UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 31, 2012

 

 

Hanesbrands Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland		001-32891		20-3552316
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
1000 East Hanes Mill Road Winston-Salem, NC				27105
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (336) 519-8080

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02. Results of Operations and Financial Condition

On July 31, 2012, Hanesbrands Inc. (“HanesBrands”) issued a press release announcing its financial results for the second quarter ended June 30, 2012 and posted on the investors section of HanesBrands’ corporate website certain supplemental information regarding discontinued operations. Copies of the press release and this supplemental information are attached as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K. Exhibits 99.1 and 99.2 are being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall Exhibits 99.1 or 99.2 be deemed incorporated by reference in any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Exhibit 99.1 contains disclosures about EBITDA and free cash flow, which are not generally accepted accounting principle (“GAAP”) measures. EBITDA is earnings before interest from continuing operations, taxes, depreciation and amortization. Free cash flow is defined as net cash provided by operating activities less net capital expenditures. HanesBrands has chosen to provide these measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating HanesBrands’ operations. This non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP or other pro forma measures used by other companies.

Item 7.01. Regulation FD Disclosure

Exhibits 99.1 and 99.2 to this Current Report on Form 8-K include forward-looking financial information that is expected to be discussed on our previously announced conference call with investors and analysts to be held at 4:30 p.m., Eastern time, today (July 31, 2012). The call may be accessed on the home page of the HanesBrands corporate website, www.hanesbrands.com. Replays of the call will be available in the investors section of the HanesBrands corporate website and via telephone. The telephone playback will be available from approximately midnight, Eastern time, on July 31, 2012, until midnight, Eastern time, on August 7, 2012. The replay will be available by calling toll-free (855) 859-2056, or by toll call at (404) 537-3406. The replay pass code is 12858065. Exhibits 99.1 and 99.2 are being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, nor shall they be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

 

(d)

Exhibits

 

Exhibit 99.1		Press release dated July 31, 2012
Exhibit 99.2		Supplemental Information Regarding Discontinued Operations

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

July 31, 2012				HANESBRANDS INC.
				By:		/s/ Richard D. Moss
						Richard D. Moss
						Chief Financial Officer

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Exhibits

 

99.1		Press release dated July 31, 2012
99.2		Supplemental Information Regarding Discontinued Operations

Exhibit 99.1

HanesBrands

1000 East Hanes Mill Road

Winston-Salem, NC 27105

(336) 519-8080

 

		news release

FOR IMMEDIATE RELEASE

 

News Media, contact:		Matt Hall, (336) 519-3386
Analysts and Investors, contact:		Charlie Stack, (336) 519-4710

HANESBRANDS REPORTS SECOND-QUARTER 2012 RESULTS

WINSTON-SALEM, N.C. (July 31, 2012) – HanesBrands (NYSE: HBI), a leading marketer of everyday branded basic apparel, today reported financial results for the second quarter ended June 30, 2012. In the quarter, the company announced exiting certain international and domestic imagewear businesses that are all now classified as discontinued operations. Unless otherwise noted, all financial results in this press release are GAAP measures for continuing operations.

In the quarter, net sales were $1.18 billion, an increase of 1 percent over last year’s quarter, and earnings per diluted share were $0.67, a decrease of 14 percent. The decrease in EPS was primarily due to substantially higher cotton costs, although the Innerwear segment had 18 percent growth in operating profit on strong sales of men’s underwear, children’s underwear, and women’s panties and bras.

With the majority of cotton inflation behind the company, Hanes expects solid results in the second half of 2012. The company’s full-year guidance is for diluted EPS of $2.50 to $2.60; net sales of $4.52 billion to $4.57 billion, an increase of approximately 2 percent to 3 percent over last year; and free cash flow of $400 million to $500 million.

“Our business had a solid quarter, and we are performing slightly ahead of our plans for the year, especially in the Innerwear segment,” Hanes Chairman and Chief Executive Officer Richard A. Noll said. “While we still have a long way to go, we are well positioned for the second half of the year.”

