HanesBrands Reports Fourth-Quarter 2012 Financial Results and Provides Fiscal 2013 Guidance

  HanesBrands Reports Fourth-Quarter 2012 Financial Results and Provides
  Fiscal 2013 Guidance

Reflecting Strong Second-Half Momentum, Fourth-Quarter Net Sales Increased 5
Percent to $1.15 Billion, Adjusted EPS from Continuing Operations More Than
Doubled to $1.07, and Free Cash Flow Totaled $228 Million

For 2013, Hanes Expects Net Sales of Approximately $4.6 Billion, EPS of $3.25
to $3.40, Free Cash Flow of $350 Million to $450 Million, and Further Debt
Reduction of $250 Million

Business Wire

WINSTON-SALEM, N.C. -- February 5, 2013

HanesBrands (NYSE: HBI), a leading marketer of everyday branded basic apparel,
today reported growth in net sales and adjusted earnings per diluted share for
its fourth quarter and fiscal year ended Dec. 29, 2012. (Unless noted, all
performance measures are from continuing operations. See discontinued
operations section in this press release.)

Net sales increased 5 percent to $1.15 billion in the fourth quarter compared
with the year-ago quarter and increased 2 percent to $4.53 billion for the
full fiscal year. Full-year sales increased 4 percent excluding the managed
decline in the branded printwear division and the decline in a large mid-tier
retailer undergoing a strategic shift.

Fourth-quarter adjusted EPS more than doubled to $1.07, excluding bond
prepayment expenses that reduced EPS by $0.30. Each of the company’s business
segments reported at least double-digit operating profit growth in the
quarter. Full-year adjusted EPS increased 7 percent to $2.62. The Innerwear
segment was the strongest contributor to full-year results, delivering 18
percent growth in operating profit.

The company also generated $508 million of free cash flow in the year and
prepaid $550 million of long-term bonds. The company ended the year with
long-term debt of approximately 2.5 times adjusted EBITDA.

“By reducing bond debt by $750 million over the past 13 months, we have ended
our era of high debt leverage, and the momentum of strong results in the back
half of 2012 positions us well for continued profit growth in 2013,” Hanes
Chairman and Chief Executive Officer Richard A. Noll said.

2012 Financial Highlights and Business Segment Summary

Key accomplishments for 2012 include:

  *Record Free Cash Flow. Solid performance and a focus on reducing inventory
    resulted in record free cash flow of $508 million in 2012. Year-end
    inventories improved to $1.25 billion, a decline of $354 million from
    $1.61 billion a year earlier.
  *Deleveraged Balance Sheet. The company significantly reduced its debt and
    no longer considers itself highly leveraged. Hanes prepaid $550 million in
    long-term bonds in 2012 and $750 million over the past five quarters. The
    company’s year-end long-term debt ratio was approximately 2.5 times
    adjusted EBITDA.
  *Successful Exit from Underperforming Businesses. The company successfully
    undertook an effort to reduce risk in its business and create more
    consistent results by quickly exiting its European imagewear screen-print
    business and reorganizing its domestic screen-print channel business as
    branded printwear focusing on higher-margin branded Hanes and Champion
  *Return of Earnings Power. The company generated record profitability in
    the second half, with sales growth of 4 percent, an operating profit
    margin of 13 percent, and adjusted EPS growth of 75 percent. The company
    successfully managed through significant cotton inflation and returned to
    performance in the second half that reflects the company’s earnings
    potential for 2013 and beyond.

“We had a very successful year under difficult circumstances,” said Hanes
Chief Financial Officer Richard D. Moss. “We managed through a $160 million
cotton inflation bubble with a successful pricing strategy and came out
stronger, more innovative and more profitable. We achieved the guidance we
laid out at the beginning of the year even with our decision to exit certain
underperforming businesses.”

Key segment highlights include:

Innerwear Segment. The Innerwear segment delivered progressively improving
performance through the year resulting in record profitability in the fourth
quarter and year.

  *Strong Operating Profit Margins. Innerwear operating profit increased 80
    percent in the fourth quarter, resulting in an operating margin of 22
    percent. For the year, operating profit increased 18 percent with an
    operating margin of 17 percent.
  *Sales Growth. Net sales increased 7 percent in the quarter and 3 percent
    for the year as a result of successful product innovation, new-product
    introductions and shelf-space gains. The rate of sales growth for the year
    overcame a nearly $40 million decline in sales to a mid-tier retailer that
    is in the midst of executing a new strategic direction. Excluding this
    retailer’s decline, Innerwear sales growth was 5 percent for the year.
  *Brand Success. Sales of Hanes and Champion men’s underwear, Hanes panties
    and Bali bras all increased by double digits in the fourth quarter.

