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HanesBrands Reports First-Quarter 2013 Financial Results

  HanesBrands Reports First-Quarter 2013 Financial Results

Significant Margin Improvement as a Result of the Company’s
Innovate-to-Elevate Initiatives and Lower Cotton Costs

Company Reaffirms Full-Year Guidance

Business Wire

WINSTON-SALEM, N.C. -- April 23, 2013

HanesBrands (NYSE: HBI), a leading marketer of everyday branded basic apparel,
today reported first-quarter 2013 net sales, operating profit and diluted
earnings per share consistent with the high end of estimated preliminary
results announced April 4.

For the quarter ended March 30, 2013, net sales declined 3 percent to $945
million, operating profit increased substantially to $85 million, and EPS
improved to $0.51 from a $0.25 loss a year ago. (Unless noted, all performance
measures for the year-ago period are for continuing operations. See
discontinued operations section in this press release.)

While net sales for the first quarter were hampered by a sluggish retail
environment, the company’s operating profit margin expanded 790 basis points
over the year-ago quarter, benefitting from an improved cotton-cost and
product-pricing environment and the company’s Innovate-to-Elevate
margin-enhancement initiatives.

Based on first-quarter results, Hanes reaffirms its 2013 guidance for net
sales of approximately $4.6 billion; operating profit of $500 million to $550
million; EPS of $3.25 to $3.40; and free cash flow of approximately $350
million to $450 million.

The company also recently announced the initiation of a regular quarterly
dividend. The company’s Board of Directors has authorized a dividend of $0.20
per share to be paid June 3, 2013, to stockholders of record at the close of
business on May 20, 2013. The quarterly dividend is the first for Hanes since
its spinoff as an independent public company in 2006.

“We are pleased with our ongoing strategic execution, which resulted in
improved profitability in the first quarter and bolsters our outlook for the
rest of the year,” Hanes Chairman and Chief Executive Officer Richard A. Noll
said. “Our operating profit margin was strong, our brands are commanding more
retail shelf space, and our product innovation is working. We have more margin
improvement potential ahead of us.”

First-Quarter 2013 Financial Highlights and Business Segment Summary

Key accomplishments for the first quarter include:

  *Space Gains Driven by Innovate-to-Elevate Platforms. The company continues
    to secure net space gains at retailers through its Innovate-to-Elevate
    platforms, which integrate the strengths of the company’s iconic brands,
    low-cost supply chain and product innovation. These platforms include
    ComfortBlend fabric underwear, socks and T-shirts, Smart Sizes seamless
    bras, and Tagless apparel.
  *Strong First-Quarter Operating Margin. The company achieved a
    first-quarter operating margin of 9 percent. Innovate-to-Elevate
    initiatives, which support higher unit selling prices and lower unit
    costs, and lower cotton costs drove a nearly 800-basis-point improvement
    in operating margin over the first quarter a year-ago.
  *Reduced Quarter-End Inventory Versus a Year Ago. Hanes continues to focus
    on inventory management, with its quarter-ending inventory level 17
    percent lower than a year ago.

Key segment highlights for the first quarter include:

Innerwear Segment. Net sales were affected by the soft retail environment, but
operating margin improved significantly over a year ago. New products
continued to perform well.

  *Strong Operating Profit and Margin Improvement. Innerwear operating profit
    increased 69 percent, and operating margin increased 760 basis points to
    18 percent.
  *Strong Bra and Sock Sales in Soft Sales Environment. Net sales for the
    segment declined 2 percent overall in the quarter, but bra and sock sales
    increased mid-single digits and men’s underwear was up slightly. Hanes
    ComfortBlend men’s underwear, panties and socks continue to perform well,
    as do Bali and barely there Smart Size seamless bras.

Activewear Segment. The Activewear segment, formerly named Outerwear, had a
strong first quarter, with increased margins and a return to operating
profitability.

  *Solid Sales. Activewear sales declined 2 percent, but excluding the $15
    million planned reduction of commodity-oriented branded printwear sales to
    the screen-print industry, segment sales increased 4 percent. Retail Hanes
    sales increased by double digits, and retail Champion and C9 by Champion
    sales increased by low single digits.
  *Strong Profitability. The segment returned to profitability, with an
    operating margin of 8 percent compared with an operating loss a year ago.

International Segment. International segment net sales declined 5 percent and
operating profit declined by 53 percent. On a constant currency basis, net
sales increased 1 percent and operating profit declined 42 percent.

Direct to Consumer Segment. Direct to Consumer sales decreased by 6 percent,
while operating profit was slightly positive compared with a loss in the
year-ago quarter.

