the Company and saved harmless against any claims, and the
expenses of defending against such claims, resulting from any action or conduct relating to the
administration of this Plan except claims arising from gross negligence, willful neglect, or
willful misconduct.
10
SECTION 4
Claims Procedures
4.1 Presentation of Claim
Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary
being referred to below as a Claimant) may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant from the Plan. If such a
claim relates to the contents of a notice received by the Claimant, the claim must be made within
sixty (60) days after such notice was received by the Claimant. All other claims must be made
within (180) days of the date on which the event that caused the claim to arise occurred. The claim
must state with particularity the determination desired by the Claimant.
4.2 Notification of Decision
The Committee shall consider a Claimants claim within a reasonable time, but no later than
ninety (90) days after receiving the claim. If the Committee determines that special circumstances
require an extension of time for processing the claim, written notice of the extension shall be
furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no
event shall such extension exceed a period of ninety (90) days from the end of the initial period.
The extension notice shall indicate the special circumstances requiring an extension of time and
the date by which the Committee expects to render the benefit determination. The Committee shall
notify the Claimant in writing:
|
(a) |
|
that the Claimants requested determination has been made, and that
the claim has been allowed in full; or that the Committee has reached
a conclusion contrary, in whole or in part, to the Claimants
requested determination, and such notice must set forth in a manner
calculated to be understood by the Claimant: |
|
|
(b) |
|
the specific reason(s) for the denial of the claim, or any part of it; |
|
|
(c) |
|
specific reference(s) to pertinent provisions of the Plan upon which such denial was based; |
|
(i) |
|
a description of any additional material or information necessary for
the Claimant to perfect the claim, and an explanation of why such
material or information is necessary; |
|
|
(ii) |
|
an explanation of the claim review procedure; and |
|
|
(iii) |
|
a statement of the Claimants right to bring a civil action under
ERISA Section 502(a) following an adverse benefit determination on
review. |
11
4.3 Review of a Denied Claim
On or before sixty (60) days after receiving a notice from the Committee that a claim has been
denied, in whole or in part, a Claimant (or the Claimants duly authorized representative) may file
with the Committee a written request for a review of the denial of the claim. The Claimant (or the
Claimants duly authorized representative):
|
(a) |
|
may, upon request and free of charge, have reasonable access to, and
copies of, all documents, records and other information relevant to
the claim for benefits; |
|
|
(b) |
|
may submit written comments or other documents; and/or |
|
|
(c) |
|
may request a hearing, which the Committee , in its sole discretion, may grant. |
4.4 Decision on Review
The Committee shall render its decision on review promptly, and no later than sixty (60) days
after the Committee receives the Claimants written request for a review of the denial of the
claim. If the Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to the Claimant prior to
the termination of the initial sixty (60) day period. In no event shall such extension exceed a
period of sixty (60) days from the end of the initial period. The extension notice shall indicate
the special circumstances requiring an extension of time and the date by which the Committee
expects to render the benefit determination. In rendering its decision, the Committee shall take
into account all comments, documents, records and other information submitted by the Claimant
relating to the claim, without regard to whether such information was submitted or considered in
the initial benefit determination. The decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:
|
(a) |
|
specific reasons for the decision; |
|
|
(b) |
|
specific reference(s) to the pertinent Plan provisions upon which the decision was based; |
|
|
(c) |
|
a statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of, all documents,
records and other information relevant (as defined in applicable ERISA
regulations) to the Claimants claim for benefits; and |
|
|
(d) |
|
a statement of the Claimants right to bring a civil action under ERISA Section 502(a). |
Benefits shall be paid under the Plan only if the Committee in its discretion determines that the
Claimant is entitled to them.
4.5 Legal Action
A Claimants compliance with the foregoing provisions of this Section 5 is a mandatory
prerequisite to a Claimants right to commence any legal action with respect to any claim for
benefits under this Plan. Any further legal action taken by a Participant against the Plan, the
Company (and its employees or directors), or the Committee must be filed in a court of law no later
than ninety (90) days after the Committees final decision on review of an appealed claim.
12
4.6 Disability Determinations
Notwithstanding the foregoing provisions of this Section 4 to the contrary, a Participants
claim for Disability benefits under this Plan must be made in accordance with the terms and
provisions of the Hanesbrands Inc. Long Term Disability Plan.
13
SECTION 5
Miscellaneous
5.1 Binding Effect
This Plan shall bind the Participant and the Company and their beneficiaries, survivors,
executors, administrators and transferees.
5.2 No Guarantee of Employment
This Plan is not an employment policy or contract. It does not give the Participant the right
to remain an employee of the Company, nor does it interfere with the Companys right to discharge
the Participant. It also does not require the Participant to remain an employee nor interfere with
the Participants right to terminate employment at any time.
5.3 Applicable Law
The Agreement and all rights hereunder shall be governed by the internal laws of the State of
North Carolina without regard to its conflict of laws provisions, except to the extent preempted by
the laws of the United States of America.
5.4 Non-Transferability
Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or
encumbered in any manner.
5.5 Named Fiduciary
The Committee shall be the named fiduciary and plan administrator under this Agreement. The
named fiduciary may delegate to others certain aspects of the management and operation
responsibilities of the Plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals. The Committee has delegated to the Insurance Company the
discretionary authority to determine claims for benefits and appeal of denied claims under the
terms of the applicable Policy.
5.6 Gender and Number
Where the context admits, words in the masculine gender include the feminine gender, the
singular includes the plural, and vice versa.
5.7 Non-Assignability and Facility of Payment
Benefits under the Plan are not in any way subject to the debts or other obligations of the
persons entitled thereto and may not be voluntarily or involuntarily sold, transferred or assigned.
When any person entitled to benefits under the Plan is under a legal disability or in the
Committees opinion is in any way incapacitated so as to be unable to manage his affairs, the
Committee may cause such persons benefits to be paid to or for the benefit of such person in any
manner that the Committee may determine.
14
5.8 Mistake of Fact
Any mistake of fact or misstatement of fact shall be corrected when it becomes known and
proper adjustment made by reason thereof.
5.9 Information to be Furnished by Covered Employees
Covered Employees under the Plan must furnish the Committee with such evidence, data or
information as the Committee considers necessary or desirable to administer the Plan. A fraudulent
misstatement or omission of fact made by a Covered Employee in an enrollment form, evidence of
insurability form, or in a claim for benefits (inclusive of all documents filed in support of the
claim) may be used to cancel coverage and/or to deny claims for benefits.
5.10 Company and Committee Decision Final
The Company, the Committee and any entity or organization to which the Company delegates
authority pursuant to the terms of the Plan, shall have the discretionary authority to construe and
interpret the Plan and make factual determinations thereunder, including the authority to determine
eligibility of employees and the amount of benefits payable under the Plan, and to decide claims
under the terms of the Plan. Subject to applicable law, any interpretation of the provisions of the
Plan and any decisions on any matter within the discretion of the Company, Committee or other
applicable entity made in good faith shall be binding on all persons. A misstatement or other
mistake of fact shall be corrected when it becomes known, and the Company, Committee or other
applicable entity shall make such adjustment on account thereof as it considers equitable and
practicable. The Company, Committee or other applicable entity shall not be liable in any manner
for any determination of fact made in good faith. Benefits will be paid under the Plan only if the
Committee or its delegate determines in its discretion that the applicant is entitled to them.
5.11 Action by Company or Employer
Any action required or permitted to be taken by the Company or an Employer under the Plan
shall be by resolution of its Board of Directors or by an officer or officers as may be authorized
to act for the Board with respect to the Plan.
5.12 Waiver of Notice
Any notice required under the Plan may be waived by the person entitled to such notice.
5.13 Recovery of Benefits
In the event a Covered Employee receives a benefit payment under the Plan which is in excess
of the benefit payment which should have been made, the Committee shall have the right to recover
the amount of such overpayment from such Covered Employee or his or her Estate.
15
The Committee may, however, at its option, deduct the amount of such excess from any subsequent
Benefits payable to, or for, the Covered Employee.
5.14 Additional Employers
Any Subsidiary of the Company may adopt the Plan by:
|
(a) |
|
Filing with the Company a written instrument to that effect, and |
|
|
(b) |
|
Filing with the Committee a statement consenting to such action signed
by the President or any Vice President of the Company on its behalf. |
5.15 Uniform Rules
The Committee shall administer the Plan on a reasonable and nondiscriminatory basis and shall
apply uniform rules to all persons similarly situated.
5.16 Evidence
Evidence required of anyone under the Plan may be by certificate, affidavit, document or other
information which the person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
16
SECTION 6
Amendment and Termination
6.1 Amendment
The Plan may be amended by the Company at any time and from time to time, except that any
benefits which had become payable under the Plan prior to the date an amendment is effected shall
be determined in accordance with the terms of the Plan as in effect immediately prior to the date
of the amendment.
6.2 Termination
The Plan, as applied to all Employers, may be terminated at any time by action of the then
Employers hereunder, and the Plan as applied to any single Employer may be terminated at any time
by such Employer, subject only to the same limitations with respect to the effect of any such
termination as are set forth in subsection 6.1 with respect to amendments of the Plan.
6.3 Mergers and Acquisitions
Notwithstanding any Plan provision to the contrary, in the case of any merger or consolidation
with, or acquisition of another business by the Company (whether a division or Subsidiary), the
provisions of the Plan, as applicable to employees of such business (e.g., eligibility, enrollment,
evidence of good health, etc.) will be as specified in the Purchase Agreement between the Company
and such other business, and if not so specified, shall apply as if such business was a new
participating Employer hereunder and such employees were newly hired employees of such Employer. If
the Purchase Agreement provides that the Company will credit the employees of such business with
service, then, in the Companys discretion, such employees will not be treated as newly hired
employees of such Employer for purposes of eligibility, enrollment, evidence of good health, etc.
17
EX-10.11
Exhibit
10.11
HANESBRANDS INC.
EXECUTIVE LONG TERM DISABILITY PLAN
(Conformed
through October 31, 2008)
TABLE OF CONTENTS
|
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|
PAGE |
SECTION 1 |
|
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1 |
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Introduction and Definitions |
|
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1 |
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1.1 Introduction |
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1 |
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1.2 Definitions |
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1 |
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SECTION 2 |
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4 |
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Eligibility and Benefits |
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4 |
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2.1 Eligibility to Participate |
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4 |
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2.2 Effective Date of Participation |
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4 |
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2.3 Termination of Participation |
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4 |
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2.4 Payment of Benefits |
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4 |
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2.5 Successive Periods of Disability |
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5 |
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2.6 Total Disability |
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5 |
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2.7 Entitlement to Benefits |
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6 |
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2.8 Disability for Which Benefits Are Not Payable |
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7 |
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2.9 Amount of Monthly Benefits |
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8 |
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2.10 Minimum Amount of Monthly Benefits |
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9 |
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2.11 Amount of Benefits for a Part of a Month |
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9 |
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2.12 Compensation |
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9 |
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2.13 Monthly Benefits for Periods of Disability Commencing Before the Effective Date |
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9 |
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2.14 Source of Benefits |
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9 |
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SECTION 3 |
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10 |
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Administration |
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10 |
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3.1 Administration |
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10 |
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3.2 Decisions and Actions of the Committee |
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10 |
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3.3 Rules and Records of the Committee |
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10 |
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3.4 Employment of Agents |
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10 |
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3.5 Plan Expenses |
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10 |
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3.6 Indemnification |
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11 |
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SECTION 4 |
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12 |
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Claims Procedures |
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12 |
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4.1 Presentation of Claim |
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12 |
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4.2 Notification of Decision |
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12 |
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4.3 Review of a Denied Claim |
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13 |
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4.4 Decision on Review |
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13 |
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4.5 Legal Action |
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14 |
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-i-
TABLE OF CONTENTS
(continued)
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PAGE |
SECTION 5 |
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15 |
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Miscellaneous |
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15 |
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5.1 Gender and Number |
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15 |
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5.2 Non-Assignability and Facility of Payment |
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15 |
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5.3 Mistake of Fact |
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15 |
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5.4 Applicable Law |
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15 |
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5.5 No Guarantee of Employment |
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15 |
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5.6 Information to be Furnished by Covered Employees |
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15 |
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5.7 Company and Committee Decision Final |
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15 |
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5.8 Action by Company or Employer |
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16 |
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5.9 Waiver of Notice |
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16 |
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5.10 Recovery of Benefits |
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16 |
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5.11 Additional Employers |
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16 |
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5.12 Uniform Rules |
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16 |
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5.13 Evidence |
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17 |
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5.14 Investigation of Claims |
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17 |
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SECTION 6 |
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18 |
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Amendment and Termination |
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18 |
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6.1 Amendment |
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18 |
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6.2 Termination |
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18 |
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6.3 Mergers and Acquisitions |
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18 |
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-ii-
HANESBRANDS INC.
EXECUTIVE LONG TERM DISABILITY PLAN
(Effective as of January 1, 2006)
SECTION 1
Introduction and Definitions
1.1 Introduction
Hanesbrands Inc. (the Company) established the Hanesbrands Inc. Executive Long Term
Disability Plan (the Plan) in order to provide long term disability benefits for persons employed
by its divisions and Subsidiaries as eligible Executives. The Hanesbrands Inc. Executive Long Term
Disability Plan, as set forth herein, is established effective as of January 1, 2006. It is the
intent of the Company that the Plan, as set forth herein, constitute a Top-Hat Plan as defined in
DOL Regulation Section 2520.104-24 for purposes of the Employee Retirement Income Security Act of
1974, as amended (ERISA).
1.2 Definitions
As used in the Plan or in any supplement or schedule hereto, the following terms shall have
the following meanings:
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(a) |
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Benefit or Benefits means the disability benefit or benefits for
Executives of the Employers under this Plan. |
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(b) |
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Committee means the Hanesbrands Inc. Employee Benefits
Administrative Committee appointed by the Board of Directors of the
Company, to administer the Plan, which committee shall be a named
fiduciary of the Plan as defined in Section 402 of ERISA. |
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(c) |
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Company means Hanesbrands Inc., a Maryland corporation and any
successor thereto, including any corporation that is a successor to
all or substantially all of the Companys assets or business. |
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(d) |
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Conclusive Medical Evidence means a specific diagnosis made by a
Physician and supported by objective medical documentation. |
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(e) |
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Covered Employee means an Executive who is participating in the Plan
in accordance with subsection 2.2 and whose participation has not
terminated in accordance with subsection 2.3. For purposes of the
Plan, a Covered Employee is considered an employee only if
specifically treated or classified as an employee for purposes of
withholding federal employment and income taxes. If classified by an
Employer as an independent contractor, consultant, leased employee or
similar position, an individual is specifically excluded from Plan
participation, even if a court, the Internal Revenue Service, or any
other third party finds that an individual should be treated as a
common-law employee of an Employer. |
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(f) |
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Disability Accommodation means the Employers reasonable
accommodation of the Covered Employees Total Disability to assist the
Covered Employee to return to active employment with the Covered
Employer in either the Covered Employees prior position or a position
in the Covered Employees regular occupation. |
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(g) |
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Effective Date means January 1, 2006, the effective date of this Plan document. |
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(h) |
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Elimination Period means a continuous period of 180 days commencing
with the day following an employees last day of active employment or
work prior to commencement of an absence on account of disability
during which the employee is continuously Totally Disabled, as defined
in subsection 2.6. Successive periods of absence on account of
disability due to the same or related cause or causes shall be
considered a single period of absence unless separated by a return to
active employment or work with the Employer of at least thirty (30)
consecutive work days. For purposes of this thirty (30) consecutive
work days provision, a Covered Employee shall be considered to have
worked one work day if the Covered Employee performs any duties for
the Employer during any portion of a work day. |
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(i) |
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Employer means the Company, its divisions and any Subsidiary of the
Company designated a Covered Employer under the Plan, which Employer
adopts the Plan, as provided in the Plan or as set forth in a Schedule
to the Plan. |
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(j) |
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Executive means an employee in Salary Bands one (1) through five (5)
and the Chief Executive Officer and Chairman of the Board. |
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(k) |
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Physician or Doctor means a person legally licensed to practice
medicine, psychiatry, psychology or psychotherapy, who is neither a
Covered Employee nor a member of a Covered Employees immediate
family. A licensed medical practitioner is a doctor as applicable
state law requires that such practitioner be recognized for purposes
of certification of disability, and the treatment provided by the
practitioner is within the scope of his or her license. |
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(l) |
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Plan means the Hanesbrands Inc. Executive Long Term Disability Plan,
effective as of January 1, 2006, including any supplements or
schedules thereto. |
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(m) |
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Plan Year means the consecutive twelve-month period commencing each
January 1 and ending on the next following December 31. |
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(n) |
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Subsidiary or Subsidiaries means any corporation more than fifty
percent of the voting stock of which is owned, directly or indirectly,
by the Company. |
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(o) |
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Vocational Rehabilitation Services means such services as the
Committee determines in its discretion will assist the Covered
Employee in returning to an occupation for wage or profit that he or
she is reasonably qualified to do by education, training or experience
or that he or she may become reasonably qualified to do by education,
training or experience. Vocational Rehabilitation Services may include
job modification, job retraining, and job placement services. |
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SECTION 2
Eligibility and Benefits
2.1 Eligibility to Participate
Each Executive in the employ of an Employer shall, subject to the terms and conditions of the
Plan, be eligible to participate in this Plan on the later of the Effective Date or as of the first
day of active service as an Executive with his or her Employer. Part time, seasonal, and temporary
employees are not eligible to participate in the Plan.
2.2 Effective Date of Participation
Each Executive may elect to participate in, and become a Covered Employee under, the Plan by
signing an application form provided by his or her Employer, and the effective date of his or her
participation will be the date on which he or she first becomes eligible to participate.
2.3 Termination of Participation
A Covered Employee will cease to be a Covered Employee on the earliest of the following dates:
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(a) |
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The date he or she ceases to be employed by an Employer as an Executive. |
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(b) |
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The date of his or her retirement from his or her employment with all
Employers, or the last day worked, whichever is later. |
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(c) |
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The date of his or her termination of employment with all Employers,
or the last day worked, whichever is later. |
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(d) |
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The date he or she is no longer actively at work due to an unpaid
leave of absence. Notwithstanding the foregoing, an unpaid leave
qualifying as a leave under the Family and Medical Leave Act of 1993
(FMLA) or the Uniformed Services Employment and Reemployment Rights
Act of 1994, as amended (USERRA) shall be administered in accordance
with the benefits requirements of the FMLA and USERRA and the
regulations thereunder. |
2.4 Payment of Benefits
Subject to subsection 2.8, upon receipt by the Committee of due proof and Conclusive Medical
Evidence, in accordance with subsection 2.7, that a Covered Employee has become Totally Disabled,
as defined in subsection 2.6, as a result of sickness or bodily injury, benefits will be payable in
the amount determined in accordance with subsection 2.9. Such payment will commence with the first
day following the expiration of the Elimination Period. Benefits will be payable for the period
during which Total Disability continues following the Elimination Period and during which the
Covered Employee is under the continuous care of a Physician and during which a defined treatment
plan specifically appropriate for the disability is in progress. Benefits
-4-
shall terminate with the payment for the month, or part of the month, in which occurs the earlier
of (i) the date the Covered Employee ceases to be Totally Disabled, as defined in subsection 2.6;
or (ii) the applicable date described in (a) or (b) next below:
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(a) |
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if such disability first occurs at or before the Covered Employees
attainment of age sixty (60) years, the date he or she attains age
sixty-five (65) years; or |
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(b) |
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if such disability first occurs after the Covered Employees
attainment of age sixty (60) years, upon the fifth anniversary of the
date he or she first qualified for monthly disability benefits. |
If a Covered Employee fails or refuses to submit to a medical examination requested by the
Committee, his or her Benefit payments shall be suspended, and payment of Benefits shall resume
only when the Covered Employee submits to such medical examination and then only if such medical
examination results in a finding of Conclusive Medical Evidence and satisfactory to the Committee
that the Covered Employee continues to be Totally Disabled, as defined in subsection 2.6. Benefits
may be denied, suspended or withheld if Plan assets are not sufficient.
2.5 Successive Periods of Disability
After completion of a Covered Employees Elimination Period, successive periods of disability
resulting from the same or related cause or causes will be considered a single period of disability
unless the periods of disability are separated by his or her return to the active service of his or
her Employer for a period of at least six (6) consecutive months.
2.6 Total Disability
During
the Elimination Period and thereafter, a Covered Employee shall be deemed Totally
Disabled if, due to sickness or bodily injury, he or she is unable to perform each and all of the
material duties pertaining to his or her occupation, and is not engaged in any occupation or
employment for wage or profit for which he or she is reasonably qualified by education, training or
experience. This means the Covered Employee cannot perform any of the material duties of his or her
position or a similar position available to him or her with the Covered Employer. The term
material duty means a duty or responsibility that is
designated as a key job element,
essential function, specific responsibility
or major responsibility in a job or position
description applicable to the Covered Employees job or similar job of the Covered Employee.
-5-
2.7 Entitlement to Benefits
Entitlement to Benefits under the Plan is subject to the following:
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(a) |
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A Covered Employee must support his initial entitlement to Benefits by
submitting, on a form provided by the Committee, written proof of
claim (including conclusive medical evidence) covering the occurrence,
character and extent of disability, which proof of claim must be filed
with the Committee not later than one year measured from the last day
the Covered Employee worked for the Employer prior to incurring the
alleged disability. Thereafter, as requested by the Committee from
time to time, the Covered Employee may be required to submit
Conclusive Medical Evidence of the continuance of his or her
disability. As a condition to a Covered Employees entitlement to
disability benefits, the Committee shall have the right to direct such
employee to submit, from time to time, to an independent medical
examination by a Physician designated by the Committee. |
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(b) |
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A Covered Employee must be under the continuous care of a Physician
who with respect to the Covered Employees disability is practicing
within the scope of his or her license, and must be under a defined
course of treatment appropriate for the Covered Employees disability.
If a Covered Employees disability is a mental or nervous disorder,
his or her treatment must include care by a board certified, licensed
Physician who specializes in psychiatric medicine. |
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(c) |
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No later than the expiration of a continuous period of ninety (90)
days during which a Covered Employee is disabled, the employee must
apply for initial disability benefits under the Social Security Act.
He or she must appeal initial and reconsideration level denials of
such Social Security benefits within the 60-day appeal period, and he
or she must supply the Committee with proof of application for, and
any denial of, disability benefits under the Social Security Act and
of any such appeal or award letters. As a pre-condition to receiving
benefits under the Plan, the Covered Employee must execute a
reimbursement agreement in which the Covered Employee agrees in
writing to reimburse his or her Employer an amount equal to any
overpayment of Benefits under the Plan due to a retroactive award of
Federal Social Security benefits (Disability or Retirement). Any such
overpayment shall be reimbursed to the Employer by the participant in
a lump sum within thirty (30) days of the date the Covered Employee is
notified in writing of the amount of such overpayment. If a Covered
Employee fails to reimburse the Employer in a lump sum as required
above, the Committee, in its |
-6-
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sole discretion, may cause his or her disability benefits to be reduced or eliminated
until the amount of such overpayment has been recovered by the Employer. |
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(d) |
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A Covered Employee must accept a Disability Accommodation, if applicable. |
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(e) |
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A Covered Employee must participate in Vocational Rehabilitation Services, if applicable. |
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(f) |
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A Covered Employee must accept an offer of employment related to
Vocational Rehabilitation Services, if applicable. |
All proof submitted pursuant to this subsection must be acceptable to the Committee, which shall
have sole discretion in determining the acceptability of such proof. In the event any Covered
Employee fails to submit due and acceptable proof when so requested or fails or refuses to submit
to an independent medical examination when so requested hereunder, the Committee may automatically
withhold or suspend payment of his or her Benefits in accordance with subsection 2.4.
