Hanesbrands Inc. (HBI)

HBI 
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Industry: Consumer Services
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Hanesbrands Inc. (HBI)

April 04, 2013 6:00 pm ET

Executives

Charlie Stack

Richard A. Noll - Chairman and Chief Executive Officer

Richard D. Moss - Chief Financial Officer

Gerald W. Evans - Co-Chief Operating Officer

Analysts

Matthew McClintock - Barclays Capital, Research Division

Eric B. Tracy - Janney Montgomery Scott LLC, Research Division

Susan K. Anderson - Citigroup Inc, Research Division

Eric M. Beder - Brean Capital LLC, Research Division

Omar Saad - ISI Group Inc., Research Division

Tom Roller

Eric A. Alexander - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Charlie Stack

Good afternoon, everyone, and welcome to the investor meeting here in Las Vegas. My name is Charlie Stack, and I'm the Chief Investor Relations Officer here at Hanesbrands. Yesterday, we held our annual shareholder meeting and we welcome those of you that are here today, as well as those listening in on the webcast.

We did issue a news release earlier today, and the release, along with the audio replay of the webcast of this call, can be found in the Investors section of our hanesbrands.com website.

I want to remind everyone that we may make forward-looking statements today, either in our prepared remarks or in the associated question-and-answer session. These statements are based on current expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially. These risks are detailed in our various filings with the SEC, such as our most recent Forms 10-K and 10-Q and may be found on our website and in our news releases and other communications. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they were made.

Please also note in May 2012, Hanesbrands announced exiting certain international and domestic inventory categories that are now classified as discontinued operations. Unless otherwise noted, today's speakers will be discussing our performance from our continuing operations. Information on discontinued operations and financial results for prior period continuing operation is available on the Investors section of our hanesbrands.com website.

Also, references in this presentation to earnings per share, EBITDA, gross margin, SG&A and operating margin represent continuing operations, excluding charges primarily related to items such as bond prepayment expenses in 2012, and for 2007 to 2009, gains related to pension and post-retirement benefits, restructuring and related expenses and other debt prepayment expenses.

Free cash flow, as well as EBITDA and EPS excluding actions are considered non-GAAP performance measures. For reconciliation to GAAP, please see our press releases dated January 28, 2009, January 27, 2010, February 5, 2013, which are also available in the Investor section of our website.

With us here today are several members of our management team, including our Chief Executive Officer, Rich Noll and our Chief Financial Officer, Rick Moss. For today's agenda, we have a short presentation that Rich will go through, and then we'll open it up to Q&A, with which myself, Rich and Rick will handle. And with that, I'll turn it over to Rich.

Richard A. Noll

Thank you, Charlie. Before I start today, I'd like to talk a little bit about the IR transition that we've alluded to over the last couple of months, specifically about Charlie Stack. As you know, this -- we've talked to Charlie about leaving the Head of IR and going back into the business, and that's going to be effective on May 1. His new role is going to be the VP, General Manager of Canada Innerwear. So we want to thank Charlie for all his great contributions he's made in his previous role, and we think it's about time that he get back to the business and start helping us drive results instead of just talking about it. So please, everybody, make sure you congratulate Charlie. And he's done a great job, and we know he's going to do a great job in the future.

Also, I'm going to talk about who is going to take over his spot also starting on May 1. He joined us April 1. His name is T.C. Robillard. He's joining us from Cbeyond, where he was the head of IR. He's also got 15 years of both buy and sell side experience, and T.C.'s also in the audience. So those of you that are here today will get a chance to meet him. He and Charlie will overlap over the next 30 days, and so he'll make sure that -- Charlie will make sure that you get a chance to meet T.C. and we expect a very smooth transition.

So with that, please welcome both of -- welcome T.C, and I'll start my prepared remarks. What I'd like to do is actually do a recap, a short recap, of a number of the themes that we talked about just a little over a month ago at our Investor Day in Winston-Salem. From that, I'll segue into detailing a little bit of the announcements that we put out this morning or a few hours ago this afternoon, and then we'll open it up for Q&A.

So let me highlight the 3 key themes that we went through on that Investor Day and that are driving -- that we focus on to execute our strategy to drive our results. And it's first, we have a strong consumer franchise, a hallmark of any good CPG company as reflected in the stability of our financial performance in very volatile times. Second, our Innovate-to-Elevate strategy allows us to leverage our most precious assets, our strong brands, our approach to consumer-driven innovation and our great global supply chain, all of which combined to allow us to organically grow sales and increase operating margins towards our 12% to 14% goal. And third, our strong free cash flows with a price -- free cash flow ratio of about 10, our cash flow is substantial relative to our valuation, as that by itself creates many opportunities for substantially increasing shareholder returns.

Let me detail a couple of these themes from -- and using a couple of the slides that we showed you back on that day. And the first, which is part of our Innovate-to-Elevate strategy, is our big strong brands. Hanes, in fact, is the third largest apparel brand in the United States in terms of dollars and #1 brand in units. We have 4 brands with $400 million or more of annual retail sales, and we hold the #1 or #2 share in every category in which we compete. Importantly, our brands resonate with consumers, young and old, rich and poor, and they span from aging baby boomers to new second wave millennials.

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