2013 Guidance

For full-year 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 from rationalization that began in mid-2012; of the expected decline,
$15 million occurred in the first quarter.

The company expects its overall media investment in 2013 to increase by $30
million to $40 million, with more than two-thirds of the increase in the
second half of the year.

Interest expense and other expense are expected to total $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 third-quarter rate expected to be toward the lower end of
the range and the second- and fourth-quarter rates expected to be 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. Free-cash-flow priorities
are funding the company’s quarterly dividends and early retirement of the
outstanding 8 percent senior notes.

Discontinued Operations

In 2012, the company announced exiting certain international and domestic
imagewear businesses that are now classified as discontinued operations.
Discontinued operations have no effect on 2013 results.

On May 30, 2012, Hanes sold its European imagewear business, and the company
subsequently completed in 2012 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 of 2012 on a continuing-operations basis and revised prior-period
results, including the first quarter of 2012, to reflect continuing
operations. The company’s branded printwear operations continue to operate and
serve the domestic screen-print market with Hanes and Champion brand products.

In the first quarter of 2012, discontinued operations reported a loss per
diluted share of $0.03.

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

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

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 first 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. Although the company does not use EBITDA
to manage its business, it believes that EBITDA is another way that investors
measure financial performance. See Table 2 attached to this press release to
reconcile EBITDA to the GAAP measure of net income from continuing operations.

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

Webcast Conference Call

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

An archived replay of the conference call webcast will be available in the
investors section of the HanesBrands website. A telephone playback will be
available from approximately midnight EDT today through midnight EDT April 30,
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 39189836.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains certain “forward-looking statements,” as defined
under U.S. federal securities laws, with respect to our long-term goals and
trends associated with our business, as well as guidance as to future
performance. These forward-looking statements are based on our current intent,
beliefs, plans and expectations. Readers are cautioned not to place any undue
reliance on any forward-looking statements. Forward-looking statements
necessarily involve risks and uncertainties, many of which are outside of our
control, that could cause actual results to differ materially from such
statements and from our historical results and experience. These risks and
uncertainties include such things as: 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 effectively manage our
inventory and reduce inventory reserves; our ability to optimize our global
supply chain; the risk of significant fluctuations in foreign currency
exchange rates; 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 and quarterly reports on Form 10-Q, as well as in the investors
section of our corporate website at http://tiny.cc/HanesBrandsIR. Since it is
not possible to predict or identify all of the risks, uncertainties and other
factors that may affect future results, the above list should not be
considered a complete list. Any forward-looking statement speaks only as of
the date on which such statement is made, and HanesBrands undertakes no
obligation to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.

HanesBrands

HanesBrands is a socially responsible leading marketer of everyday basic
apparel under some of the world’s strongest apparel brands, including Hanes,
Champion, Playtex, Bali, JMS/Just My Size, barely there, Wonderbra and Gear
for Sports. The company sells T-shirts, bras, panties, men’s underwear,
children’s underwear, socks, hosiery, casualwear and activewear produced in
the company’s low-cost global supply chain. Ranked No. 512 on the Fortune 1000
list, Hanes has approximately 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 2013 and 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
www.HanesBrands.com.

TABLE 1                                                             
HANESBRANDS INC.

Condensed Consolidated Statements of Income (Loss)

(Amounts in thousands, except per-share amounts)

(Unaudited)
                                                                      
                                    Quarter Ended
                                    March 30, 2013  March 31, 2012   % Change
Net sales                           $  945,461       $  973,133       (2.8  )%
Cost of sales                       618,162         718,019     
Gross profit                        327,299          255,114          28.3  %
As a % of net sales                 34.6        %    26.2        %
Selling, general and administrative 242,156          244,469
expenses
As a % of net sales                 25.6        %    25.1        %
Operating profit                    85,143           10,645           699.8 %
As a % of net sales                 9.0         %    1.1         %
Other expenses                      464              645
Interest expense, net               25,623          36,995      
Income (loss) from continuing
operations before income tax        59,056           (26,995     )
expense (benefit)
Income tax expense (benefit)        7,677           (2,724      )
Income (loss) from continuing       51,379           (24,271     )    NM
operations
Loss from discontinued operations,  —               (2,559      )
net of tax
Net income (loss)                   $  51,379       $  (26,830  )    NM
                                                                      
Earnings (loss) per share - basic:
Continuing operations               $  0.52          $  (0.25    )    NM
Discontinued operations             —               (0.03       )    NM
Net income (loss)                   $  0.52         $  (0.27    )    NM
                                                                      
Earnings (loss) per share -
diluted:
Continuing operations               $  0.51          $  (0.25    )    NM
Discontinued operations             —               (0.03       )    NM
Net income (loss)                   $  0.51         $  (0.27    )    NM
                                                                      
Weighted average shares
outstanding:
Basic                               99,369           98,533
Diluted                             101,460          98,533

TABLE 2
HANESBRANDS INC.