Notwithstanding the foregoing, if it is shown to the Committees satisfaction that furnishing proof
required by this subsection was not reasonably possible within any time limits prescribed by the
Committee and if due and acceptable proof is furnished as soon as reasonably possible, but in no
event later than one year from the time such proof is otherwise required, any payment of Benefits
which has been withheld or denied shall be made as soon as practicable after such proof has been
supplied.
2.8 Disability for Which Benefits Are Not Payable
Benefits will not be payable for any disability resulting from war, insurrection, rebellion,
participation in a riot, intentionally self-inflicted injuries or commission of a felony by the
employee, or, if the disability application form, together with Conclusive Medical Evidence
supporting a finding of Total Disability, is submitted later than one year measured from the last
day the Covered Employee worked for the Employer prior to incurring the alleged disability. If the
disability application form is filed within the one year period described above, but the
application is materially incomplete or the Covered Employees status as Totally Disabled cannot be
verified because the Covered Employee fails to undergo or complete one or more independent medical
examinations, as are prescribed by the Committee, or the Covered Employee (or the Covered
Employees Physician on behalf of the Covered Employee) fails to furnish all medical evidence and
records as are requested by the Committee, then the disability application form with Conclusive
Medical Evidence shall be considered to have not been timely filed within the one year period
described above. Timely submission of the disability application form and proof of claim (including
Conclusive Medical Evidence) under this Plan is a condition of receiving benefits under this Plan.
Accordingly, in no event shall disability benefits be payable or paid with respect to or on behalf
of a Covered Employee (or legal representative who initiates or completes a disability application
form and supporting documents) under this Plan after the end of the one year period measured from
the last day the Executive worked for the Employer prior to incurring the alleged disability.
-7-
2.9 Amount of Monthly Benefits
Except as provided in subsections 2.10 and 2.11 below and subject to the succeeding provisions
of this subsection, the monthly amount of Benefit payable to a Covered Employee who becomes Totally
Disabled due to a sickness or bodily injury which first occurs on or after the Effective Date shall
be an amount (not to exceed $41,667) equal to 75% of his or her Monthly Compensation (as defined in
subsection 2.12) immediately prior to the occurrence of his or her Total Disability (up to a
maximum annual salary of $500,000) plus, if a Short Term (Annual) Incentive bonus has been paid,
50% of the Covered Employees three-year average Short Term (Annual) Incentive Plan bonus (up to an
average bonus of $250,000) for three (3) years immediately preceding the onset of Total Disability.
If the Covered Employee has not received three (3) years of Short Term (Annual) Incentive Plan
bonuses to average, the Plan will average the bonus payments received as of the onset of Total
Disability. The monthly amount determined above shall be subtracted by any of the following amounts
paid or payable for the same month:
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(a) |
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Amounts initially awarded as a monthly primary and dependent
benefit(s) under the Federal Social Security Act (Disability or
Retirement). Future increases awarded by Social Security will not be
offset from the monthly benefit. |
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(b) |
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Amounts paid or payable under any workers compensation, occupational
disease or similar law (other than lump sum payments or awards made
under any such law for loss or partial loss, or loss or partial loss
of use of, a bodily member). |
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(c) |
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Amounts paid or payable under any state compulsory disability benefit law. |
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(d) |
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Amounts paid or payable under any other plan of the Employer,
providing benefits for disability or retirement (other than amounts
paid or payable from any other defined contribution plan maintained by
an Employer). |
In the event any amount described in subparagraph (b) or (d) above which is otherwise payable to a
Covered Employee in monthly, weekly or other periodic payments is paid to him or her in a lump sum,
such lump sum payment shall be applied in reduction of the monthly Benefits otherwise payable under
the Plan by reducing such benefits (i) in the case of payments described in subparagraph (b) above,
by the amount of such payment the Covered Employee would have received during each month had
payment not been made in a lump sum until an amount equal to such lump sum has been applied; and
(ii) in case of payments described in subparagraph (d) above, by the amount of the monthly or other
periodic payment which would otherwise have been made. If after the Elimination Period
a Covered Employee engages in other employment
while unable to fully perform the duties of his or her occupation for his or her Employer as a
result of sickness or injury, the monthly amount of Benefit to which he or she is entitled under
the Plan for any month while so engaged shall be reduced by 66-2/3% of the monthly compensation or
income the Covered Employee receives from such other employment during such month. For this
purpose, the term other employment means any employment engaged in by such employee whether
part-time or full-time, or as an employee, independent contractor or a self-employed person.
-8-
2.10 Minimum Amount of Monthly Benefits
Notwithstanding the provisions of subsection 2.9 to the contrary, the amount of monthly
Benefits payable to a Covered Employee on account of a disability due to sickness or bodily injury
which first occurs on or after the Effective Date shall not be less than $50.00 a month.
2.11 Amount of Benefits for a Part of a Month
If monthly Benefits are payable for any period of time which is less than a full month, the
amount of monthly Benefits for such period will be proportionately reduced.
2.12 Compensation
For purposes of this Plan, Monthly Compensation shall mean the monthly amount of basic
salary (exclusive of commissions and bonuses, distributions from nonqualified deferred compensation
plans, overtime, fringe benefits, stock options, relocation expenses, incentive payments,
non-monetary awards, directors and other fees, and automobile and other allowances) the Covered
Employee was receiving from the Employer as of his or her last day of active employment prior to
his or her absence due to Total Disability. The Plan considers Monthly Compensation up to a maximum
annual base salary of $500,000.
2.13 Monthly Benefits for Periods of Disability Commencing Before the Effective Date
The amount of monthly benefit payable to a disabled employee whose period of disability first
commenced before the Effective Date shall be determined in accordance with the then applicable
provisions of the Plan.
2.14 Source of Benefits
No contributions shall be required or permitted by Covered Employees under this Plan. Any
benefits which become payable under the Plan shall be paid from the general assets of the
Employers, and neither a Covered Employee nor any other person shall by reason of the establishment
of the Plan acquire any right in or title to any assets, funds, or property of the Employers.
-9-
SECTION 3
Administration
3.1 Administration
This Plan shall be administered by the Committee. The Committee shall have the full
discretionary authority to construe and interpret all of the provisions of this Plan, including
making factual determinations thereunder, to adopt procedures and practices concerning the
administration of this Plan, and to make any determinations necessary hereunder, which shall,
subject to Section 4 below, be binding and conclusive on all parties. The Committee may appoint one
or more individuals and delegate such of its power and duties as it deems desirable to any such
individual, in which case every reference herein made to the Committee shall be deemed to mean or
include the individuals as to matters within their jurisdiction.
3.2 Decisions and Actions of the Committee
The Committee may act at a meeting or in writing without a meeting. All decisions and actions
of the Committee shall be made by vote of the majority, including actions in writing taken without
a meeting.
3.3 Rules and Records of the Committee
The Committee may make such rules and regulations in connection with its administration of
this Plan as are consistent with the terms and provisions hereof. The Committee shall keep a record
of each Participants name, address, social security number, benefit commencement date, and the
amount of benefit.
3.4 Employment of Agents
The Committee may employ agents, including without limitation, accountants, actuaries,
consultants, or attorneys, to exercise and perform the powers and duties of the Committee as the
Committee delegates to them, and to render such services to the Committee as the Committee may
determine, and the Committee may enter into agreements setting forth the terms and conditions of
such service.
3.5 Plan Expenses
The Company shall pay all expenses reasonably incurred in the administration of this Plan. The
members of the Committee shall serve without compensation for their services as such, but all
expenses of the Committee shall be paid by the Company. No employee of the Company shall receive
compensation from this Plan regardless of the nature of his or her services to this Plan.
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3.6 Indemnification
To the extent permitted by law, the Committee, and all agents and representatives of the
Committee, shall be indemnified by the Company and saved harmless against any claims, and the
expenses of defending against such claims, resulting from any action or conduct relating to the
administration of this Plan except claims arising from gross negligence, willful neglect, or
willful misconduct.
-11-
SECTION 4
Claims Procedures
4.1 Presentation of Claim
Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary
being referred to below as a Claimant) may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant from the Plan. If such a
claim relates to the contents of a notice received by the Claimant, the claim must be made within
sixty (60) days after such notice was received by the Claimant. All other claims must be made
within (180) days of the date on which the event that caused the claim to arise occurred. The claim
must state with particularity the determination desired by the Claimant.
4.2 Notification of Decision
The Committee shall consider a Claimants claim within a reasonable time, but no later than
forty-five (45) days after receiving the claim. If the Committee determines that special
circumstances require an extension of time for processing the claim, written notice of the
extension shall be furnished to the Claimant prior to the termination of the initial forty-five
(45) day period. In no event shall such extension exceed a period of thirty (30) days from the end
of the initial period. The extension notice shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render the benefit determination.
If the Claims Administrator determines that an additional extension is needed, the Claims
Administrator shall notify the claimant in writing within the first 30-day extension period. If an
extension is necessary because additional information is needed from the claimant, the notice of
extension shall also specifically describe the missing information, and the claimant shall have at
least forty-five (45) days from receipt of the notice within which to provide the requested
information. The Committee shall notify the Claimant in writing:
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(a) |
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that the Claimants requested determination has been made, and that
the claim has been allowed in full; or that the Committee has reached
a conclusion contrary, in whole or in part, to the Claimants
requested determination, and such notice must set forth in a manner
calculated to be understood by the Claimant: |
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(b) |
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the specific reason(s) for the denial of the claim, or any part of it; |
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(c) |
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specific reference(s) to pertinent provisions of the Plan upon which such denial was based; |
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(d) |
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a description of any additional material or information necessary for
the Claimant to perfect the claim, and an explanation of why such
material or information is necessary; |
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(e) |
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an explanation of the claim review procedure; and |
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(f) |
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a statement of the Claimants right to bring a civil action under
ERISA Section 502(a) following an adverse benefit determination on
review. |
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4.3 Review of a Denied Claim
On or before one hundred eighty (180) days after receiving a notice from the Committee that a claim
has been denied, in whole or in part, a Claimant (or the Claimants duly authorized representative)
may file with the Committee a written request for a review of the denial of the claim. The Claimant
(or the Claimants duly authorized representative):
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(a) |
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may, upon request and free of charge, have reasonable access to, and
copies of, all documents, records and other information relevant to
the claim for benefits; |
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(b) |
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may submit written comments or other documents; and/or |
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(c) |
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may request a hearing, which the Committee , in its sole discretion, may grant. |
4.4 Decision on Review
The Committee shall render its decision on review promptly, and no later than forty-five (45)
days after the Committee receives the Claimants written request for a review of the denial of the
claim. If the Committee determines that special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished to the Claimant prior to
the termination of the initial forty-five (45) day period. In no event shall such extension exceed
a period of forty-five (45) days from the end of the initial period. The extension notice shall
indicate the special circumstances requiring an extension of time and the date by which the
Committee expects to render the benefit determination. In rendering its decision, the Committee
shall take into account all comments, documents, records and other information submitted by the
Claimant relating to the claim, without regard to whether such information was submitted or
considered in the initial benefit determination. The decision must be written in a manner
calculated to be understood by the Claimant, and it must contain:
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(a) |
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specific reasons for the decision; |
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(b) |
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specific reference(s) to the pertinent Plan provisions upon which the decision was based; |
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(c) |
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a statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of, all documents,
records and other information relevant (as defined in applicable ERISA
regulations) to the Claimants claim for benefits; |
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(d) |
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any internal rule, guideline, protocol or other similar criterion
relied on in the denial, or a statement that a copy of such rule,
guideline, protocol or other similar criterion will be provided free
of charge on request; and |
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(e) |
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a statement of the Claimants right to bring a civil action under ERISA Section 502(a). |
-13-
Benefits shall be paid under the Plan only if the Committee in its discretion determines that the
Claimant is entitled to them.
4.5 Legal Action
A Claimants compliance with the foregoing provisions of this Section 5 is a mandatory
prerequisite to a Claimants right to commence any legal action with respect to any claim for
benefits under this Plan. Any further legal action taken by a Participant against the Plan, the
Company (and its employees or directors), or the Committee must be filed in a court of law no later
than ninety (90) days after the Committees final decision on review of an appealed claim.
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SECTION 5
Miscellaneous
5.1 Gender and Number
Where the context admits, words in the masculine gender include the feminine gender, the
singular includes the plural, and vice versa.
5.2 Non-Assignability and Facility of Payment
Benefits under the Plan are not in any way subject to the debts or other obligations of the
persons entitled thereto and may not be voluntarily or involuntarily sold, transferred or assigned.
When any person entitled to benefits under the Plan is under a legal disability or in the
Committees opinion is in any way incapacitated so as to be unable to manage his affairs, the
Committee may cause such persons benefits to be paid to or for the benefit of such person in any
manner that the Committee may determine.
5.3 Mistake of Fact
Any mistake of fact or misstatement of fact shall be corrected when it becomes known and
proper adjustment made by reason thereof.
5.4 Applicable Law
Except to the extent superseded by the laws of the United States, the Plan and all rights and
duties thereunder shall be governed, construed and administered in accordance with the laws of the
State of North Carolina.
5.5 No Guarantee of Employment
Employment rights of an employee shall not be deemed to be enlarged or diminished by reason of
establishment of the Plan, nor shall establishment of the Plan confer any right upon any employee
to be retained in the service of an Employer.
5.6 Information to be Furnished by Covered Employees
Covered Employees under the Plan must furnish the Committee with such evidence, data or
information as the Committee considers necessary or desirable to administer the Plan. A fraudulent
misstatement or omission of fact made by a Covered Employee in an enrollment form, evidence of
insurability form, or in a claim for benefits (inclusive of all documents filed in support of the
claim) may be used to cancel coverage and/or to deny claims for benefits.
5.7 Company and Committee Decision Final
The Company, the Committee and any entity or organization to which the Company delegates
authority pursuant to the terms of the Plan, shall have the discretionary authority to
-15-
construe and interpret the Plan and make factual determinations thereunder, including the authority
to determine eligibility of employees and the amount of benefits payable under the Plan, and to
decide claims under the terms of the Plan. Subject to applicable law, any interpretation of the
provisions of the Plan and any decisions on any matter within the discretion of the Company,
Committee or other applicable entity made in good faith shall be binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known, and the Company,
Committee or other applicable entity shall make such adjustment on account thereof as it considers
equitable and practicable. The Company, Committee or other applicable entity shall not be liable in
any manner for any determination of fact made in good faith. Benefits will be paid under the Plan
only if the Committee or its delegate determines in its discretion that the applicant is entitled
to them.
5.8 Action by Company or Employer
Any action required or permitted to be taken by the Company or an Employer under the Plan
shall be by resolution of its Board of Directors or by an officer or officers as may be authorized
to act for the Board with respect to the Plan.
5.9 Waiver of Notice
Any notice required under the Plan may be waived by the person entitled to such notice.
5.10 Recovery of Benefits
In the event a Covered Employee receives a benefit payment under the Plan which is in excess
of the benefit payment which should have been made, the Committee shall have the right to recover
the amount of such overpayment from such Covered Employee or his or her Estate. The Committee may,
however, at its option, deduct the amount of such excess from any subsequent Benefits payable to,
or for, the Covered Employee.
5.11 Additional Employers
Any Subsidiary of the Company may adopt the Plan by:
|
(a) |
|
Filing with the Company a written instrument to that effect, and |
|
|
(b) |
|
Filing with the Committee a statement consenting to such action signed
by the President or any Vice President of the Company on its behalf. |
5.12 Uniform Rules
The Committee shall administer the Plan on a reasonable and nondiscriminatory basis and shall
apply uniform rules to all persons similarly situated.
-16-
5.13 Evidence
Evidence required of anyone under the Plan may be by certificate, affidavit, document or other
information which the person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
5.14 Investigation of Claims
The Company and the Committee may investigate claims for benefits under the Plan and may
designate a person or entity to investigate such claims.
-17-
SECTION 6
Amendment and Termination
6.1 Amendment
The Plan may be amended by the Company at any time and from time to time, except that any
benefits which had become payable under the Plan prior to the date an amendment is effected shall
be determined in accordance with the terms of the Plan as in effect immediately prior to the date
of the amendment.
6.2 Termination
The Plan, as applied to all Employers, may be terminated at any time by action of the then
Employers hereunder, and the Plan as applied to any single Employer may be terminated at any time
by such Employer, subject only to the same limitations with respect to the effect of any such
termination as are set forth in subsection 6.1 with respect to amendments of the Plan.
6.3 Mergers and Acquisitions
Notwithstanding any Plan provision to the contrary, in the case of any merger or consolidation
with, or acquisition of another business by the Company (whether a division or Subsidiary), the
provisions of the Plan, as applicable to employees of such business (e.g., eligibility, enrollment,
evidence of good health, etc.) will be as specified in the Purchase Agreement between the Company
and such other business, and if not so specified, shall apply as if such business was a new
participating Employer hereunder and such employees were newly hired employees of such Employer. If
the Purchase Agreement provides that the Company will credit the employees of such business with
service, then, in the Companys discretion, such employees will not be treated as newly hired
employees of such Employer for purposes of eligibility, enrollment, evidence of good health, etc.
-18-
EX-10.13
Exhibit 10.13
HANESBRANDS INC.
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
(As
Amended and Restated December 9, 2008)
HANESBRANDS INC.
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
(As
Amended and Restated December 9, 2008)
1. Purpose. The purpose of the Hanesbrands Inc. Non-Employee Director Deferred Compensation
Plan is to allow Non-Employee Directors of the Corporation to defer the payment of Cash Retainers
and, effective January 1, 2008, Equity Retainers. Notwithstanding any provision of the Plan to the
contrary, amounts deferred under the Plan are subject to the provisions of Section 409A of the Code
and at all times the Plan shall be interpreted and administered so that it is consistent with such
Code section.
2. Definitions. Where the context of this Plan permits, words in the masculine gender shall
include the feminine gender, the plural form of a word shall include the singular form, and the
singular form of a word shall include the plural form. Unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
|
(a) |
|
Balance Calculation Date means the date a Non-Employee Directors Deferral
Account is valued for purposes of making a distribution from such Non-Employee
Directors Deferral Account. For a distribution payable on a Distribution Date, the
Balance Calculation Date is the last business day of the month preceding the
Distribution Date; except that, for distributions payable due to a Non-Employee
Directors earlier Separation from Service or pursuant to sections 10 and 17, the
Balance Calculation Date is the last business day of the month in which the applicable
distribution event occurs. |
|
|
(b) |
|
Board means the Board of Directors of the Corporation. |
|
|
(c) |
|
Cash Retainer means the annual cash retainer fee payable by the
Corporation to a Non-Employee Director for services as a director of the
Corporation, as such amount may be changed from time to time. The Cash
Retainer shall include Committee Fees except as otherwise provided herein. |
|
|
(d) |
|
Change in Control means Change in Control as defined under the terms
of the Stock Plan. |
|
|
(e) |
|
Code means the Internal Revenue Code of 1986, as amended. |
|
|
(f) |
|
Committee means the Compensation Committee of the Board. |
-1-
|
(g) |
|
Committee Fees means the annual fees payable by the Corporation to a
Non-Employee Director for services as a member or chair of a Board committee, as such
amounts may be changed from time to time. |
|
|
(h) |
|
Corporation means Hanesbrands Inc. and any successor thereto. |
|
|
(i) |
|
Deferral means an amount deferred pursuant to a Deferral Election and any
automatic deferral of restricted stock units as described in section 5 below. |
|
|
(j) |
|
Deferral Account means a bookkeeping account in the name of a Non-Employee
Director to hold the Non-Employee Directors Deferrals. |
|
|
(k) |
|
Deferral Crediting Date means the last business day of each calendar quarter. |
|
|
(l) |
|
Deferral Elections means irrevocable elections to defer receipt of a Cash
Retainer or an Equity Retainer. |
|
|
(m) |
|
Distribution Date means the specified date on which a Deferral will be paid or
begin to be paid, pursuant to either a Deferral Election or the applicable provisions
of the Plan or the award agreement. |
|
|
(n) |
|
Equity Retainer means any annual equity retainer fee payable by the Corporation
to a Non-Employee Director for services as a director of the Corporation, as such
amount may be determined from time to time, that is not required to be deferred by its
terms as described in section 5. |
|
|
(o) |
|
Fair Market Value means the average of the high and low quotes of Stock on the
applicable day on the New York Stock Exchange Composite Transaction Tape; provided,
however, that effective as of January 1, 2008, the Fair Market Value of Stock shall be
the closing price on the applicable day on the New York Stock Exchange Composite
Transaction Tape. |
|
|
(p) |
|
Interest Account means the default alternative from among the two investment
alternatives (the other being a Stock Equivalent Account) in which a Non-Employee
Director may elect to invest a Deferral as described in sections 7 and 8 below. |
|
|
(q) |
|
Non-Employee Director means a director of the Corporation who is not an
employee of the Corporation or any subsidiary of the Corporation. |
|
|
(r) |
|
Plan means this Hanesbrands Inc. Non-Employee Director Deferred Compensation
Plan. |
|
|
(s) |
|
Plan Year means the calendar year. |
|
|
(t) |
|
Re-Deferral Election means a Non-Employee Directors irrevocable election to
extend a Distribution Date. |
-2-
|
(u) |
|
Separation from Service means the date of a Non-Employee Directors termination
of service on the Board, which date shall be determined in a manner that is consistent
with the requirements of Treasury regulations section 1.409A-1(h). |
|
|
(v) |
|
Stock means a share of the common stock of the Corporation that, by its terms,
may be voted on all matters submitted to stockholders of the Corporation generally. |
|
|
(w) |
|
Stock Equivalent Account means one of two investment alternatives (the other
being an Interest Account) in which a Non-Employee Director may elect to invest a
Deferral as described in sections 7 and 8 below. |
|
|
(x) |
|
Stock Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006 or any
successor thereto that provides for the issuance of Stock to Non-Employee Directors. |
3. Administration. The Plan shall be administered by the Committee. The Committee shall have
full power and authority to interpret and construe the Plan and adopt such rules and regulations as
it shall deem necessary and advisable to implement and administer the Plan and to designate persons
other than members of the Committee to carry out its responsibilities, subject to applicable law
and such limitations, restrictions and conditions as it may prescribe, such actions to be taken in
accordance with the Committees best business judgment as to the best interests of the Corporation
and its stockholders and in accordance with the purposes of the Plan. The Committee may delegate
administrative duties under the Plan to one or more agents, as it shall deem necessary or
advisable. A majority of the Committee shall constitute a quorum at any meeting of the Committee,
and all determinations of the Committee shall be made by a majority of its members. Any
determination of the Committee under the Plan may be made without notice or a meeting of the
Committee by a written consent signed by all members of the Committee. No member of the Committee
or the Board shall be personally liable for any action or determination made in good faith with
respect to the Plan or to any settlement of any dispute between a Non-Employee Director and the
Corporation. Any decision or action taken by the Committee or the Board with respect to the
administration or interpretation of the Plan shall be conclusive and binding upon all persons.