Second-Quarter Business Highlights

 

•

Innerwear segment net sales increased 2 percent in the quarter over last year, following a 1 percent sales gain in the first quarter. Excluding sales declines to a major mid-tier retail customer that is undergoing a major strategic shift, year-over-year Innerwear sales would have increased 4.4 percent in the second quarter and 2.7 percent in the first quarter. Operating profit in the quarter increased 18 percent over last year, and the segment operating profit margin increased 2.4 percentage points.

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HanesBrands Reports Second-Quarter 2012 Results – Page 2

 

•

Outerwear segment net sales increased 1 percent while the segment had an operating loss. Sales increased for Champion activewear and Hanes casualwear, but as expected, sales declined in branded printwear. Higher cotton costs and lower prices in branded printwear reduced margins and profitability.

 

•

International segment net sales declined 2 percent, and operating profit was comparable to a year ago. On a constant currency basis, International net sales increased 5 percent and operating profit increased 10 percent. With the sale of the company’s European imagewear operations, the company has no exposure to the European market.

 

•

The company’s overall operating profit margin was 10.2 percent in the quarter, and its gross margin was 31.1 percent despite cotton costs of more than double those of the prior-year quarter.

Additional Guidance

Hanes 2012 full-year guidance for continuing operations is diluted EPS of $2.50 to $2.60 and net sales of $4.52 billion to $4.57 billion.

The company’s guidance for continuing operations is based on the following facts. Product pricing, shelf space, and promotion plans for the remainder of 2012 have been finalized with major retail accounts. Virtually all commodity costs have been fixed for the remainder of the year, with the company incurring significantly lower cotton and other inflation impacts in the second half of the year. The majority of sales trends have been substantially tracking to expectations, with the notable exception of a major mid-tier retail account that is undergoing a major strategic shift. Approximately $8 million of company costs, primarily from supply chain restructuring, that had been expected in the second quarter are now expected to occur in the second half.

For margins, Hanes expects continued sequential quarter improvement in gross and operating margins in the third and fourth quarters as the company overlaps last year’s progressively higher cotton costs with this year’s declining cotton costs. Gross margin percentages in the second half are expected to average in the low to mid-30s, while operating margins are expected to average approximately 12.5 percent to 13 percent.

Interest expense in 2012 is expected to be approximately $17 million lower than 2011 as a result of debt reduction. The company completed an amendment in July to reduce its revolving credit facility’s borrowing rate by 100 basis points.

The company’s full-year tax rate now is expected to be in the mid-teens, an increase from previous guidance of a low double-digit rate. However, the company expects increased operating profit to offset the tax rate increase. As is typical for the company, the net tax rate will fluctuate by quarter, with the third-quarter’s rate expected to be slightly less than 10 percent and the fourth-quarter rate being in the mid- to high teens.

The company continues to expect full-year free cash flow of $400 million to $500 million after net capital expenditures of approximately $45 million. Free cash flow will primarily be used in 2012 to retire all of the company’s $300 million of floating rate notes, including approximately $150 million of these notes retired on July 12.

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HanesBrands Reports Second-Quarter 2012 Results – Page 3

 

For 2013, the company remains committed to prepaying all of its $500 million of 8 percent fixed rate notes and still believes that a reasonable estimate of EPS potential is in the low $3 range.

Discontinued Operations

On May 30, Hanes sold its European imagewear business, and the company is completing the discontinuation of its private-label and Outer Banks domestic imagewear operations serving wholesalers that sell to the screen-print industry. In accordance with GAAP requirements, the company reported results for the second quarter on a continuing-operations basis and revised prior-period results to reflect continuing operations. The company’s branded printwear operations will continue to operate and serve the branded domestic screen-print market.

For the first half, discontinued operations had a loss per diluted share of $0.69 – a loss of $0.03 in the first quarter and a loss of $0.66 in the second quarter.

In February when the company issued financial guidance for 2012, the company’s expectations for what are now discontinued operations were net sales of approximately $190 million, an operating loss of less than $1 million, and cash flow from operations of approximately $15 million.

