HANESBRANDS, INC.
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2007
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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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.)
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1000 East Hanes Mill Road
Winston-Salem, North Carolina
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27105
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(Address of principal executive
office)
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(Zip
code)
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(336) 519-4400
(Registrants telephone
number including area code)
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 whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act.
Large accelerated
filer o Accelerated
filer o Non-accelerated
filer þ
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 May 1, 2007, there were 96,417,175 shares of the
registrants common stock outstanding.
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 Quarterly Report on
Form 10-Q
include the Hanes, Champion, Playtex, Bali, Just My Size,
barely there, Wonderbra, C9 by Champion, Leggs,
Beefy-T and Outer Banks 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 Quarterly Report on
Form 10-Q.
FORWARD-LOOKING
STATEMENTS
This Quarterly Report on
Form 10-Q
and other materials we have filed or will file with the
Securities and Exchange Commission, or the SEC,
contain, or will contain, certain forward-looking statements
regarding business strategies, market potential, future
financial performance and other matters. 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 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. More information on factors that could
affect our financial results is included from time to time in
our reports filed with the Securities and Exchange Commission,
including our Report on
Form 10-KT
for the six months ended December 30, 2006.
All forward-looking statements and the related risks,
uncertainties and other factors speak only as of the date of
this Quarterly Report on
Form 10-Q.
We expressly disclaim any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in our
expectations with regard thereto or any other change in events,
conditions or circumstances on which any such statement is
based, 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 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 Web site 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 Quarterly Report on
Form 10-Q.
PART I
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Item 1.
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Financial
Statements
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HANESBRANDS
(in thousands, except per share amounts)
(unaudited)
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Quarter Ended
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March 31, 2007
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April 1, 2006
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Net sales
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$
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1,039,894
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$
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1,032,860
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Cost of sales
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700,215
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691,968
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Gross profit
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339,679
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340,892
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Selling, general and
administrative expenses
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254,567
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243,370
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Restructuring
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16,246
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1,284
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Operating profit
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68,866
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96,238
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Interest expense, net
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51,717
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3,100
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Income before income taxes
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17,149
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93,138
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Income tax expense
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5,145
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18,546
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Net income
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$
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12,004
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$
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74,592
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Earnings per share:
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Basic
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$
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0.12
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$
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0.77
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Diluted
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$
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0.12
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$
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0.77
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Weighted average shares
outstanding:
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Basic
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96,475
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96,306
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Diluted
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97,105
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96,306
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See accompanying notes to Condensed Consolidated Financial
Statements.
2
HANESBRANDS
(in thousands, except share and per share amounts)
(unaudited)
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March 31, 2007
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December 30, 2006
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Assets
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Cash and cash equivalents
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$
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149,290
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$
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155,973
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Trade accounts receivable, less
allowances of $29,057 at March 31, 2007 and $27,709 at
December 30, 2006
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513,823
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488,629
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Inventories
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1,253,668
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1,216,501
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Deferred tax assets and other
current assets
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196,566
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210,077
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Total current assets
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2,113,347
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2,071,180
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Property, net
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530,882
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556,866
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Trademarks and other identifiable
intangibles, net
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138,231
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137,181
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Goodwill
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281,483
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281,525
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Deferred tax assets and other
noncurrent assets
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390,640
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388,868
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Total assets
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$
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3,454,583
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$
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3,435,620
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Liabilities and
Stockholders Equity
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Accounts payable
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$
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232,658
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$
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222,541
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Accrued liabilities
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383,189
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365,001
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Notes payable to banks
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12,179
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14,264
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Current portion of long-term debt
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18,750
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9,375
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Total current liabilities
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646,776
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611,181
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Long-term debt
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2,474,625
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2,484,000
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Other noncurrent liabilities
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241,862
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271,168
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Total liabilities
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3,363,263
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3,366,349
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Stockholders equity:
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Preferred stock (50,000,000
authorized shares; $.01 par value)
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Issued and outstanding
None
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Common stock (500,000,000
authorized shares; $.01 par value)
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Issued and outstanding
March 31, 2007 96,408,943;
December 30, 2006 96,312,458
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964
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963
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Additional paid-in capital
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106,756
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94,852
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Retained earnings
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45,028
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33,024
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Accumulated other comprehensive
loss
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(61,428
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)
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(59,568
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)
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Total stockholders equity
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91,320
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69,271
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Total liabilities and
stockholders equity
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$
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3,454,583
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$
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3,435,620
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See accompanying notes to Condensed Consolidated Financial
Statements.
3
HANESBRANDS
(in thousands)
(unaudited)
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Quarter Ended
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March 31, 2007
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April 1, 2006
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Operating activities:
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Net income
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$
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12,004
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$
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74,592
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Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
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Depreciation
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26,610
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26,535
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Amortization of intangibles
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1,560
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2,560
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Restructuring
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(633
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)
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Amortization of debt issuance costs
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1,625
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Stock compensation expense
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9,564
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Deferred taxes and other
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(3,833
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)
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7,364
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Changes in assets and liabilities:
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Accounts receivable
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(24,806
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)
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12,032
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Inventories
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(36,865
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)
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(50,772
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)
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Other assets
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15,790
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965
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Due to and from related entities
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4,435
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Accounts payable
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10,690
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22,649
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Accrued liabilities
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(12,297
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)
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1,937
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Net cash provided by (used in)
operating activities
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(591
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)
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102,297
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Investing activities:
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Purchases of property and equipment
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(7,394
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)
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(21,115
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)
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Proceeds from sales of assets
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4,528
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1,019
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Other
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(634
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)
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(376
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)
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Net cash used in investing
activities
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(3,500
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)
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(20,472
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)
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Financing activities:
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Principal payments on capital
lease obligations
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(277
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)
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(1,209
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)
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Borrowings on notes payable to
banks
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8,992
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1,748
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Repayments on notes payable to
banks
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(11,204
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)
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(37,749
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)
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Cost of debt issuance
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(1,774
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)
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Decrease in bank overdraft.
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(834
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)
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Proceeds from stock options
exercised
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2,338
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Repayments on notes payable to
related entities
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(5,157
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)
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Net transactions with parent
companies
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105,970
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Net transactions with related
entities
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(200,502
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)
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Net cash used in financing
activities
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(2,759
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)
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(136,899
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)
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Effect of changes in foreign
exchange rates on cash
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167
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337
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Decrease in cash and cash
equivalents
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(6,683
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)
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(54,737
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)
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Cash and cash equivalents at
beginning of year
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155,973
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510,632
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Cash and cash equivalents at end
of period
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$
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149,290
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$
|
455,895
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See accompanying notes to Condensed Consolidated Financial
Statements.
4
(1) Basis
of Presentation
These statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the
SEC) and, in accordance with those rules and
regulations, do not include all information and footnote
disclosures normally included in annual financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP).
Management believes that the disclosures made are adequate for a
fair statement of the results of operations, financial position
and cash flows of Hanesbrands Inc., a Maryland corporation, and
its consolidated subsidiaries (the Company or
Hanesbrands). In the opinion of management, the
condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the results of operations, financial
position and cash flows for the interim periods presented
herein. The preparation of condensed consolidated financial
statements in conformity with GAAP requires management to make
use of estimates and assumptions that affect the reported
amounts and disclosures. Actual results may vary from these
estimates.
These condensed consolidated interim financial statements should
be read in conjunction with the combined and consolidated
financial statements and notes thereto included in the
Companys most recent Report on
Form 10-KT.
The results of operations for any interim period are not
necessarily indicative of the results of operations to be
expected for the full year.
Hanesbrands was incorporated in connection with the spin off by
Sara Lee Corporation (Sara Lee) of its apparel
business in the Americas and Asia (the Branded Apparel
Americas and Asia Business). The condensed consolidated
financial statements reflect the consolidated operations of
Hanesbrands and its subsidiaries as a separate, stand-alone
entity subsequent to the spin off from Sara Lee on
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.
Management believes the assumptions underlying the condensed
consolidated financial statements for these periods are
reasonable. However, the condensed consolidated financial
statements included herein for periods prior to
September 5, 2006 do not necessarily reflect what the
Branded Apparel Americas and Asia Business results of
operations, financial position and cash flows would have been
had the Branded Apparel Americas and Asia Business been a
stand-alone company during those periods.
(2) 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 first quarter ended
March 31, 2007. Diluted EPS was calculated to give effect
to all potentially dilutive shares of common stock. Outstanding
stock options and restricted stock units represent the only
potentially dilutive effects on the Companys weighted
average shares. For the first quarter ended March 31, 2007,
options to purchase 2,554 shares of common stock were
excluded from the diluted earnings per share calculation because
their effect would be anti-dilutive. For the first quarter ended
March 31, 2007, there were 630 dilutive securities (options
to purchase 171 shares of common stock and 459 restricted
stock units) for purposes of computing diluted EPS.
For the first quarter ended April 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.
5
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
(3) Stock-Based
Compensation
During the first quarter ended March 31, 2007, the Company
granted options to purchase 1,082 shares of common stock
pursuant to the Hanesbrands Inc. Omnibus Incentive Plan of 2006
(the Omnibus Plan) at an exercise price of
$25.10 per share, which was the closing price of
Hanesbrands stock on the date of grant. Options can be
exercised over a term of between five and seven years and vest
ratably over one to three years with the exception of one
category of award which vested immediately upon grant. The fair
value of each option granted during the first quarter ended
March 31, 2007 was estimated as of the date of grant using
the Black-Scholes option-pricing model using the following
weighted average assumptions: weighted average expected
volatility of 26%; weighted average expected term of
4.49 years; expected dividend yield of 0%; and risk-free
interest rate ranging from 4.85% to 4.92%, with a weighted
average of 4.85%. The Company uses 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 relatively short period of time since the spin off on
September 5, 2006 during which Hanesbrands stock was
traded. The Company utilized the simplified method outlined in
SEC Staff Accounting Bulletin No. 107 to estimate
expected lives for options granted during the first quarter
ended March 31, 2007. The weighted average fair value of
individual options granted during the first quarter ended
March 31, 2007 was $7.73.
During the first quarter ended March 31, 2007, the Company
granted 574 restricted stock units (RSUs) pursuant to the
Omnibus Plan. Upon the achievement of defined service
conditions, the RSUs are converted into shares of the
Companys common stock on a
one-for-one
basis and issued to the grantees. All RSUs 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. The grant date fair value of the RSUs was $25.10.