4. Deferral Elections. Any eligible Non-Employee Director may make irrevocable elections to
defer receipt of his Cash Retainer and, effective January 1, 2008, his Equity Retainer. Each such
election shall be referred to as a Deferral Election and any amount
-3-
deferred pursuant to such election shall be referred to as a Deferral for a Plan Year, in
accordance with the rules set forth below.
|
(a) |
|
A Non-Employee Director shall be eligible to make a Deferral Election only if
he is an active member of the Board, or has been elected to the Board on the date such
election is made. |
|
|
(b) |
|
For the 2007 Plan Year, a Non-Employee Director may defer all or any portion
not less than 25 percent of his Cash Retainer, and may make a separate election to
defer all or any portion not less than 25 percent of his Committee Fees. Effective
January 1, 2008, a Non-Employee Director may elect to defer not less than 100% percent
of his Cash Retainer, his Equity Retainer, or both. |
|
|
(c) |
|
All Deferral Elections must be made pursuant to such rules as the Committee may
prescribe and must be received by the Committee no later than the date specified by the
Committee. In no event will the date specified by the Committee with respect to a
Deferral Election be later than the end of the Plan Year preceding the Plan Year in
which the Cash Retainer or Equity Retainer would otherwise be paid. In the case of the
first year in which the Non-Employee Director becomes eligible to participate, such
election may be made with respect to services to be performed subsequent to the
election within 30 days after the date the Non-Employee Director becomes eligible to
participate. |
|
|
(d) |
|
As part of each Deferral Election for the 2007 Plan Year, the Non-Employee
Director must specify the Distribution Date on which the Deferral will be paid or
commence. For 2008 and subsequent Plan Years, the Distribution Date with respect to a
Deferral shall be the earlier of the fifth anniversary of the applicable Deferral
Crediting Date or the Non-Employee Directors Separation from Service. A Non-Employee
Director may make a different Deferral Election for each separate Deferral under the
Plan. Except as provided in subsection (e) below, an election under this subsection
(d) is irrevocable and shall apply only to that portion of the Non-Employee Directors
Deferral Account which is attributable to the Deferral. |
|
|
(e) |
|
A Non-Employee Director may make a Re-Deferral Election; provided, that no
Re-Deferral Election shall be effective unless (i) the Committee receives the election
not later than 12 months prior to the Distribution Date to be changed, and (ii) the new
Distribution Date shall be the earlier of the Non-Employee Directors Separation from
Service and a date that is not earlier than the fifth anniversary of the prior
Distribution Date. If a Non-Employee Director makes a Re-Deferral Election with
respect to a Deferral for the 2007 Plan Year, the Deferral shall become payable upon
the earlier of the fifth anniversary of the prior Distribution Date and the
Non-Employee Directors Separation from Service. All Re-Deferral Elections must be
made pursuant to such rules as the Committee may prescribe. The Committee, in its
complete discretion, may modify the general rules set forth |
-4-
|
|
|
above as permitted by IRS Notice 2005-1, applicable regulations and other guidance
issued under Code Section 409A. |
|
|
(f) |
|
As part of each Deferral Election for the 2007 Plan Year, a Non-Employee
Director must elect the form in which the Deferral will be paid in accordance with
section 9. Except as provided in section 9, a Non-Employee Directors election as to
the form of payment shall be irrevocable. |
|
|
(g) |
|
As part of each Deferral Election, a Non-Employee Director must elect the
investment alternatives that shall apply to the Deferral of a Cash Retainer in
accordance with sections 7 and 8 below. |
|
|
(h) |
|
Deferrals and Deferral Elections shall be irrevocable. |
5. Automatic Deferral of Stock Grants. In addition to any elective Deferrals made by a
Non-Employee Director as provided under section 4 above, any restricted stock, restricted stock
units or deferred stock units awarded to a Non-Employee Director that are automatically deferred
pursuant to the terms of the award agreement shall be deferred under the Plan and credited to a
Non-Employee Directors Deferral Account as described below. Notwithstanding any Plan provision to
the contrary, the Balance Calculation Date for automatic deferrals under this section shall at all
times be the date which is six months following the Non-Employee Directors Separation from
Service.
6. Deferral Accounts. All amounts deferred pursuant to a Non-Employee Directors Deferral
Elections under section 4 above as well as any automatic Deferrals under section 5 above shall be
allocated to a bookkeeping account in the name of the Non-Employee Director. Each Deferral shall
be credited to the Deferral Account as of the applicable Deferral Crediting Date. A Non-Employee
Director shall be fully vested at all times in the balance of his Deferral Account.
7. Investment Alternatives. A Non-Employee Director must make an investment election at the
time of each Deferral Election, with respect to Deferrals of Cash Retainers. The investment
election must be made pursuant to such rules as the Committee may prescribe, subject to this
section and section 8 below, and shall designate the portion of the Deferral which is to be treated
as invested in each investment alternative. The two investment alternatives shall be as follows:
-5-
|
(a) |
|
Stock Equivalent Account. |
|
(i) |
|
Under the Stock Equivalent Account, the value of the
Non-Employee Directors Deferral shall be determined as if the Deferral were
invested in Stock as of the Deferral Crediting Date. If a payment of Stock is
deferred, then the number of Stock equivalents to be credited to the
Non-Employee Directors Deferral Account and appropriate subaccounts on each
Deferral Crediting Date shall equal the number of shares deferred. If a
payment of cash is deferred, then the number of Stock equivalents to be
credited to the Non-Employee Directors Deferral Account and appropriate
subaccounts on each Deferral Crediting Date shall be determined by dividing the
Deferral to be invested on that date by the Fair Market Value of Stock on
that date. Fractional Stock equivalents will be computed to six decimal
places. |
|
|
(ii) |
|
An amount equal to the number of Stock equivalents as of the
record date multiplied by the dividend paid on a share of Stock on each
dividend payment date shall be credited to the Non-Employee Directors Deferral
Account and appropriate subaccount as of the Deferral Crediting Date coincident
with or next following the dividend payment date and invested in additional
Stock equivalents as though such dividend credits were a Deferral. |
|
|
(iii) |
|
The Corporation may, but is not required to, match any amounts
that a Non-Employee Director elects to invest in the Stock Equivalent Account. |
|
|
(iv) |
|
In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number of Stock equivalents in the Stock Equivalent Account under
the Plan shall be equitably adjusted by the Committee. |
|
(b) |
|
Interest Account. Under the Interest Account, prior to 2008, interest accrues
daily and is credited to the Non-Employee Directors Deferral Account on a monthly
basis. Effective January 1, 2008, interest accrues and is credited daily. The rate of
interest to be credited shall equal the 5-year constant maturity Treasury note interest
rate as published by the Federal Reserve in effect on the first business day of the
applicable calendar year. If installment payments are elected, the amount to be paid
to the Non-Employee Director as of a Distribution Date shall be determined by dividing
the Non-Employee Directors Deferral Account balance as of the applicable Balance
Calculation Date by the number of remaining installment payments. |
8. Investment Elections and Changes. A Non-Employee Directors investment elections shall be
subject to the following rules:
-6-
|
(a) |
|
With respect to Cash Retainer payments, if the Non-Employee Director fails to
make an investment election with respect to a Deferral, the Deferral shall be deemed to
be invested in the Interest Account. |
|
|
(b) |
|
All Equity Retainer payments that are deferred at the election of the
Non-Employee Director and all awards that are deferred automatically as described in
section 5 above shall be invested in the Stock Equivalent Account. |
|
|
(c) |
|
All investments in the Stock Equivalent Account shall be irrevocable. |
|
|
(d) |
|
As of the last business day of any calendar quarter, a Non-Employee Director
may elect to transfer amounts invested in the Interest Account to the Stock Equivalent
Account by filing an investment change election during the time period specified by the
Committee. Any such election shall be effective as of the first business day of the
following calendar quarter. The number of Stock equivalents to be credited to the
Non-Employee Directors Deferral Account and appropriate subaccounts as of the
effective date of the Non-Employee Directors election shall be determined by dividing
the amount to be transferred by the Fair Market Value of Stock on the last business day
of the calendar quarter preceding the effective date of the Non-Employee Directors
election. Notwithstanding the foregoing, effective January 1, 2008, a Non-Employee
Director may elect to transfer amounts from the Interest Account to the Stock
Equivalent Account as of any business day; any such transfer shall be made in
accordance with procedures established by the Committee. |
9. Time and Method of Payment. Payment of a Non-Employee Directors Deferral Account shall be
made in accordance with the following rules:
|
(a) |
|
Payment of a Non-Employee Directors Deferral shall be made in a single lump
sum; provided that, for a Cash Retainer deferred for the 2007 Plan Year, the
Non-Employee Director may elect to receive payment in substantially equal annual
installments over a period not exceeding ten years, as elected by the Non-Employee
Director in the Deferral Election. |
|
|
(b) |
|
If a Non-Employee Director makes a Re-Deferral Election with respect to a
Deferral for the 2007 Plan Year, any prior election of annual installments shall be
null and void and the Non-Employee Directors Deferral shall become payable in a single
lump sum. Installment payments shall be treated as a single payment for purposes of a
Re-Deferral Election, and the first scheduled installment will be the measuring
standard for purposes of determining whether a Re-Deferral Election complies with the
requirements of subsection 4(e) above. |
|
|
(c) |
|
If a Non-Employee Directors Deferral is payable in a single lump sum, the
payment shall be made within the 60-day period following the Balance Calculation Date,
as determined in the sole discretion of the Committee. If a Non-Employee Directors
Deferral is payable in installment payments, then the Non-Employee Directors Deferral
shall be paid in substantially equal annual |
-7-
|
|
|
installments commencing in the month following the initial Balance Calculation Date,
with the remaining installment payments made as of each subsequent January 1st
(based on the preceding December 31st Deferral balance) over the period elected by
the Non-Employee Director in the Deferral Election. |
10. Payment Upon Death of a Non-Employee Director. In the event a Non-Employee Director dies
before all amounts credited to his Deferral Account have been paid, payment of the Non-Employee
Directors Deferral Account shall be made in a single sum payment to the Non-Employee Directors
Beneficiary within the 60-day period after the applicable Balance Calculation Date as determined in
the sole discretion of the Committee.
11. Beneficiary. A Non-Employee Directors Beneficiary shall mean the individual(s) or
entity designated by the Non-Employee Director to receive the balance of the Non-Employee
Directors Deferral Account in the event of the Non-Employee Directors death prior to the payment
of his entire Deferral Account. To be effective, any Beneficiary designation shall be filed with
the Committee pursuant to rules established by the Committee from time to time. A Non-Employee
Director may revoke an existing Beneficiary designation by filing another Beneficiary designation
with the Committee. The latest Beneficiary designation received by the Committee prior to the
Non-Employee Directors death shall be controlling. If no Beneficiary is named by a Non-Employee
Director or if no Beneficiary survives the Non-Employee Director, the Non-Employee Directors
Deferral Account shall be paid in the following order of precedence:
|
(a) |
|
the Non-Employee Directors spouse; |
|
|
(b) |
|
the Non-Employee Directors children (including adopted children), per stirpes;
or |
|
|
(c) |
|
the Non-Employee Directors estate. |
12. Form of Payment. The payment of that portion of a Deferral deemed to be invested in the
Interest Account shall be made in cash. The distribution of that portion of a Deferral deemed to
be invested at the Non-Employee Directors election or automatically invested in the Stock
Equivalent Account shall be distributed under the Stock Plan in whole shares of Stock with
fractional shares distributed in cash.
13. Funding. Payouts under the Plan to any Non-Employee Director shall be paid directly by
the Corporation. The Corporation shall not be required to fund, or otherwise
-8-
segregate assets to be used for payment of benefits under the Plan. Notwithstanding the
foregoing, the Corporation, in the discretion of the Committee, may maintain one or more grantor
trusts to hold assets to be used for payment of benefits under the Plan; provided that, in no event
shall the Corporation make a contribution or deposit to a trust during a restricted period as
defined in Code Section 409A(b)(3). The assets of any such trust shall remain the assets of the
Corporation subject to the claims of its general creditors. Any payments from such a trust of
benefits provided to a Non-Employee Director under the Plan shall be considered payment by the
Corporation and shall discharge the Corporation of any further liability under the Plan for such
payments.
14. Interests Not Transferable. No benefit payable at any time under the Plan shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal
process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or
otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. No
person shall, in any manner, be liable for or subject to the debts or liabilities of any person
entitled to such benefits. If any person shall attempt to, or shall alienate, sell, transfer,
assign, pledge or otherwise encumber his benefits under the Plan, or if by any reason of his
bankruptcy or other event happening at any time, such benefits would devolve upon any other person
or would not be enjoyed by the person entitled thereto under the Plan, then the Committee, in its
discretion, may terminate the interest in any such benefits of the person entitled thereto under
the Plan and hold or apply them for or to the benefit of such person entitled thereto under the
Plan or his spouse, children or other dependents, or any of them, in such manner as the Committee
may deem proper.
15. Forfeitures of Unclaimed Amounts. Unclaimed amounts shall consist of the amounts of the
Deferral Account of a Non-Employee Director that are not distributed because of the Committees
inability, after a reasonable search, to locate a Non-Employee Director or his Beneficiary, as
applicable, by the later of the end of the Plan Year in which the Participants Distribution Date,
Separation from Service, or death occurs, or the end of the 90-day period following said
Distribution Date, Separation from Service, or death. Unclaimed amounts shall be forfeited at the
end of such period. These forfeitures will reduce the obligations of the
-9-
Corporation under the Plan, and the Non-Employee Director or Beneficiary, as applicable, shall
have no further right to his Deferral Account.
16. Change in Control. Notwithstanding a Non-Employee Directors elections under sections 4
and 9 above or the other terms of the Plan regarding the form and timing of payment, upon the
Non-Employee Directors Separation from Service following a Change in Control, the Non-Employee
Directors Deferral Account shall be payable in a single lump sum within the 60-day period after
the Balance Calculation Date as determined in the sole discretion of the Committee.
17. Amendment and Termination. The Corporation may amend the Plan from time to time, or may
terminate the Plan at any time, by resolution of the Board or by resolution of a committee
authorized by resolution of the Board. The Board or any duly authorized committee also may
unilaterally modify the terms and conditions of an outstanding election under the Plan as
necessary, including revoking an election entirely, to reflect changes in applicable law. Any
amendment or termination of the Plan shall comply with the restrictions of Code Section 409A to the
extent applicable. Specifically, no amendment or termination of the Plan may accelerate a
scheduled payment unless permitted by Treasury regulations section 1.409A-3(j)(4), nor may any
amendment permit a subsequent deferral unless such amendment complies with the requirements of
Treasury regulations section 1.409A-2(b).
18. Governing Law, Venue. Except to the extent superseded by the laws of the United States,
the laws of the State of North Carolina, without regard to any states conflict of laws principles,
shall govern in all matters relating to the Plan. Any legal action related to this Plan shall be
brought only in a federal or state court located in North Carolina.
19. Effective Date of Plan. This Plan shall be effective as of July 2, 2006.
-10-
EX-10.14
Exhibit 10.14
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
18th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
"Company), and Richard A. Noll (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
|
(a) |
|
Eligibility for Severance. |
|
(i) |
|
Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances: |
|
(A) |
|
Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
|
|
(B) |
|
Executive terminates his or her employment at
the request of Company. |
|
(ii) |
|
Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances: |
|
(A) |
|
A termination for Cause. For purposes of this
Agreement, "Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
|
|
(B) |
|
A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
|
|
(C) |
|
A termination due to death; |
|
|
(D) |
|
A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan"); |
|
|
(E) |
|
A voluntary termination of employment other
than at the request of Company; |
|
|
(F) |
|
A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
|
|
(G) |
|
The transfer of Executives employment to a
subsidiary or affiliate of Company with his consent; |
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(H) |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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(I) |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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(iii) |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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(iv) |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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(b) |
|
Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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(i) |
|
Executive shall be entitled to receive his Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company (including
periods of employment with Sara Lee Corporation) by three; provided, however,
that in no event shall the Severance Period be less than twelve months or more
than twenty-four months. Base Salary shall mean the annual salary in effect
for Executive immediately prior to his Termination Date. At the discretion of
the Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executives target bonus under the Annual Incentive
Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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(A) |
|
The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year or
Short Year in which the Termination Date occurs based on actual fiscal
year performance (the Annual Incentive Portion of Severance). In
this Agreement, Short Year means an incentive period of less than 12
months duration occurring immediately subsequent to the Companys exit
from the Sara Lee Corporations controlled group of corporations
(within the meaning of Section 1563(a) of the Code)). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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(B) |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of his service prior to his Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant |
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to the Executives award agreement(s). Executive shall not be eligible for
any new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants,
or any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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(ii) |
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Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless he or she elects such coverage within thirty (30) days
following his Termination Date. The premium charged for such retiree medical
coverage may be different (greater) than the premium charged an active employee
for similar coverage; |
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(iii) |
|
Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated |
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|
senior executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and ESOPs,
personal accident insurance, travel accident insurance, short and long term
disability insurance, and accidental death and dismemberment insurance,
shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to his annual salary on his Termination Date. |
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(c) |
|
Payment of Severance. |
|
(i) |
|
Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
|
(A) |
|
That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
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(B) |
|
The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary |
-5-
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|
Portion of Severance be paid to Executive later than December 31 of
the second calendar year following the calendar year in which
Executives Termination Date occurs. The payment(s) to be made to
Executive pursuant to this subparagraph (B) are intended to be exempt
from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called two times pay exemption). |
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(ii) |
|
Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
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(iii) |
|
Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
|
(d) |
|
Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(e) |
|
Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
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(f) |
|
Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
|
(a) |
|
Eligibility for Change in Control Benefits. |
|
(i) |
|
Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for |
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|
Cause, or (C) within twenty-four (24) months following a Change in Control
Executive voluntarily terminates his employment for Good Reason, Executive
shall be entitled to the Change in Control benefits as described in section
3(b) below. |
|
(ii) |
|
Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
|
(A) |
|
A material adverse change in Executives duties
or responsibilities; |
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(B) |
|
A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
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(C) |
|
A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
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(D) |
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The failure of any successor to Company to
assume and agree to perform this Agreement; or |
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(E) |
|
Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from his or her
office location at the time of the Change in Control. |
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The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of his or her rights with
respect to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of his or her rights with respect
to any circumstances which may constitute Good Reason; provided, however,
that Executive may not rely on any particular action or event described in
clause (A) through (E) above as a basis for terminating his employment for
Good Reason unless he delivers a Notice of Termination based on that action
or event within ninety (90) days after its occurrence and Company has failed
to correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
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(iii) |
|
Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
|
(A) |
|
Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the |
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|
Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); provided,
however, that the following acquisitions shall not constitute a
Change in Control: |
|
1) |
|
Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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2) |
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Any acquisition by Company; |
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3) |
|
Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
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4) |
|
Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
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(B) |
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Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
|
1) |
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All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or |
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indirectly (either by remaining outstanding or by being
converted into voting securities of the entity resulting from
such transaction), more than fifty (50) percent of the
combined voting power of the voting securities of the entity
resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
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2) |
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No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
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3) |
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At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
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(C) |
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Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
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(D) |
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When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation |
-9-
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|
by a Person (other than the Board) made for the purpose of opposing a
solicitation by the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation of
proxies or consents by or on behalf of any Person (other than the
Board). |
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(iv) |
|
Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
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(b) |
|
Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
|
(i) |
|
In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
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(A) |
|
A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
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(B) |
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A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
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(C) |
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A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
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(D) |
|
A lump sum payment equal to three times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs (including for this purpose any annual incentive
received from Sara Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution plan in which
Executive is participating at the Termination Date (currently 4%). |
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Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below.
|
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(ii) |
|
For a period of 36 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance coverages
which insurance coverages shall be provided at the same levels and the same
costs in effect immediately prior to the Change in Control. Beginning on his
Termination Date, Executive shall be eligible to elect continued coverage under
the group medical and dental plan available to similarly situated senior
executives. If Executive elects continuation coverage for medical coverage,
dental coverage or both, he shall pay the entire COBRA premium charged for such
continuation coverage during the CIC Severance Period; provided, however, that
during the CIC Severance Period, Company shall reimburse Executive for that
portion of the COBRA premium paid that exceeds the amount payable by an active
executive of Company for similar coverage, as adjusted from time to time. Such
reimbursement shall be made to Executive on the 20th day of each
calendar month during the CIC Severance Period, or within ten (10) business
days thereafter. The amount eligible for reimbursement under this subparagraph
in any calendar year shall not affect any amounts eligible for reimbursement to
be provided in any other calendar year. In addition, Executives right to
reimbursement hereunder shall not be subject to liquidation or exchange for any
other benefit. Executives right to COBRA continuation coverage under any such
group health plan shall be reduced by the number of months of coverage
otherwise provided pursuant to this subparagraph. The premium charged for any
continuation coverage after the end of the CIC Severance Period shall be
entirely at Executives expense and shall be the actuarially determined cost of
the continuation coverage as determined by an actuary selected by the Company
(in accordance with the requirements under COBRA, to the extent applicable).
Executive shall not be entitled to reimbursement of any portion of the premium
charged for such coverage after the end of the CIC Severance Period.
Executives COBRA continuation coverage shall terminate in accordance with the
COBRA continuation of coverage provisions under Companys group medical and
dental plans. If Executive is eligible for early retirement under the terms of
the Retirement Plan (or would become eligible if the CIC Severance Period is
considered as employment), then, after exhausting any COBRA continuation
coverage under the group medical plan, Executive may elect to participate in
any retiree medical plan available to similarly situated senior executives in
accordance with the terms and conditions of such plan in effect on and after
Executives Termination Date; provided, that such retiree medical coverage
shall not be available to Executive unless he or she elects such coverage
within thirty (30) days following his Termination Date. The premium charged
for such retiree medical coverage may be different from the premium charged an
active employee for similar coverage; |
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(iii) |
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If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be
provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan"). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date he
or she would otherwise be eligible to begin receiving benefits under such
plans; |
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(iv) |
|
Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
|
(c) |
|
Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
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(d) |
|
Termination for Retirement or Death. If Executives employment is terminated
by reason of his retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
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(e) |
|
Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
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|
(f) |
|
Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
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(g) |
|
Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executives termination. |
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(h) |
|
Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
|
|
(i) |
|
Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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|
(j) |
|
Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
|
|
(k) |
|
Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event |
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Executives parachute payments do not exceed the Threshold, the benefits provided to
such Executive under this Agreement that are classified as parachute payments shall
be reduced such that the value of the Total Payments that Executive is entitled to
receive shall be one dollar ($1) less than the maximum amount which such Executive
may receive without becoming subject to the tax imposed by Code Section 4999, or
which Company may pay without loss of deduction under Code Section 280G(a). For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax, the amounts of such Excise Tax and the amount of any Gross Up Payment,
the following shall apply: |
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Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
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The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
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The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
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Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section |
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3(j), Company shall reimburse Executive for the full amount necessary to
make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately following Executives
termination of employment and shall be made by Company to Executive within
twenty (20) days of the date he remits the additional taxes as a result of
such adjustment; and |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion. |
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Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
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Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
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Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing his rights under this section 3. |
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Such reimbursement shall be made within thirty (30) days following final resolution,
in favor of Executive, of the conflict or dispute giving rise to such fees and
expenses. In no event shall Executive be entitled to receive the reimbursements
provided for in this subparagraph if he acts in bad faith or pursues a claim without
merit, or if he fails to prevail in any action instituted by him or Company. |
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(o) |
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Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with
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respect to the processing, review, investigation, approval and payment of severance/Change in
Control benefits, to designated individuals or committees.
6. Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes he or she should have received such benefits. No later than
ninety (90) days after the receipt of the claim, the Committee shall either allow or deny the claim
in writing. A denial of a claim, in whole or in part, shall be written in a manner calculated to
be understood by Executive and shall include the specific reason or reasons for the denial;
specific reference to the pertinent provisions of this Agreement on which the denial is based; a
description of any additional material or information necessary for Executive to perfect the claim
and an explanation of why such material or information is necessary; and an explanation of the
claim review procedure. Executive (or his duly authorized representative) may within sixty 60 days
after receipt of the denial of his claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the
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subject matter hereof. In the event of any inconsistency between any provision of this
Agreement and any provision of any plan, employee handbook, personnel manual, program, policy,
arrangement or agreement of Company or any of its subsidiaries or affiliates, the provisions of
this Agreement shall control. This Agreement may be modified or amended only by an instrument in
writing signed by both parties.
