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