  *Innovation. New products, including Hanes ComfortBlend men’s underwear,
    Hanes Classics slim fit and stretch premium underwear T-shirts, and Bali
    and Barely There Smart Size seamless bras, continue to exceed

Outerwear Segment. The Outerwear segment also had a strong fourth quarter with
net sales growth of 6 percent and operating profit that more than tripled. Net
sales for the year increased 2 percent. Excluding the planned exit of some
branded printwear sales, Outerwear sales increased 8 percent in the fourth
quarter and 6 percent for the year.

  *Strong Sales Performance to Retailers. Retail sales for Hanes, including
    T-shirts, fleece and graphic apparel, and for Champion both increased by
    double digits for the year.
  *Branded Printwear Impact. As expected, branded printwear profitability was
    adversely affected by cotton inflation in the first half of the year, and
    net sales for the year were affected by a strategic de-emphasis of
    commodity products in favor of Hanes and Champion branded products.
    Branded printwear sales declined by approximately $50 million for the year
    as a result of the de-emphasis.

International Segment. International segment results in 2012 were affected by
performance issues and currency exchange rates. International segment net
sales declined 1 percent for the year and operating profit declined 14 percent
compared with a year ago. On a constant currency basis, net sales increased 3
percent and operating profit decreased 9 percent.

Direct to Consumer. Direct to Consumer sales decreased by 1 percent in 2012,
but operating profit increased 16 percent as a result of tight cost control
and a manage-for-profit emphasis.

2013 Guidance

For 2013, Hanes expects net sales of approximately $4.6 billion; operating
profit of $500 million to $550 million; and EPS of $3.25 to $3.40. The company
expects a decline in branded printwear sales of $40 million to $50 million,
with approximately half of the decline occurring in the first quarter,
reflecting rationalization that started in mid-2012.

The company intends to increase its overall media investment in 2013 by $30
million to $40 million, of which more than two-thirds will occur in the second

Interest expense and other expense are expected to be a combined $120 million,
including approximately $15 million in prepayment expenses to retire the
remaining $250 million of 8 percent senior notes due 2016. The full-year tax
rate is expected to be in the teens. However, due to enacted tax-law changes
and anticipated discrete tax items, Hanes expects its tax rate will fluctuate
by quarter, with the first- and third-quarter rates expected to be toward the
lower end of the range and second- and fourth-quarter rates being at the high
end of the range.

Free cash flow is expected to be approximately $350 million to $450 million,
including expected pension contributions of approximately $38 million and net
capital expenditures of approximately $50 million.

The company ended 2012 with $1.25 billion in bond debt. In 2013, the company
expects its primary use of free cash flow will be for the prepayment of the
remaining $250 million of 8 percent notes.

Bond Repayment Charge and Discontinued Operations

In the fourth quarter, Hanes incurred a pretax charge of $34 million for bond
prepayment expenses and acceleration of noncash unamortized debt costs
associated with retiring $250 million of the company’s 8 percent senior notes
due 2016. The charge reduced earnings per diluted share from continuing
operations by $0.30. EPS from continuing operations was $0.78 in the fourth
quarter and $2.32 for the full year. Excluding the charge, adjusted EPS from
continuing operations was $1.07 in the fourth quarter and $2.62 for the full
year. (Fourth-quarter adjusted EPS amount does not foot due to rounding.)

In May 2012, the company announced exiting certain international and domestic
imagewear businesses that are all now classified as discontinued operations.

On May 30, Hanes sold its European imagewear business, and the company has
completed the discontinuation of its private-label and Outer Banks domestic
imagewear operations serving wholesalers that sell to the screen-print
industry. In accordance with generally accepted accounting principles, the
company reported results for the second, third and fourth quarters on a
continuing-operations basis and revised prior-period results to reflect
continuing operations. The company’s branded printwear operations will
continue to operate and serve the domestic screen-print market with Hanes and
Champion brand products.

For the full year, discontinued operations reported a loss per diluted share
of $0.68 – a loss of $0.03 in the first quarter, a loss of $0.66 in the second
quarter, a loss of $0.01 in the third quarter, and earnings of $0.02 in the
fourth quarter.

The company has updated information on discontinued operations and financial
results for prior periods, including posting a five-year history of results
from continuing operations. The information is available in the investors
section of the company’s corporate website, http://tiny.cc/HanesBrandsIR.

Note on Non-GAAP Terms and Definitions

Adjusted earnings per diluted share from continuing operations (adjusted EPS
from continuing operations), free cash flow, and adjusted EBITDA are not
generally accepted accounting principle measures.