12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections he may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following his separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following his separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should he become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the
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Company and Executive dated September 1, 2006 (Prior Agreement), to comply with Section 409A
and to clarify certain other provisions of the Prior Agreement. This amended and restated
Agreement does not preclude the Prior Agreement (as amended and restated by this Agreement) from
qualifying for grandfather treatment under the transition rule set forth in Internal Revenue
Service Revenue Ruling 2008-13 with respect to contracts in effect on February 21, 2008. Each of
the parties hereto has relied on his or its own judgment in entering into this Agreement.
IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE
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HANESBRANDS INC. |
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By: |
/s/ Kevin W. Oliver
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Title: Executive Vice President, Human
Resources |
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Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and Richard A. Noll
(Executive) enter into this Separation
and Release Agreement which was received by Executive on the ___ day of
______, 200__, signed by
Executive on the ______ day of ______, 200__, and is effective on the
______ day of ______, 200__ (the
Effective Date). The Effective Date shall be no less than 7 days after the
date signed by
Executive.
WITNESSETH:
WHEREAS, Executive has been employed by the Company as a ____________; and
WHEREAS, Executives employment with the Company is terminated as of ______, 200__(the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated __________, 2008 (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
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of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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(a) |
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and any of its subsidiaries, affiliates, successors, assigns and
past, present and future directors, officers, employees, trustees and shareholders (the
Released Parties) from and against any and all complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, which, at any
time up to and including the date on which Executive signs this Agreement, exists, have
existed, or may arise from any matter whatsoever occurring, including, but not limited
to, any claims arising out of or in any way related to Executives employment with
Company or its subsidiaries or affiliates and the conclusion thereof, which Executive,
or any of Executives heirs, executors, administrators, assigns, affiliates, and agents
ever had, now has or at any time hereafter may have, own or hold against any of the
Released Parties based on any matter existing on or before the date on which Executive
signs this Agreement. Executive acknowledges that in exchange for this release,
Company is providing Executive with total consideration, financial or otherwise, which
exceeds what Executive would have been given without the release. By executing this
Agreement, Executive is waiving, without limitation, all claims (except for the filing
of a charge with an administrative agency) against the Released Parties arising under
federal, state and local labor and antidiscrimination laws, any employment related
claims under the employee Retirement Income Security Act of 1974, as amended, and any
other restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act of |
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1990, as amended, and the North Carolina Equal Employment Practices Act, as amended.
Nothing herein shall release any party from any obligation under this Agreement.
Executive acknowledges and agrees that this release and the covenant not to sue set
forth in paragraph (c) below are essential and material terms of this Agreement and
that, without such release and covenant not to sue, no agreement would have been
reached by the parties and no benefits under the Change in Control Agreement would
have been paid. Executive understands and acknowledges the significance and
consequences of this release and this Agreement. |
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(b) |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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To the maximum extent permitted by law, Executive covenants not to sue or to
institute or cause to be instituted any action in any federal, state, or local agency
or court against any of the Released Parties, including, but not limited to, any of the
claims released this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Executive or any of the Released Parties from filing a charge with an
administrative agency, from instituting any action required to enforce the terms of
this Agreement, or from challenging the validity of this Agreement. In addition,
nothing herein shall be construed to prevent Executive from enforcing |
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any rights Executive may have to recover vested benefits under the Employee
Retirement Income Security Act of 1974, as amended. |
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(d) |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement. |
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(e) |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
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14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE
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HANESBRANDS INC. |
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By: |
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Title: |
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A-6
EX-10.15
Exhibit 10.15
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
18th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
Company), and Gerald W. Evans, Jr. (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
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(a) |
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Eligibility for Severance. |
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(i) |
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Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances: |
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(A) |
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Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
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(B) |
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Executive terminates his or her employment at
the request of Company. |
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(ii) |
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Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances: |
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(A) |
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A termination for Cause. For purposes of this
Agreement, Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
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(B) |
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A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
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(C) |
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A termination due to death; |
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(D) |
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A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan); |
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(E) |
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A voluntary termination of employment other
than at the request of Company; |
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(F) |
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A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
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(G) |
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The transfer of Executives employment to a
subsidiary or affiliate of Company with his consent; |
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(H) |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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(I) |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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(iii) |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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(iv) |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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(b) |
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Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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(i) |
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Executive shall be entitled to receive his Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company (including
periods of employment with Sara Lee Corporation) by two; provided, however,
that in no event shall the Severance Period be less than twelve months or more
than twenty-four months. Base Salary shall mean the annual salary in effect
for Executive immediately prior to his Termination Date. At the discretion of
the Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executives target bonus under the Annual Incentive
Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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(A) |
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The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year or
Short Year in which the Termination Date occurs based on actual fiscal
year performance (the Annual Incentive Portion of Severance). In
this Agreement, Short Year means an incentive period of less than 12
months duration occurring immediately subsequent to the Companys exit
from the Sara Lee Corporations controlled group of corporations
(within the meaning of Section 1563(a) of the Code)). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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(B) |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of his service prior to his Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant |
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to the Executives award agreement(s). Executive shall not be eligible for
any new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants,
or any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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(ii) |
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Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless he or she elects such coverage within thirty (30) days
following his Termination Date. The premium charged for such retiree medical
coverage may be different (greater) than the premium charged an active employee
for similar coverage; |
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(iii) |
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Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated |
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senior executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and ESOPs,
personal accident insurance, travel accident insurance, short and long term
disability insurance, and accidental death and dismemberment insurance,
shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to his annual salary on his Termination Date. |
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Payment of Severance. |
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(i) |
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Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
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That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
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(B) |
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The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary |
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Portion of Severance be paid to Executive later than December 31 of
the second calendar year following the calendar year in which
Executives Termination Date occurs. The payment(s) to be made to
Executive pursuant to this subparagraph (B) are intended to be exempt
from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called two times pay exemption). |
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Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
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(iii) |
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Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
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(d) |
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Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(e) |
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Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
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(f) |
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Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
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(a) |
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Eligibility for Change in Control Benefits. |
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(i) |
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Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for |
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Cause, or (C) within twenty-four (24) months following a Change in Control
Executive voluntarily terminates his employment for Good Reason, Executive
shall be entitled to the Change in Control benefits as described in section
3(b) below. |
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(ii) |
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Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
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(A) |
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A material adverse change in Executives duties
or responsibilities; |
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(B) |
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A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
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(C) |
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A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
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(D) |
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The failure of any successor to Company to
assume and agree to perform this Agreement; or |
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Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from his or her
office location at the time of the Change in Control. |
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The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of his or her rights with
respect to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of his or her rights with respect
to any circumstances which may constitute Good Reason; provided, however,
that Executive may not rely on any particular action or event described in
clause (A) through (E) above as a basis for terminating his employment for
Good Reason unless he delivers a Notice of Termination based on that action
or event within ninety (90) days after its occurrence and Company has failed
to correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
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(iii) |
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Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
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(A) |
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Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the |
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Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); provided,
however, that the following acquisitions shall not constitute a
Change in Control: |
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Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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Any acquisition by Company; |
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Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
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4) |
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Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
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Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
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All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or |
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indirectly (either by remaining outstanding or by being
converted into voting securities of the entity resulting from
such transaction), more than fifty (50) percent of the
combined voting power of the voting securities of the entity
resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
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No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
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At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
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Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
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When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation |
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by a Person (other than the Board) made for the purpose of opposing a
solicitation by the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation of
proxies or consents by or on behalf of any Person (other than the
Board). |
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Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
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(b) |
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Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
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(i) |
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In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
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A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
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(B) |
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A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
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(C) |
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A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
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(D) |
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A lump sum payment equal to two times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs (including for this purpose any annual incentive
received from Sara Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution plan in which
Executive is participating at the Termination Date (currently 4%). |
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Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below. |
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(ii) |
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For a period of 24 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance coverages
which insurance coverages shall be provided at the same levels and the same
costs in effect immediately prior to the Change in Control. Beginning on his
Termination Date, Executive shall be eligible to elect continued coverage under
the group medical and dental plan available to similarly situated senior
executives. If Executive elects continuation coverage for medical coverage,
dental coverage or both, he shall pay the entire COBRA premium charged for such
continuation coverage during the CIC Severance Period; provided, however, that
during the CIC Severance Period, Company shall reimburse Executive for that
portion of the COBRA premium paid that exceeds the amount payable by an active
executive of Company for similar coverage, as adjusted from time to time. Such
reimbursement shall be made to Executive on the 20th day of each
calendar month during the CIC Severance Period, or within ten (10) business
days thereafter. The amount eligible for reimbursement under this subparagraph
in any calendar year shall not affect any amounts eligible for reimbursement to
be provided in any other calendar year. In addition, Executives right to
reimbursement hereunder shall not be subject to liquidation or exchange for any
other benefit. Executives right to COBRA continuation coverage under any such
group health plan shall be reduced by the number of months of coverage
otherwise provided pursuant to this subparagraph. The premium charged for any
continuation coverage after the end of the CIC Severance Period shall be
entirely at Executives expense and shall be the actuarially determined cost of
the continuation coverage as determined by an actuary selected by the Company
(in accordance with the requirements under COBRA, to the extent applicable).
Executive shall not be entitled to reimbursement of any portion of the premium
charged for such coverage after the end of the CIC Severance Period.
Executives COBRA continuation coverage shall terminate in accordance with the
COBRA continuation of coverage provisions under Companys group medical and
dental plans. If Executive is eligible for early retirement under the terms of
the Retirement Plan (or would become eligible if the CIC Severance Period is
considered as employment), then, after exhausting any COBRA continuation
coverage under the group medical plan, Executive may elect to participate in
any retiree medical plan available to similarly situated senior executives in
accordance with the terms and conditions of such plan in effect on and after
Executives Termination Date; provided, that such retiree medical coverage
shall not be available to Executive unless he or she elects such coverage
within thirty (30) days following his Termination Date. The premium charged
for such retiree medical coverage may be different from the premium charged an
active employee for similar coverage; |
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(iii) |
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If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be
provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date he
or she would otherwise be eligible to begin receiving benefits under such
plans; |
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Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
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(c) |
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Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
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(d) |
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Termination for Retirement or Death. If Executives employment is terminated
by reason of his retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
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(e) |
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Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
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(f) |
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Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
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(g) |
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Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executives termination. |
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(h) |
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Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
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(i) |
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Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(j) |
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Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
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(k) |
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Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event |
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Executives parachute payments do not exceed the Threshold, the benefits provided to
such Executive under this Agreement that are classified as parachute payments shall
be reduced such that the value of the Total Payments that Executive is entitled to
receive shall be one dollar ($1) less than the maximum amount which such Executive
may receive without becoming subject to the tax imposed by Code Section 4999, or
which Company may pay without loss of deduction under Code Section 280G(a). For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax, the amounts of such Excise Tax and the amount of any Gross Up Payment,
the following shall apply: |
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(i) |
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Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
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(ii) |
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The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
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(iii) |
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The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
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(iv) |
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Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
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(v) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section |
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3(j), Company shall reimburse Executive for the full amount necessary to
make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately following Executives
termination of employment and shall be made by Company to Executive within
twenty (20) days of the date he remits the additional taxes as a result of
such adjustment; and |
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(vi) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion. |
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(l) |
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Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
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(m) |
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Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
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(n) |
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Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing his rights under this section 3. |
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Such reimbursement shall be made within thirty (30) days following final resolution,
in favor of Executive, of the conflict or dispute giving rise to such fees and
expenses. In no event shall Executive be entitled to receive the reimbursements
provided for in this subparagraph if he acts in bad faith or pursues a claim without
merit, or if he fails to prevail in any action instituted by him or Company. |
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(o) |
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Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with
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respect to the processing, review, investigation, approval and payment of severance/Change in
Control benefits, to designated individuals or committees.
6. Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes he or she should have received such benefits. No later than
ninety (90) days after the receipt of the claim, the Committee shall either allow or deny the claim
in writing. A denial of a claim, in whole or in part, shall be written in a manner calculated to
be understood by Executive and shall include the specific reason or reasons for the denial;
specific reference to the pertinent provisions of this Agreement on which the denial is based; a
description of any additional material or information necessary for Executive to perfect the claim
and an explanation of why such material or information is necessary; and an explanation of the
claim review procedure. Executive (or his duly authorized representative) may within sixty 60 days
after receipt of the denial of his claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the
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subject matter hereof. In the event of any inconsistency between any provision of this
Agreement and any provision of any plan, employee handbook, personnel manual, program, policy,
arrangement or agreement of Company or any of its subsidiaries or affiliates, the provisions of
this Agreement shall control. This Agreement may be modified or amended only by an instrument in
writing signed by both parties.
12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections he may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following his separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following his separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should he become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the
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Company and Executive dated September 1, 2006 (Prior Agreement), to comply with Section 409A
and to clarify certain other provisions of the Prior Agreement. This amended and restated
Agreement does not preclude the Prior Agreement (as amended and restated by this Agreement) from
qualifying for grandfather treatment under the transition rule set forth in Internal Revenue
Service Revenue Ruling 2008-13 with respect to contracts in effect on February 21, 2008. Each of
the parties hereto has relied on his or its own judgment in entering into this Agreement.
IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE |
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HANESBRANDS INC. |
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/s/ Gerald W. Evans, Jr. |
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By: |
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/s/ Richard A. Noll |
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Title:
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Chief Executive Officer
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-19-
Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and Gerald W. Evans, Jr.
(Executive) enter into this
Separation and Release Agreement which was received by Executive on the ___ day of
______, 200__,
signed by Executive on the ______ day of ______, 200__, and is effective on the
______ day of ______,
200__ (the Effective Date). The Effective Date shall be no less than
7 days after the date signed
by Executive.
WITNESSETH:
WHEREAS,
Executive has been employed by the Company as a ______; and
WHEREAS, Executives employment with the Company is terminated
as of ______, 200__ (the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ______, 2008 (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
A-2
of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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(a) |
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and any of its subsidiaries, affiliates, successors, assigns and
past, present and future directors, officers, employees, trustees and shareholders (the
Released Parties) from and against any and all complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, which, at any
time up to and including the date on which Executive signs this Agreement, exists, have
existed, or may arise from any matter whatsoever occurring, including, but not limited
to, any claims arising out of or in any way related to Executives employment with
Company or its subsidiaries or affiliates and the conclusion thereof, which Executive,
or any of Executives heirs, executors, administrators, assigns, affiliates, and agents
ever had, now has or at any time hereafter may have, own or hold against any of the
Released Parties based on any matter existing on or before the date on which Executive
signs this Agreement. Executive acknowledges that in exchange for this release,
Company is providing Executive with total consideration, financial or otherwise, which
exceeds what Executive would have been given without the release. By executing this
Agreement, Executive is waiving, without limitation, all claims (except for the filing
of a charge with an administrative agency) against the Released Parties arising under
federal, state and local labor and antidiscrimination laws, any employment related
claims under the employee Retirement Income Security Act of 1974, as amended, and any
other restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act of |
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1990, as amended, and the North Carolina Equal Employment Practices Act, as amended.
Nothing herein shall release any party from any obligation under this Agreement.
Executive acknowledges and agrees that this release and the covenant not to sue set
forth in paragraph (c) below are essential and material terms of this Agreement and
that, without such release and covenant not to sue, no agreement would have been
reached by the parties and no benefits under the Change in Control Agreement would
have been paid. Executive understands and acknowledges the significance and
consequences of this release and this Agreement. |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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To the maximum extent permitted by law, Executive covenants not to sue or to
institute or cause to be instituted any action in any federal, state, or local agency
or court against any of the Released Parties, including, but not limited to, any of the
claims released this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Executive or any of the Released Parties from filing a charge with an
administrative agency, from instituting any action required to enforce the terms of
this Agreement, or from challenging the validity of this Agreement. In addition,
nothing herein shall be construed to prevent Executive from enforcing |
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any rights Executive may have to recover vested benefits under the Employee
Retirement Income Security Act of 1974, as amended. |
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(d) |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement. |
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(e) |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
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14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE |
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HANESBRANDS INC. |
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By: |
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Title:
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A-6
EX-10.16
Exhibit 10.16
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
18th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
Company), and E. Lee Wyatt, Jr. (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
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(a) |
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Eligibility for Severance. |
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(i) |
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Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances: |
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(A) |
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Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
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(B) |
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Executive terminates his or her employment at
the request of Company. |
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(ii) |
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Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances: |
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(A) |
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A termination for Cause. For purposes of this
Agreement, Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
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(B) |
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A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
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(C) |
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A termination due to death; |
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(D) |
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A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan); |
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(E) |
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A voluntary termination of employment other
than at the request of Company; |
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(F) |
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A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
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(G) |
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The transfer of Executives employment to a
subsidiary or affiliate of Company with his consent; |
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(H) |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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(I) |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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(iii) |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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(iv) |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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(b) |
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Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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(i) |
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Executive shall be entitled to receive his Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company (including
periods of employment with Sara Lee Corporation) by two; provided, however,
that in no event shall the Severance Period be less than twelve months or more
than twenty-four months. Base Salary shall mean the annual salary in effect
for Executive immediately prior to his Termination Date. At the discretion of
the Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executives target bonus under the Annual Incentive
Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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(A) |
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The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year or
Short Year in which the Termination Date occurs based on actual fiscal
year performance (the Annual Incentive Portion of Severance). In
this Agreement, Short Year means an incentive period of less than 12
months duration occurring immediately subsequent to the Companys exit
from the Sara Lee Corporations controlled group of corporations
(within the meaning of Section 1563(a) of the Code)). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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(B) |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of his service prior to his Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant |
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to the Executives award agreement(s). Executive shall not be eligible for
any new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants,
or any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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(ii) |
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Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless he or she elects such coverage within thirty (30) days
following his Termination Date. The premium charged for such retiree medical
coverage may be different (greater) than the premium charged an active employee
for similar coverage; |
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(iii) |
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Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated |
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senior executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and ESOPs,
personal accident insurance, travel accident insurance, short and long term
disability insurance, and accidental death and dismemberment insurance,
shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to his annual salary on his Termination Date. |
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Payment of Severance. |
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Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
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That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
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(B) |
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The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary |
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Portion of Severance be paid to Executive later than December 31 of
the second calendar year following the calendar year in which
Executives Termination Date occurs. The payment(s) to be made to
Executive pursuant to this subparagraph (B) are intended to be exempt
from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called two times pay exemption). |
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Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
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(iii) |
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Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
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Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(e) |
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Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
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(f) |
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Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
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(a) |
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Eligibility for Change in Control Benefits. |
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(i) |
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Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for |
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Cause, or (C) within twenty-four (24) months following a Change in Control
Executive voluntarily terminates his employment for Good Reason, Executive
shall be entitled to the Change in Control benefits as described in section
3(b) below. |
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Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
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(A) |
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A material adverse change in Executives duties
or responsibilities; |
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(B) |
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A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
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(C) |
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A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
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(D) |
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The failure of any successor to Company to
assume and agree to perform this Agreement; or |
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Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from his or her
office location at the time of the Change in Control. |
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The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of his or her rights with
respect to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of his or her rights with respect
to any circumstances which may constitute Good Reason; provided, however,
that Executive may not rely on any particular action or event described in
clause (A) through (E) above as a basis for terminating his employment for
Good Reason unless he delivers a Notice of Termination based on that action
or event within ninety (90) days after its occurrence and Company has failed
to correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
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Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
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Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the |
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Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); provided,
however, that the following acquisitions shall not constitute a
Change in Control: |
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Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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Any acquisition by Company; |
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Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
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4) |
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Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
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Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
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All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or |
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indirectly (either by remaining outstanding or by being
converted into voting securities of the entity resulting from
such transaction), more than fifty (50) percent of the
combined voting power of the voting securities of the entity
resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
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2) |
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No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
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At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
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Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
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When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation
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by a Person (other than the Board) made for the purpose of opposing a
solicitation by the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation of
proxies or consents by or on behalf of any Person (other than the
Board). |
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(iv) |
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Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
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(b) |
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Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
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(i) |
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In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
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(A) |
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A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
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(B) |
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A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
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(C) |
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A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
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(D) |
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A lump sum payment equal to two times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs (including for this purpose any annual incentive
received from Sara Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution plan in which
Executive is participating at the Termination Date (currently 4%). |
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Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below. |
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(ii) |
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For a period of 24 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance coverages
which insurance coverages shall be provided at the same levels and the same
costs in effect immediately prior to the Change in Control. Beginning on his
Termination Date, Executive shall be eligible to elect continued coverage under
the group medical and dental plan available to similarly situated senior
executives. If Executive elects continuation coverage for medical coverage,
dental coverage or both, he shall pay the entire COBRA premium charged for such
continuation coverage during the CIC Severance Period; provided, however, that
during the CIC Severance Period, Company shall reimburse Executive for that
portion of the COBRA premium paid that exceeds the amount payable by an active
executive of Company for similar coverage, as adjusted from time to time. Such
reimbursement shall be made to Executive on the 20th day of each
calendar month during the CIC Severance Period, or within ten (10) business
days thereafter. The amount eligible for reimbursement under this subparagraph
in any calendar year shall not affect any amounts eligible for reimbursement to
be provided in any other calendar year. In addition, Executives right to
reimbursement hereunder shall not be subject to liquidation or exchange for any
other benefit. Executives right to COBRA continuation coverage under any such
group health plan shall be reduced by the number of months of coverage
otherwise provided pursuant to this subparagraph. The premium charged for any
continuation coverage after the end of the CIC Severance Period shall be
entirely at Executives expense and shall be the actuarially determined cost of
the continuation coverage as determined by an actuary selected by the Company
(in accordance with the requirements under COBRA, to the extent applicable).
Executive shall not be entitled to reimbursement of any portion of the premium
charged for such coverage after the end of the CIC Severance Period.
Executives COBRA continuation coverage shall terminate in accordance with the
COBRA continuation of coverage provisions under Companys group medical and
dental plans. If Executive is eligible for early retirement under the terms of
the Retirement Plan (or would become eligible if the CIC Severance Period is
considered as employment), then, after exhausting any COBRA continuation
coverage under the group medical plan, Executive may elect to participate in
any retiree medical plan available to similarly situated senior executives in
accordance with the terms and conditions of such plan in effect on and after
Executives Termination Date; provided, that such retiree medical coverage
shall not be available to Executive unless he or she elects such coverage
within thirty (30) days following his Termination Date. The premium charged
for such retiree medical coverage may be different from the premium charged an
active employee for similar coverage; |
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(iii) |
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If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be
provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date he
or she would otherwise be eligible to begin receiving benefits under such
plans; |
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(iv) |
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Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
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(c) |
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Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
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(d) |
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Termination for Retirement or Death. If Executives employment is terminated
by reason of his retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
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(e) |
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Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
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(f) |
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Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
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(g) |
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Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executives termination. |
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(h) |
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Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
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(i) |
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Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(j) |
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Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
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(k) |
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Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event |
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Executives parachute payments do not exceed the Threshold, the benefits provided to
such Executive under this Agreement that are classified as parachute payments shall
be reduced such that the value of the Total Payments that Executive is entitled to
receive shall be one dollar ($1) less than the maximum amount which such Executive
may receive without becoming subject to the tax imposed by Code Section 4999, or
which Company may pay without loss of deduction under Code Section 280G(a). For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax, the amounts of such Excise Tax and the amount of any Gross Up Payment,
the following shall apply: |
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(i) |
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Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
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(ii) |
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The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
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(iii) |
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The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
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(iv) |
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Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
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(v) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section |
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3(j), Company shall reimburse Executive for the full amount necessary to
make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately following Executives
termination of employment and shall be made by Company to Executive within
twenty (20) days of the date he remits the additional taxes as a result of
such adjustment; and |
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(vi) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion. |
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(l) |
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Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
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(m) |
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Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
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(n) |
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Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing his rights under this section 3. |
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Such reimbursement shall be made within thirty (30) days following final resolution,
in favor of Executive, of the conflict or dispute giving rise to such fees and
expenses. In no event shall Executive be entitled to receive the reimbursements
provided for in this subparagraph if he acts in bad faith or pursues a claim without
merit, or if he fails to prevail in any action instituted by him or Company. |
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(o) |
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Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with
-16-
respect to the processing, review, investigation, approval and payment of severance/Change in
Control benefits, to designated individuals or committees.
6. Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes he or she should have received such benefits. No later than
ninety (90) days after the receipt of the claim, the Committee shall either allow or deny the claim
in writing. A denial of a claim, in whole or in part, shall be written in a manner calculated to
be understood by Executive and shall include the specific reason or reasons for the denial;
specific reference to the pertinent provisions of this Agreement on which the denial is based; a
description of any additional material or information necessary for Executive to perfect the claim
and an explanation of why such material or information is necessary; and an explanation of the
claim review procedure. Executive (or his duly authorized representative) may within sixty 60 days
after receipt of the denial of his claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the
-17-
subject matter hereof. In the event of any inconsistency between any provision of this
Agreement and any provision of any plan, employee handbook, personnel manual, program, policy,
arrangement or agreement of Company or any of its subsidiaries or affiliates, the provisions of
this Agreement shall control. This Agreement may be modified or amended only by an instrument in
writing signed by both parties.
12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections he may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following his separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following his separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should he become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the
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Company and Executive dated September 1, 2006 (Prior Agreement), to comply with Section 409A
and to clarify certain other provisions of the Prior Agreement. This amended and restated
Agreement does not preclude the Prior Agreement (as amended and restated by this Agreement) from
qualifying for grandfather treatment under the transition rule set forth in Internal Revenue
Service Revenue Ruling 2008-13 with respect to contracts in effect on February 21, 2008. Each of
the parties hereto has relied on his or its own judgment in entering into this Agreement.
IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE |
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HANESBRANDS INC. |
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/s/ E. Lee Wyatt, Jr. |
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By: |
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/s/ Richard A. Noll |
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Title:
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Chief Executive Officer
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-19-
Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and E. Lee Wyatt, Jr.
(Executive) enter into this Separation
and Release Agreement which was received by Executive on the ___ day of
______, 200__, signed by
Executive on the ______ day of ______, 200__, and is effective on the
______ day of ______, 200__(the
Effective Date). The Effective Date shall be no less than 7 days
after the date signed by
Executive.
WITNESSETH:
WHEREAS, Executive has been employed by the Company as a ______; and
WHEREAS, Executives employment with the Company is terminated as of ______, 200__(the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ___, 2008 (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
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of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and any of its subsidiaries, affiliates, successors, assigns and
past, present and future directors, officers, employees, trustees and shareholders (the
Released Parties) from and against any and all complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, which, at any
time up to and including the date on which Executive signs this Agreement, exists, have
existed, or may arise from any matter whatsoever occurring, including, but not limited
to, any claims arising out of or in any way related to Executives employment with
Company or its subsidiaries or affiliates and the conclusion thereof, which Executive,
or any of Executives heirs, executors, administrators, assigns, affiliates, and agents
ever had, now has or at any time hereafter may have, own or hold against any of the
Released Parties based on any matter existing on or before the date on which Executive
signs this Agreement. Executive acknowledges that in exchange for this release,
Company is providing Executive with total consideration, financial or otherwise, which
exceeds what Executive would have been given without the release. By executing this
Agreement, Executive is waiving, without limitation, all claims (except for the filing
of a charge with an administrative agency) against the Released Parties arising under
federal, state and local labor and antidiscrimination laws, any employment related
claims under the employee Retirement Income Security Act of 1974, as amended, and any
other restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act of |
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1990, as amended, and the North Carolina Equal Employment Practices Act, as amended.
Nothing herein shall release any party from any obligation under this Agreement.
Executive acknowledges and agrees that this release and the covenant not to sue set
forth in paragraph (c) below are essential and material terms of this Agreement and
that, without such release and covenant not to sue, no agreement would have been
reached by the parties and no benefits under the Change in Control Agreement would
have been paid. Executive understands and acknowledges the significance and
consequences of this release and this Agreement. |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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To the maximum extent permitted by law, Executive covenants not to sue or to
institute or cause to be instituted any action in any federal, state, or local agency
or court against any of the Released Parties, including, but not limited to, any of the
claims released this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Executive or any of the Released Parties from filing a charge with an
administrative agency, from instituting any action required to enforce the terms of
this Agreement, or from challenging the validity of this Agreement. In addition,
nothing herein shall be construed to prevent Executive from enforcing |
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any rights Executive may have to recover vested benefits under the Employee
Retirement Income Security Act of 1974, as amended. |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement. |
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(e) |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
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14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE |
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HANESBRANDS INC. |
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By: |
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Title: |
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EX-10.17
Exhibit 10.17
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
10th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
Company), and Kevin W. Oliver (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
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(a) |
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Eligibility for Severance. |
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(i) |
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Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances: |
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(A) |
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Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
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(B) |
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Executive terminates his or her employment at
the request of Company. |
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(ii) |
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Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances: |
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(A) |
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A termination for Cause. For purposes of this
Agreement, Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
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(B) |
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A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
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(C) |
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A termination due to death; |
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(D) |
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A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan); |
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(E) |
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A voluntary termination of employment other
than at the request of Company; |
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(F) |
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A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
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(G) |
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The transfer of Executives employment to a
subsidiary or affiliate of Company with his consent; |
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(H) |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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(I) |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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(iii) |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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(iv) |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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(b) |
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Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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(i) |
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Executive shall be entitled to receive his Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company (including
periods of employment with Sara Lee Corporation) by two; provided, however,
that in no event shall the Severance Period be less than twelve months or more
than twenty-four months. Base Salary shall mean the annual salary in effect
for Executive immediately prior to his Termination Date. At the discretion of
the Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executives target bonus under the Annual Incentive
Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year or
Short Year in which the Termination Date occurs based on actual fiscal
year performance (the Annual Incentive Portion of Severance). In
this Agreement, Short Year means an incentive period of less than 12
months duration occurring immediately subsequent to the Companys exit
from the Sara Lee Corporations controlled group of corporations
(within the meaning of Section 1563(a) of the Code)). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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(B) |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of his service prior to his Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant |
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to the Executives award agreement(s). Executive shall not be eligible for
any new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants,
or any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless he or she elects such coverage within thirty (30) days
following his Termination Date. The premium charged for such retiree medical
coverage may be different (greater) than the premium charged an active employee
for similar coverage; |
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Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated |
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senior executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and ESOPs,
personal accident insurance, travel accident insurance, short and long term
disability insurance, and accidental death and dismemberment insurance,
shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to his annual salary on his Termination Date. |
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Payment of Severance. |
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Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
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That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
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The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary |
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Portion of Severance be paid to Executive later than December 31 of
the second calendar year following the calendar year in which
Executives Termination Date occurs. The payment(s) to be made to
Executive pursuant to this subparagraph (B) are intended to be exempt
from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called two times pay exemption). |
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Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
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Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
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Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(e) |
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Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
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Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
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(a) |
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Eligibility for Change in Control Benefits. |
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(i) |
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Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for |
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Cause, or (C) within twenty-four (24) months following a Change in Control
Executive voluntarily terminates his employment for Good Reason, Executive
shall be entitled to the Change in Control benefits as described in section
3(b) below. |
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Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
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(A) |
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A material adverse change in Executives duties
or responsibilities; |
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(B) |
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A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
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(C) |
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A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
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(D) |
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The failure of any successor to Company to
assume and agree to perform this Agreement; or |
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(E) |
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Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from his or her
office location at the time of the Change in Control. |
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The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of his or her rights with
respect to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of his or her rights with respect
to any circumstances which may constitute Good Reason; provided, however,
that Executive may not rely on any particular action or event described in
clause (A) through (E) above as a basis for terminating his employment for
Good Reason unless he delivers a Notice of Termination based on that action
or event within ninety (90) days after its occurrence and Company has failed
to correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
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(iii) |
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Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
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(A) |
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Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the |
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Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); provided,
however, that the following acquisitions shall not constitute a
Change in Control: |
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1) |
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Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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2) |
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Any acquisition by Company; |
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3) |
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Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
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4) |
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Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
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(B) |
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Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
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1) |
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All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or |
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indirectly (either by remaining outstanding or by being
converted into voting securities of the entity resulting from
such transaction), more than fifty (50) percent of the
combined voting power of the voting securities of the entity
resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
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2) |
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No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
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3) |
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At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
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(C) |
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Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
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(D) |
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When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation |
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by a Person (other than the Board) made for the purpose of opposing a
solicitation by the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation of
proxies or consents by or on behalf of any Person (other than the
Board). |
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(iv) |
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Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
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(b) |
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Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
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(i) |
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In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
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(A) |
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A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
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(B) |
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A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
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(C) |
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A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
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(D) |
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A lump sum payment equal to two times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs (including for this purpose any annual incentive
received from Sara Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution plan in which
Executive is participating at the Termination Date (currently 4%). |
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Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below. |
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(ii) |
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For a period of 24 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance coverages
which insurance coverages shall be provided at the same levels and the same
costs in effect immediately prior to the Change in Control. Beginning on his
Termination Date, Executive shall be eligible to elect continued coverage under
the group medical and dental plan available to similarly situated senior
executives. If Executive elects continuation coverage for medical coverage,
dental coverage or both, he shall pay the entire COBRA premium charged for such
continuation coverage during the CIC Severance Period; provided, however, that
during the CIC Severance Period, Company shall reimburse Executive for that
portion of the COBRA premium paid that exceeds the amount payable by an active
executive of Company for similar coverage, as adjusted from time to time. Such
reimbursement shall be made to Executive on the 20th day of each
calendar month during the CIC Severance Period, or within ten (10) business
days thereafter. The amount eligible for reimbursement under this subparagraph
in any calendar year shall not affect any amounts eligible for reimbursement to
be provided in any other calendar year. In addition, Executives right to
reimbursement hereunder shall not be subject to liquidation or exchange for any
other benefit. Executives right to COBRA continuation coverage under any such
group health plan shall be reduced by the number of months of coverage
otherwise provided pursuant to this subparagraph. The premium charged for any
continuation coverage after the end of the CIC Severance Period shall be
entirely at Executives expense and shall be the actuarially determined cost of
the continuation coverage as determined by an actuary selected by the Company
(in accordance with the requirements under COBRA, to the extent applicable).
Executive shall not be entitled to reimbursement of any portion of the premium
charged for such coverage after the end of the CIC Severance Period.
Executives COBRA continuation coverage shall terminate in accordance with the
COBRA continuation of coverage provisions under Companys group medical and
dental plans. If Executive is eligible for early retirement under the terms of
the Retirement Plan (or would become eligible if the CIC Severance Period is
considered as employment), then, after exhausting any COBRA continuation
coverage under the group medical plan, Executive may elect to participate in
any retiree medical plan available to similarly situated senior executives in
accordance with the terms and conditions of such plan in effect on and after
Executives Termination Date; provided, that such retiree medical coverage
shall not be available to Executive unless he or she elects such coverage
within thirty (30) days following his Termination Date. The premium charged
for such retiree medical coverage may be different from the premium charged an
active employee for similar coverage; |
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(iii) |
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If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be
provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date he
or she would otherwise be eligible to begin receiving benefits under such
plans; |
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(iv) |
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Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
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(c) |
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Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
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(d) |
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Termination for Retirement or Death. If Executives employment is terminated
by reason of his retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
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(e) |
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Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
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(f) |
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Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
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(g) |
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Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executives termination. |
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(h) |
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Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
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(i) |
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Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(j) |
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Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
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(k) |
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Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event |
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Executives parachute payments do not exceed the Threshold, the benefits provided to
such Executive under this Agreement that are classified as parachute payments shall
be reduced such that the value of the Total Payments that Executive is entitled to
receive shall be one dollar ($1) less than the maximum amount which such Executive
may receive without becoming subject to the tax imposed by Code Section 4999, or
which Company may pay without loss of deduction under Code Section 280G(a). For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax, the amounts of such Excise Tax and the amount of any Gross Up Payment,
the following shall apply: |
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(i) |
|
Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
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(ii) |
|
The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
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(iii) |
|
The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
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(iv) |
|
Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
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(v) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section |
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3(j), Company shall reimburse Executive for the full amount necessary to
make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately following Executives
termination of employment and shall be made by Company to Executive within
twenty (20) days of the date he remits the additional taxes as a result of
such adjustment; and |
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(vi) |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion. |
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(l) |
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Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
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(m) |
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Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
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(n) |
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Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing his rights under this section 3. |
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Such reimbursement shall be made within thirty (30) days following final resolution,
in favor of Executive, of the conflict or dispute giving rise to such fees and
expenses. In no event shall Executive be entitled to receive the reimbursements
provided for in this subparagraph if he acts in bad faith or pursues a claim without
merit, or if he fails to prevail in any action instituted by him or Company. |
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(o) |
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Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with
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respect to the processing, review, investigation, approval and payment of severance/Change in
Control benefits, to designated individuals or committees.
6. Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes he or she should have received such benefits. No later than
ninety (90) days after the receipt of the claim, the Committee shall either allow or deny the claim
in writing. A denial of a claim, in whole or in part, shall be written in a manner calculated to
be understood by Executive and shall include the specific reason or reasons for the denial;
specific reference to the pertinent provisions of this Agreement on which the denial is based; a
description of any additional material or information necessary for Executive to perfect the claim
and an explanation of why such material or information is necessary; and an explanation of the
claim review procedure. Executive (or his duly authorized representative) may within sixty 60 days
after receipt of the denial of his claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the
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subject matter hereof. In the event of any inconsistency between any provision of this
Agreement and any provision of any plan, employee handbook, personnel manual, program, policy,
arrangement or agreement of Company or any of its subsidiaries or affiliates, the provisions of
this Agreement shall control. This Agreement may be modified or amended only by an instrument in
writing signed by both parties.
12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections he may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following his separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following his separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should he become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the
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Company and Executive dated September 1, 2006 (Prior Agreement), to comply with Section 409A
and to clarify certain other provisions of the Prior Agreement. This amended and restated
Agreement does not preclude the Prior Agreement (as amended and restated by this Agreement) from
qualifying for grandfather treatment under the transition rule set forth in Internal Revenue
Service Revenue Ruling 2008-13 with respect to contracts in effect on February 21, 2008. Each of
the parties hereto has relied on his or its own judgment in entering into this Agreement.
IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE |
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HANESBRANDS INC. |
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/s/ Kevin W. Oliver |
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By: |
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/s/ Richard A. Noll |
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Title:
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/s/ Chief Executive Officer
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Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and Kevin W. Oliver
(Executive) enter into this Separation
and Release Agreement which was received by Executive on the ___ day of
______, 200__, signed by
Executive on the ______ day of ______, 200__, and is effective on the
______ day of ______, 200__(the
Effective Date). The Effective Date shall be no less than 7 days after
the date signed by
Executive.
WITNESSETH:
WHEREAS, Executive has been employed by the Company as a ______; and
WHEREAS,
Executives employment with the Company is terminated as of ______, 200__(the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ___, 2008 (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
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of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and any of its subsidiaries, affiliates, successors, assigns and
past, present and future directors, officers, employees, trustees and shareholders (the
Released Parties) from and against any and all complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, which, at any
time up to and including the date on which Executive signs this Agreement, exists, have
existed, or may arise from any matter whatsoever occurring, including, but not limited
to, any claims arising out of or in any way related to Executives employment with
Company or its subsidiaries or affiliates and the conclusion thereof, which Executive,
or any of Executives heirs, executors, administrators, assigns, affiliates, and agents
ever had, now has or at any time hereafter may have, own or hold against any of the
Released Parties based on any matter existing on or before the date on which Executive
signs this Agreement. Executive acknowledges that in exchange for this release,
Company is providing Executive with total consideration, financial or otherwise, which
exceeds what Executive would have been given without the release. By executing this
Agreement, Executive is waiving, without limitation, all claims (except for the filing
of a charge with an administrative agency) against the Released Parties arising under
federal, state and local labor and antidiscrimination laws, any employment related
claims under the employee Retirement Income Security Act of 1974, as amended, and any
other restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act of |
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1990, as amended, and the North Carolina Equal Employment Practices Act, as amended.
Nothing herein shall release any party from any obligation under this Agreement.
Executive acknowledges and agrees that this release and the covenant not to sue set
forth in paragraph (c) below are essential and material terms of this Agreement and
that, without such release and covenant not to sue, no agreement would have been
reached by the parties and no benefits under the Change in Control Agreement would
have been paid. Executive understands and acknowledges the significance and
consequences of this release and this Agreement. |
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(b) |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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(c) |
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To the maximum extent permitted by law, Executive covenants not to sue or to
institute or cause to be instituted any action in any federal, state, or local agency
or court against any of the Released Parties, including, but not limited to, any of the
claims released this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Executive or any of the Released Parties from filing a charge with an
administrative agency, from instituting any action required to enforce the terms of
this Agreement, or from challenging the validity of this Agreement. In addition,
nothing herein shall be construed to prevent Executive from enforcing |
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any rights Executive may have to recover vested benefits under the Employee
Retirement Income Security Act of 1974, as amended. |
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(d) |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement. |
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(e) |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
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14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE |
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HANESBRANDS INC. |
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By: |
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Title:
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EX-10.18
Exhibit 10.18
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
17th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
Company), and Joia M. Johnson (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to her duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
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Eligibility for Severance. |
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Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if her employment terminates under one of the following
circumstances: |
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Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
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Executive terminates her employment at the
request of Company. |
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Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if her employment terminates under any of the
following circumstances: |
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A termination for Cause. For purposes of this
Agreement, Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
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A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
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A termination due to death; |
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A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan); |
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A voluntary termination of employment other
than at the request of Company; |
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A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
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The transfer of Executives employment to a
subsidiary or affiliate of Company with her consent; |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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Executive shall be entitled to receive her Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company (including
periods of employment with Sara Lee Corporation) by two; provided, however,
that in no event shall the Severance Period be less than twelve months or more
than twenty-four months. Base Salary shall mean the annual salary in effect
for Executive immediately prior to her Termination Date. At the discretion of
the Committee, Executive may receive an additional salary portion in an amount
equal to as much as 100% of Executives target bonus under the Annual Incentive
Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year or
Short Year in which the Termination Date occurs based on actual fiscal
year performance (the Annual Incentive Portion of Severance). In
this Agreement, Short Year means an incentive period of less than 12
months duration occurring immediately subsequent to the Companys exit
from the Sara Lee Corporations controlled group of corporations
(within the meaning of Section 1563(a) of the Code)). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of her service prior to her Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant |
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to the Executives award agreement(s). Executive shall not be eligible for
any new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants,
or any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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Beginning on her Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless she elects such coverage within thirty (30) days following her
Termination Date. The premium charged for such retiree medical coverage may be
different (greater) than the premium charged an active employee for similar
coverage; |
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Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated |
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senior executives including but not limited to, qualified pension plans,
stock purchase plans, matching grant programs, 401(k) plans and ESOPs,
personal accident insurance, travel accident insurance, short and long term
disability insurance, and accidental death and dismemberment insurance,
shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to her annual salary on her Termination Date. |
|
(c) |
|
Payment of Severance. |
|
(i) |
|
Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
|
(A) |
|
That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
|
|
(B) |
|
The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary |
-5-
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|
|
Portion of Severance be paid to Executive later than December 31 of
the second calendar year following the calendar year in which
Executives Termination Date occurs. The payment(s) to be made to
Executive pursuant to this subparagraph (B) are intended to be exempt
from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(9)(iii) for separation pay
plans (i.e., the so-called two times pay exemption). |
|
(ii) |
|
Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
|
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(iii) |
|
Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
|
(d) |
|
Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
|
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(e) |
|
Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
|
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(f) |
|
Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
|
(a) |
|
Eligibility for Change in Control Benefits. |
|
(i) |
|
Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for |
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|
|
Cause, or (C) within twenty-four (24) months following a Change in Control
Executive voluntarily terminates her employment for Good Reason, Executive
shall be entitled to the Change in Control benefits as described in section
3(b) below. |
|
(ii) |
|
Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
|
(A) |
|
A material adverse change in Executives duties
or responsibilities; |
|
|
(B) |
|
A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
|
|
(C) |
|
A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
|
|
(D) |
|
The failure of any successor to Company to
assume and agree to perform this Agreement; or |
|
|
(E) |
|
Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from her office
location at the time of the Change in Control. |
|
|
|
The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of her rights with respect
to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of her rights with respect to any
circumstances which may constitute Good Reason; provided, however, that
Executive may not rely on any particular action or event described in clause
(A) through (E) above as a basis for terminating her employment for Good
Reason unless she delivers a Notice of Termination based on that action or
event within ninety (90) days after its occurrence and Company has failed to
correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
|
|
(iii) |
|
Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
|
(A) |
|
Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the |
-7-
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|
|
Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); provided,
however, that the following acquisitions shall not constitute a
Change in Control: |
|
1) |
|
Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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|
2) |
|
Any acquisition by Company; |
|
|
3) |
|
Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
|
|
4) |
|
Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
|
(B) |
|
Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
|
1) |
|
All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or |
-8-
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|
|
indirectly (either by remaining outstanding or by being
converted into voting securities of the entity resulting from
such transaction), more than fifty (50) percent of the
combined voting power of the voting securities of the entity
resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
|
2) |
|
No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
|
|
3) |
|
At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
|
(C) |
|
Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
|
|
(D) |
|
When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation |
-9-
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|
|
by a Person (other than the Board) made for the purpose of opposing a
solicitation by the Board with respect to the election or removal of
directors; or (2) any other actual or threatened solicitation of
proxies or consents by or on behalf of any Person (other than the
Board). |
|
(iv) |
|
Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
|
(b) |
|
Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
|
(i) |
|
In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
|
(A) |
|
A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
|
|
(B) |
|
A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
|
|
(C) |
|
A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
|
|
(D) |
|
A lump sum payment equal to two times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs (including for this purpose any annual incentive
received from Sara Lee Corporation); and (3) an amount equal to the
Company matching contribution to the defined contribution plan in which
Executive is participating at the Termination Date (currently 4%). |
|
|
|
Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below. |
-10-
|
(ii) |
|
For a period of 24 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance coverages
which insurance coverages shall be provided at the same levels and the same
costs in effect immediately prior to the Change in Control. Beginning on her
Termination Date, Executive shall be eligible to elect continued coverage under
the group medical and dental plan available to similarly situated senior
executives. If Executive elects continuation coverage for medical coverage,
dental coverage or both, she shall pay the entire COBRA premium charged for
such continuation coverage during the CIC Severance Period; provided, however,
that during the CIC Severance Period, Company shall reimburse Executive for
that portion of the COBRA premium paid that exceeds the amount payable by an
active executive of Company for similar coverage, as adjusted from time to
time. Such reimbursement shall be made to Executive on the 20th day
of each calendar month during the CIC Severance Period, or within ten (10)
business days thereafter. The amount eligible for reimbursement under this
subparagraph in any calendar year shall not affect any amounts eligible for
reimbursement to be provided in any other calendar year. In addition,
Executives right to reimbursement hereunder shall not be subject to
liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of coverage otherwise provided pursuant to this subparagraph.