(4) Restructuring
The reported results for the quarters ended March 31, 2007
and April 1, 2006 reflect amounts recognized for
restructuring actions. Reported amounts also include the impact
of certain actions that were completed for amounts more
favorable than previously estimated of $633 in the first quarter
ended March 31, 2007. The impact of restructuring on income
before income taxes is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Restructuring programs:
|
|
|
|
|
|
|
|
|
Fiscal year 2007 restructuring
actions
|
|
$
|
7,648
|
|
|
$
|
|
|
Six months ended December 30,
2006 restructuring actions
|
|
|
13,648
|
|
|
|
|
|
Fiscal year 2006 restructuring
actions
|
|
|
|
|
|
|
1,284
|
|
Fiscal year 2005 restructuring
actions
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in income before income
taxes
|
|
$
|
21,513
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
6
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
The following table illustrates where the costs associated with
these actions are recognized in the Condensed Consolidated
Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Cost of sales
|
|
$
|
5,267
|
|
|
$
|
|
|
Restructuring
|
|
|
16,246
|
|
|
|
1,284
|
|
|
|
|
|
|
|
|
|
|
Decrease in income before income
taxes
|
|
$
|
21,513
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
The impact of these costs (income) on the Companys
business segments is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Innerwear
|
|
$
|
18,725
|
|
|
$
|
149
|
|
Outerwear
|
|
|
(381
|
)
|
|
|
223
|
|
Hosiery
|
|
|
2,952
|
|
|
|
(2
|
)
|
International
|
|
|
|
|
|
|
824
|
|
|
|
|
|
|
|
|
|
|
Decrease in segment operating
profit
|
|
|
21,296
|
|
|
|
1,194
|
|
Decrease in general corporate
expenses
|
|
|
217
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
Decrease in operating profit
|
|
$
|
21,513
|
|
|
$
|
1,284
|
|
|
|
|
|
|
|
|
|
|
During the first quarter ended March 31, 2007, the Company,
in connection with its plans to migrate portions of its
manufacturing operations to lower-cost manufacturing facilities
in other countries and to consolidate production and
distribution capacity, approved actions that will result in the
closure of two textile facilities and two distribution centers
in the United States. All actions are expected to be completed
within a
12-month
period. The net impact of these actions was to reduce income
before income taxes by $7,648.
|
|
|
|
|
$6,406 of the net charge represents costs associated with the
planned termination of 930 employees for employee termination
and other benefits in accordance with benefit plans previously
communicated to the affected employee group. This charge is
reflected in the Restructuring line of the Condensed
Consolidated Statement of Income. As of March 31, 2007, two
employees had been terminated and the severance obligation
remaining in accrued liabilities on the Condensed Consolidated
Balance Sheet was $6,404.
|
|
|
|
$1,242 of the net charge represents accelerated depreciation of
buildings and equipment for the period between the date on which
the action was approved and actual closure of the facilities.
This charge is reflected in the Cost of Sales line
of the Condensed Consolidated Statement of Income.
|
7
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
The following table summarizes the charges taken for the
restructuring activities approved during the first quarter ended
March 31, 2007 and the related status as of March 31,
2007. Any accrued amounts remaining as of March 31, 2007
represent those cash expenditures necessary to satisfy remaining
obligations, which will be primarily paid in the next twelve
months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
as of
|
|
|
|
Restructuring Costs
|
|
|
Non-Cash
|
|
|
Cash
|
|
|
March 31,
|
|
|
|
Recognized
|
|
|
Charges
|
|
|
Payments
|
|
|
2007
|
|
|
Employee termination and other
benefits
|
|
$
|
6,406
|
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
6,404
|
|
Accelerated depreciation
|
|
|
1,242
|
|
|
|
(1,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,648
|
|
|
$
|
(1,242
|
)
|
|
$
|
(2
|
)
|
|
$
|
6,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes activity in accrued restructuring
for each of the prior period restructuring actions from
December 30, 2006 to March 31, 2007. Any accrued
amounts remaining as of March 31, 2007 represent those cash
expenditures necessary to satisfy remaining obligations.
Remaining obligations for employee termination and other
benefits will be paid primarily in the next twelve months, while
the obligations for lease termination costs will be paid
primarily over the next several years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
Restructuring
|
|
|
Cash
|
|
|
March 31,
|
|
|
|
2006
|
|
|
Charges
|
|
|
Payments
|
|
|
2007
|
|
|
Six months ended December 30,
2006 restructuring actions
|
|
$
|
5,334
|
|
|
$
|
9,623
|
|
|
$
|
(2,972
|
)
|
|
$
|
11,985
|
|
Fiscal year 2006 restructuring
actions
|
|
|
1,858
|
|
|
|
|
|
|
|
(393
|
)
|
|
|
1,465
|
|
Fiscal year 2005 restructuring
actions
|
|
|
8,027
|
|
|
|
217
|
|
|
|
(2,539
|
)
|
|
|
5,705
|
|
Fiscal year 2004 restructuring
actions
|
|
|
36
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
Business reshaping
|
|
|
1,774
|
|
|
|
|
|
|
|
(66
|
)
|
|
|
1,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued restructuring
|
|
$
|
17,029
|
|
|
$
|
9,840
|
|
|
$
|
(6,006
|
)
|
|
$
|
20,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized restructuring charges of $10,231 for
estimated lease termination costs associated with plant closures
announced in the six months ended December 30, 2006, for
facilities which were exited in the first quarter ended
March 31, 2007.
(5) Income
Taxes
The Company adopted FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN 48),
during the first quarter ended March 31, 2007. As a result
of the implementation of FIN 48, the Company recognized no
adjustment in the liability for unrecognized income tax
benefits. At the adoption date on December 31, 2006, the
Company had $3,267 of unrecognized tax benefits, all of which
would affect the effective tax rate if recognized. As of
March 31, 2007, the Company has $4,134 of unrecognized tax
benefits.
Under a tax sharing agreement entered into in connection with
the spin off from Sara Lee on September 5, 2006, 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 is also 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.
8
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
The Companys policy is to recognize interest
and/or
penalties related to income tax matters in income tax expense.
As of March 31, 2007, the Company had no accrual for
interest and penalties as the Company has not filed any income
tax returns for taxable periods subsequent to September 5,
2006.
For the first quarter ended March 31, 2007, income taxes
have been computed consistent with Accounting Principles Board
Opinion No. 28, Interim Financial Reporting
(APB 28) and Financial Accounting Standards Board
Interpretation No. 18, Accounting for Income Taxes in
Interim Periods an Interpretation of APB Opinion
No. 28 (FIN 18). For the first quarter ended
April 1, 2006, the Companys operations were included
in the consolidated income tax returns of Sara Lee. Income taxes
were calculated and provided for by the Company on a separate
return basis for each quarterly period prior to the spin off
from Sara Lee on September 5, 2006.
The difference in the effective tax rate of 30.0% for the first
quarter ended March 31, 2007 and the U.S. statutory
rate of 35.0% is primarily attributable to unremitted earnings
of foreign subsidiaries taxed at rates less than the
U.S. statutory rate and federal tax credits. The difference
in the effective tax rate of 19.9% for the quarter ended
April 1, 2006 and the U.S. statutory rate of 35.0% is
primarily attributable to tax incentives for manufacturing in
Puerto Rico, which were repealed effective for the
Companys tax year commencing after July 1, 2006, and
unremitted earnings of foreign subsidiaries taxed at rates less
than the U.S. statutory rate.
(6) Comprehensive
Income
SFAS No. 130, Reporting Comprehensive Income, requires
that all components of comprehensive income, including net
income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as
the change in equity during a period from transactions and other
events and circumstances from non-owner sources. Net income and
other comprehensive income, including foreign currency
translation adjustments, amounts amortized into net periodic
benefit cost as required by SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans and unrealized gains and losses on
qualifying cash flow hedges, are combined, net of their related
tax effect, to arrive at comprehensive income. The
Companys comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Net income
|
|
$
|
12,004
|
|
|
$
|
74,592
|
|
Translation adjustments
|
|
|
473
|
|
|
|
158
|
|
Net unrealized loss on qualifying
cash flow hedges, net of tax
|
|
|
(2,331
|
)
|
|
|
(365
|
)
|
Amounts amortized into net
periodic benefit cost:
|
|
|
|
|
|
|
|
|
Prior service benefit
|
|
|
(1,224
|
)
|
|
|
|
|
Actuarial loss
|
|
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
9,491
|
|
|
$
|
74,385
|
|
|
|
|
|
|
|
|
|
|
9
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
(7) Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Raw materials
|
|
$
|
108,793
|
|
|
$
|
111,503
|
|
Work in process
|
|
|
200,341
|
|
|
|
197,645
|
|
Finished goods
|
|
|
944,534
|
|
|
|
907,353
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,253,668
|
|
|
$
|
1,216,501
|
|
|
|
|
|
|
|
|
|
|
(8) Defined
Benefit Pension Plans
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. The
annual cost of the Sara Lee defined benefit plans was allocated
from Sara Lee to all of the participating businesses based upon
a specific actuarial computation which was followed
consistently. In addition to participation in the Sara Lee
sponsored plans, the Company sponsors two noncontributory
defined benefit plans, the Playtex Apparel, Inc. Pension Plan
(the Playtex Plan) and the National Textiles LLC
Pension Plan (the National Textiles Plan), for
certain qualifying individuals.
Total assets for the Hanesbrands Inc. Pension and Retirement
Plan remain within the master trust maintained by Sara Lee. A
final transfer of assets from Sara Lees master trust to
the master trust maintained by the Company will occur in fiscal
2007 once the allocation of assets and liabilities has been
completed in accordance with governmental regulations. The fair
value of plan assets included in the annual valuations
represents a best estimate based upon a percentage allocation of
total assets of the Sara Lees master trust and will be
adjusted once the final transfer is made.
In connection with the spin off on September 5, 2006, the
Company assumed Sara Lees obligations for all pension
plans that related to the Companys current and former
employees. The benefits for these plans were frozen on
January 1, 2006. The obligations and costs related to these
plans, in addition to those obligations and costs related to the
Playtex Plan and the National Textiles Plan, are included in the
Companys Condensed Consolidated Financial Statements as of
March 31, 2007.