Adjusted EPS from continuing operations is defined as EPS from continuing
operations (a GAAP measure) excluding the after-tax charge for bond prepayment
expenses and acceleration of noncash unamortized debt costs associated with
retiring $250 million of the company’s 8 percent senior notes due 2016. See
the section above for a reconciliation of non-GAAP adjusted EPS from
continuing operations with the GAAP measure of EPS from continuing operations.

The company believes that adjusted EPS from continuing operations provides
investors with an additional means of analyzing the company’s performance
absent the effect of voluntary long-term debt prepayment.

Free cash flow is defined as net cash from operating activities less net
capital expenditures. Free cash flow may not be representative of the amount
of residual cash flow that is available to the company for discretionary
expenditures since it may not include deductions for mandatory debt-service
requirements and other nondiscretionary expenditures.

The company believes, however, that free cash flow is a useful measure of the
cash-generating ability of the business relative to capital expenditures and
financial performance. See Table 4 and its footnotes attached to this press
release to reconcile free cash flow for the year and fourth quarter to the
GAAP measure of net cash provided by operating activities.

EBITDA is defined as earnings from continuing operations before interest,
taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA
excluding $34 million in debt prepayment expenses incurred in the fourth
quarter 2012. See Table 2 attached to this press release to reconcile EBITDA
and adjusted EBITDA to the GAAP measure of net income from continuing

Although the company does not use EBITDA and adjusted EBITDA to manage its
business, it has chosen to provide these measures to investors to enable
additional analyses of past, present and future operating performance and as a
supplemental means of evaluating company operations.

Non-GAAP information, such as adjusted EPS, free cash flow and adjusted
EBITDA, should not be considered a substitute for financial information
presented in accordance with GAAP and may be different from non-GAAP or other
pro forma measures used by other companies.

Webcast Conference Call

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

An archived replay of the conference call webcast will be available in the
investors section of the HanesBrands website. A telephone playback will be
available from approximately midnight EST today through midnight EST Feb. 12,
2013. The replay will be available by calling toll-free (855) 859-2056, or by
toll call at (404) 537-3406. The replay pass code is 92989781.

Cautionary Statement Concerning Forward-Looking Statements

Statements in this press release that are not statements of historical fact
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including those regarding our long-term goals and trends associated with our
business, as well as guidance as to future performance. Examples of such
statements include the statements included in this press release in the
section titled 2013 Guidance. These and other forward-looking statements are
made only as of the date of this press release and are based on our current
intent, beliefs, plans and expectations. They involve risks and uncertainties
that could cause actual future results, performance or developments to differ
materially from those described in or implied by such forward-looking
statements. These risks and uncertainties include the following: current
economic conditions, including consumer spending levels and the price
elasticity of our products; the impact of significant fluctuations and
volatility in various input costs, such as cotton and oil-related materials,
utilities, freight and wages; the highly competitive and evolving nature of
the industry in which we compete; financial difficulties experienced by, or
loss of or reduction in sales to, any of our top customers or groups of
customers; our ability to successfully manage social, political, economic,
legal and other conditions affecting our domestic and foreign operations and
supply-chain sources, such as political instability and acts of war or
terrorism, natural disasters, disruption of markets, operational disruptions,
changes in import and export laws, currency restrictions and currency exchange
rate fluctuations; the impact of the loss of one or more of our suppliers of
finished goods or raw materials; our ability to effectively manage our
inventory and reduce inventory reserves; our ability to optimize our global
supply chain; our ability to continue to effectively distribute our products
through our distribution network; the risk of significant fluctuations in
foreign currency exchange rates; the impact of customers requiring products on
an exclusive basis or other forms of economic support; our ability to
accurately forecast demand for our products; increasing pressure on margins;
our ability to keep pace with changing consumer preferences; the impact of any
inadequacy, interruption or failure with respect to our information technology
or any data security breach; our ability to protect our reputation and brand
images; our ability to protect our trademarks, copyrights and patents; risks
associated with our indebtedness, such as our debt service requirements, the
financial ratios our debt instruments require us to maintain and restrictions
on our operating and financial flexibility; market returns on the plan assets
of our pension plans; the impact of a significant decline in the fair value of
the intangible assets and goodwill on our balance sheet; unanticipated changes
in our tax rates or exposure to additional income tax liabilities or a change
in our ability to realize deferred tax benefits; our ability to comply with
environmental and other laws and regulations; legal, regulatory, political and
economic risks associated with our operations in international markets; costs
and adverse publicity from violations of labor or environmental laws by us or
our suppliers; our ability to attract and retain key personnel; our ability to
integrate and grow acquisitions successfully; anti-takeover provisions our
charter and bylaws, as well as Maryland law and our stockholder rights
agreement; and other risks identified from time to time in our most recent
Securities and Exchange Commission reports, including our annual report on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K,
registration statements, press releases and other communications, as well as
in the investors section of our corporate website at
http://tiny.cc/HanesBrandsIR. Except as required by law, the company
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.