The premium charged for any continuation coverage after the end of the CIC
Severance Period shall be entirely at Executives expense and shall be the
actuarially determined cost of the continuation coverage as determined by an
actuary selected by the Company (in accordance with the requirements under
COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the CIC Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the CIC Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless she elects such coverage within thirty (30) days following her
Termination Date. The premium charged for such retiree medical coverage may be
different from the premium charged an active employee for similar coverage; |
-11-
|
(iii) |
|
If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits she would have received had she been fully vested will
be provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical plan,
additional years of age and service credits equivalent to the length of the CIC
Severance Period shall be included. However, Executive will not be eligible to
begin receiving any retirement benefits under any such plans until the date she
would otherwise be eligible to begin receiving benefits under such plans; |
|
|
(iv) |
|
Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
|
(c) |
|
Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive her Base Salary
through the Termination Date, at which time her benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
|
|
(d) |
|
Termination for Retirement or Death. If Executives employment is terminated
by reason of her retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
|
|
(e) |
|
Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive her full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
|
|
(f) |
|
Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
-12-
|
(g) |
|
Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall be paid in accordance with
the terms of such plan following Executives termination. |
|
|
(h) |
|
Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
|
|
(i) |
|
Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
|
|
(j) |
|
Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
|
|
(k) |
|
Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event |
-13-
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|
|
Executives parachute payments do not exceed the Threshold, the benefits provided to
such Executive under this Agreement that are classified as parachute payments shall
be reduced such that the value of the Total Payments that Executive is entitled to
receive shall be one dollar ($1) less than the maximum amount which such Executive
may receive without becoming subject to the tax imposed by Code Section 4999, or
which Company may pay without loss of deduction under Code Section 280G(a). For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax, the amounts of such Excise Tax and the amount of any Gross Up Payment,
the following shall apply: |
|
(i) |
|
Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
|
|
(ii) |
|
The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
|
|
(iii) |
|
The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
|
|
(iv) |
|
Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
|
|
(v) |
|
In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section |
-14-
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|
|
3(j), Company shall reimburse Executive for the full amount necessary to
make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately following Executives
termination of employment and shall be made by Company to Executive within
twenty (20) days of the date she remits the additional taxes as a result of
such adjustment; and |
|
(vi) |
|
In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to her by such tax
authority for the period she held such portion. |
|
(l) |
|
Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
|
|
(m) |
|
Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
|
|
(n) |
|
Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing her rights under this section 3.
|
-15-
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|
Such reimbursement shall be made within thirty (30) days following final resolution,
in favor of Executive, of the conflict or dispute giving rise to such fees and
expenses. In no event shall Executive be entitled to receive the reimbursements
provided for in this subparagraph if she acts in bad faith or pursues a claim
without merit, or if she fails to prevail in any action instituted by him or
Company. |
|
(o) |
|
Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of her employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and her beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with
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respect to the processing, review, investigation, approval and payment of severance/Change in
Control benefits, to designated individuals or committees.
6. Claims Procedure. If Executive believes that she is entitled to receive severance benefits
under this Agreement, she may file a claim in writing with the Committee within ninety (90) days
after the date such Executive believes she should have received such benefits. No later than
ninety (90) days after the receipt of the claim, the Committee shall either allow or deny the claim
in writing. A denial of a claim, in whole or in part, shall be written in a manner calculated to
be understood by Executive and shall include the specific reason or reasons for the denial;
specific reference to the pertinent provisions of this Agreement on which the denial is based; a
description of any additional material or information necessary for Executive to perfect the claim
and an explanation of why such material or information is necessary; and an explanation of the
claim review procedure. Executive (or her duly authorized representative) may within sixty 60 days
after receipt of the denial of her claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at her home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the
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subject matter hereof. In the event of any inconsistency between any provision of this
Agreement and any provision of any plan, employee handbook, personnel manual, program, policy,
arrangement or agreement of Company or any of its subsidiaries or affiliates, the provisions of
this Agreement shall control. This Agreement may be modified or amended only by an instrument in
writing signed by both parties.
12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections she may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following her separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following her separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should she become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the
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Company and Executive dated March 5, 2007 (Prior Agreement), to comply with Section 409A and
to clarify certain other provisions of the Prior Agreement. This amended and restated Agreement
does not preclude the Prior Agreement (as amended and restated by this Agreement) from qualifying
for grandfather treatment under the transition rule set forth in Internal Revenue Service Revenue
Ruling 2008-13 with respect to contracts in effect on February 21, 2008. Each of the parties
hereto has relied on her or its own judgment in entering into this Agreement.
IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE |
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HANESBRANDS INC. |
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/s/ Joia M. Johnson |
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By: |
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/s/ Richard A. Noll |
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Title:
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Chief Executive Officer
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Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and Joia M. Johnson (Executive) enter into this Separation
and Release Agreement which was received by Executive on the
______ day of ______, 200__, signed by
Executive on the ______ day of
______, 200__, and is effective
on the ______ day of
______, 200__ (the
Effective Date). The Effective Date shall be no less than 7 days after the date signed by
Executive.
WITNESSETH:
WHEREAS, Executive has been employed by the Company as a ______; and
WHEREAS,
Executives employment with the Company is terminated as of ______, 200_____ (the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ______, 2008 (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
A-2
of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and any of its subsidiaries, affiliates, successors, assigns and
past, present and future directors, officers, employees, trustees and shareholders (the
Released Parties) from and against any and all complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown,
suspected or unsuspected, foreseen or unforeseen, matured or unmatured, which, at any
time up to and including the date on which Executive signs this Agreement, exists, have
existed, or may arise from any matter whatsoever occurring, including, but not limited
to, any claims arising out of or in any way related to Executives employment with
Company or its subsidiaries or affiliates and the conclusion thereof, which Executive,
or any of Executives heirs, executors, administrators, assigns, affiliates, and agents
ever had, now has or at any time hereafter may have, own or hold against any of the
Released Parties based on any matter existing on or before the date on which Executive
signs this Agreement. Executive acknowledges that in exchange for this release,
Company is providing Executive with total consideration, financial or otherwise, which
exceeds what Executive would have been given without the release. By executing this
Agreement, Executive is waiving, without limitation, all claims (except for the filing
of a charge with an administrative agency) against the Released Parties arising under
federal, state and local labor and antidiscrimination laws, any employment related
claims under the employee Retirement Income Security Act of 1974, as amended, and any
other restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act of |
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1990, as amended, and the North Carolina Equal Employment Practices Act, as amended.
Nothing herein shall release any party from any obligation under this Agreement.
Executive acknowledges and agrees that this release and the covenant not to sue set
forth in paragraph (c) below are essential and material terms of this Agreement and
that, without such release and covenant not to sue, no agreement would have been
reached by the parties and no benefits under the Change in Control Agreement would
have been paid. Executive understands and acknowledges the significance and
consequences of this release and this Agreement. |
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(b) |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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(c) |
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To the maximum extent permitted by law, Executive covenants not to sue or to
institute or cause to be instituted any action in any federal, state, or local agency
or court against any of the Released Parties, including, but not limited to, any of the
claims released this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent Executive or any of the Released Parties from filing a charge with an
administrative agency, from instituting any action required to enforce the terms of
this Agreement, or from challenging the validity of this Agreement. In addition,
nothing herein shall be construed to prevent Executive from enforcing |
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any rights Executive may have to recover vested benefits under the Employee
Retirement Income Security Act of 1974, as amended. |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are
released in this paragraph 10; (iv) the same have not been transferred or assigned or
caused to be transferred or assigned to any other person, firm, corporation or other
legal entity; and (v) Executive has the full right and power to grant, execute, and
deliver the releases, undertakings, and agreements contained in this Agreement. |
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(e) |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
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14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary or any entity
which at any time whether by merger, purchase, or otherwise acquires all or substantially all of
the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE |
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HANESBRANDS INC. |
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By: |
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Title: |
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EX-10.19
Exhibit 10.19
SEVERANCE/CHANGE IN CONTROL AGREEMENT
THIS SEVERANCE/CHANGE IN CONTROL AGREEMENT (the Agreement), is made and entered into this
18th day of December 2008, by and between Hanesbrands Inc., a Maryland corporation (the
Company), and William J. Nictakis (Executive).
WHEREAS, Executive is an employee of Company, Company desires to foster the continuous
employment of Executive and has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Executive to his duties free from distractions
which could arise in anticipation of an involuntary termination of employment or a Change in
Control of Company;
NOW, THEREFORE, in consideration of the mutual agreements herein set forth, Company and
Executive agree as follows:
1. Term and Nature of Agreement. This Agreement shall commence on the date it is fully
executed (Execution Date) by all parties and shall continue in effect unless the Company gives at
least eighteen (18) months prior written notice that this Agreement will not be renewed. In the
event of such notice, this Agreement will expire on the next anniversary of the Execution Date that
is at least eighteen (18) months after the date of such notice. Notwithstanding the foregoing, if
a Change in Control occurs during any term of this Agreement, the term of this Agreement shall be
extended automatically for a period of twenty-four (24) months after the end of the month in which
the Change in Control occurs. Except to the extent otherwise provided, the parties intend for this
Agreement to be construed and enforced as an unfunded welfare benefit plan under the Employee
Retirement Income Security Act of 1974, as amended (ERISA), including without limitation the
jurisdictional provisions of ERISA.
2. Involuntary Termination Benefits. Executive shall be eligible for severance benefits upon
an involuntary termination of employment under the terms and conditions specified in this section
2.
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Eligibility for Severance. |
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Eligible Terminations. Subject to subparagraph (a)(ii) below,
Executive shall be eligible for severance payments and benefits under this
section 2 if his employment terminates under one of the following
circumstances: |
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Executives employment is terminated
involuntarily without Cause (defined in subparagraph 2(a)(ii)(A)); or |
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Executive terminates his employment at the
request of Company. |
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Ineligible Terminations. Notwithstanding subparagraph (a)(i)
next above, Executive shall not be eligible for any severance payments or
benefits under this section 2 if his employment terminates under any of the
following circumstances: |
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A termination for Cause. For purposes of this
Agreement, Cause means Executive has been convicted of (or pled
guilty or no contest to) a felony or any crime involving fraud,
embezzlement, theft, misrepresentation of financial impropriety; has
willfully engaged in misconduct resulting in material harm to Company;
has willfully failed to substantially perform duties after written
notice; or is in willful violation of Company policies resulting in
material harm to Company; |
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A termination as the result of Disability. For
purposes of this Agreement Disability shall mean a determination
under Companys disability plan covering Executive that Executive is
disabled; |
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A termination due to death; |
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A termination due to Retirement. For purposes
of this Agreement Retirement shall mean Executives voluntary
termination of employment on or after Executives attainment of the
normal retirement age as defined in the Hanesbrands Inc. Pension and
Retirement Plan (the Retirement Plan); |
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A voluntary termination of employment other
than at the request of Company; |
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A termination following which Executive is
immediately offered and accepts new employment with Company, or becomes
a non-executive member of the Board; |
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The transfer of Executives employment to a
subsidiary or affiliate of Company with his consent; |
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A termination of employment that qualifies
Executive to receive severance payments or benefits under section 3
below following a Change in Control; or |
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Any other termination of employment under
circumstances not described in subparagraph 2(a)(i). |
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Characterization of Termination. The characterization of
Executives termination shall be made by the Committee (as defined in section 5
below) which determination shall be final and binding. |
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Termination Date. For purposes of this section 2, Executives
Termination Date shall mean the date specified in the separation and release
agreement described under section 2(e) below. |
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(b) |
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Severance Benefits Payable. If Executive is terminated under circumstances
described in subparagraph 2(a)(i), and not described in subparagraph 2(a)(ii), then |
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in lieu of any benefits payable under any other severance plan of the Company of any
type and in consideration of the separation and release agreement and the covenants
contained herein, the following shall apply: |
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(i) |
|
Executive shall be entitled to receive his Base Salary (the
Salary Portion of Severance) during the Severance Period, payable as
provided in section 2(c). The Severance Period shall mean the number of
months determined by multiplying the number of Executives full years of
employment with Company or any subsidiary or affiliate of Company by two;
provided, however, that in no event shall the Severance Period be less than
twelve months or more than twenty-four months. Base Salary shall mean the
annual salary in effect for Executive immediately prior to his Termination
Date. At the discretion of the Committee, Executive may receive an additional
salary portion in an amount equal to as much as 100% of Executives target
bonus under the Annual Incentive Plan. |
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Executive shall receive a pro-rata amount (determined based upon the number
of days from the first day of the Companys current fiscal year to
Executives Termination Date divided by the total number of days in the
applicable performance period and based on actual performance and
achievement of any performance goals) of: |
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(A) |
|
The annual incentive, if any, payable under the
Annual Incentive Plan in effect with respect to the fiscal year in
which the Termination Date occurs based on actual fiscal year
performance (the Annual Incentive Portion of Severance). Annual
Incentive Plan means the Hanesbrands Inc. annual incentive plan in
which Executive participates as of the Termination Date; and |
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(B) |
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The long-term incentive payable under the
Omnibus Plan in effect on Executives Termination Date for any
performance period or cycle that is at least fifty (50) percent
completed prior to Executives Termination Date and which relates to
the period of his service prior to his Termination Date. The Omnibus
Plan means the Hanesbrands Inc. Omnibus Incentive Plan of 2006, as
amended from time to time, and any successor plan or plans. The
long-term incentive described in this section (Long-Term Cash
Incentive Plan) includes cash long-term incentives, but does not
include stock options, RSUs, or other equity awards. |
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Such amounts shall be payable as provided in section 2(c). Treatment of
stock options, RSUs, or other equity awards shall be determined pursuant to
the Executives award agreement(s). Executive shall not be eligible for any
new Annual Incentive Plan grants, Long-Term Cash Incentive Plan grants, or
any other grants of stock options, RSUs, or other equity awards under the
Omnibus Plan during the Severance Period. |
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(ii) |
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Beginning on his Termination Date, Executive shall be eligible
to elect continued coverage under the group medical and dental plan available
to similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the entire
COBRA premium charged for such continuation coverage during the Severance
Period; provided, however, that during the Severance Period Company shall
reimburse Executive for that portion of the COBRA premium paid that exceeds the
amount payable by an active executive of Company for similar coverage, as
adjusted from time to time. Such reimbursement shall be made to Executive on
the 20th day of each calendar month during the Severance Period, or
within ten (10) business days thereafter. The amount eligible for
reimbursement under this subparagraph in any calendar year shall not affect any
amounts eligible for reimbursement to be provided in any other calendar year.
In addition, Executives right to reimbursement hereunder shall not be subject
to liquidation or exchange for any other benefit. Executives right to COBRA
continuation coverage under any such group health plan shall be reduced by the
number of months of medical and dental coverage otherwise provided pursuant to
this subparagraph. The premium charged for any continuation coverage after the
end of the Severance Period shall be entirely at Executives expense and shall
be the actuarially determined cost of the continuation coverage as determined
by an actuary selected by the Company (in accordance with the requirements
under COBRA, to the extent applicable). Executive shall not be entitled to
reimbursement of any portion of the premium charged for such coverage after the
end of the Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible for
early retirement under the terms of the Retirement Plan (or would become
eligible if the Severance Period is considered as employment), then, after
exhausting any COBRA continuation coverage under the group medical plan,
Executive may elect to participate in any retiree medical plan available to
similarly situated senior executives in accordance with the terms and
conditions of such plan in effect on and after Executives Termination Date;
provided, that such retiree medical coverage shall not be available to
Executive unless he or she elects such coverage within thirty (30) days
following his Termination Date. The premium charged for such retiree medical
coverage may be different (greater) than the premium charged an active employee
for similar coverage; |
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(iii) |
|
Except as otherwise provided herein or in the applicable plan,
participation in all other Company plans available to similarly situated senior
executives including but not limited to, qualified pension plans, stock
purchase plans, matching grant programs, 401(k) plans and ESOPs, personal
accident insurance, travel accident insurance, short and long term disability
insurance, and accidental death and dismemberment insurance, |
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shall cease on Executives Termination Date. During the Severance Period,
Company shall continue to maintain life insurance covering Executive under
Companys Executive Life Insurance Plan in accordance with its terms. If
Executive is eligible for early retirement or becomes eligible for early
retirement during the Severance Period, then Company will continue to pay
the premiums (or prepay the entire premium) so that Executive has a paid-up
life insurance benefit equal to his annual salary on his Termination Date. |
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(c) |
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Payment of Severance. |
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(i) |
|
Salary Portion. The Salary Portion of Severance shall be paid
as follows: |
|
(A) |
|
That portion of the Salary Portion of Severance
that exceeds the Separation Pay Limit, if any, shall be paid to
Executive in a lump sum payment as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. The Separation Pay Limit shall mean two (2) times the
lesser of (1) the sum of Executives annualized compensation based upon
the annual rate of pay for services provided to Company for the
calendar year immediately preceding the calendar year in which the
Termination Date occurs (adjusted for any increase during that calendar
year that was expected to continue indefinitely if Executive had not
terminated employment); and (2) the maximum dollar amount of
compensation that may be taken into account under a tax-qualified
retirement plan under Code Section 401(a)(17) for the year in which the
Termination Date occurs. The payment to be made to Executive pursuant
to this subparagraph (A) is intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation
Section 1.409A-(b)(4) for short-term deferrals. |
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(B) |
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The remaining portion of the Salary Portion of
Severance shall be paid during the Severance Period in accordance with
Companys payroll schedule, unless the Committee shall elect to pay the
remaining Salary Portion of Severance in a lump sum payment or a
combination of regular payments and a lump sum payment. Any lump sum
payment shall be paid to Executive as soon as practicable following the
Termination Date, but in no event later than the fifteenth day of the
third month after the date of the termination of Executives
employment. Notwithstanding the foregoing, in no event shall such
remaining portion of the Salary Portion of Severance be paid to
Executive later than December 31 of the second calendar year following
the calendar year in which Executives Termination Date occurs. The
payments(s) to be made to Executive pursuant to this subparagraph (B)
are intended to be |
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exempt from Code Section 409A (as defined in section 15) under the
exemption found in Regulation Section 1.409A-(b)(9)(iii) for
separation pay plans (i.e., the so-called two times pay exemption). |
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(ii) |
|
Incentive Portion. The Annual Incentive Portion of Severance,
if any, shall be paid in cash on the same date the active participants under
the Annual Incentive Plan are paid. The Long-Term Cash Incentive Plan payout,
if any, shall be paid in the same form and on the same date the active
participants under the Omnibus Plan are paid. |
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(iii) |
|
Withholding. All payments hereunder shall be reduced by such
amount as Company (or any subsidiary or affiliate of Company) may be required
under all applicable federal, state, local or other laws or regulations to
withhold or pay over with respect to such payment. |
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(d) |
|
Termination of Benefits. Notwithstanding any provisions in this Agreement to
the contrary, all rights to receive or continue to receive severance payments and
benefits under this section 2 shall cease on the earliest of: (i) the date Executive
breaches any of the covenants in the separation and release agreement described in
section 2(e); or (ii) the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(e) |
|
Separation and Release Agreement. No benefits under this section 2 shall be
payable to Executive unless Executive and Company have executed a separation and
release agreement within forty-five (45) days following the Termination Date and the
payment of severance benefits under this section 2 shall be subject to the terms and
conditions of the separation and release agreement. |
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(f) |
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Death of Executive. In the event that Executive shall die prior to the payment
in full of any benefits described above as payable to Executive for Involuntary
Termination, payments of such benefits shall cease on the date of Executives death. |
3. Change in Control Benefits.
|
(a) |
|
Eligibility for Change in Control Benefits. |
|
(i) |
|
Eligible Terminations. If (A) within three (3) months
preceding a Change in Control, the Executives employment is terminated by the
Company at the request of a third party in contemplation of a Change in
Control, (B) within twenty-four (24) months following a Change in Control,
Executives employment is terminated by Company other than on account of
Executives death, disability or retirement and other than for Cause, or (C)
within twenty-four (24) months following a Change in Control Executive
voluntarily terminates his employment for Good Reason, Executive shall be
entitled to the Change in Control benefits as described in section 3(b) below. |
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(ii) |
|
Good Reason. For purposes of this section 3, Good Reason
means the occurrence of any one or more of the following (without Executives
written consent after a Change in Control): |
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(A) |
|
A material adverse change in Executives duties
or responsibilities; |
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(B) |
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A reduction in Executives annual base salary
except any reduction of not more than ten (10) percent; |
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(C) |
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A material reduction in Executives level of
participation in any of Companys short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices or arrangements in which Executive participates except for
any reduction applicable to all senior executives; |
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(D) |
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The failure of any successor to Company to
assume and agree to perform this Agreement; or |
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(E) |
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Companys requiring Executive to be based at an
office location which is at least fifty (50) miles from his office
location at the time of the Change in Control. |
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The existence of Good Reason shall not be affected by Executives temporary
incapacity due to physical or mental illness not constituting a Disability.
Executives retirement shall constitute a waiver of his rights with respect
to any circumstance constituting Good Reason. Executives continued
employment shall not constitute a waiver of his rights with respect to any
circumstances which may constitute Good Reason; provided, however, that
Executive may not rely on any particular action or event described in clause
(A) through (E) above as a basis for terminating his employment for Good
Reason unless he delivers a Notice of Termination based on that action or
event within ninety (90) days after its occurrence and Company has failed to
correct the circumstances cited by Executive as constituting Good Reason
within thirty (30) days of receiving the Notice of Termination. |
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(iii) |
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Change in Control. For purposes of this Agreement, a Change
in Control will occur: |
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(A) |
|
Upon the acquisition by any individual, entity
or group, including any Person (as defined in the United States
Securities Exchange Act of 1934, as amended (the Exchange Act)), of
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of twenty (20) percent or more
of the combined voting power of the then outstanding capital stock of
Company that by its terms may be voted on all matters submitted to
stockholders of Company generally (Voting Stock); |
-7-
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provided, however, that the following acquisitions shall not
constitute a Change in Control: |
|
1) |
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Any acquisition directly from
Company (excluding any acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities unless such outstanding
convertible or exchangeable securities were acquired directly
from Company); |
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2) |
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Any acquisition by Company; |
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3) |
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Any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by
Company or any corporation controlled by Company; or |
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4) |
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Any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation involving Company, if, immediately after such
reorganization, merger or consolidation, each of the conditions
described in clauses (1), (2) and (3) of subparagraph
3(a)(iii)(B) below shall be satisfied; and provided further
that, for purposes of clause (2) immediately above, if (i) any
Person (other than Company or any employee benefit plan (or
related trust) sponsored or maintained by Company or any
corporation controlled by Company) shall become the beneficial
owner of twenty (20) percent or more of the Voting Stock by
reason of an acquisition of Voting Stock by Company, and (ii)
such Person shall, after such acquisition by Company, become the
beneficial owner of any additional shares of the Voting Stock
and such beneficial ownership is publicly announced, then such
additional beneficial ownership shall constitute a Change in
Control; or |
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(B) |
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Upon the consummation of a reorganization,
merger or consolidation of Company, or a sale, lease, exchange or other
transfer of all or substantially all of the assets of Company;
excluding, however, any such reorganization, merger, consolidation,
sale, lease, exchange or other transfer with respect to which,
immediately after consummation of such transaction: |
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1) |
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All or substantially all of the
beneficial owners of the Voting Stock of Company outstanding
immediately prior to such transaction continue to beneficially
own, directly or indirectly (either by remaining outstanding or
by being converted into voting securities of the entity
resulting from such transaction), more than fifty (50) percent
of the combined voting power of the voting securities of the
entity |
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resulting from such transaction (including, without
limitation, Company or an entity which as a result of such
transaction owns Company or all or substantially all of
Companys property or assets, directly or indirectly) (the
Resulting Entity) outstanding immediately after such
transaction, in substantially the same proportions relative
to each other as their ownership immediately prior to such
transaction; and |
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2) |
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No Person (other than any Person
that beneficially owned, immediately prior to such
reorganization, merger, consolidation, sale or other
disposition, directly or indirectly, Voting Stock representing
twenty (20) percent or more of the combined voting power of
Companys then outstanding securities) beneficially owns,
directly or indirectly, twenty (20) percent or more of the
combined voting power of the then outstanding securities of the
Resulting Entity; and |
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3) |
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At least a majority of the
members of the board of directors of the entity resulting from
such transaction were members of the board of directors of
Company (the Board) at the time of the execution of the
initial agreement or action of the Board authorizing such
reorganization, merger, consolidation, sale or other
disposition; or |
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(C) |
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Upon the consummation of a plan of complete
liquidation or dissolution of Company; or |
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(D) |
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When the Initial Directors cease for any reason
to constitute at least a majority of the Board. For this purpose, an
Initial Director shall mean those individuals serving as the
directors of Company immediately after Company ceased to be
wholly-owned by Sara Lee Corporation; provided, however, that any
individual who becomes a director of Company at or after the first
annual meeting of stockholders of Company whose election, or nomination
for election by the Companys stockholders, was approved by the vote of
at least a majority of the Initial Directors then comprising the Board
(or by the nominating committee of the Board, if such committee is
comprised of Initial Directors and has such authority) shall be deemed
to have been an Initial Director; and provided further, that no
individual shall be deemed to be an Initial Director if such individual
initially was elected as a director of Company as a result of: (1) an
actual or threatened solicitation by a Person (other than the Board)
made for the purpose of opposing a solicitation by the Board with
respect to the election or removal of directors; or (2) any other
actual or threatened |
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solicitation of proxies or consents by or on behalf of any Person
(other than the Board). |
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(iv) |
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Termination Date. For purposes of this section 3, Termination
Date shall mean the date specified in the Notice of Termination as the date on
which the conditions giving rise to Executives termination were first met. |
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(b) |
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Change in Control Benefits. In the event Executive becomes entitled to receive
benefits under this section 3, the following shall apply: |
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(i) |
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In consideration of Executives covenant in section 4 below,
Executive shall be entitled to receive the following amounts, payable as
provided in section 3(j): |
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(A) |
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A lump sum payment equal to the unpaid portion
of Executives annual Base Salary and vacation accrued through the
Termination Date; |
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(B) |
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A lump sum payment equal to Executives
prorated Annual Incentive Plan payment (as determined in accordance
with subparagraph 2(b)(ii)(A) above); |
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(C) |
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A lump sum payment equal to Executives
prorated Long-Term Cash Incentive Plan payment (as determined in
accordance with subparagraph 2(b)(ii)(B) above); and |
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(D) |
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A lump sum payment equal to two times the sum
of (1) Executives annual Base Salary; and (2) the greater of (i)
Executives target annual incentive (as defined in the Annual Incentive
Plan) for the year in which the Change in Control occurs and (ii)
Executives average annual incentive calculated over the three (3)
fiscal years immediately preceding the year in which the Change in
Control occurs; and (3) an amount equal to the Company matching
contribution to the defined contribution plan in which Executive is
participating at the Termination Date (currently 4%). |
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Treatment of stock options, RSUs, or other equity awards shall be determined
pursuant to the Executives award agreement(s). Executive shall not be
eligible for any new Annual Incentive Plan grants, Long-Term Cash Incentive
Plan grants, or any other grants of stock options, RSUs, or other equity
awards under the Omnibus Plan with respect to the CIC Severance Period as
defined immediately below. |
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(ii) |
|
For a period of 24 months following Executives Termination
Date (the CIC Severance Period), Executive shall have the right to elect
continuation of the life insurance, personal accident insurance, travel
accident insurance and accidental death and dismemberment insurance |
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coverages which insurance coverages shall be provided at the same levels and
the same costs in effect immediately prior to the Change in Control.