The pension expense (income) incurred by the Company for these
defined benefit plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Participation in Sara Lee
sponsored defined benefit plans
|
|
$
|
|
|
|
$
|
(82
|
)
|
Hanesbrands sponsored defined
benefit plans
|
|
|
1,115
|
|
|
|
|
|
Playtex Apparel, Inc. Pension Plan
|
|
|
(34
|
)
|
|
|
(58
|
)
|
National Textiles LLC Pension Plan
|
|
|
(85
|
)
|
|
|
(265
|
)
|
|
|
|
|
|
|
|
|
|
Total pension plan expense (income)
|
|
$
|
996
|
|
|
$
|
(405
|
)
|
|
|
|
|
|
|
|
|
|
10
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
For the first quarter ended March 31, 2007, the components
of the Companys noncontributory defined benefit plans net
periodic benefit cost were as follows:
|
|
|
|
|
Service cost
|
|
$
|
313
|
|
Interest cost
|
|
|
12,387
|
|
Expected return on assets
|
|
|
(12,386
|
)
|
Amortization of:
|
|
|
|
|
Prior service cost
|
|
|
10
|
|
Net actuarial loss
|
|
|
672
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
996
|
|
|
|
|
|
|
During the first quarter ended March 31, 2007, the Company
made a discretionary contribution of $41,900, which, when
combined with the payment made in December 2006, satisfies the
2007 minimum funding requirement for the pension plans.
(9) Postretirement
Healthcare and Life Insurance Plans
Prior to the spin off from Sara Lee on September 5, 2006,
employees who met certain eligibility requirements participated
in post-retirement healthcare and life insurance sponsored by
Sara Lee. The annual cost of the Sara Lee defined benefit plans
was allocated from Sara Lee 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. The
obligations and costs related to all of these plans are included
in the Companys Condensed Consolidated Financial
Statements as of March 31, 2007.
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 amendments are currently being amortized
and the Company expects to record a final gain on curtailment of
plan benefits of approximately $36,000 in December 2007.
The postretirement plan expense (income) incurred by the Company
for these postretirement plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Participation in Sara Lee
sponsored postretirement healthcare and life insurance plans
|
|
$
|
|
|
|
$
|
1,474
|
|
Hanesbrands postretirement
healthcare and life insurance plans
|
|
|
(1,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,456
|
)
|
|
$
|
1,474
|
|
|
|
|
|
|
|
|
|
|
11
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
For the first quarter ended March 31, 2007, the components
of the Companys postretirement plans net periodic benefit
income were as follows:
|
|
|
|
|
Service cost
|
|
$
|
78
|
|
Interest cost
|
|
|
224
|
|
Expected return on assets
|
|
|
(2
|
)
|
Amortization of:
|
|
|
|
|
Transition obligation
|
|
|
(2
|
)
|
Prior service cost
|
|
|
(2,013
|
)
|
Net actuarial loss
|
|
|
259
|
|
|
|
|
|
|
Net periodic benefit income
|
|
$
|
(1,456
|
)
|
|
|
|
|
|
(10) Long-Term
Debt
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 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 in December 2006.
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 loans, and from 1.25% to 0.75% with respect to
loans maintained as Base Rate loans. At the
Companys option, borrowings under the Senior Secured
Credit Facility may be maintained from time to time as
(a) Base Rate loans, which 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, 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.
The First Amendment also provides that in the event that, prior
to February 22, 2008, the Company: (i) incurs a new
tranche of replacement loans constituting obligations under the
Senior Secured Credit Facility having an effective interest rate
margin less than the applicable margin for loans pursuant to the
Term B Loan Facility (Term B Loans), the
proceeds of which are used to repay or return, in whole or in
part, principal of the outstanding Term B Loans,
(ii) consummates any other amendment to the Senior Secured
Credit Facility that reduces the applicable margin for the Term
B Loans, or (iii) incurs additional Term B Loans having an
effective interest rate margin less than the applicable margin
for Term B Loans, the proceeds of which are used in whole or in
part to prepay or repay outstanding Term B Loans, then in any
such case, the Company will pay to the Administrative Agent, for
the ratable account of each Lender with outstanding Term B
Loans, a fee in an amount equal to 1.0% of the aggregate
principal amount of all Term B Loans being replaced on such date
immediately prior to the effectiveness of such transaction.
The Company incurred $1,600 in debt issuance costs in connection
with entering into the First Amendment which will be amortized
over the life of the Term B Loan Facility.
12
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
(11) Business
Segment Information
Our operations are managed and reported in five operating
segments, each of which is a reportable segment: Innerwear,
Outerwear, Hosiery, International and Other. These segments are
organized principally by product category and geographic
location. Management of each segment is responsible for the
assets and operations of these businesses.
The types of products and services from which each reportable
segment derives its revenues are as follows:
|
|
|
|
|
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.
|
|
|
|
Outerwear sells basic branded products that are seasonal in
nature under the product categories of casualwear and activewear.
|
|
|
|
Hosiery sells products in categories such as pantyhose and knee
highs.
|
|
|
|
International relates to the Europe, Asia, Canada and Latin
America geographic locations which sell products that span
across the innerwear, outerwear and hosiery reportable segments.
|
|
|
|
Other is comprised of sales of nonfinished products such as
fabric and certain other materials in the United States, Asia
and Latin America in order to maintain asset utilization at
certain manufacturing facilities.
|
The accounting policies of the segments are consistent with
those described in Note 2 to the Companys combined
and consolidated financial statements included in its Report on
Form 10-KT
for the six months ended December 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Net sales(1) (2):
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
590,447
|
|
|
$
|
593,620
|
|
Outerwear
|
|
|
283,635
|
|
|
|
267,286
|
|
Hosiery
|
|
|
73,693
|
|
|
|
77,314
|
|
International
|
|
|
90,777
|
|
|
|
91,966
|
|
Other
|
|
|
15,398
|
|
|
|
16,997
|
|
|
|
|
|
|
|
|
|
|
Total segment net sales
|
|
|
1,053,950
|
|
|
|
1,047,183
|
|
Intersegment
|
|
|
(14,056
|
)
|
|
|
(14,323
|
)
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,039,894
|
|
|
$
|
1,032,860
|
|
|
|
|
|
|
|
|
|
|
13
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Segment operating
profit:
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
75,968
|
|
|
$
|
79,048
|
|
Outerwear
|
|
|
6,100
|
|
|
|
15,902
|
|
Hosiery
|
|
|
20,045
|
|
|
|
11,937
|
|
International
|
|
|
7,778
|
|
|
|
9,018
|
|
Other
|
|
|
(775
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
Total segment operating profit
|
|
|
109,116
|
|
|
|
115,784
|
|
Items not included in segment
operating profit:
|
|
|
|
|
|
|
|
|
General corporate expenses
|
|
|
(17,177
|
)
|
|
|
(15,702
|
)
|
Amortization of trademarks and
other identifiable intangibles
|
|
|
(1,560
|
)
|
|
|
(2,560
|
)
|
Restructuring
|
|
|
(16,246
|
)
|
|
|
(1,284
|
)
|
Accelerated depreciation
|
|
|
(5,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit
|
|
|
68,866
|
|
|
|
96,238
|
|
Interest expense, net
|
|
|
(51,717
|
)
|
|
|
(3,100
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
17,149
|
|
|
$
|
93,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
1,420,251
|
|
|
$
|
1,354,183
|
|
Outerwear
|
|
|
747,660
|
|
|
|
761,653
|
|
Hosiery
|
|
|
89,913
|
|
|
|
110,400
|
|
International
|
|
|
212,956
|
|
|
|
222,561
|
|
Other
|
|
|
19,923
|
|
|
|
21,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,490,703
|
|
|
|
2,470,595
|
|
Corporate(3)
|
|
|
963,880
|
|
|
|
965,025
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,454,583
|
|
|
$
|
3,435,620
|
|
|
|
|
|
|
|
|
|
|
14
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Depreciation expense for fixed
assets:
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
14,363
|
|
|
$
|
11,492
|
|
Outerwear
|
|
|
5,120
|
|
|
|
5,640
|
|
Hosiery
|
|
|
2,304
|
|
|
|
3,237
|
|
International
|
|
|
738
|
|
|
|
478
|
|
Other
|
|
|
651
|
|
|
|
912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,176
|
|
|
|
21,759
|
|
Corporate
|
|
|
3,434
|
|
|
|
4,776
|
|
|
|
|
|
|
|
|
|
|
Total depreciation expense for
fixed assets
|
|
$
|
26,610
|
|
|
$
|
26,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Additions to long-lived
assets:
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
2,196
|
|
|
$
|
1,539
|
|
Outerwear
|
|
|
1,109
|
|
|
|
6,879
|
|
Hosiery
|
|
|
159
|
|
|
|
53
|
|
International
|
|
|
338
|
|
|
|
143
|
|
Other
|
|
|
7
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,809
|
|
|
|
8,710
|
|
Corporate
|
|
|
3,585
|
|
|
|
12,405
|
|
|
|
|
|
|
|
|
|
|
Total additions to long-lived
assets
|
|
$
|
7,394
|
|
|
$
|
21,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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: |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
Innerwear
|
|
$
|
1,725
|
|
|
$
|
2,853
|
|
Outerwear
|
|
|
6,798
|
|
|
|
4,742
|
|
Hosiery
|
|
|
4,824
|
|
|
|
5,811
|
|
International
|
|
|
709
|
|
|
|
917
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,056
|
|
|
$
|
14,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Principally cash and equivalents, certain fixed assets, net
deferred tax assets, goodwill, trademarks and other intangibles,
and certain other noncurrent assets. |
15
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
(12) Consolidating
Financial Information
In accordance with the indenture governing the Companys
$500 million 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) Hanesbrands (on an unconsolidated basis), the issuer of
the guaranteed obligations;
(ii) Divisional entities, on a combined basis, representing
operating divisions 100% owned by Hanesbrands;
(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 Hanesbrands, 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) Hanesbrands, on a consolidated basis.
As described in Note 1 to the Companys Combined and
Consolidated Financial Statements included in its Report on
Form 10-KT
for the six months ended December 30, 2006, 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 wholly
owned direct or indirect subsidiary of Hanesbrands Inc. as of
September 5, 2006. Therefore, a parent company entity is
not presented for fiscal periods prior to the spin-off.