More information on discontinued operations and financial results for prior-period continuing operations is available in the investors section of the company’s corporate website, http://tiny.cc/HanesBrandsIR, and will be available in the company’s Form 10-Q filing for the second quarter.

Note on Non-GAAP Terms and Definitions

Free cash flow and EBITDA are not generally accepted accounting principle measures.

Free cash flow is defined as cash from operations less net capital expenditures. Free cash flow may not be representative of the amount of residual cash flow that is available to the company for discretionary expenditures since it may not include deductions for mandatory debt-service requirements and other nondiscretionary expenditures. The company believes, however, that free cash flow is a useful measure of the cash-generating ability of the business relative to capital expenditures and financial performance. See Table 4 attached to this press release to reconcile free cash flow to the GAAP measure of net cash provided by operating activities.

EBITDA is defined as earnings from continuing operations before interest, taxes, depreciation, and amortization. Although the company does not use EBITDA to manage its business, it believes that EBITDA is another way that investors measure financial performance. See Table 2 attached to this press release to reconcile EBITDA to the GAAP measure of net income from continuing operations.

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HanesBrands Reports Second-Quarter 2012 Results – Page 4

 

Hanes has chosen to provide these measures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating company operations. Non-GAAP information should not be considered a substitute for financial information presented in accordance with GAAP and may be different from non-GAAP or other pro forma measures used by other companies.

Webcast Conference Call

Hanes will host a live Internet webcast of its quarterly investor conference call at 4:30 p.m. EDT today. The broadcast may be accessed on the home page of the HanesBrands corporate website, www.hanesbrands.com. The call is expected to conclude by 5:30 p.m.

An archived replay of the conference call webcast will be available in the investors section of the HanesBrands website. A telephone playback will be available from approximately midnight EDT today through midnight EDT Aug. 7, 2012. The replay will be available by calling toll-free (855) 859-2056, or by toll call at (404) 537-3406. The replay pass code is 12858065.

Cautionary Statement Concerning Forward-Looking Statements

Statements in this press release that are not statements of historical fact are 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, including those regarding our long-term goals and trends associated with our business, as well as guidance as to future performance. These and other forward-looking statements are made only as of the date of this press release and are based on our current intent, beliefs, plans and expectations. They involve risks and uncertainties that could cause actual future results, performance or developments to differ materially from those described in or implied by such forward-looking statements. These risks and uncertainties include the following: current economic conditions, including consumer spending levels and the price elasticity of our products; the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; the highly competitive and evolving nature of the industry in which we compete; our ability to successfully manage social, political, economic, legal and other conditions affecting our domestic and foreign operations and supply-chain sources, such as political instability and acts of war or terrorism, natural disasters, disruption of markets, operational disruptions, changes in import and export laws, currency restrictions and currency exchange rate fluctuations; the impact of the loss of one or more of our suppliers of finished goods or raw materials; our ability to effectively manage our inventory and reduce inventory reserves; our ability to optimize our global supply chain; our ability to continue to effectively distribute our products through our distribution network; financial difficulties experienced by, or loss of or reduction in sales to, any of our top customers or groups of customers; gains and losses in the shelf space that our customers devote to our products; our ability to accurately forecast demand for our products; increasing pressure on margins; our ability to keep pace with changing consumer preferences; the impact of any inadequacy, interruption or failure with respect to our information technology or any data security breach; our ability to protect our reputation and brand images; our ability to protect our trademarks, copyrights and patents; our debt and debt service requirements that restrict our operating and financial flexibility and impose interest and financing costs; the financial ratios that our debt instruments require us to maintain; future financial performance, including availability, terms and deployment of capital; our ability to comply with environmental and

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HanesBrands Reports Second-Quarter 2012 Results – Page 5

 

occupational health and safety laws and regulations; costs and adverse publicity from violations of labor or environmental laws by us or our suppliers; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, registration statements, press releases and other communications, as well as in the investors section of our corporate website at http://tiny.cc/HanesBrandsIR. Except as required by law, the company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