HanesBrands is a socially responsible leading marketer of everyday basic
apparel under some of the world’s strongest apparel brands, including Hanes,
Champion, Playtex, Bali, JMS/Just My Size, barely there, Wonderbra and Gear
for Sports. The company sells T-shirts, bras, panties, men’s underwear,
children’s underwear, socks, hosiery, casualwear and activewear produced in
the company’s low-cost global supply chain. Ranked No. 512 on the Fortune 1000
list, Hanes has approximately 51,500 employees in more than 25 countries and
takes pride in its strong reputation for ethical business practices. Hanes is
a U.S. Environmental Protection Agency Energy Star 2012 Sustained Excellence
Award winner and 2010 and 2011 Partner of the Year. The company ranks No. 141
on Newsweek magazine’s list of Top 500 greenest U.S. companies. More
information about the company and its corporate social responsibility
initiatives, including environmental, social compliance and community
improvement achievements, may be found on the Hanes corporate website at

TABLE 1                                                                             
Condensed Consolidated Statements of Income
(Amounts in thousands, except per-share amounts)
               Quarter Ended                              Year Ended
               December 29,    December 31,    %         December 29,    December 31,    %      
               2012            2011            Change     2012            2011            Change
Net sales      $ 1,153,256     $ 1,100,951     4.8    %   $ 4,525,721     $ 4,434,291     2.1    %
Cost of sales   755,185       772,778                  3,105,674     2,941,083 
Gross profit     398,071         328,173       21.3   %     1,420,047       1,493,208     -4.9   %
As a % of net    34.5      %     29.8      %                31.4      %     33.7      %
general and
administrative   245,060         253,904                    979,932         1,046,081
As a % of net   21.2      %    23.1      %               21.7      %    23.6      %
Operating        153,011         74,269        106.0  %     440,115         447,127       -1.6   %
As a % of net    13.3      %     6.7       %                9.7       %     10.1      %
Other expenses   35,486          4,082                      40,315          6,377
Interest        30,352        37,715                   136,855       156,198   
expense, net
Income from
before income
tax expense      87,173          32,472                     262,945         284,552
Income tax
expense         8,958          (6,300    )               30,502         41,983    
Income from
continuing       78,215          38,772        101.7  %     232,443         242,569       -4.2   %
Income (loss)
operations,     2,173         2,193                    (67,762   )    24,119    
net of tax
Net income     $ 80,388       $ 40,965       96.2   %   $ 164,681      $ 266,688      -38.2  %
(loss) per
share - basic:
Continuing     $ 0.79          $ 0.39          102.6  %   $ 2.35          $ 2.48          -5.2   %
Discontinued    0.02          0.02         0.0    %    (0.69     )    0.25         NM
Net income     $ 0.81         $ 0.42         92.9   %   $ 1.67         $ 2.73         -38.8  %
(loss) per
share -
Continuing     $ 0.78          $ 0.39          100.0  %   $ 2.32          $ 2.44          -4.9   %
Discontinued    0.02          0.02         0.0    %    (0.68     )    0.24         NM
Net income     $ 0.80         $ 0.41         95.1   %   $ 1.64         $ 2.69         -39.0  %
average shares
Basic            98,989          98,157                     98,709          97,710
Diluted          100,885         99,375                     100,269         99,251