16
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
The Floating Rate Senior Notes are fully and unconditionally
guaranteed on a joint and several basis by each guarantor
subsidiary. Each entity in the consolidating financial
information follows the same accounting policies as described in
the Companys Combined and Consolidated Financial
Statements included in its Report on
Form 10-KT
for the six months ended December 30, 2006, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
|
|
March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries
|
|
|
|
|
|
|
Parent
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
and
|
|
|
|
|
|
|
Company (*)
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
34,528
|
|
|
$
|
8,806
|
|
|
$
|
105,956
|
|
|
$
|
|
|
|
$
|
149,290
|
|
Trade accounts receivable
|
|
|
|
|
|
|
437,082
|
|
|
|
15,244
|
|
|
|
61,497
|
|
|
|
|
|
|
|
513,823
|
|
Inventories
|
|
|
|
|
|
|
976,503
|
|
|
|
134,503
|
|
|
|
245,103
|
|
|
|
(102,441
|
)
|
|
|
1,253,668
|
|
Deferred tax assets and other
current assets
|
|
|
|
|
|
|
34,771
|
|
|
|
138,581
|
|
|
|
23,208
|
|
|
|
6
|
|
|
|
196,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
1,482,884
|
|
|
|
297,134
|
|
|
|
435,764
|
|
|
|
(102,435
|
)
|
|
|
2,113,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, net
|
|
|
|
|
|
|
277,596
|
|
|
|
90,501
|
|
|
|
162,785
|
|
|
|
|
|
|
|
530,882
|
|
Trademarks and other identifiable
intangibles, net
|
|
|
|
|
|
|
15,982
|
|
|
|
112,667
|
|
|
|
9,582
|
|
|
|
|
|
|
|
138,231
|
|
Goodwill
|
|
|
|
|
|
|
212,565
|
|
|
|
16,934
|
|
|
|
51,984
|
|
|
|
|
|
|
|
281,483
|
|
Investments in subsidiaries
|
|
|
91,320
|
|
|
|
|
|
|
|
185,944
|
|
|
|
278,030
|
|
|
|
(555,294
|
)
|
|
|
|
|
Deferred tax assets and other
noncurrent assets
|
|
|
|
|
|
|
161,064
|
|
|
|
275,228
|
|
|
|
20,007
|
|
|
|
(65,659
|
)
|
|
|
390,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
91,320
|
|
|
$
|
2,150,091
|
|
|
$
|
978,408
|
|
|
$
|
958,152
|
|
|
$
|
(723,388
|
)
|
|
$
|
3,454,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
159,148
|
|
|
$
|
27,012
|
|
|
$
|
46,498
|
|
|
$
|
|
|
|
$
|
232,658
|
|
Accrued liabilities
|
|
|
|
|
|
|
303,817
|
|
|
|
30,096
|
|
|
|
51,877
|
|
|
|
(2,601
|
)
|
|
|
383,189
|
|
Notes payable to banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,179
|
|
|
|
|
|
|
|
12,179
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
18,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
481,715
|
|
|
|
57,108
|
|
|
|
110,554
|
|
|
|
(2,601
|
)
|
|
|
646,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
2,024,625
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
2,474,625
|
|
Other noncurrent liabilities
|
|
|
|
|
|
|
201,537
|
|
|
|
28,240
|
|
|
|
8,128
|
|
|
|
3,957
|
|
|
|
241,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
2,707,877
|
|
|
|
535,348
|
|
|
|
118,682
|
|
|
|
1,356
|
|
|
|
3,363,263
|
|
Stockholders equity
|
|
|
91,320
|
|
|
|
(557,786
|
)
|
|
|
443,060
|
|
|
|
839,470
|
|
|
|
(724,744
|
)
|
|
|
91,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
91,320
|
|
|
$
|
2,150,091
|
|
|
$
|
978,408
|
|
|
$
|
958,152
|
|
|
$
|
(723,388
|
)
|
|
$
|
3,454,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Parent Company refers to Hanesbrands Inc. without its
subsidiaries or divisions. |
17
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
|
|
December 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entries
|
|
|
|
|
|
|
Parent
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
and
|
|
|
|
|
|
|
Company (*)
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
60,960
|
|
|
$
|
154
|
|
|
$
|
94,859
|
|
|
$
|
|
|
|
$
|
155,973
|
|
Trade accounts receivable
|
|
|
|
|
|
|
408,751
|
|
|
|
9,369
|
|
|
|
70,509
|
|
|
|
|
|
|
|
488,629
|
|
Inventories
|
|
|
|
|
|
|
959,274
|
|
|
|
128,773
|
|
|
|
226,188
|
|
|
|
(97,734
|
)
|
|
|
1,216,501
|
|
Deferred tax assets and other
current assets
|
|
|
|
|
|
|
55,481
|
|
|
|
142,183
|
|
|
|
27,329
|
|
|
|
(14,916
|
)
|
|
|
210,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
1,484,466
|
|
|
|
280,479
|
|
|
|
418,885
|
|
|
|
(112,650
|
)
|
|
|
2,071,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, net
|
|
|
|
|
|
|
298,755
|
|
|
|
96,147
|
|
|
|
161,964
|
|
|
|
|
|
|
|
556,866
|
|
Trademarks and other identifiable
intangibles, net
|
|
|
|
|
|
|
13,301
|
|
|
|
114,205
|
|
|
|
9,675
|
|
|
|
|
|
|
|
137,181
|
|
Goodwill
|
|
|
|
|
|
|
213,376
|
|
|
|
16,935
|
|
|
|
51,214
|
|
|
|
|
|
|
|
281,525
|
|
Investments in subsidiaries
|
|
|
69,271
|
|
|
|
|
|
|
|
175,594
|
|
|
|
266,347
|
|
|
|
(511,212
|
)
|
|
|
|
|
Deferred tax assets and other
noncurrent assets
|
|
|
|
|
|
|
144,281
|
|
|
|
233,608
|
|
|
|
245,879
|
|
|
|
(234,900
|
)
|
|
|
388,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
69,271
|
|
|
$
|
2,154,179
|
|
|
$
|
916,968
|
|
|
$
|
1,153,964
|
|
|
$
|
(858,762
|
)
|
|
$
|
3,435,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
162,281
|
|
|
$
|
20,109
|
|
|
$
|
44,855
|
|
|
$
|
(4,704
|
)
|
|
$
|
222,541
|
|
Accrued liabilities
|
|
|
|
|
|
|
189,243
|
|
|
|
29,784
|
|
|
|
292,788
|
|
|
|
(146,814
|
)
|
|
|
365,001
|
|
Notes payable to banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,264
|
|
|
|
|
|
|
|
14,264
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
360,899
|
|
|
|
49,893
|
|
|
|
351,907
|
|
|
|
(151,518
|
)
|
|
|
611,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
2,034,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
2,484,000
|
|
Other noncurrent liabilities
|
|
|
|
|
|
|
238,271
|
|
|
|
20,525
|
|
|
|
8,567
|
|
|
|
3,805
|
|
|
|
271,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
2,633,170
|
|
|
|
520,418
|
|
|
|
360,474
|
|
|
|
(147,713
|
)
|
|
|
3,366,349
|
|
Stockholders equity
|
|
|
69,271
|
|
|
|
(478,991
|
)
|
|
|
396,550
|
|
|
|
793,490
|
|
|
|
(711,049
|
)
|
|
|
69,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
69,271
|
|
|
$
|
2,154,179
|
|
|
$
|
916,968
|
|
|
$
|
1,153,964
|
|
|
$
|
(858,762
|
)
|
|
$
|
3,435,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Parent Company refers to Hanesbrands Inc. without its
subsidiaries or divisions. |
18
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
First Quarter Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
|
|
Company (*)
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
1,042,703
|
|
|
$
|
232,120
|
|
|
$
|
570,177
|
|
|
$
|
(805,106
|
)
|
|
$
|
1,039,894
|
|
Cost of sales
|
|
|
|
|
|
|
805,905
|
|
|
|
183,805
|
|
|
|
503,205
|
|
|
|
(792,700
|
)
|
|
|
700,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
236,798
|
|
|
|
48,315
|
|
|
|
66,972
|
|
|
|
(12,406
|
)
|
|
|
339,679
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
220,847
|
|
|
|
2,486
|
|
|
|
25,612
|
|
|
|
5,622
|
|
|
|
254,567
|
|
Restructuring
|
|
|
|
|
|
|
15,901
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
16,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
50
|
|
|
|
45,829
|
|
|
|
41,015
|
|
|
|
(18,028
|
)
|
|
|
68,866
|
|
Equity in earnings (loss) of
subsidiaries
|
|
|
12,004
|
|
|
|
|
|
|
|
10,350
|
|
|
|
13,116
|
|
|
|
(35,470
|
)
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
41,442
|
|
|
|
10,639
|
|
|
|
(357
|
)
|
|
|
(7
|
)
|
|
|
51,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
12,004
|
|
|
|
(41,392
|
)
|
|
|
45,540
|
|
|
|
54,488
|
|
|
|
(53,491
|
)
|
|
|
17,149
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
440
|
|
|
|
4,705
|
|
|
|
|
|
|
|
5,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
12,004
|
|
|
$
|
(41,392
|
)
|
|
$
|
45,100
|
|
|
$
|
49,783
|
|
|
$
|
(53,491
|
)
|
|
$
|
12,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Parent Company refers to Hanesbrands Inc. without its
subsidiaries or divisions. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
First Quarter Ended April 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
1,104,873
|
|
|
$
|
284,236
|
|
|
$
|
661,093
|
|
|
$
|
(1,017,342
|
)
|
|
$
|
1,032,860
|
|
Cost of sales
|
|
|
949,709
|
|
|
|
224,382
|
|
|
|
529,644
|
|
|
|
(1,011,767
|
)
|
|
|
691,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
155,164
|
|
|
|
59,854
|
|
|
|
131,449
|
|
|
|
(5,575
|
)
|
|
|
340,892
|
|
Selling, general and
administrative expenses
|
|
|
178,369
|
|
|
|
39,292
|
|
|
|
24,177
|
|
|
|
1,532
|
|
|
|
243,370
|
|
Restructuring
|
|
|
421
|
|
|
|
(3
|
)
|
|
|
866
|
|
|
|
|
|
|
|
1,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(23,626
|
)
|
|
|
20,565
|
|
|
|
106,406
|
|
|
|
(7,107
|
)
|
|
|
96,238
|
|
Equity in earnings (loss) of
subsidiaries
|
|
|
|
|
|
|
22,236
|
|
|
|
47,766
|
|
|
|
(70,002
|
)
|
|
|
|
|
Interest expense, net
|
|
|
550
|
|
|
|
2,255
|
|
|
|
295
|
|
|
|
|
|
|
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(24,176
|
)
|
|
|
40,546
|
|
|
|
153,877
|
|
|
|
(77,109
|
)
|
|
|
93,138
|
|
Income tax expense
|
|
|
|
|
|
|
16,463
|
|
|
|
2,083
|
|
|
|
|
|
|
|
18,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(24,176
|
)
|
|
$
|
24,083
|
|
|
$
|
151,794
|
|
|
$
|
(77,109
|
)
|
|
$
|
74,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
First Quarter Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Parent
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
|
|
Company (*)
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
|
|
|
$
|
(84,163
|
)
|
|
$
|
16,448
|
|
|
$
|
267,792
|
|
|
$
|
(200,668
|
)
|
|
$
|
(591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
(5,473
|
)
|
|
|
(284
|
)
|
|
|
(1,637
|
)
|
|
|
|
|
|
|
(7,394
|
)
|
Proceeds from sales of assets
|
|
|
|
|
|
|
414
|
|
|
|
1,162
|
|
|
|
2,952
|
|
|
|
|
|
|
|
4,528
|
|
Other
|
|
|
|
|
|
|
(366
|
)
|
|
|
84
|
|
|
|
(709
|
)
|
|
|
357
|
|
|
|
(634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
|
|
|
|
(5,425
|
)
|
|
|
962
|
|
|
|
606
|
|
|
|
357
|
|
|
|
(3,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on capital
lease obligations
|
|
|
|
|
|
|
(262
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(277
|
)
|
Borrowings on notes payable to
banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,992
|
|
|
|
|
|
|
|
8,992
|
|
Repayments on notes payable to
banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,204
|
)
|
|
|
|
|
|
|
(11,204
|
)
|
Cost of debt issuance
|