HanesBrands

HanesBrands is a socially responsible leading marketer of everyday basic apparel under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, Bali, JMS/Just My Size, barely there, Wonderbra and Gear for Sports. The company sells T-shirts, bras, panties, men’s underwear, children’s underwear, socks, hosiery, casualwear and activewear produced in the company’s low-cost global supply chain. Ranked No. 512 on the Fortune 1000 list, Hanes has approximately 53,300 employees in more than 25 countries and takes pride in its strong reputation for ethical business practices. Hanes is a U.S. Environmental Protection Agency Energy Star 2012 Sustained Excellence Award winner and 2010 and 2011 Partner of the Year. The company ranks No. 152 on Newsweek magazine’s list of Top 500 greenest U.S. companies. More information about the company and its corporate social responsibility initiatives, including environmental, social compliance and community improvement achievements, may be found on the Hanes corporate website at www.hanesbrands.com.

# # #

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TABLE 1

HANESBRANDS INC.

Condensed Consolidated Statements of Income (Loss)

(Amounts in thousands, except per-share amounts)

(Unaudited)

 

		Quarter Ended												Six Months Ended
		June 30, 2012				July 2, 2011				% Change				June 30, 2012				July 2, 2011				% Change
Net sales		$	1,180,651			$	1,167,986				1.1	%		$	2,153,784			$	2,148,036				0.3	%
Cost of sales			813,719				757,962								1,531,738				1,397,054
Gross profit			366,932				410,024				-10.5	%			622,046				750,982				-17.2	%
As a % of net sales			31.1	%			35.1	%							28.9	%			35.0	%
Selling, general and administrative expenses			246,981				274,202								491,450				523,068
As a % of net sales			20.9	%			23.5	%							22.8	%			24.4	%
Operating profit			119,951				135,822				-11.7	%			130,596				227,914				-42.7	%
As a % of net sales			10.2	%			11.6	%							6.1	%			10.6	%
Other expenses			811				814								1,456				1,415
Interest expense, net			36,611				39,127								73,606				80,228
Income from continuing operations before income tax expense			82,529				95,881								55,534				146,271
Income tax expense			15,213				18,121								12,489				27,544
Income from continuing operations			67,316				77,760				-13.4	%			43,045				118,727				-63.7	%
Income (loss) from discontinued operations, net of tax			(66,085	)			9,022				NM				(68,644	)			16,164				NM
Net income (loss)		$	1,231			$	86,782				-98.6	%		$	(25,599	)		$	134,891				NM
Earnings (loss) per share - basic:
Continuing operations		$	0.68			$	0.80				-15.0	%		$	0.44			$	1.22				-63.9	%
Discontinued operations			(0.67	)			0.09				NM				(0.70	)			0.17				NM
Net income (loss)		$	0.01			$	0.89				-98.9	%		$	(0.26	)		$	1.39				NM
Earnings (loss) per share - diluted:
Continuing operations		$	0.67			$	0.78				-14.1	%		$	0.43			$	1.20				-64.2	%
Discontinued operations			(0.66	)			0.09				NM				(0.69	)			0.16				NM
Net income (loss)		$	0.01			$	0.87				-98.9	%		$	(0.26	)		$	1.36				NM
Weighted average shares outstanding:
Basic			98,572				97,537								98,553				97,366
Diluted			100,066				99,224								99,962				98,927

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TABLE 2

HANESBRANDS INC.

Supplemental Financial Information

(Dollars in thousands)

(Unaudited)

 