TABLE 2                                                                              
Supplemental Financial Information
(Dollars in thousands)
                 Quarter Ended                              Year Ended
                 December 29,    December 31,    %         December 29,    December 31,    %      
                 2012            2011            Change     2012            2011            Change
Segment net
Innerwear        $ 585,750       $ 549,364       6.6    %   $ 2,334,006     $ 2,261,166     3.2    %
Outerwear          336,991         318,537       5.8    %     1,318,012       1,289,313     2.2    %
Direct to          93,963          97,621        -3.7   %     372,359         375,440       -0.8   %
International     136,552       135,429      0.8    %    501,344       508,372      -1.4   %
Total net        $ 1,153,256    $ 1,100,951    4.8    %   $ 4,525,721    $ 4,434,291    2.1    %
Innerwear        $ 127,045       $ 70,719        79.6   %   $ 396,763       $ 336,693       17.8   %
Outerwear          36,868          10,792        241.6  %     60,986          105,057       -41.9  %
Direct to          9,248           7,267         27.3   %     34,021          29,222        16.4   %
International      12,198          10,679        14.2   %     46,162          53,954        -14.4  %
corporate         (32,348   )    (25,188   )   28.4   %    (97,817   )    (77,799   )   25.7   %
operating        $ 153,011      $ 74,269       106.0  %   $ 440,115      $ 447,127      -1.6   %
Net income
from             $ 78,215        $ 38,772                   $ 232,443       $ 242,569
Interest           30,352          37,715                     136,855         156,198
expense, net
Income tax
expense            8,958           (6,300    )                30,502          41,983
and                22,940          23,694                     92,253          88,863
prepayment        33,906        -                       33,906        -            
Total Adjusted   $ 174,371      $ 93,881       85.7   %   $ 525,959      $ 529,613      -0.7   %
¹ As a result of the reduced size of sheer hosiery and changing trends, HanesBrands decided in the
first quarter of 2012 to change its external segment reporting to include hosiery operations within
the Innerwear segment. Hosiery had previously been reported as a separate segment. Prior year
segment sales and operating profit results, including other minor allocation changes, have been
revised to conform to the current year presentation. In addition, in May 2012, HanesBrands sold its
European imagewear business, and the company completed the discontinuation of its private-label and
Outer Banks domestic imagewear operations that served wholesalers that sell to the screen-print
industry. As a result, the current year and prior year segment disclosures do not reflect the sales
and operating profit results of these discontinued businesses.
² Earnings from continuing operations before interest, taxes, depreciation, amortization and debt
prepayment expenses (Adjusted EBITDA) is a non-GAAP financial measure.

TABLE 3                                                    
Condensed Consolidated Balance Sheets
(Dollars in thousands)
                                         December 29, 2012   December 31, 2011
Cash and cash equivalents                $   42,796          $   35,345
Trade accounts receivable, net               506,278             470,713
Inventories                                  1,253,136           1,607,555
Other current assets                        225,315           217,178    
Total current assets                        2,027,525         2,330,791  
Property, net                                596,158             635,406
Intangible assets and goodwill               553,414             603,071
Other noncurrent assets                     454,603           465,401    
Total assets                             $   3,631,700      $   4,034,669  
Accounts payable and accrued liabilities $   675,616         $   703,711
Notes payable                                26,216              63,075
Accounts Receivable Securitization          173,836           166,933    
Total current liabilities                   875,668           933,719    
Long-term debt                               1,317,500           1,807,777
Other noncurrent liabilities                551,666           612,112    
Total liabilities                           2,744,834         3,353,608  
Equity                                      886,866           681,061    
Total liabilities and equity             $   3,631,700      $   4,034,669  
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
                                         Year Ended
                                         December 29, 2012   December 31, 2011
Operating Activities:
Net income                               $   164,681         $   266,688
Depreciation and amortization                93,036              90,725
Impairment of intangibles                    37,425              -
Loss on disposition of business              32,829              -
Other noncash items                          (613       )        44,738
Changes in assets and liabilities, net      221,544           (234,194   )
Net cash provided by operating              548,902           167,957    
Investing Activities:
Capital expenditures                         (40,570    )        (76,479    )
Acquisition of business                      -                   (9,154     )
Disposition of business                     12,704            -          
Net cash used in investing activities       (27,866    )       (85,633    )
Financing Activities:
Net repayments on notes payable, debt       (513,072   )       (89,519    )
and other
Effect of changes in foreign currency       (513       )       (1,131     )
exchange rates on cash
Increase (decrease) in cash and cash         7,451               (8,326     )
Cash and cash equivalents at beginning      35,345            43,671     
of year
Cash and cash equivalents at end of year $   42,796         $   35,345     
Supplemental cash flow information¹:
Net cash provided by operating           $   548,902         $   167,957
Capital expenditures                        (40,570    )       (76,479    )
Free cash flow                           $   508,332        $   91,478     

¹ Free cash flow is a non-GAAP measure. For the quarter ended December 29,
2012, net cash provided by operating activities (GAAP) was $239 million and
net capital expenditures were $11 million, resulting in non-GAAP free cash
flow of $228 million. For 2013 guidance, net cash provided by operating
activities is expected to be approximately $400 million to $500 million and
net capital expenditures are expected to be approximately $50 million,
resulting in expectations for non-GAAP free cash flow of approximately $350
million to $450 million.


News Media, Matt Hall, 336-519-3386
Analysts and Investors, Charlie Stack, 336-519-4710
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