Hanesbrands Inc., a leading marketer of innerwear, outerwear and hosiery apparel, today reported results for the 2007 fourth quarter. Diluted earnings per share in the fourth quarter increased to $0.52 from $0.25.


Non-GAAP diluted earnings per share, which exclude actions, increased by 31 percent in the quarter to $0.38 as a result of increased sales and cost-reduction initiatives. (See non-GAAP description below.)

Total net sales in the quarter increased by 2.4 percent to $1.16 billion.


“We capped a successful first year, in which we exceeded our financial goals, with solid performance in the fourth quarter in a tough consumer climate,” said Hanesbrands Chief Executive Officer Richard A. Noll. “And, as we have done all year, we continued to generate strong cash flow, using it to reduce long-term debt by an additional $50 million in the quarter.”


Noteworthy Financial Highlights


Selected highlights for the fourth quarter and fiscal year ended Dec. 29, 2007, include:


Total net sales in the quarter increased by 2.4 percent to $1.16 billion – the fourth consecutive quarter of sales growth. By sequential quarter, sales in the fiscal year grew by 0.7 percent, 0.2 percent, 3.1 percent and 2.4 percent. Total net sales for the full fiscal year increased by $71 million, or 1.6 percent, to $4.47 billion.


“One of our strategies is to invest in our largest and strongest brands with innovative key items supported by great media,” Noll said. “This strategy is delivering results.”

For the quarter and the full year, Hanes, Champion and Bali brand sales increased. The Champion brand has recorded double-digit sales growth for three consecutive years. For the full year, sales to each of the company’s top three customers increased.


Diluted earnings per share in the quarter were $0.52, up from $0.25 a year ago, while diluted EPS for the year was $1.30 versus $2.16 a year ago. The full-year decline reflected increased interest expense as a result of the company’s independent structure, higher restructuring costs and a higher tax rate.


Non-GAAP diluted EPS increased by 31 percent in the quarter to $0.38 from $0.29 a year ago. The increase was primarily a result of increased sales and operating profit and lower interest expense.

Operating profit in the quarter, based on generally accepted accounting principles, increased to $125.9 million, from $96.2 million a year ago. For the year, operating profit increased to $388.6 million compared with $366.2 million a year ago.


Non-GAAP operating profit increased by 6.6 percent in the quarter and 3.3 percent in the year, to $101.8 million and $432.0 million, respectively. The company’s non-GAAP operating profit margin, a measure the company uses to better assess underlying performance because it excludes actions, was 9.7 percent for the year, compared with 9.5 percent last year.

“We achieved operating profit growth and improved our margins during a year of significant change,” Noll said. “We exceeded our goal to offset our stand-alone company costs and selected increased investment in our business with cost savings from consolidation and moving supply chain operations to lower cost countries.”


Hanesbrands used its continued strong cash flow from operations to prepay long-term debt in the quarter by $50 million. Cash flow from operations for the year increased by 28 percent to $359 million. In fiscal 2007, Hanesbrands repaid $178 million of long-term debt, repurchased $44 million in company stock and voluntarily contributed $48 million to its qualified pension plans.


Since Hanesbrands spun off in September 2006, the company has reduced long-term debt by $285 million and voluntarily contributed $96 million to its qualified pension plans.

(Operating profit excluding actions and diluted EPS excluding actions are non-GAAP measures used to better assess underlying business performance because they exclude the effect of unusual actions that are not directly related to operations. The unusual actions in the quarter and full year were plant closings and reorganization, gain on curtailment of postretirement benefits, amortization of gain on postretirement benefits, separation of pension plan assets and liabilities, nonrecurring spinoff and related charges, other expenses, and the tax effect on these items. See Table 4A and 4B for details and reconciliation with reported operating results.)


Other Highlights


As part of continued investment in brands and marketing, the Champion brand launched its “How You Play” advertising campaign on Nov. 7, the first campaign for the brand since 2003. On Oct. 31, Hanesbrands announced a 10-year strategic alliance with The Walt Disney Company that includes basic apparel exclusivity for the Hanes and Champion brands, product co-branding, attraction sponsorships and other brand visibility and signage at Disney properties. The alliance included the naming rights for the stadium at Disney’s Wide World of Sports Complex, now known as Champion Stadium.


As part of its global supply chain strategy, Hanesbrands acquired in December the Inversiones Bonaventure S.A. de C.V. hosiery sewing operation in Las Lourdes, El Salvador. The 900-employee Bonaventure plant had been a contract sewing supplier for Hanesbrands for 12 years.


“We are very pleased with our performance in our first year of independence,” Noll said. “We delivered sales growth, margin expansion and continued strong cash generation. This puts us in good position as we seek to achieve our long-term growth goals for sales, operating profit and earnings per share.


“This would not have been possible without the significant efforts of our worldwide workforce to manage change, embrace our improvement strategies and focus on our competitiveness. I appreciate all of their efforts and commitment to our success.”


Hanesbrands Policy on Guidance


Hanesbrands follows a policy of not providing quarterly or annual EPS guidance. The company plans to communicate appropriately to provide investors with an understanding of long-term goals, the trends associated with its business and current financial performance.