Beginning on his Termination Date, Executive shall be eligible to elect
continued coverage under the group medical and dental plan available to
similarly situated senior executives. If Executive elects continuation
coverage for medical coverage, dental coverage or both, he shall pay the
entire COBRA premium charged for such continuation coverage during the CIC
Severance Period; provided, however, that during the CIC Severance Period,
Company shall reimburse Executive for that portion of the COBRA premium paid
that exceeds the amount payable by an active executive of Company for
similar coverage, as adjusted from time to time. Such reimbursement shall
be made to Executive on the 20th day of each calendar month
during the CIC Severance Period, or within ten (10) business days
thereafter. The amount eligible for reimbursement under this subparagraph
in any calendar year shall not affect any amounts eligible for reimbursement
to be provided in any other calendar year. In addition, Executives right
to reimbursement hereunder shall not be subject to liquidation or exchange
for any other benefit. Executives right to COBRA continuation coverage
under any such group health plan shall be reduced by the number of months of
coverage otherwise provided pursuant to this subparagraph. The premium
charged for any continuation coverage after the end of the CIC Severance
Period shall be entirely at Executives expense and shall be the actuarially
determined cost of the continuation coverage as determined by an actuary
selected by the Company (in accordance with the requirements under COBRA, to
the extent applicable). Executive shall not be entitled to reimbursement of
any portion of the premium charged for such coverage after the end of the
CIC Severance Period. Executives COBRA continuation coverage shall
terminate in accordance with the COBRA continuation of coverage provisions
under Companys group medical and dental plans. If Executive is eligible
for early retirement under the terms of the Retirement Plan (or would become
eligible if the CIC Severance Period is considered as employment), then,
after exhausting any COBRA continuation coverage under the group medical
plan, Executive may elect to participate in any retiree medical plan
available to similarly situated senior executives in accordance with the
terms and conditions of such plan in effect on and after Executives
Termination Date; provided, that such retiree medical coverage shall not be
available to Executive unless he or she elects such coverage within thirty
(30) days following his Termination Date. The premium charged for such
retiree medical coverage may be different from the premium charged an active
employee for similar coverage; |
|
(iii) |
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If the aggregate benefits accrued by Executive as of the
Termination Date under the savings and retirement plans sponsored by Company
are not fully vested pursuant to the terms of the applicable plan(s), the
difference between the benefits Executive is entitled to receive under such
plans and the benefits he would have received had he been fully vested will be |
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provided to Executive under the Hanesbrands Inc. Supplemental Employee
Retirement Plan (the Supplemental Plan). In addition, for purposes of
determining Executives benefits under the Supplemental Plan and Executives
right to post-retirement medical benefits under Companys retiree medical
plan, additional years of age and service credits equivalent to the length
of the CIC Severance Period shall be included. However, Executive will not
be eligible to begin receiving any retirement benefits under any such plans
until the date he or she would otherwise be eligible to begin receiving
benefits under such plans; |
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(iv) |
|
Except as otherwise provided herein or in the applicable plan,
participation in all other plans of Company or any subsidiary or affiliate of
Company available to similarly situated Executives of Company, shall cease on
Executives Termination Date. |
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(c) |
|
Termination for Disability. If Executives employment is terminated due to
Disability following a Change in Control, Executive shall receive his Base Salary
through the Termination Date, at which time his benefits shall be determined in
accordance with Companys disability, retirement, insurance and other applicable plans
and programs then in effect, and Executive shall not be entitled to any other benefits
provided by this Agreement. |
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(d) |
|
Termination for Retirement or Death. If Executives employment is terminated
by reason of his retirement or death following a Change in Control, Executives
benefits shall be determined in accordance with Companys retirement, survivors
benefits, insurance, and other applicable programs then in effect, and Executive shall
not be entitled to any other benefits provided by this Agreement. |
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(e) |
|
Termination for Cause, or Other Than for Good Reason or Retirement. If
Executives employment is terminated either by Company for Cause, or voluntarily by
Executive (other than for Retirement or Good Reason) following a Change in Control,
Company shall pay Executive his full Base Salary and accrued vacation through the
Termination Date, at the rate then in effect, plus all other amounts to which such
Executive is entitled under any compensation plans of Company, at the time such
payments are due, and Company shall have no further obligations to such Executive under
this Agreement. |
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(f) |
|
Separation and Release Agreement. No benefits under this section 3 shall be
payable to Executive unless Executive and Company have executed a Separation and
Release Agreement (in substantially the form attached hereto as Exhibit A) within
forty-five (45) days following the Termination Date and the payment of change in
control benefits under this section 3 shall be subject to the terms and conditions of
the Separation and Release Agreement. |
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(g) |
|
Deferred Compensation. All amounts previously deferred by or accrued to the
benefit of Executive under any nonqualified deferred compensation plan sponsored by
Company (including, without limitation, any vested amounts deferred under incentive
plans), together with any accrued earnings thereon, shall |
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be paid in accordance with the terms of such plan following Executives termination. |
|
(h) |
|
Notice of Termination. Any termination of employment under this section 3 by
Company or by Executive for Good Reason shall be communicated by a written notice which
shall indicate the specific Change in Control termination provision relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executives employment under the provision so indicated (a
Notice of Termination). |
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(i) |
|
Termination of Benefits. All rights to receive or continue to receive
severance payments and benefits pursuant to this section 3 by reason of a Change in
Control shall cease on the date Executive becomes reemployed by Company or any of its
subsidiaries or affiliates. |
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(j) |
|
Form and Timing of Benefits. Subject to the provisions of this section 3, the
Change in Control benefits described herein shall be paid to Executive in cash in a
single lump sum payment as soon as practicable following the Termination Date, but in
no event later than the fifteenth day of the third month after the date of the
Executives termination of employment. The Change in Control benefits payable to
Executive pursuant to this subparagraph (j) are intended to be exempt from Code Section
409A (as defined in section 15) under the exemption found in Regulation Section
1.409A-(b)(4) for short-term deferrals. |
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(k) |
|
Excise Tax Equalization Payment. Subject to the limitation below, in the event
that Executive becomes entitled to any payment or benefit under this section 3 (such
benefits together with any other payments or benefits payable under any other agreement
with, or plan or policy of, Company are referred to in the aggregate as the Total
Payments), if all or any part of the Total Payments will be subject to the tax (the
Excise Tax) imposed by Code Section 4999 (or any similar tax that may hereafter be
imposed), Company shall pay to Executive in cash an additional amount (the Gross-Up
Payment) such that the net amount retained by Executive after deduction of any Excise
Tax on the Total Payments and any federal, state and local income tax, penalties,
interest and Excise Tax upon the Gross-Up Payment provided for by this section 3
(including FICA and FUTA), shall be equal to the Total Payments. Any such payment
shall be made by Company to Executive as soon as practical following the Termination
Date, but in no event beyond twenty (20) days from such date. Such payment is intended
to be exempt from Code Section 409A (as defined in section 15) under the exemption
found in Regulation Section 1.409A-(b)(4) for short-term deferrals. Executive shall
only be entitled to a Gross-Up Payment under this section 3 if Executives parachute
payments (as such term is defined in Code Section 280G) exceed three hundred thirty
percent (330%) (the Threshold) of Executives base amount (as determined under Code
Section 280G(b)). In the event Executives parachute payments do not exceed the
Threshold, the benefits provided to such Executive under this Agreement that are
classified as parachute payments shall be reduced such that the value of the Total
Payments that Executive is entitled to receive shall be one dollar ($1) less than the
maximum |
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amount which such Executive may receive without becoming subject to the tax imposed
by Code Section 4999, or which Company may pay without loss of deduction under Code
Section 280G(a). For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax, the amounts of such Excise Tax and the amount of any
Gross Up Payment, the following shall apply: |
|
(i) |
|
Any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executives termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
policy, arrangement or agreement with Company, or with any Person whose actions
result in a Change in Control or any Person affiliated with Company or such
Persons) shall be treated as parachute payments within the meaning of Code
Section 280G(b)(2), and all excess parachute payments within the meaning of
Code Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of Companys tax counsel as supported by Companys independent
auditors and acceptable to Executive, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Code Section 280G(b)(4) in
excess of the base amount within the meaning of Code Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; |
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The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Total Payments; or (B) the amount of excess parachute payments within
the meaning of Code Section 280G(b)(1) (after applying the provisions of this
section 3(i) above); |
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The value of any noncash benefits or any deferred payment or
benefit shall be determined by Companys independent auditors in accordance
with the principles of Code Sections 280G(d)(3) and (4); |
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Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executives
residence on the Termination Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes; |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive
did not receive the full net benefit intended under the provisions of this
section 3(j), Company shall reimburse Executive for the full amount necessary
to make Executive whole as determined by the Committee. Any such payment shall
be treated for Section 409A purposes as a payment separate from the payment
made pursuant to this subparagraph (k) immediately |
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following Executives termination of employment and shall be made by Company
to Executive within twenty (20) days of the date he remits the additional
taxes as a result of such adjustment; and |
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In the event the Internal Revenue Service adjusts any item
included in Companys computations under this section 3(j) so that Executive is
not required to pay the full amount of the excise tax assumed to have been
owing in the determination of the Gross-Up Payment hereunder (or receives a
refund of all or a portion of such excise tax), Executive shall repay to
Company within twenty (20) days of the date the actual refund or credit of such
portion has been made to Executive such portion of the Gross-Up Payment as
shall exceed the amount of federal, state and local taxes actually determined
to be owed together with such interest received or credited to him by such tax
authority for the period he held such portion. |
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Companys Payment Obligation. Subject to the provisions of section 4,
Companys obligation to make the payments and the arrangements provided in this section
3 shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which Company may have against Executive or anyone else. All amounts payable by
Company under this section 3 shall be paid without notice or demand and each and every
payment made by Company shall be final, and Company shall not seek to recover all or
any part of such payment from Executive or from whomsoever may be entitled thereto, for
any reason except as provided in section 3(k) above or in section 4. |
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Other Employment. Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under this section 3, and the
obtaining of any such other employment shall in no event result in any reduction of
Companys obligations to make the payments and arrangements required to be made under
this section 3, except to the extent otherwise specifically provided in this Agreement. |
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Payment of Legal Fees and Expenses. To the extent permitted by law, Company
shall reimburse Executive for all reasonable legal fees, costs of litigation or
arbitration, prejudgment or pre-award interest, and other expenses incurred in good
faith by Executive as a result of Companys refusal to provide benefits under this
section 3, or as a result of Company contesting the validity, enforceability or
interpretation of the provisions of this section 3, or as the result of any conflict
(including conflicts related to the calculation of parachute payments or the
characterization of Executives termination) between Executive and Company; provided
that the conflict or dispute is resolved in Executives favor and Executive acts in
good faith in pursuing his rights under this section 3. Such reimbursement shall be
made within thirty (30) days following final resolution, in favor of Executive, of the
conflict or dispute giving rise to such fees and expenses. In no event shall Executive
be entitled to receive the reimbursements provided for in this subparagraph if he acts
in bad faith or |
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pursues a claim without merit, or if he fails to prevail in any action instituted by
him or Company. |
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Arbitration for Change in Control Benefits. Any dispute or controversy arising
under or in connection with the benefits provided under this section 3 shall promptly
and expeditiously be submitted to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect at the time of such
arbitration proceeding utilizing a panel of three (3) arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of his employment with
Company. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The costs and expenses of both parties, including,
without limitation, attorneys fees shall be borne by Company. Pending the resolution
of any such dispute, controversy or claim, Executive (and his beneficiaries) shall,
except to the extent that the arbitrator otherwise expressly provides, continue to
receive all payments and benefits due under this section 3. |
4. Remedies. In the event of any actual or threatened breach of the provisions of this
Agreement or any separation and release agreement, the party who claims such breach or threatened
breach shall give the other party written notice and, except in the case of a breach which is not
susceptible to being cured, ten calendar days in which to cure. In the event of a breach of any
provision of this Agreement or any separation and release agreement by Executive, (i) Executive
shall reimburse Company: the full amount of any payments made under section 2(b)(i) or (ii) or
section 3(b)(i) of this Agreement (as the case may be), (ii) Company shall have the right, in
addition to and without waiving any other rights to monetary damages or other relief that may be
available to Company at law or in equity, to immediately discontinue any remaining payments due
under subparagraph 2(b)(i) or (ii) or subparagraph 3(b)(i) of this Agreement (as the case may be)
including but not limited to any remaining Salary Portion of Severance payments, and (iii) the
Severance Period or the CIC Severance Period (as the case may be) shall thereupon cease, provided
that Executives obligations under, if applicable, any separation and release agreement shall
continue in full force and effect in accordance with their terms for the entire duration of the
Severance Period or CIC Severance Period as applicable. In addition, Executive acknowledges that
Company will suffer irreparable injury in the event of a breach or violation or threatened breach
or violation of the provisions of this Agreement or any separation and release agreement and agrees
that in the event of an actual or threatened breach or violation of such provisions, in addition to
the other remedies or rights available to under this Agreement or otherwise, Company shall be
awarded injunctive relief in the federal or state courts located in North Carolina to prohibit any
such violation or breach or threatened violation or breach, without necessity of posting any bond
or security.
5. Committee. Except as specifically provided herein, this Agreement shall be administered by
the Compensation and Benefits Committee of the Board (the Committee). The Committee may delegate
any administrative duties, including, without limitation, duties with respect to the processing,
review, investigation, approval and payment of severance/Change in Control benefits, to designated
individuals or committees.
6. Claims Procedure. If Executive believes that he is entitled to receive severance benefits
under this Agreement, he may file a claim in writing with the Committee within ninety
-16-
(90) days after the date such Executive believes he or she should have received such benefits.
No later than ninety (90) days after the receipt of the claim, the Committee shall either allow or
deny the claim in writing. A denial of a claim, in whole or in part, shall be written in a manner
calculated to be understood by Executive and shall include the specific reason or reasons for the
denial; specific reference to the pertinent provisions of this Agreement on which the denial is
based; a description of any additional material or information necessary for Executive to perfect
the claim and an explanation of why such material or information is necessary; and an explanation
of the claim review procedure. Executive (or his duly authorized representative) may within sixty
60 days after receipt of the denial of his claim request a review upon written application to the
Committee; review pertinent documents; and submit issues and comments in writing. The Committee
shall notify Executive of its decision on review within sixty (60) days after receipt of a request
for review unless special circumstances require an extension of time for processing, in which case
a decision shall be rendered as soon as possible, but not later than one-hundred twenty (120) days
after receipt of a request for review. Notice of the decision on review shall be in writing. The
Committees decision on review shall be final and binding on Executive and any successor in
interest. If Executive subsequently wishes to file a claim under Section 502(a) of ERISA, any
legal action must be filed within ninety (90) days of the Committees final decision. Executive
must exhaust the claims procedure provided in this section 6 before filing a claim under ERISA with
respect to any benefits provided under section 2 of this Agreement.
7. Notices. Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and either delivered in person or sent by first class, certified or
registered mail, postage prepaid, if to Company at Companys principal place of business, and if to
Executive, at his home address most recently filed with Company, or to such other address as either
party shall have designated in writing to the other party.
8. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to any states conflict of law principles.
9. Severability and Construction. If any provision of this Agreement is declared void or
unenforceable or against public policy, such provision shall be deemed severable and severed from
this Agreement and the balance of this Agreement shall remain in full force and effect. If a court
of competent jurisdiction determines that any restriction in this Agreement is overbroad or
unreasonable under the circumstances, such restriction shall be modified or revised by such court
to include the maximum reasonable restriction allowed by law.
10. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant or condition.
11. Entire Agreement Modifications. This Agreement (including all exhibits hereto) constitutes
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior agreements, oral and written, between the parties hereto with respect to the subject matter
hereof. In the event of any inconsistency between any provision of this Agreement and any
provision of any plan, employee handbook, personnel manual, program, policy, arrangement or
agreement of Company or any of its subsidiaries or affiliates, the provisions of this Agreement
shall control. This Agreement may be modified or amended only by an instrument in writing signed
by both parties.
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12. Withholding. All payments made to Executive pursuant to this Agreement will be subject to
withholding of employment taxes and other lawful deductions, as applicable.
13. Survivorship. Except as otherwise set forth in this Agreement, to the extent necessary to
carry out the intentions of the parties hereunder the respective rights and obligations of the
parties hereunder shall survive any termination of Executives employment.
14. Successors and Assigns. This Agreement shall bind and shall inure to the benefit of
Company and any and all of its successors and assigns. This Agreement is personal to Executive and
shall not be assignable by Executive. Company may assign this Agreement to any entity which (i)
purchases all or substantially all of the assets of Company or (ii) is a direct or indirect
successor (whether by merger, sale of stock or transfer of assets) of Company. Any such assignment
shall be valid so long as the entity which succeeds to Company expressly assumes Companys
obligations hereunder and complies with its terms.
15. Compliance with Code Section 409A. To the extent applicable, it is intended that the
payment of benefits described in this Agreement comply with Code Section 409A and all guidance or
regulations thereunder (Section 409A), including compliance with all applicable exemptions from
Section 409A (e.g., the short-term deferral exception and the two times pay exemption applicable
to severance payments). This Agreement will at all times be construed in a manner to comply with
Section 409A and should any provision be found not in compliance with Section 409A, Executive
hereby agrees to any changes to the terms of this Agreement deemed necessary and required by legal
counsel for Company to achieve compliance with Section 409A, including any applicable exemptions.
By signing a copy of this Agreement, Executive irrevocably waives any objections he may have to
any changes that may be required by Section 409A. In no event will any payment that becomes
payable pursuant to this Agreement that is considered deferred compensation within the meaning of
Section 409A, if any, and does not satisfy any of the applicable exemptions under Section 409A, be
accelerated in violation of Section 409A. If Executive is a specified employee as defined in
Section 409A, any payment that becomes payable pursuant to this Agreement that is considered
deferred compensation within the meaning of Section 409A and does not satisfy any of the
applicable exemptions under Section 409A may not be made before the date that is six months after
Executives separation from service (or death, if earlier). To the extent Executive becomes subject
to the six-month delay rule, all payments that would have been made to Executive during the six
months following his separation from service that are not otherwise exempt from Section 409A, if
any, will be accumulated and paid to Executive during the seventh month following his separation
from service, and any remaining payments due will be made in their ordinary course as described in
this Agreement. Company will notify Executive should he become subject to the six month delay
rule.
16. Restatement of Prior Agreement. This Agreement amends and restates, effective as of
January 1, 2008, the Severance/Change in Control Agreement between the Company and Executive dated
January 24, 2008 (Prior Agreement), to comply with Section 409A and to clarify certain other
provisions of the Prior Agreement. This amended and restated Agreement does not preclude the Prior
Agreement (as amended and restated by this Agreement) from qualifying for grandfather treatment
under the transition rule set forth in Internal Revenue Service Revenue Ruling 2008-13 with respect
to contracts in effect on February 21, 2008. Each of the parties hereto has relied on his or its
own judgment in entering into this Agreement.
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IN WITNESS WHEREOF, Company and Executive have duly executed and delivered this Agreement as
of the day and year first above written.
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EXECUTIVE |
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HANESBRANDS INC. |
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/s/ William J. Nictakis |
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By: |
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/s/ Richard A. Noll |
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Title:
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Chief Executive Officer |
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-19-
Exhibit A
MODEL FORM
SEPARATION AND RELEASE AGREEMENT
Hanesbrands Inc.(the Company) and [NAME
] (Executive) enter
into this Separation and Release Agreement which was received by
Executive on the ______ day of
______, 200__, signed by
Executive on the ______ day of ______, 200__, and
is effective on the ______ day
of ______, 200__(the Effective Date).
The Effective Date shall be no less than 7 days after
the date signed by Executive.
WITNESSETH:
WHEREAS, Executive has been employed by the Company as a ______; and
WHEREAS, Executives employment with the Company is terminated as of ______, 200__(the
Termination Date); and
WHEREAS, pursuant to that certain Severance/Change in Control Agreement between Company and
Executive dated ______, 200__ (the Change in Control Agreement), upon a termination of
Executives employment that satisfies the conditions specified in the Change in Control Agreement,
Executive is entitled to the benefits described in the Change in Control Agreement provided
Executive executes a separation and release agreement acceptable to Company; and
WHEREAS, this separation and release agreement (the Agreement) is intended to satisfy the
requirements of the Change in Control Agreement and to form a part of the Change in Control
Agreement in such a manner that all the rights, duties and obligations arising between Executive
and Company, including, but in no way limited to, any rights, duties and obligations that have
arisen or might arise out of or are in any way related to Executives employment with the Company
and the conclusion of that employment are settled herein through the joinder of the Change in
Control Agreement with this Agreement.