		Quarter Ended												Six Months Ended
		June 30, 2012				July 2, 2011				% Change				June 30, 2012				July 2, 2011				% Change
Segment net sales1:
Innerwear		$	664,940			$	650,697				2.2	%		$	1,173,978			$	1,153,380				1.8	%
Outerwear			295,424				291,788				1.2	%			567,988				578,093				-1.7	%
Direct to Consumer			94,572				97,456				-3.0	%			179,285				180,254				-0.5	%
International			125,715				128,045				-1.8	%			232,533				236,309				-1.6	%
Total net sales		$	1,180,651			$	1,167,986				1.1	%		$	2,153,784			$	2,148,036				0.3	%
Segment operating profit¹:
Innerwear			121,235				102,837				17.9	%			172,877				177,602				-2.7	%
Outerwear			(977	)			27,254				NM				(22,221	)			45,886				NM
Direct to Consumer			9,279				9,360				-0.9	%			10,361				9,687				7.0	%
International			11,694				11,724				-0.3	%			16,390				28,478				-42.4	%
General corporate expenses/other			(21,280	)			(15,353	)			38.6	%			(46,811	)			(33,739	)			38.7	%
Total operating profit		$	119,951			$	135,822				-11.7	%		$	130,596			$	227,914				-42.7	%
EBITDA²:
Net income from continuing operations		$	67,316			$	77,760							$	43,045			$	118,727
Interest expense, net			36,611				39,127								73,606				80,228
Income tax expense			15,213				18,121								12,489				27,544
Depreciation and amortization			23,404				21,986								46,266				43,213
Total EBITDA		$	142,544			$	156,994				-9.2	%		$	175,406			$	269,712				-35.0	%

 

¹

As a result of the reduced size of sheer hosiery and changing trends, HanesBrands decided in the first quarter of 2012 to change its external segment reporting to include hosiery operations within the Innerwear segment. Hosiery had previously been reported as a separate segment. Prior-year segment sales and operating profit results, including other minor allocation changes, have been revised to conform to the current-year presentation. In addition, in May 2012, HanesBrands sold its European imagewear business, and the Company is completing the discontinuation of its private label and Outer Banks domestic imagewear operations serving wholesalers that sell to the screen-print industry. As a result, the current year and prior-year segment disclosures do not reflect the sales and operating profit results of these discontinued businesses.

²	Earnings from continuing operations before interest, taxes, depreciation and amortization is a non-GAAP financial measure.

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TABLE 3

HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

 

		June 30, 2012				December 31, 2011
Assets
Cash and cash equivalents		$	29,662			$	35,345
Trade accounts receivable, net			585,979				470,713
Inventories			1,435,850				1,607,555
Other current assets			204,037				217,178
Total current assets			2,255,528				2,330,791
Property, net			612,515				635,406
Intangible assets and goodwill			558,115				603,071
Other noncurrent assets			459,898				465,401
Total assets		$	3,886,056			$	4,034,669
Liabilities
Accounts payable and accrued liabilities		$	598,552			$	703,711
Notes payable			46,693				63,075
Accounts Receivable Securitization Facility			170,106				166,933
Current portion of long-term debt			148,092				—
Total current liabilities			963,443				933,719
Long-term debt			1,660,685				1,807,777
Other noncurrent liabilities			604,170				612,112
Total liabilities			3,228,298				3,353,608
Equity			657,758				681,061
Total liabilities and equity		$	3,886,056			$	4,034,669

TABLE 4

HANESBRANDS INC.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

		Six Months Ended
		June 30, 2012				July 2, 2011
Operating Activities:
Net income (loss)		$	(25,599	)		$	134,891
Depreciation and amortization			47,049				44,135
Impairment of intangibles			37,597				—
Loss on disposition of business			31,616				—
Other noncash items			5,415				18,371
Changes in assets and liabilities, net			(83,338	)			(265,650	)
Net cash provided by (used in) operating activities			12,740				(68,253	)
Investing Activities:
Capital expenditures			(19,005	)			(35,540	)
Acquisition of business			—				(9,154	)
Disposition of business			12,903				—
Net cash used in investing activities			(6,102	)			(44,694	)
Financing Activities:
Net borrowings (repayments) on notes payable, debt and other			(11,614	)			113,201
Effect of changes in foreign currency exchange rates on cash			(707	)			730
Increase (decrease) in cash and cash equivalents			(5,683	)			984
Cash and cash equivalents at beginning of year			35,345				43,671
Cash and cash equivalents at end of period		$	29,662			$	44,655
Supplemental cash flow information¹:
Net cash provided by (used in) operating activities		$	12,740			$	(68,253	)
Capital expenditures			(19,005	)			(35,540	)
Free cash flow		$	(6,265	)		$	(103,793	)

 

¹

Free cash flow is a non-GAAP measure. For 2012 guidance, net cash provided by operating activities (GAAP) is expected to be between $445 million and $545 million and net capital expenditures are expected to be approximately $45 million, resulting in expectations for free cash flow of $400 million to $500 million, which is a non-GAAP measure.