|
|
|
|
|
|
(1,774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,774
|
)
|
Decrease in bank overdraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(834
|
)
|
|
|
|
|
|
|
(834
|
)
|
Proceeds from stock options
exercised
|
|
|
|
|
|
|
2,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,338
|
|
Net transactions with related
entities
|
|
|
|
|
|
|
62,854
|
|
|
|
(8,743
|
)
|
|
|
(254,422
|
)
|
|
|
200,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
|
|
|
|
63,156
|
|
|
|
(8,758
|
)
|
|
|
(257,468
|
)
|
|
|
200,311
|
|
|
|
(2,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign
exchange rates on cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and
cash equivalents
|
|
|
|
|
|
|
(26,432
|
)
|
|
|
8,652
|
|
|
|
11,097
|
|
|
|
|
|
|
|
(6,683
|
)
|
Cash and cash equivalents at
beginning of year
|
|
|
|
|
|
|
60,960
|
|
|
|
154
|
|
|
|
94,859
|
|
|
|
|
|
|
|
155,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
|
|
|
|
$
|
34,528
|
|
|
$
|
8,806
|
|
|
$
|
105,956
|
|
|
$
|
|
|
|
$
|
149,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Parent Company refers to Hanesbrands Inc. without its
subsidiaries or divisions. |
20
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
First Quarter Ended April 1, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
|
Divisional
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Entries and
|
|
|
|
|
|
|
Entities
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
213,572
|
|
|
$
|
28,438
|
|
|
$
|
143,129
|
|
|
$
|
(282,842
|
)
|
|
$
|
102,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(13,381
|
)
|
|
|
(1,447
|
)
|
|
|
(6,287
|
)
|
|
|
|
|
|
|
(21,115
|
)
|
Proceeds from sales of assets
|
|
|
978
|
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
1,019
|
|
Other
|
|
|
(426
|
)
|
|
|
|
|
|
|
(374
|
)
|
|
|
424
|
|
|
|
(376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
(12,829
|
)
|
|
|
(1,447
|
)
|
|
|
(6,620
|
)
|
|
|
424
|
|
|
|
(20,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on capital
lease obligations
|
|
|
(1,152
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,209
|
)
|
Borrowings on notes payable to
banks
|
|
|
|
|
|
|
|
|
|
|
1,748
|
|
|
|
|
|
|
|
1,748
|
|
Repayments on notes payable to
banks
|
|
|
|
|
|
|
|
|
|
|
(37,749
|
)
|
|
|
|
|
|
|
(37,749
|
)
|
Borrowings (repayments) on notes
payable to related entities
|
|
|
(8,000
|
)
|
|
|
8,271
|
|
|
|
(5,428
|
)
|
|
|
|
|
|
|
(5,157
|
)
|
Net transactions with parent
companies
|
|
|
23,769
|
|
|
|
(74,146
|
)
|
|
|
(126,071
|
)
|
|
|
282,418
|
|
|
|
105,970
|
|
Net transactions with related
entities
|
|
|
(200,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(200,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(185,885
|
)
|
|
|
(65,932
|
)
|
|
|
(167,500
|
)
|
|
|
282,418
|
|
|
|
(136,899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in foreign
exchange rates on cash
|
|
|
|
|
|
|
|
|
|
|
337
|
|
|
|
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and
cash equivalents
|
|
|
14,858
|
|
|
|
(38,941
|
)
|
|
|
(30,654
|
)
|
|
|
|
|
|
|
(54,737
|
)
|
Cash and cash equivalents at
beginning of year
|
|
|
(24,248
|
)
|
|
|
292,264
|
|
|
|
242,616
|
|
|
|
|
|
|
|
510,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
|
$
|
(9,390
|
)
|
|
$
|
253,323
|
|
|
$
|
211,962
|
|
|
$
|
|
|
|
$
|
455,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13) Issued
But Not Yet Effective Accounting Standards
Fair
Value Measurements
The FASB has issued FAS 157, Fair Value Measurements
(SFAS 157), which provides guidance for using
fair value to measure assets and liabilities. The standard also
responds to investors requests for more information about
(1) the extent to which companies measure assets and
liabilities at fair value, (2) the information used to
measure fair value, and (3) the effect that fair-value
measurements have on earnings. SFAS 157 will apply whenever
another standard requires (or permits) assets or liabilities to
be measured at fair value. The standard does not expand the use
of fair value to any new circumstances. SFAS 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within
21
HANESBRANDS
Notes to Condensed Consolidated Financial
Statements (Continued)
(dollars and shares in thousands, except per share data)
(unaudited)
those fiscal years. The Company is currently evaluating the
impact, if any, of SFAS 157 on its results of operations
and financial position.
Pension
and Other Postretirement Benefits
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (an amendment of FASB Statements
No. 87, 88, 106, and 132R) (SFAS 158).
SFAS 158 requires an employer to recognize in its statement
of financial position an asset for a plans over funded
status or a liability for a plans under funded status,
measure a plans assets and its obligations that determine
its funded status as of the end of the employers fiscal
year (with limited exceptions), and recognize changes in the
funded status of a defined benefit postretirement plan in the
year in which the changes occur. Those changes will be reported
in comprehensive loss and as a separate component of
stockholders equity. The Company adopted the provision to
recognize the funded status of a benefit plan and the disclosure
requirements during the six months ended December 30, 2006.
The requirement to measure plan assets and benefit obligations
as of the date of the employers fiscal year-end is
effective for fiscal years ending after December 15, 2008.
The Company plans to adopt the measurement date provision in
2007.
Fair
Value Option for Financial Assets and Financial
Liabilities
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement
No. 115 (SFAS 159). SFAS 159 permits
companies to choose to measure many financial instruments and
certain other items at fair value that are not currently
required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. The
provisions of SFAS 159 become effective for fiscal years
beginning after November 15, 2007. The Company is currently
evaluating the impact that SFAS 159 will have on its
results of operations and financial position.
22
|
|
Item 2.
|
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 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 Quarterly Report on
Form 10-Q.
The unaudited condensed consolidated financial statements and
notes included herein should be read in conjunction with our
audited combined and consolidated financial statements and notes
for the six month period ended December 30, 2006, which
were included in our Report on
Form 10-KT
filed with the Securities and Exchange Commission. 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
included elsewhere in this Quarterly Report on
Form 10-Q
and those included in our Report on
Form 10-KT.
Overview
We are a consumer goods company with a portfolio of leading
apparel brands, including Hanes, Champion,
Playtex, Bali, Just My Size, barely
there and Wonderbra. We design, manufacture, source
and sell a broad range of apparel essentials such as t-shirts,
bras, panties, mens underwear, kids underwear,
socks, hosiery, casualwear and activewear. Our brands hold
either the number one or number two U.S. market position by
sales in most product categories in which we compete.
Our operations are managed and reported in five operating
segments, each of which is a reportable segment: innerwear,
outerwear, hosiery, international and other. These segments are
organized principally by product category and geographic
location. Management of each segment is responsible for the
assets and operations of these businesses.
|
|
|
|
|
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, and Wonderbra brands. We are also a
leading manufacturer and marketer of mens underwear, and
kids underwear under the Hanes and Champion
brand names. Our net sales for the first quarter ended
March 31, 2007 from our innerwear segment were
$590 million, 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 in 2004 launched an apparel program at
Target stores, C9 by Champion. We also license our
Champion name for collegiate apparel and footwear. We
also supply our t-shirts, sportshirts and fleece products to
screen printers and embellishers, who imprint or embroider the
product and then resell to specialty retailers and organizations
such as resorts and professional sports clubs. Our net sales for
the first quarter ended March 31, 2007 from our outerwear
segment were $284 million, representing approximately 27%
of total segment net sales.
|
|
|
|
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 Hanes, Leggs and Just My Size
brands. Our net sales for the first quarter ended
March 31, 2007 from our hosiery segment were
$74 million, representing approximately 7% of total segment
net sales. In light of a sustained decline in the hosiery
industry due to changes in consumer preferences, our net sales
from hosiery sales have declined each year since 1995.
|
23
|
|
|
|
|
International. International includes products
that span across the innerwear, outerwear and hosiery reportable
segments. Our net sales for the first quarter ended
March 31, 2007 in our international segment were
$91 million, representing approximately 9% of total segment
net sales and included sales in Europe, Asia, Canada and Latin
America. Japan, Canada and Mexico are our largest international
markets and we also have opened sales offices in India and China.
|
|
|
|
Other. Our net sales for the first quarter
ended March 31, 2007 in our other segment were
$15 million, representing approximately 1% of total segment
net sales and are comprised of sales of nonfinished products
such as fabric and certain other materials in the United States,
Asia and Latin America in order to maintain asset utilization at
certain manufacturing facilities
|
Highlights
from the First Quarter Ended March 31, 2007
|
|
|
|
|
Total net sales increased by $7 million, or 0.7%, to
$1.04 billion, up from $1.03 billion in the year-ago
quarter ended April 1, 2006. Growth in the outerwear
segment resulted from double-digit gains for Champion
activewear and Hanes casualwear and more than offset
generally flat sales in the innerwear segment and declines in
other segments, primarily Hosiery.