NOW, THEREFORE, in consideration of the obligations of the parties under the Change in Control
Agreement and the additional covenants and mutual promises herein contained, it is further agreed
as follows:
1. Termination Date. Executive agrees to resign Executives employment and all appointments
Executive holds with Company, and its subsidiaries and affiliates, on the Termination Date.
Executive understands and agrees that Executives employment with the Company will conclude on the
close of business on the Termination Date.
2. Termination Benefits. Executive and Company agree that Executive shall receive the
benefits described in the Change in Control Agreement, less all applicable withholding taxes and
other customary payroll deductions, provided in the Change in Control Agreement.
3. Receipt of Other Compensation. Executive acknowledges and agrees that, other than as
specifically set forth in the Change in Control Agreement or this Agreement, following
the Termination Date, Executive is not and will not be due any compensation, including, but
not limited to, compensation for unpaid salary (except for amounts unpaid and owing for Executives
employment with Company, its subsidiaries or affiliates prior to the Termination Date), unpaid
bonus, severance and accrued or unused vacation time or vacation pay from the Company or any of its
subsidiaries or affiliates. Except as provided herein or in the Change in Control Agreement,
Executive will not be eligible to participate in any of the benefit plans of the Company after
Executives Termination Date. However, Executive will be entitled to receive benefits which are
vested and accrued prior to the Termination Date pursuant to the employee benefit plans of the
Company. Any participation by Executive (if any) in any of the compensation or benefit plans of
the Company as of and after the Termination Date shall be subject to and determined in accordance
with the terms and conditions of such plans, except as otherwise expressly set forth in the Change
in Control Agreement or this Agreement.
4. Continuing Cooperation. Following the Termination Date, Executive agrees to cooperate with
all reasonable requests for information made by or on behalf of Company with respect to the
operations, practices and policies of the Company. In connection with any such requests, the
Company shall reimburse Executive for all out-of-pocket expenses reasonably and necessarily
incurred in responding to such request(s).
5. Executives Representation and Warranty. Executive hereby represents and warrants that,
during Executives period of employment with the Company, Executive did not willfully or
negligently breach Executives duties as an employee or officer of the Company, did not commit
fraud, embezzlement, or any other similar dishonest conduct, and did not violate the Companys
business standards.
6. Non-Solicitation and Non-Compete. In consideration of the benefits provided under this
Agreement and in the Change in Control Agreement, Executive agrees that during Executives
employment and for the duration of the applicable Severance Period as determined pursuant to the
terms of the Change in Control Agreement, Executive will not, without the prior written consent of
Company, either alone or in association with others, solicit for employment or assist or encourage
the solicitation for employment, any employee of Company, or any of its subsidiaries or affiliates;
and will not, without the prior written consent of Company, directly or indirectly counsel, advise,
perform services for, or be employed by, or otherwise engage or participate in any Competing
Business (regardless of whether Executive receives compensation of any kind). For purposes of this
Agreement, a Competing Business shall mean any commercial activity which competes or is
reasonably likely to compete with any business that the Company conducts, or demonstrably
anticipates conducting, at any time during Executives employment.
7. Confidentiality. At all times after the Effective Date, Executive will maintain the
confidentiality of all information in whatever form concerning Company or any of its subsidiaries
or affiliates relating to its or their businesses, customers, finances, strategic or other plans,
marketing, employees, trade practices, trade secrets, know-how or other matters which are not
generally known outside Company or any of its subsidiaries or affiliates, and Executive will not,
directly or indirectly, make any disclosure thereof to anyone, or make any use thereof, on
Executives own behalf or on behalf of any third party, unless specifically requested by or agreed
to in writing by an executive officer of Company. In addition, Executive agrees that Executive
will not disclose the existence or terms of this Agreement to any third parties with the exception
A-2
of Executives accountants, attorneys, or spouse, and shall ensure that none of them discloses
such existence or terms to any other person, except as required to comply with law. Executive will
promptly return to Company all reports, files, memoranda, records, computer equipment and software,
credit cards, cardkey passes, door and file keys, computer access codes or disks and instructional
manuals, and other physical or personal property which Executive received or prepared or helped
prepare in connection with Executives employment and Executive will not retain any copies,
duplicates, reproductions or excerpts thereof. The obligations of this paragraph 7 shall survive
the expiration of this Agreement.
8. Non-Disparagement. At all times after the Effective Date, Executive will not disparage or
criticize, orally or in writing, the business, products, policies, decisions, directors, officers
or employees of Company or any of its subsidiaries or affiliates to any person. Company also
agrees that none of its executive officers will disparage or criticize Executive to any person or
entity. The obligations of this paragraph 8 shall survive the expiration of this Agreement.
9. Breach of Agreement. Any actual or threatened breach of this Agreement will be handled as
provided in the Change in Control Agreement.
10. Release.
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(a) |
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Executive on behalf of Executive, Executives heirs, executors, administrators
and assigns, does hereby knowingly and voluntarily release, acquit and forever
discharge Company and all current and former parents, subsidiaries, related companies,
successors, assigns and past, present and future directors, officers, employees,
trustees and shareholders (the Released Parties) from and against any and all
complaints, claims, cross-claims, third-party claims, counterclaims, contribution
claims, liabilities, obligations, promises, agreements, controversies, damages,
actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of
any nature whatsoever, known or unknown, suspected or unsuspected, foreseen or
unforeseen, matured or unmatured, which, at any time up to and including the date on
which Executive signs this Agreement, exists, have existed, or may arise from any
matter whatsoever occurring, including, but not limited to, any claims arising out of
or in any way related to Executives employment with Company or its subsidiaries or
affiliates and the conclusion thereof, which Executive, or any of Executives heirs,
executors, administrators, assigns, affiliates, and agents ever had, now has or at any
time hereafter may have, own or hold against any of the Released Parties based on any
matter existing on or before the date on which Executive signs this Agreement. Nothing
in this Agreement releases any claims that the law does not permit Executive to
release, including claims for vested pension benefits accrued by Executive under any
tax-qualified pension plan of the Corporation. Executive acknowledges that in exchange
for this release, Company is providing Executive with total consideration, financial or
otherwise, which exceeds what Executive would have been given without the release. By
executing this Agreement, Executive is waiving, without limitation, all claims (except
for the filing of a charge with an administrative agency) against the Released Parties
arising under federal, state and local labor and antidiscrimination laws, any
employment related claims under |
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the employee Retirement Income Security Act of 1974, as amended, and any other
restriction on the right to terminate employment, including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act of 1990, as amended, and the North Carolina Equal Employment
Practices Act, as amended [ADD ANY ADDITIONAL STATE LAW REFERENCES]. Nothing herein
shall release any party from any obligation under this Agreement. Executive
acknowledges and agrees that this release and the covenant not to sue set forth in
paragraph (c) below are essential and material terms of this Agreement and that,
without such release and covenant not to sue, no agreement would have been reached
by the parties and no benefits under the Change in Control Agreement would have been
paid. Executive understands and acknowledges the significance and consequences of
this release and this Agreement. |
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EXECUTIVE SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS
EXECUTIVE MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR
RIGHTS ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (ADEA). EXECUTIVE FURTHER AGREES: (i) THAT EXECUTIVES WAIVER OF RIGHTS
UNDER THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKERS
BENEFIT PROTECTION ACT OF 1990; (ii) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
RELEASE; (iii) THAT EXECUTIVES WAIVER OF RIGHTS IN THIS RELEASE IS IN EXCHANGE FOR
CONSIDERATION THAT WOULD NOT OTHERWISE BE OWING TO EXECUTIVE PURSUANT TO ANY
PREEXISTING OBLIGATION OF ANY KIND HAD EXECUTIVE NOT SIGNED THIS RELEASE; (iv) THAT
EXECUTIVE HEREBY IS AND HAS BEEN ADVISED IN WRITING BY COMPANY TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (v) THAT COMPANY HAS GIVEN EXECUTIVE A PERIOD
OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (vi) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVES EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE UNDERSIGNED,
AND (vii) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND EFFECT IF
EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO REVOKE, THAT THIS
AGREEMENT AND RELEASE THEN BECOME EFFECTIVE AND ENFORCEABLE UPON THE EIGHTH DAY AFTER
EXECUTIVE SIGNS THIS AGREEMENT. |
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Executive represents and warrants that: (i) Executive has not filed or
initiated any legal, equitable, administrative, or other proceeding(s) against any of
the Released Parties; (ii) no such proceeding(s) have been initiated against any of the
Released Parties on Executives behalf; (iii) Executive is the sole owner of the actual
or alleged claims, demands, rights, causes of action, and other matters that are |
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released in this paragraph 10; (iv) the same have not been transferred or assigned
or caused to be transferred or assigned to any other person, firm, corporation or
other legal entity; and (v) Executive has the full right and power to grant,
execute, and deliver the releases, undertakings, and agreements contained in this
Agreement. |
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The consideration offered herein is accepted by Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or potential
claims, and Executive expressly agrees that Executive is not entitled to and shall not
receive any further payments, benefits, or other compensation or recovery of any kind
from Company or any of the other Released Parties. Executive further agrees that in
the event of any further proceedings whatsoever based upon any matter released herein,
Company and each of the other Released Parties shall have no further monetary or other
obligation of any kind to Executive, including without limitation any obligation for
any costs, expenses and attorneys fees incurred by or on behalf of Executive. |
11. Executives Understanding. Executive acknowledges by signing this Agreement that
Executive has read and understands this document, that Executive has conferred with or had
opportunity to confer with Executives attorney regarding the terms and meaning of this Agreement,
that Executive has had sufficient time to consider the terms provided for in this Agreement, that
no representations or inducements have been made to Executive except as set forth in this
Agreement, and that Executive has signed the same KNOWINGLY AND VOLUNTARILY.
12. Non-Reliance. Executive represents to Company and Company represents to Executive that in
executing this Agreement they do not rely and have not relied upon any representation or statement
not set forth herein made by the other or by any of the others agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise.
13. Severability of Provisions. In the event that any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Agreement are held to be
excessively broad as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable
law.
14. Non-Admission of Liability. Executive agrees that neither this Agreement nor the
performance by the parties hereunder constitutes an admission by any of the Released Parties of any
violation of any federal, state, or local law, regulation, common law, breach of any contract, or
any other wrongdoing of any type.
15. Assignability. The rights and benefits under this Agreement are personal to Executive and
such rights and benefits shall not be subject to assignment, alienation or transfer, except to the
extent such rights and benefits are lawfully available to the estate or beneficiaries of Executive
upon death. Company may assign this Agreement to any parent, affiliate or subsidiary
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or any entity which at any time whether by merger, purchase, or otherwise acquires all or
substantially all of the assets, stock or business of Company.
16. Choice of Law. This Agreement shall be constructed and interpreted in accordance with the
internal laws of the State of North Carolina without regard to any states conflict of law
principles.
17. Entire Agreement. This Agreement, together with the Change in Control Agreement, sets
forth all the terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from Company and supersedes and replaces any and all other agreements or
understandings Executive may have or may have had with respect thereto. This Agreement may not be
modified or amended except in writing and signed by both Executive and an authorized representative
of Company.
18. Notice. Any notice to be given hereunder shall be in writing and shall be deemed given
when mailed by certified mail, return receipt requested, addressed as follows:
To Executive at:
[add address]
To the Company at:
Hanesbrands Inc.
Attention: General Counsel
1000 East Hanes Mill Road
Winston-Salem, NC 27105
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
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EXECUTIVE |
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HANESBRANDS INC.
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By: |
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Title: |
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A-6
EX-12.1
Exhibit 12.1
Hanesbrands Inc.
Ratio of Earnings to Fixed Charges
(Dollars in thousands)
(Unaudited)
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Six Months |
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Years Ended |
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Ended |
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Years Ended |
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January 3, 2009 |
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December 29, 2007 |
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December 30, 2006 |
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July 1, 2006 |
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July 2, 2005 |
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July 3, 2004 |
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Earnings, as defined: |
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Income from continuing operations before income
tax expense, minority interest and income/loss
from equity investees |
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$ |
163,195 |
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$ |
185,321 |
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$ |
112,830 |
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$ |
417,543 |
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$ |
343,099 |
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$ |
397,512 |
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Fixed charges |
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179,003 |
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223,395 |
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90,168 |
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44,366 |
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52,596 |
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52,743 |
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Amortization of capitalized interest |
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3,632 |
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3,676 |
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2,024 |
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4,227 |
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5,000 |
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6,438 |
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Distributed income of equity investees |
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3,030 |
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3,943 |
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Interest capitalized |
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(4,047 |
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(2,184 |
) |
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(1,904 |
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(4,656 |
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(1,694 |
) |
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(1,353 |
) |
Minority interest in pre-tax income |
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(158 |
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(1,195 |
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(910 |
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(1,224 |
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(55 |
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100 |
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Total earnings, as defined |
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$ |
341,625 |
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$ |
409,013 |
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$ |
202,208 |
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$ |
460,256 |
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$ |
401,976 |
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$ |
459,383 |
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Fixed charges, as defined: |
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Interest expense |
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$ |
155,280 |
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$ |
201,131 |
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$ |
78,692 |
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$ |
26,075 |
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$ |
35,244 |
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$ |
37,411 |
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Amortized premiums, discounts and capitalized
expenses related to indebtedness |
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6,032 |
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6,475 |
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2,279 |
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Interest factor in rental expenses |
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17,691 |
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15,789 |
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9,197 |
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18,291 |
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17,352 |
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15,332 |
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Total fixed charges, as defined |
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$ |
179,003 |
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$ |
223,395 |
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$ |
90,168 |
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$ |
44,366 |
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$ |
52,596 |
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$ |
52,743 |
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Ratio of earnings to fixed charges |
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1.91 |
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1.83 |
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2.24 |
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10.37 |
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7.64 |
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8.71 |
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Note: |
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The Ratio of Earnings to Fixed Charges should be read in conjunction with the Consolidated
Financial Statements and Managements Discussion and Analysis of Financial Condition and Results
of Operations in this Form 10-K. The interest expense included in the
fixed charges calculation above excludes interest expense relating to
the Companys uncertain tax positions. The percentage of rent
included in the calculation is a reasonable approximation of the
interest factor. |
EX-21.1
Exhibit 21.1
SUBSIDIARIES OF HANESBRANDS INC.
All subsidiaries are wholly-owned, directly or indirectly, by Hanesbrands Inc. (other than
directors qualifying shares or similar interests ) unless otherwise indicated
U.S. Subsidiaries
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Name of Subsidiary |
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Jurisdiction of Formation |
BA International, L.L.C.
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Delaware |
Caribesock, Inc.
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Delaware |
Caribetex, Inc.
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Delaware |
CASA International, LLC
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Delaware |
Ceibena Del, Inc.
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Delaware |
Hanes Menswear, LLC
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Delaware |
Hanes Puerto Rico, Inc.
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Delaware |
Hanesbrands Direct, LLC
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Colorado |
Hanesbrands Distribution, Inc.
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Delaware |
HBI Branded Apparel Limited, Inc.
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Delaware |
HBI Branded Apparel Enterprises, LLC
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Delaware |
HBI Playtex BATH LLC
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Delaware |
HbI International, LLC
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Delaware |
HBI Receivables LLC
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Delaware |
HBI Sourcing, LLC
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Delaware |
Inner Self LLC
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Delaware |
Jasper-Costa Rica, L.L.C.
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Delaware |
Playtex Dorado, LLC
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Delaware |
Playtex Industries, Inc.
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Delaware |
Playtex Marketing Corporation (50%) owned)
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Delaware |
Seamless Textiles, LLC
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Delaware |
UPCR, Inc.
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Delaware |
UPEL, Inc.
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Delaware |
Non-U.S. Subsidiaries
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Name of Subsidiary |
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Jurisdiction of Formation |
Bali Dominicana, Inc.
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Panama/DR |
Bali Dominicana Textiles, S.A.
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Panama/DR |
Bal-Mex S. de R.L. de C.V.
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Mexico |
Bordados Industriales, S. A. de C.V.
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Honduras |
Canadelle Limited Partnership
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Canada |
Canadelle Holding Corporation Limited
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Canada |
Cartex Manufacturera S. de R. L.
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Costa Rica |
CASA International, LLC Holdings S.C.S.
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Luxembourg |
Caysock, Inc.
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Cayman Islands |
Caytex, Inc.
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Cayman Islands |
Caywear, Inc.
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Cayman Islands |
Ceiba Industrial, S. De R.L.
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Honduras |
Champion Products S. de R.L. de C.V.
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Mexico |
Choloma, Inc.
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Cayman Islands |
Confecciones Atlantida S. de R.L.
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Honduras |
Confecciones de Nueva Rosita S. de R.L. de C.V.
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Mexico |
Confecciones El Pedregal Inc.
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Cayman Islands |
Confecciones El Pedregal S.A. de C.V.
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El Salvador |
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Confecciones del Valle, S. de R.L.
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Honduras |
Confecciones Jiboa S.A. de C.V.
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El Salvador |
Confecciones La Caleta, Inc.
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Cayman Islands |
Confecciones La Herradura S.A. de C.V.
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El Salvador |
Confecciones La Libertad, Ltda. de C.V.
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El Salvador |
DFK International Limited
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Hong Kong |
Dos Rios Enterprises, Inc.
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Cayman Islands |
Hanes Brands Incorporated de Costa Rica, S.A.
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Costa Rica |
Hanes Caribe, Inc.
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Cayman Islands |
Hanes Choloma, S. de R. L.
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Honduras |
Hanes Colombia, S.A.
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Colombia |
Hanes de Centroamerica S.A.
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Guatemala |
Hanes de El Salvador, S.A. de C.V.
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El Salvador |
Hanes de Honduras S. de R.L. de C.V.
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Honduras |
Hanes Dominican, Inc.
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Cayman Islands |
Hanes Menswear Puerto Rico, Inc.
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Puerto Rico |
Hanes Panama Inc.
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Panama |
Hanesbrands Apparel India Private Limited
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India |
Hanesbrands Argentina S.A.
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Argentina |
Hanesbrands Brasil Textil Ltda.
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Brazil |
Hanesbrands Canada NS ULC
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Canada |
Hanesbrands Caribbean Logistics, Inc.
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Cayman Islands |
Hanesbrands Dominicana, Inc.
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Cayman Islands |
Hanesbrands Dos Rios Textiles, Inc.
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Cayman Islands |
Hanesbrands El Salvador, Ltda. de C.V.
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El Salvador |
Hanesbrands Europe GmbH
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Germany |
Hanesbrands Holdings
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Mauritius |
Hanesbrands International (Shanghai) Co. Ltd.
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China |
Hanesbrands Japan Inc.
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Japan |
Hanesbrands (Nanjing) Textile Co., Ltd.
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China |
Hanesbrands Philippines Inc.
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Philippines |
Hanesbrands Sourcing (India) Private Limited
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India |
Hanesbrands (HK) Limited
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Hong Kong |
Hanesbrands ROH Asia Ltd.
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Thailand |
HBI Alpha Holdings, Inc.
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Cayman Islands |
Hanesbrands (Vietnam) Company Limited
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Vietnam |
HBI Beta Holdings, Inc.
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Cayman Islands |
HBI Compania de Servicios, S.A. de C.V.
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El Salvador |
HbI International Holdings S.à r.l.
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Luxembourg |
HBI RH Mexico, S. De R.L. de C.V.
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Mexico |
HBI Manufacturing (Thailand) Ltd.
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Thailand |
HBI Risk Management Ltd.
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Bermuda |
HBI Servicios Administrativos de Costa Rica, S.A.
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Costa Rica |
HBI Socks de Honduras, S. de R.L. de C.V.
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Honduras |
HBI Sourcing Asia Limited
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Hong Kong |
H.N. Fibers Ltd (49%)
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Israel |
Indumentaria Andina S.A.
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Argentina |
Industria Textilera del Este ITE, S.de R.L.
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Costa Rica |
Industrias Internacionales de San Pedro S. de R.L. de C.V.
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Mexico |
Inversiones Bonaventure S.A. de C.V.
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El Salvador |
J.E. Morgan de Honduras, S.A.
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Honduras |
Jasper Honduras, S.A.
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Honduras |
Jogbra Honduras, S.A.
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Honduras |
Madero Internacional S. de R.L. de C.V.
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Mexico |
Manufacturera Ceibena S. de R.L.
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Honduras |
Manufacturera Comalapa S.A. de C.V.
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El Salvador |
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Manufacturera de Cartago, S.R.L.
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Costa Rica |
Manufacturera San Pedro Sula, S. de R.L.
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Honduras |
Monclova Internacional S. de R.L. de C.V.
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Mexico |
Playtex Puerto Rico, Inc.
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Puerto Rico |
PT. HBI Sourcing Indonesia
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Indonesia |
PTX (D.R.), Inc.
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Cayman Islands |
Rinplay S. de R.L. de C.V.
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Mexico |
Seamless Puerto Rico, Inc.
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Puerto Rico |
Servicios de Soporte Intimate Apparel, S de RL
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Costa Rica |
Socks Dominicana S.A.
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Dominican Republic |
Texlee El Salvador, Ltda. de C.V.
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El Salvador |
The Harwood Honduras Companies, S. de R.L.
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Honduras |
UPEL Chinandega y Compania Limitada
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Nicaragua |
EX-23.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No.
333-152733) and the Registration Statement on Form S-8 (No. 333-137142) of Hanesbrands Inc. of our
report dated February 11, 2009 relating to the financial statements and the effectiveness of
internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Greensboro, North Carolina
February 11, 2009
EX-31.1
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Richard A. Noll, certify that:
1. I have reviewed this Annual Report on Form 10-K of Hanesbrands Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
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Date:
February 11, 2009 |
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/s/ Richard A. Noll |
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Richard A. Noll
Chief Executive Officer |
EX-31.2
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, E. Lee Wyatt Jr., certify that:
1. I have reviewed this Annual Report on Form 10-K of Hanesbrands Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
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Date:
February 11, 2009 |
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/s/ E. Lee Wyatt Jr. |
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E. Lee Wyatt Jr.
Executive Vice President,
Chief Financial Officer |
EX-32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Hanesbrands Inc. (Hanesbrands) on Form 10-K for the
fiscal year ended January 3, 2009 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, Richard A. Noll, Chief Executive Officer of Hanesbrands, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of Hanesbrands.
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Date:
February 11, 2009 |
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/s/ Richard A. Noll |
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Richard A. Noll
Chief Executive Officer |
The foregoing certification is being furnished to accompany Hanesbrands Inc.s Annual Report
on Form 10-K for the fiscal year ended January 3, 2009 (the Report) solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a
separate disclosure document and shall not be deemed incorporated by reference into any other
filing of Hanesbrands Inc. that incorporates the Report by reference. A signed original of this
written certification required by Section 906 has been provided to Hanesbrands Inc. and will be
retained by Hanesbrands Inc. and furnished to the Securities and Exchange Commission or its staff
upon request.
EX-32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of Hanesbrands Inc. (Hanesbrands) on Form 10-K for the
fiscal year ended January 3, 2009 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, E. Lee., Wyatt, Jr., Chief Financial Officer of Hanesbrands, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of Hanesbrands.
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Date:
February 11, 2009 |
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/s/ E. Lee Wyatt Jr. |
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E. Lee Wyatt Jr.
Executive Vice President,
Chief Financial Officer |
The foregoing certification is being furnished to accompany Hanesbrands Inc.s Annual Report
on Form 10-K for the fiscal year ended January 3, 2009 (the Report) solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed as part of the Report or as a
separate disclosure document and shall not be deemed incorporated by reference into any other
filing of Hanesbrands Inc. that incorporates the Report by reference. A signed original of this
written certification required by Section 906 has been provided to Hanesbrands Inc. and will be
retained by Hanesbrands Inc. and furnished to the Securities and Exchange Commission or its staff
upon request.