Exhibit 99.2

 

Hanesbrands Inc.

Supplemental Information Regarding the Condensed Consolidated Statement of Income (Loss)

(Amounts in thousands, except per-share amounts)

(Unaudited)

 

		2011																												2012
		First Quarter Ended April 2, 2011				Second Quarter Ended July  2, 2011				Second Quarter Year to Date July 2, 2011				Third Quarter Ended October 1, 2011				Third Quarter Year to Date October 1, 2011				Fourth Quarter Ended December  31, 2011				Year Ended December 31, 2011				First Quarter Ended March  31, 2012
Net sales		$	980,050			$	1,167,986			$	2,148,036			$	1,185,304			$	3,333,340			$	1,100,951			$	4,434,291			$	973,133
Cost of sales			639,092				757,962				1,397,054				771,251				2,168,305				772,778				2,941,083				718,019
Gross profit			340,958				410,024				750,982				414,053				1,165,035				328,173				1,493,208				255,114
As a % of net sales			34.8	%			35.1	%			35.0	%			34.9	%			35.0	%			29.8	%			33.7	%			26.2	%
Selling, general and administrative expenses			248,866				274,202				523,068				269,109				792,177				253,904				1,046,081				244,469
As a % of net sales			25.4	%			23.5	%			24.4	%			22.7	%			23.8	%			23.1	%			23.6	%			25.1	%
Operating profit			92,092				135,822				227,914				144,944				372,858				74,269				447,127				10,645
As a % of net sales			9.4	%			11.6	%			10.6	%			12.2	%			11.2	%			6.7	%			10.1	%			1.1	%
Other expenses			601				814				1,415				880				2,295				4,082				6,377				645
Interest expense, net			41,101				39,127				80,228				38,255				118,483				37,715				156,198				36,995
Income (loss) from continuing operations before income tax expense (benefit)			50,390				95,881				146,271				105,809				252,080				32,472				284,552				(26,995	)
Income tax expense (benefit)			9,423				18,121				27,544				20,739				48,283				(6,300	)			41,983				(2,724	)
Effective tax rate			19	%			19	%			19	%			20	%			19	%			-19	%			15	%			10	%
Income (loss) from continuing operations			40,967				77,760				118,727				85,070				203,797				38,772				242,569				(24,271	)
Income (loss) from discontinued operations, net of tax			7,142				9,022				16,164				5,762				21,926				2,193				24,119				(2,559	)
Net income (loss)		$	48,109			$	86,782			$	134,891			$	90,832			$	225,723			$	40,965			$	266,688			$	(26,830	)
Earnings (loss) per share - basic:
Continuing operations		$	0.42			$	0.80			$	1.22			$	0.87			$	2.09			$	0.39			$	2.48			$	(0.25	)
Discontinued operations			0.07				0.09				0.17				0.06				0.22				0.02				0.25				(0.03	)
Net income (loss)		$	0.49			$	0.89			$	1.39			$	0.93			$	2.31			$	0.42			$	2.73			$	(0.27	)
Earnings (loss) per share - diluted:
Continuing operations		$	0.42			$	0.78			$	1.20			$	0.85			$	2.05			$	0.39			$	2.44			$	(0.25	)
Discontinued operations			0.07				0.09				0.16				0.06				0.22				0.02				0.24				(0.03	)
Net income (loss)		$	0.49			$	0.87			$	1.36			$	0.91			$	2.28			$	0.41			$	2.69			$	(0.27	)
Weighted average shares outstanding:
Basic			97,194				97,537				97,366				97,925				97,559				98,157				97,710				98,533
Diluted			98,589				99,224				98,927				99,535				99,200				99,375				99,251				98,533

In May 2012, the Company sold its European imagewear business, and the Company is completing the discontinuation of its private-label and Outer Banks domestic imagewear operations serving wholesalers that sell to the screen-print industry. As a result of these actions, the current year and prior-year disclosures reflect these operations as discontinued operations. This information is solely for illustrative purposes and the information regarding income that we previously reported in our SEC filings remains accurate. For more information about our income as reported for periods prior to the second quarter of 2012, please refer to our periodic reports for those periods.