|
|
|
|
Operating profit was $68.9 million, a decrease of 28.4%
from $96.2 million a year ago. The profit decline primarily
reflected restructuring and related charges for plant closures,
higher cotton costs and increased investment in business
operations.
|
|
|
|
Net income for the quarter was $12.0 million, down from
$74.6 million a year ago, primarily as a result of our new
independent structure. The decrease in net income reflected a
$49 million increase in interest expense, reduced operating
profit and a higher effective rate of income taxes.
|
|
|
|
Using cash flow from operations, we made a voluntary
$42 million pension contribution in the first quarter,
reducing our underfunded liability for qualified pension plans
to approximately $131 million. Our qualified pension plan
liability is now approximately 84% funded.
|
|
|
|
We entered into a first amendment to our senior secured credit
facility with our lenders which primarily lowered the borrowing
applicable 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.
|
|
|
|
We approved actions to close two textile facilities and two
distribution centers in the United States. In addition, we
completed previously announced actions in the first quarter of
2007. The net impact of these actions was to reduce income
before income taxes by $22 million.
|
Condensed
Consolidated Results of Operations Quarter Ended
March 31, 2007 Compared with Quarter Ended April 1,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Better
|
|
|
Percent
|
|
|
|
March 31, 2007
|
|
|
April 1, 2006
|
|
|
(Worse)
|
|
|
Change
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Net sales
|
|
$
|
1,039,894
|
|
|
$
|
1,032,860
|
|
|
$
|
7,034
|
|
|
|
0.7
|
%
|
Cost of sales
|
|
|
700,215
|
|
|
|
691,968
|
|
|
|
(8,247
|
)
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
339,679
|
|
|
|
340,892
|
|
|
|
(1,213
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
254,567
|
|
|
|
243,370
|
|
|
|
(11,197
|
)
|
|
|
(4.6
|
)
|
Restructuring
|
|
|
16,246
|
|
|
|
1,284
|
|
|
|
(14,962
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
68,866
|
|
|
|
96,238
|
|
|
|
(27,372
|
)
|
|
|
(28.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
51,717
|
|
|
|
3,100
|
|
|
|
(48,617
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17,149
|
|
|
|
93,138
|
|
|
|
(75,989
|
)
|
|
|
(81.6
|
)
|
Income tax expense
|
|
|
5,145
|
|
|
|
18,546
|
|
|
|
13,401
|
|
|
|
72.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,004
|
|
|
$
|
74,592
|
|
|
$
|
(62,588
|
)
|
|
|
(83.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
1,039,894
|
|
|
$
|
1,032,860
|
|
|
$
|
7,034
|
|
|
|
0.7
|
%
|
Consolidated net sales increased by $7 million or 0.7% in
the first quarter of 2007 compared to the same quarter in 2006.
The increase was primarily due to growth in sales volume in
Hanes casualwear and Champion activewear brand
sales in our Outerwear segment. We experienced higher net sales
in our womens products such as panties, casualwear, socks
and sleepwear which were partially offset by lower mens
and kids underwear net sales. The increase in womens
net sales reflects the recent launch of our Hanes All-Over
Comfort Bra. The All-Over Comfort Bra is the latest
in our Hanes ComfortSoft platform, which spans across the
mens, womens and kids product categories.
Our Outerwear segment net sales increased by $16 million
and were offset by slight declines in Innerwear of
$3 million, Hosiery of $4 million, International of
$1 million and Other segment net sales of $1 million.
We expect the trend of declining hosiery sales to continue as a
result of shifts in consumer preferences, which is consistent
with the long-term decline in the overall hosiery industry.
Gross
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Gross profit
|
|
$
|
339,679
|
|
|
$
|
340,892
|
|
|
$
|
(1,213
|
)
|
|
|
(0.4
|
)%
|
As a percent of net sales, our gross profit percentage decreased
to 32.7% in the first quarter of 2007 from 33.0% in the same
quarter in 2006. The decrease in gross profit percentage was
primarily due to higher cotton costs of $10 million,
$5 million in accelerated depreciation and higher excess
and obsolete inventory costs of $4 million. Cotton prices,
which were approximately 45 cents per pound in the first half of
2006, returned to the historical average of approximately 55
cents per pound in the second half of calendar 2006 and the
first quarter of 2007. These higher costs were offset primarily
by lower spending in numerous areas resulting from our prior
year restructuring actions and cost savings initiatives of
$14 million and lower allocations of overhead costs
$7 million. The accelerated depreciation was a result of
actions approved in the first quarter of 2007 to close two
textile manufacturing plants and two distribution centers in the
United States and previously approved actions that were
completed during the first quarter of 2007.
Selling,
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Selling, general and
administrative expenses
|
|
$
|
254,567
|
|
|
$
|
243,370
|
|
|
$
|
(11,197
|
)
|
|
|
(4.6
|
)%
|
Selling, general and administrative expenses were
$11 million higher in the first quarter of 2007 compared to
the same quarter in 2006. Our expenses were higher in the first
quarter of 2007 primarily due to a reduction of allocations to
inventory cost of $7 million, higher technology consulting
expenses of $4 million, higher distribution expenses of
$3 million, incremental stand alone expenses associated
with being an independent company of $2 million and offset
by the elimination of allocations from Sara Lee of
$6 million. Our higher expenses were primarily offset by
lower spending in media, advertising and promotion of
$6 million and lower non-recurring spin off and related
expenses of $3 million in the first quarter 2007 compared
to the same quarter in 2006. The lower media, advertising and
promotion expenses are primarily due to timing of actual
spending during the full year 2007 versus 2006.
25
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Restructuring
|
|
$
|
16,246
|
|
|
$
|
1,284
|
|
|
$
|
(14,962
|
)
|
|
|
NM
|
|
During the first quarter of 2007, we approved actions to close
two textile manufacturing plants and two distribution centers in
the United States. These actions resulted in a charge of
$6 million, representing costs associated with the planned
termination of 930 employees for employee and other termination
benefits 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 associated with plant closures announced in
the six months ended December 30, 2006, for facilities
which were exited in the first quarter of 2007. In connection
with the approved actions in the first quarter of 2007 and
previously announced actions which were completed this quarter,
a charge of $5 million for accelerated depreciation of
buildings and equipment is reflected in the Cost of
sales line of the Condensed Consolidated Statement of
Income. The first quarter actions are expected to be completed
during the balance of 2007. These actions, which are a
continuation of our long-term supply chain 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Operating profit
|
|
$
|
68,866
|
|
|
$
|
96,238
|
|
|
$
|
(27,372
|
)
|
|
|
(28.4
|
)%
|
Operating profit decreased in the first quarter of 2007 by
$27 million as compared to the same quarter in 2006
primarily as a result of restructuring and related charges for
facility closures of $22 million and higher selling,
general and administrative expenses of $11 million. Our
higher costs were partially offset by benefits from prior year
restructuring actions and cost savings initiatives.
Interest
Expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Interest expense, net
|
|
$
|
51,717
|
|
|
$
|
3,100
|
|
|
$
|
(48,617
|
)
|
|
|
NM
|
|
Interest expense, net increased by $49 million in the first
quarter of 2007 compared to the same quarter in 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 a new senior secured credit
facility, a new senior secured second lien credit facility and a
bridge loan facility. In December 2006, we issued
$500 million of floating rate senior notes and the net
proceeds were used to repay the bridge loan facility. On
February 22, 2007, we entered into a first amendment to our
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.
Income
Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Income tax expense
|
|
$
|
5,145
|
|
|
$
|
18,546
|
|
|
$
|
13,401
|
|
|
|
72.3
|
%
|
Our effective income tax rate increased to 30.0% in the first
quarter of 2007 from 19.9% in the same quarter of 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, which were repealed effective
after our tax
26
year commencing after July 1, 2006 and lower unremitted
earnings from foreign subsidiaries in the first quarter of 2007
taxed at rates less than the U.S. statutory rate.
Net
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net income
|
|
$
|
12,004
|
|
|
$
|
74,592
|
|
|
|
(62,588
|
)
|
|
|
(83.9
|
)%
|
Net income for the first quarter of 2007 was lower than the same
quarter of 2006 as a result of higher interest expense, lower
operating profit and a higher effective rate of income taxes.
Operating
Results by Business Segment Quarter Ended
March 31, 2007 Compared with Quarter Ended April 1,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
Quarter Ended
|
|
|
Better
|
|
|
Percent
|
|
|
|
March 31, 2007
|
|
|
April 1, 2006
|
|
|
(Worse)
|
|
|
Change
|
|
|
|
(dollars in thousands)
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
590,447
|
|
|
$
|
593,620
|
|
|
$
|
(3,173
|
)
|
|
|
(0.5
|
)%
|
Outerwear
|
|
|
283,635
|
|
|
|
267,286
|
|
|
|
16,349
|
|
|
|
6.1
|
|
Hosiery
|
|
|
73,693
|
|
|
|
77,314
|
|
|
|
(3,621
|
)
|
|
|
(4.7
|
)
|
International
|
|
|
90,777
|
|
|
|
91,966
|
|
|
|
(1,189
|
)
|
|
|
(1.3
|
)
|
Other
|
|
|
15,398
|
|
|
|
16,997
|
|
|
|
(1,599
|
)
|
|
|
(9.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net segment sales
|
|
|
1,053,950
|
|
|
|
1,047,183
|
|
|
|
6,767
|
|
|
|
0.6
|
|
Intersegment
|
|
|
(14,056
|
)
|
|
|
(14,323
|
)
|
|
|
267
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,039,894
|
|
|
$
|
1,032,860
|
|
|
$
|
7,034
|
|
|
|
0.7
|
%
|
Segment operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innerwear
|
|
$
|
75,968
|
|
|
$
|
79,048
|
|
|
$
|
(3,080
|
)
|
|
|
(3.9
|
)%
|
Outerwear
|
|
|
6,100
|
|
|
|
15,902
|
|
|
|
(9,802
|
)
|
|
|
(61.6
|
)
|
Hosiery
|
|
|
20,045
|
|
|
|
11,937
|
|
|
|
8,108
|
|
|
|
67.9
|
|
International
|
|
|
7,778
|
|
|
|
9,018
|
|
|
|
(1,240
|
)
|
|
|
(13.8
|
)
|
Other
|
|
|
(775
|
)
|
|
|
(121
|
)
|
|
|
(654
|
)
|
|
|
(540.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit
|
|
|
109,116
|
|
|
|
115,784
|
|
|
|
(6,668
|
)
|
|
|
(5.8
|
)
|
Items not included in segment
operating profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expenses
|
|
|
(17,177
|
)
|
|
|
(15,702
|
)
|
|
|
(1,475
|
)
|
|
|
(9.4
|
)
|
Amortization of trademarks and
other intangibles
|
|
|
(1,560
|
)
|
|
|
(2,560
|
)
|
|
|
1,000
|
|
|
|
39.1
|
|
Restructuring
|
|
|
(16,246
|
)
|
|
|
(1,284
|
)
|
|
|
(14,962
|
)
|
|
|
NM
|
|
Accelerated depreciation
|
|
|
(5,267
|
)
|
|
|
|
|
|
|
(5,267
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit
|
|
|
68,866
|
|
|
|
96,238
|
|
|
|
(27,372
|
)
|
|
|
(28.4
|
)
|
Interest expense, net
|
|
|
(51,717
|
)
|
|
|
(3,100
|
)
|
|
|
(48,617
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
17,149
|
|
|
$
|
93,138
|
|
|
$
|
(75,989
|
)
|
|
|
(81.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Innerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
|
|
(dollars in thousands)
|
|
|
|
Net sales
|
|
$
|
590,447
|
|
|
$
|
593,620
|
|
|
$
|
(3,173
|
)
|
|
|
(0.5
|
)%
|
Segment operating profit
|
|
|
75,968
|
|
|
|
79,048
|
|
|
|
(3,080
|
)
|
|
|
(3.9
|
)
|
Overall net sales in the Innerwear segment decreased slightly in
the first quarter of 2007 compared to the same quarter in 2006.