Supplemental Financial Information

(Dollars in thousands)

(Unaudited)
                                    Quarter Ended                   
                                    March 30, 2013  March 31, 2012   % Change
Segment net sales¹:
Innerwear                           $  497,025       $  509,038       (2.4  )%
Activewear                          267,186          272,564          (2.0  )%
Direct to Consumer                  80,083           84,713           (5.5  )%
International                       101,167         106,818         (5.3  )%
Total net sales                     $  945,461      $  973,133      (2.8  )%
                                                                      
Segment operating profit (loss)¹:
Innerwear                           $  89,742        $  53,208        68.7  %
Activewear                          21,309           (18,678     )    NM
Direct to Consumer                  132              (761        )    NM
International                       2,282            4,899            (53.4 )%
General corporate expenses/other    (28,322     )    (28,023     )    1.1   %
Total operating profit              $  85,143       $  10,645       699.8 %
                                                                      
EBITDA²:
Net income (loss) from continuing   $  51,379        $  (24,271  )
operations
Interest expense, net               25,623           36,995
Income tax expense (benefit)        7,677            (2,724      )
Depreciation and amortization       23,221          22,862      
Total EBITDA                        $  107,900      $  32,862       228.3 %

  In the first quarter of 2013, Hanesbrands renamed the Outerwear segment to
  Activewear to reflect the trend of this category becoming a part of
  consumers' active lifestyles and more aptly describe the competitive space
¹ of this business. In addition, certain prior-year segment operating profit
  disclosures have been revised to conform to the current-year presentation.
  These changes were primarily the result of Hanesbrands' decision to revise
  the manner in which Hanesbrands allocates certain selling, general and
  administrative expenses.
² Earnings from continuing operations before interest, taxes, depreciation and
  amortization (EBITDA) is a non-GAAP financial measure.

TABLE 3                                                    
HANESBRANDS INC.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)
                                            March 30, 2013   December 29, 2012
Assets
Cash and cash equivalents                   $  68,545        $    42,796
Trade accounts receivable, net              550,650          506,278
Inventories                                 1,346,985        1,253,136
Other current assets                        231,378         225,315
Total current assets                        2,197,558       2,027,525
                                                             
Property, net                               582,382          596,158
Intangible assets and goodwill              550,412          553,414
Other noncurrent assets                     476,773         454,603
Total assets                                $  3,807,125    $    3,631,700
                                                             
Liabilities
Accounts payable and accrued liabilities    $  685,988       $    675,616
Notes payable                               29,827           26,216
Accounts Receivable Securitization Facility 159,747         173,836
Total current liabilities                   875,562         875,668
Long-term debt                              1,435,000        1,317,500
Other noncurrent liabilities                548,009         551,666
Total liabilities                           2,858,571       2,744,834
                                                             
Equity                                      948,554         886,866
Total liabilities and equity                $  3,807,125    $    3,631,700

TABLE 4
HANESBRANDS INC.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)
                                               Quarter Ended
                                               March 30, 2013  March 31, 2012
Operating Activities:
Net income (loss)                              $  51,379        $  (26,830   )
Depreciation and amortization                  23,221           23,330
Other noncash items                            2,638            3,914
Changes in assets and liabilities, net         (156,309    )    (94,529      )
Net cash used in operating activities          (79,071     )    (94,115      )
                                                                
Investing Activities:
Capital expenditures                           (6,530      )    (9,016       )
                                                                
Financing Activities:
Net borrowings on notes payable, debt and      111,803         102,144      
other
Effect of changes in foreign currency exchange (453        )    242          
rates on cash
Increase (decrease) in cash and cash           25,749           (745         )
equivalents
Cash and cash equivalents at beginning of year 42,796          35,345       
Cash and cash equivalents at end of period     $  68,545       $  34,600    
                                                                
Supplemental cash flow information¹:
Net cash used in operating activities          $  (79,071  )    $  (94,115   )
Capital expenditures                           (6,530      )    (9,016       )
Free cash flow                                 $  (85,601  )    $  (103,131  )

  Free cash flow is a non-GAAP measure. For 2013 guidance, net cash provided
  by operating activities is expected to be approximately $400 million to $500
¹ 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.

Contact:

HanesBrands
News Media: Matt Hall, 336-519-3386
Analysts and Investors: T.C. Robillard, 336-519-2115