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Hanesbrands Inc.

Supplemental Information Regarding Sales and Operating Profit by Segment

(dollars in thousands)

(Unaudited)

 

		2011																												2012
		First Quarter Ended April 2, 2011				Second Quarter Ended July  2, 2011				Second Quarter Year to Date July 2, 2011				Third Quarter Ended October  1, 2011				Third Quarter Year to Date October 1, 2011				Fourth Quarter Ended December 31, 2011				Year Ended December 31, 2011				First Quarter Ended March  31, 2012
Net sales:
Innerwear		$	502,683			$	650,697			$	1,153,380			$	558,422			$	1,711,802			$	549,364			$	2,261,166			$	509,038
Outerwear			286,305				291,788				578,093				392,683				970,776				318,537				1,289,313				272,564
Direct to Consumer			82,798				97,456				180,254				97,565				277,819				97,621				375,440				84,713
International			108,264				128,045				236,309				136,634				372,943				135,429				508,372				106,818
Total net sales		$	980,050			$	1,167,986			$	2,148,036			$	1,185,304			$	3,333,340			$	1,100,951			$	4,434,291			$	973,133
Segment operating profit (loss):
Innerwear		$	74,765			$	102,837			$	177,602			$	88,372			$	265,974			$	70,719			$	336,693			$	51,642
Outerwear			18,632				27,254				45,886				48,379				94,265				10,792				105,057				(21,244	)
Direct to Consumer			327				9,360				9,687				12,268				21,955				7,267				29,222				1,082
International			16,754				11,724				28,478				14,797				43,275				10,679				53,954				4,696
Total segment operating profit			110,478				151,175				261,653				163,816				425,469				99,457				524,926				36,176
Items not included in segment operating profit:
General corporate expenses			(15,201	)			(12,171	)			(27,372	)			(15,680	)			(43,052	)			(21,930	)			(64,982	)			(22,104	)
Amortization of trademarks and other identifiable intangibles			(3,185	)			(3,182	)			(6,367	)			(3,192	)			(9,559	)			(3,258	)			(12,817	)			(3,427	)
Total operating profit			92,092				135,822				227,914				144,944				372,858				74,269				447,127				10,645
Other expenses			(601	)			(814	)			(1,415	)			(880	)			(2,295	)			(4,082	)			(6,377	)			(645	)
Interest expense, net			(41,101	)			(39,127	)			(80,228	)			(38,255	)			(118,483	)			(37,715	)			(156,198	)			(36,995	)
Income (loss) from continuing operations before income tax expense		$	50,390			$	95,881			$	146,271			$	105,809			$	252,080			$	32,472			$	284,552			$	(26,995	)

As a result of the reduced size of sheer hosiery and changing trends, we decided in the first quarter of 2012 to change our external segment reporting to include hosiery operations within the Innerwear segment. Hosiery had previously been reported as a separate segment. Prior-year segment sales and operating profit results, including other minor allocation changes, have been revised to conform to the current-year presentation. In addition, in May 2012, HanesBrands sold its European imagewear business, and the Company is completing the discontinuation of its private-label and Outer Banks domestic imagewear operations serving wholesalers who sell to the screen-print industry. As a result, the current year and prior-year segment disclosures do not reflect the sales and operating profit results of these discontinued businesses. This information is solely for illustrative purposes and the information regarding segment sales and operating profit that we previously reported in our SEC filings remains accurate. For more information about our segments as reported for periods prior to the second quarter of 2012, please refer to our periodic reports for those periods.