We experienced lower sales of mens and kids
underwear of $11 million, lower intersegment sales of
$5 million and an aggregate of $4 million lower sales
in all other product categories in the first quarter of 2007
compared to a year ago. The lower net sales of mens and
kids underwear were primarily offset by higher net sales
in our womens products in socks of $8 million,
womens intimate apparel of $5 million and
womens sleepwear of $4 million. Following our recent
launch of our Hanes All-Over Comfort Bra with ComfortSoft
Straps media campaign, we experienced a higher retail sell
through of the All-Over Comfort Bra.
As a percent of segment net sales, gross profit percentage in
the Innerwear segment increased in the first quarter of 2007 to
38.6% as compared to 37.9% in the same quarter of 2006. The
improvement in gross profit is primarily attributable to lower
sourcing costs and other manufacturing efficiencies of
$8 million and lower allocations of overhead costs of
$4 million offset primarily by $7 million of higher
incentives on sales and $5 million of higher cotton costs.
The decrease in Innerwear segment operating profit in the first
quarter of 2007 as compared to the same quarter in 2006 is
primarily attributable to the higher gross profit on lower net
sales, and lower media, advertising and promotion costs of
$7 million offset by a higher allocation of selling,
general and administrative expenses of $12 million. Our
consolidated selling, general and administrative expenses before
segment allocations increased in the first quarter of 2007 as
compared to the same quarter of 2006 primarily due to a
reduction of allocations to inventory cost, higher technology
consulting expenses, higher distribution expenses and higher
stand alone company expenses offset by the elimination of
allocations from Sara Lee and lower media, advertising and
promotion expenses.
Outerwear
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
283,635
|
|
|
$
|
267,286
|
|
|
$
|
16,349
|
|
|
|
6.1
|
%
|
Segment operating profit
|
|
|
6,100
|
|
|
|
15,902
|
|
|
|
(9,802
|
)
|
|
|
(61.6
|
)
|
Net sales in the Outerwear segment increased by $16 million
in the first quarter of 2007 compared to the same quarter of
2006 primarily a result of gains for Champion activewear
and Hanes retail casualwear sales. Champion, our
second largest brand, benefited from higher penetration in the
mid-tier department store and sporting goods channels. Overall
activewear and casualwear sales increased by $16 million
and $22 million, respectively, in the first quarter of 2007
compared to the same quarter in 2006. These sales increases more
than offset the decrease in sales in our casualwear business of
$21 million, primarily t-shirts sold through our
embellishment channel.
As a percent of segment net sales, gross profit percentage in
the Outerwear segment increased in the first quarter of 2007 to
18.9% as compared to 17.7% in the same quarter in 2006. The
improvement in gross profit is attributable to a more favorable
product sales mix of $6 million and the results of prior
year restructuring actions and cost savings initiatives of
$4 million and lower allocations of overhead costs of
$3 million offset primarily by $6 million of higher
cotton costs.
The decrease in Outerwear segment operating profit in the first
quarter of 2007 as compared to the same quarter in 2006 is
primarily attributable to the higher gross profit on higher net
sales which were more than offset by higher media, advertising
and promotion expenses of $2 million and higher allocation
of selling, general and administrative expenses of
$14 million. Our consolidated selling, general and
administrative
28
expenses before segment allocations increased in the first
quarter of 2007 as compared to the same quarter in 2006
primarily due to a reduction of allocations to inventory cost,
higher technology consulting expenses, higher distribution
expenses, higher stand alone company expenses offset by the
elimination of allocations from Sara Lee and lower media,
advertising and promotion expenses.
Hosiery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
73,693
|
|
|
$
|
77,314
|
|
|
$
|
(3,621
|
)
|
|
|
(4.7
|
)%
|
Segment operating profit
|
|
|
20,045
|
|
|
|
11,937
|
|
|
|
8,108
|
|
|
|
67.9
|
|
Net sales in the Hosiery segment decreased by $4 million in
the first quarter of 2007 compared to the same quarter in 2006
primarily due to lower sales of the Leggs brand to
mass retailers and food and drug stores. We expect this trend to
continue as a result of shifts in consumer preferences.
As a percent of segment net sales, gross profit percentage
increased in the first quarter of 2007 to 45.7% from 41.1% in
the same quarter in 2006 primarily due cost savings initiatives
and manufacturing efficiencies of $3 million which were
offset by the impact on gross profit of lower sales of
approximately $2 million.
Hosiery segment operating profit increased in the first quarter
of 2007 as compared to the same quarter in 2006 primarily due to
$6 million in lower allocated selling, general and
administrative expenses and the improvement in gross profit.
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
90,777
|
|
|
$
|
91,966
|
|
|
$
|
(1,189
|
)
|
|
|
(1.3
|
)%
|
Segment operating profit
|
|
|
7,778
|
|
|
|
9,018
|
|
|
|
(1,240
|
)
|
|
|
(13.8
|
)
|
Overall net sales in the International segment decreased
slightly in the first quarter of 2007 compared to the same
quarter of 2006. During the first quarter of 2007 we experienced
higher sales of t-shirts in Europe of $3 million and higher
sales of $2 million in our emerging markets in Asia offset
primarily by softer sales in Canada of $6 million. Changes
in foreign currency exchange rates increased net sales by
$1 million in the first quarter of 2007 compared to the
same quarter in 2006.
As a percent of segment net sales, gross profit percentage was
flat at 40.9% in the first quarter in 2007 compared to the same
quarter in 2006 at 40.8%. Gross profit was flat on slightly
lower sales offset by headcount savings from prior year
restructuring actions and other lower expenses.
The slight decrease in International segment operating profit in
the first quarter of 2007 compared to the same quarter in 2006
is primarily attributable to a higher allocation of selling,
general and administrative expenses. Our consolidated selling,
general and administrative expenses before segment allocations
increased in the first quarter of 2007 as compared to the same
quarter in 2006 primarily due to higher technology consulting
expenses, higher distribution expenses, higher stand alone
company expenses offset by the elimination of allocations from
Sara Lee and lower media, advertising and promotion expenses.
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Quarter Ended
|
|
Better
|
|
Percent
|
|
|
March 31, 2007
|
|
April 1, 2006
|
|
(Worse)
|
|
Change
|
|
|
(dollars in thousands)
|
|
Net sales
|
|
$
|
15,398
|
|
|
$
|
16,997
|
|
|
$
|
(1,599
|
)
|
|
|
(9.4
|
)%
|
Segment operating profit
|
|
|
(775
|
)
|
|
|
(121
|
)
|
|
|
(654
|
)
|
|
|
(540.5
|
)
|
29
Overall net sales in the Other segment decreased primarily due
to lower net sales of nonfinished fabric and other materials to
third parties in the first quarter of 2007 compared to the same
quarter of 2006. Net sales of this segment are generated for the
purpose of maintaining asset utilization at certain
manufacturing facilities.
Gross profit in this segment declined slightly in the first
quarter of 2007 compared to the same quarter of 2006. The
decrease in segment operating profit is primarily attributable
to the lower sales volume.
General
Corporate Expenses
General corporate expenses increased in the first quarter of
2007 compared to the same quarter of 2006 primarily due to
higher costs of operating as an independent company of
$2 million offset by a decrease in spin off and related
charges of $3 million.
Liquidity
and Capital Resources
Trends
and Uncertainties Affecting Liquidity
Our primary sources of liquidity are our cash flows from
operating activities and availability under our revolving loan
facility described below. The following has or is expected to
negatively impact our 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
Central America, the Caribbean Basin and Asia;
|
|
|
|
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 significantly increase our income tax
expense; and
|
|
|
|
we expect to repurchase up to 10 million shares of our
stock in the open market over the next several years.
|
We believe that our cash provided from operating activities,
together with our available credit capacity, will enable us to
comply with the terms of our indebtedness and meet presently
foreseeable financial requirements.
We expect to continue the restructuring efforts that we have
undertaken since the spin off from Sara Lee. For example, during
the first quarter ended March 31, 2007, we approved actions
that will result in the closure of two textile manufacturing
plants and two distribution centers. The implementation of these
efforts, which are designed to improve operating efficiencies
and lower costs, has resulted and is likely to continue to
result in significant costs. As further plans are developed and
approved by management and our board of directors, we expect to
recognize additional restructuring costs to eliminate
duplicative functions within the organization and transition a
significant portion of our manufacturing capacity to lower-cost
locations in other countries. As a result of these efforts, we
expect to incur approximately $250 million in restructuring
and related charges over the three year period following the
spin off from Sara Lee approximately half of which is expected
to be noncash. As of March 31, 2007, we have incurred
$55 million in restructuring and related charges related to
these efforts. We also expect to incur costs associated with the
integration of our information technology systems across our
company.
