Note on Non-GAAP Terms and Definitions
Free cash flow and diluted EPS excluding actions are not generally accepted accounting principle measures.
Free cash flow is defined as cash from operations 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 attached to the company’s fourth-quarter and full-year 2011 results press release dated Feb. 15, 2012, to reconcile free cash flow to the GAAP measure of net cash provided by operating activities.
Diluted EPS excluding actions is a non-GAAP measure used to better assess underlying business performance because it excludes the impact of charges taken in conjunction with the divestiture of European imagewear operations and the expected charges to be taken in conjunction with the divestiture of the
brand in the United States, which will no longer be part of the company’s core operating business. Forward-looking non-GAAP diluted EPS has not been reconciled to the comparable GAAP measure because not all of the information necessary for a quantitative reconciliation is available without unreasonable effort, in particular the actual charges to be incurred as a result of imagewear actions. The company intends to reconcile non-GAAP diluted EPS with GAAP diluted EPS when it releases second-quarter financial results.
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.