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Discontinued Operations FAQ

Q: Was there a choice as to the accounting treatment of the sale of European Imagewear, private-label Imagewear and Outer Banks businesses as discontinued operations?

A: No. Generally Accepted Accounting Principles (GAAP) dictates the accounting treatment of these actions. In addition, we are required to provide revised historical results in future 10-K and 10-Q filings for comparative purposes.

Q: For 2012, what was the expected impact from discontinued operations on sales, profits and free cash flow?

A: In February, inherent in our initial guidance was that discontinued operations were expected to generate full year 2012 sales of about $190 million, an operating profit loss less than $1 million, and about $15 million of cash flow from operations.

Q: Were you expecting back-half profits from the discontinued operations that you will no longer have?

A: Yes. While the businesses were expected to lose less than $1 million for the full-year, they were expected to lose money in the first half when cotton costs were high and contribute to profits in the second half as costs come down.

Q: Should we see 2012 margins change when excluding discontinued operations?

A: Yes. Annual operating margins should increase by approximately 40 basis points due to the exit from discontinued operations.

Q: Is the promotional sector of Branded Printwear included in discontinued operations?

A: No. While we are pulling back from this sector, these results are still included in ongoing operations.

Q: How much did the removal of discontinued operations help gross margins in the first half of the year?

A: Gross margins in the first quarter benefited by 100 basis points. For the second quarter, as we initiated specific actions to exit those businesses, the operating results were negatively impacted, and therefore we cannot quantify the potential gross margin impact.

Q: What are sales now expected to be in the Branded Printwear sector?

A: Branded Printwear sales for 2012 are now expected to be between $180 million - $190 million dollars, and could decline to around $150 million in 2013 as we overlap the reduction in the promotional sector.

Q: What were the components of the profits and losses associated with discontinued operations?

A: In the second quarter, the sale of European Imagewear resulted in a pre-tax loss of roughly $32 million and the Company-incurred pretax charges, substantially all noncash, for the write-down of intangibles, inventory markdowns and other negative operating impacts from winding down those operations totaled about $58 million. In addition, operating losses from the discontinued operations are included. More specifics will be provided in the second quarter 10-Q.

Q: Were the charges associated with the supply chain adjustments attributable to discontinued operations?

A: No. Per GAAP guidelines, only costs directly related to the affected businesses can be included in discontinued operations. Approximately $16 million of supply chain restructuring charges are still included in continuing operations for 2012.

Q: What was the forecast for discontinued operations in the second quarter of 2012?

A: We will not be providing guidance for discontinued operations going forward. The majority of costs associated with exiting those operations have been recognized, with minimal activity expected in the second half of the year.

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Q: How is the supplemental information regarding the condensed consolidated statement of income prepared?

A: In accordance with GAAP rules, the same methodology is used and only items directly attributable to the discontinued operations may be used. This is true for historical revisions as well as any future activity within the discontinued operations.

Q: Is the balance sheet or cash flow statement revised?

A: No, they are not required to be revised.

Q: When calculating historical Days Sales Outstanding (DSO) or inventory turn metrics, will they change by removing discontinued operations?

A: Yes. We would advise using the as-reported financials as a better indication of asset productivity. For example, calculating DSO at the end of the second quarter for all sales would be 43, but using only continuing operations would be 45, a difference of 2 days.

# # #

This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform of Act 1995. 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 “will,” “anticipate,” “estimate,” “expect,” “should,” and “may” or similar expressions. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated: current economic conditions, including consumer spending levels and the price elasticity of our products; the loss of or material reduction in sales to any of our top customers; our ability to keep pace with evolving consumer preferences and trends; the impact of significant fluctuations and volatility in various input costs, such as cotton; our ability to remain competitive in the areas of price, quality, brand recognition and research and product development; and our debt and debt service requirements that restrict our operating and financial flexibility and impose interest and financing costs. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent Form 10-K, 10-Q and 8-K reports filed with the SEC, as well as the investors section of our corporate website at http://tiny.cc/HanesBrandsIR. Except as required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.