As we continue to add new manufacturing capacity in Central
America, the Caribbean Basin and Asia, our exposure to events
that could disrupt our foreign supply chain, including political
instability, acts of war or terrorism or other international
events resulting in the disruption of trade, disruptions in
shipping and freight forwarding services, increases in oil
prices (which would increase the cost of shipping),
interruptions in the availability of basic services and
infrastructure and fluctuations in foreign currency exchange
rates, is increased. Disruptions in our foreign supply chain
could negatively impact our liquidity by interrupting production
in offshore facilities, 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
30
timing, these events could also result in lost sales,
cancellation charges or excessive markdowns. For a discussion of
these and other risk factors facing our business, see the risk
factors section of our Report on
Form 10-KT
for the six months ended December 30, 2006.
As a result of provisions of the Pension Protection Act of 2006,
we are required, commencing with plan years beginning after
2007, to make larger contributions to our pension plans than
Sara Lee made with respect to these plans in past years. We
contributed $48 million in December 2006 and
$42 million in March 2007 based upon minimum funding
estimates. While these contribution payments fulfill our minimum
funding requirements through fiscal 2007, if financial
conditions change or if the assumptions we have used to
calculate our pension costs and obligations turn out to be
inaccurate, we could be required to make contributions to the
pension plans in excess of our current expectations for future
years. A significant increase in our funding obligations could
have a negative impact on our liquidity.
Net
Cash Provided by (Used in) Operating Activities
Net cash used in operating activities decreased to
$1 million in the first quarter ended March 31, 2007
from cash provided by operating activities of $102 million
in the first quarter ended April 1, 2006. The
$103 million decrease was primarily the result of lower
earnings in the business due to higher interest expense, a
$42 million pension contribution and changes in the use of
working capital.
Net
Cash Used in Investing Activities
Net cash used in investing activities decreased to
$4 million in the first quarter ended March 31, 2007
from $20 million in the first quarter ended April 1,
2006. The $16 million decrease was primarily the result of
lower purchases of property and equipment and higher cash
received from sales of property and equipment. While capital
spending can vary from quarter to quarter, we anticipate that
over the long term our capital expenditures will be
approximately level with our annual depreciation of
$110 million.
Net
Cash Used in Financing Activities
Net cash used in financing activities decreased to
$3 million in the first quarter ended March 31, 2007
from $137 million in the first quarter ended April 1,
2006. The decrease was primarily the result of the elimination
of net transactions with parent companies and related entities
subsequent to the spin off from Sara Lee and lower repayments on
notes payable to banks in the first quarter ended March 31,
2007.
Cash
and Cash Equivalents
As of March 31, 2007 and December 30, 2006, cash and
cash equivalents were $149 million and $156 million,
respectively. The decrease in cash and cash equivalents as of
March 31, 2007 was primarily the result of changes in
working capital balances and a $42 million pension
contribution.
Revolving
Loan Facility
We have significant liquidity based on our availability under
the Revolving Loan Facility provided under the senior
secured credit facility that we entered into in September 2006.
As of March 31, 2007, $73 million of standby and trade
letters of credit were issued under this facility and
$427 million was available for borrowings.
Significant
Accounting Policies and Critical 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 Combined and Consolidated Financial Statements included
in our Report on
Form 10-KT
for the six months ended December 30, 2006.
31
The application of these 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 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 discussed in Managements
Discussion and Analysis of Financial Condition and Results of
Operations in our Report on
Form 10-KT
for the six months ended December 30, 2006. There have been
no material changes during the first quarter ended
March 31, 2007 in these policies except as follows:
Income
Taxes
In July 2006, the FASB issued Interpretation 48, Accounting
for Uncertainty in Income Taxes (FIN 48),
which became effective during the first quarter ended
March 31, 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 our tax
positions in accordance with FIN 48 did not have an impact
on our results of operations, financial condition or liquidity.
For additional information regarding the adoption of
FIN 48, see Note 5, Income Taxes. For further
discussion of our critical accounting estimates related to
income taxes, see our Report on
Form 10-KT
for the six months ended December 30, 2006.
Issued
But Not Yet Effective Accounting Standards
Fair
Value Measurements
The FASB has issued FAS 157, Fair Value Measurements, or
SFAS 157, which provides guidance for using
fair value to measure assets and liabilities. The standard also
responds to investors requests for more information about
(1) the extent to which companies measure assets and
liabilities at fair value, (2) the information used to
measure fair value, and (3) the effect that fair-value
measurements have on earnings. SFAS 157 will apply whenever
another standard requires (or permits) assets or liabilities to
be measured at fair value. The standard does not expand the use
of fair value to any new circumstances. SFAS 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. We are currently evaluating the
impact, if any, of SFAS 157 on our results of operations
and financial position.
Pension
and Other Postretirement Benefits
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (an amendment of FASB Statements
No. 87, 88, 106, and 132R), or SFAS 158.
SFAS 158 requires an employer to recognize in its statement
of financial position an asset for a plans over funded
status, or a liability for a plans under funded status,
measure a plans assets and its obligations that determine
its funded status as of the end of the employers fiscal
year (with limited exceptions), and recognize changes in the
funded status of a defined benefit postretirement plan in the
year in which the changes occur. Those changes will be reported
in our comprehensive loss and as a separate component of
stockholders equity. We adopted the provision to recognize
the funded status of a benefit plan and the disclosure
requirements during the six months ended December 30, 2006.
The requirement to measure plan assets and benefit obligations
as of the date of the employers fiscal year-end is
effective for fiscal years ending after December 15, 2008.
We plan to adopt the measurement date provision in 2007.
32
Fair
Value Option for Financial Assets and Financial
Liabilities
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement
No. 115 (SFAS 159). SFAS 159 permits
companies to choose to measure many financial instruments and
certain other items at fair value that are not currently
required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. The
provisions of SFAS 159 become effective for fiscal years
beginning after November 15, 2007. We are currently
evaluating the impact that SFAS 159 will have on our
results of operations and financial position.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
There have been no significant changes in our market risk
exposures from those described in Item 7A of our Report on
Form 10-KT
for the six months ended December 30, 2006.
|
|
Item 4.
|
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.
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 4T. Controls
and Procedures
Not applicable.
PART II
|
|
Item 1.
|
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 or financial condition.
No updates to report.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of stockholders during the
first quarter ended March 31, 2007.
|
|
Item 5.
|
Other
Information
|
None.
The exhibits listed in the accompanying Exhibit Index on
page E-1
are filed or furnished as part of this Quarterly Report.
33
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 thereunto duly authorized.
HANESBRANDS INC.
E. Lee Wyatt Jr.
Executive Vice President,
Chief Financial Officer
Date: May 14, 2007
34
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
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).
|
|
3
|
.2
|
|
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).
|
|
3
|
.3
|
|
Amended and Restated Bylaws of
Hanesbrands Inc. (incorporated by reference from
Exhibit 3.3 to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
September 5, 2006).
|
|
3
|
.4
|
|
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).
|
|
3
|
.5
|
|
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).
|
|
3
|
.6
|
|
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).
|
|
3
|
.7
|
|
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).
|
|
3
|
.8
|
|
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).
|
|
3
|
.9
|
|
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).
|
|
3
|
.10
|
|
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).
|
|
3
|
.11
|
|
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).
|
|
3
|
.12
|
|
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).
|
|
3
|
.13
|
|
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
|
|
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).
|
E-1
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.15
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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).
|
|
3
|
.26
|
|
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
|
|
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
|
|
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).
|
E-2
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.29
|
|
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
|
|
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
|
|
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
|
|
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
|
|
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
|
|
Certificate of Formation of United
States Knitting, L.L.C., together with Certificate of Amendment
reflecting the change of the entitys name to National
Textiles, L.L.C. and subsequent Certificate of Amendment
(incorporated by reference from Exhibit 3.34 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
|
|
Amended and Restated Limited
Liability Company Agreement of National Textiles, L.L.C.
(incorporated by reference from Exhibit 3.35 to Amendment
No. 1 to the Registrants Registration Statement on
Form S-4
(Commission file
number 333-142371)
filed with the Securities and Exchange Commission on May 7,
2007).
|
|
3
|
.36
|
|
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
|
.37
|
|
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
|
.38
|
|
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
|
.39
|
|
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
|
.40
|
|
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
|
.41
|
|
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).
|
|
3
|
.42
|
|
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).
|
E-3
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.43
|
|
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).
|
|
3
|
.44
|
|
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).
|
|
3
|
.45
|
|
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).
|
|
10
|
.1
|
|
Severance/Change in Control
Agreement dated March 5, 2007 between the Registrant and
Joia M. Johnson (incorporated by reference from
Exhibit 10.22 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).
|
|
10
|
.2
|
|
First Amendment dated
February 22, 2007 to the First Lien Credit Agreement dated
as of September 5, 2006 among Hanesbrands Inc., the various
financial institutions and other persons from time to time party
hereto, HSBC Bank USA, National Association, Lasalle Bank
National Association and Barclays Bank PLC, as the
co-documentation agents, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley Senior
Funding, Inc., as the co-syndication agents, Citicorp USA, Inc.,
as the administrative agent, Citibank, N.A., as the collateral
agent, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley Senior Funding, Inc., as the
joint lead arrangers and joint bookrunners (the Senior
Secured Credit Facility), among Hanesbrands Inc. and the
Lenders (as that term is defined in 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).
|
|
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.
|
E-4
EXHIBIT 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 Quarterly Report on
Form 10-Q
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))
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) 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
(c) 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.
Richard A. Noll
Chief Executive Officer
Date: May 14, 2007
EXHIBIT 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 Quarterly Report on
Form 10-Q
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))
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) 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
(c) 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.
E. Lee Wyatt Jr.
Executive Vice President and
Chief Financial Officer
Date: May 14, 2007
EXHIBIT 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 Quarterly Report of Hanesbrands Inc.
(Hanesbrands) on
Form 10-Q
for the fiscal quarter ended March 31, 2007 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.
Richard A. Noll
Chief Executive Officer
Date: May 14, 2007
The foregoing certification is being furnished to accompany
Hanesbrands Inc.s Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 (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.
Hanesbrands, Inc.
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 Quarterly Report of Hanesbrands Inc.
(Hanesbrands) on
Form 10-Q
for the fiscal quarter ended March 31, 2007 as filed with
the Securities and Exchange Commission on the date hereof (the
Report), I, E. Lee Wyatt, 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.
E. Lee Wyatt Jr.
Executive Vice President and
Chief Financial Officer
Date: May 14, 2007
The foregoing certification is being furnished to accompany
Hanesbrands Inc.s Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 (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.