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New-product Innovation Contributed To HanesBrands Sales Growth In The Third Quarter. Hanes' New ComfortBlend Men's Underwear Bottoms And T-shirts Use A Special Cotton-polyester Fiber Blend For A Softer Feel, Less Shrinkage And Quicker Drying. (Photo: Business Wire)

Stocks in this article: HBI

The corresponding guidance for the fourth-quarter is net sales of approximately $1.13 billion to $1.17 billion and EPS of $1.00 to $1.06. The company expects a gross margin percentage in the mid-30s and an operating profit margin of slightly more than 13 percent. Interest expense is expected to be approximately $33 million, and the effective tax rate is expected to be in the midteens.

The company’s guidance for continuing operations is based on the following facts. Product pricing, shelf space, and promotion plans for the remainder of 2012 have been finalized with major retail accounts. All commodity costs have been fixed for the remainder of the year, with the company incurring significantly lower cotton and other inflation impacts for the remainder of the year.

The company will continue to focus its use of free cash flow on debt retirement. In 2012, the company retired all of its approximately $300 million of floating rate notes. For 2013, the company remains committed to prepaying all of its $500 million of 8 percent fixed-rate notes.

The company continues to believe that a reasonable estimate of EPS potential in 2013 is in the low $3 range.

Discontinued Operations

In May 2012, the company announced exiting certain international and domestic imagewear businesses that are all now classified as discontinued operations.

On May 30, Hanes sold its European imagewear business, and the company has substantially completed the discontinuation of its private-label and Outer Banks domestic imagewear operations serving wholesalers that sell to the screen-print industry. In accordance with GAAP requirements, the company reported results for the second and third quarters on a continuing-operations basis and revised prior-period results to reflect continuing operations. The company’s branded printwear operations will continue to operate and serve the branded domestic screen-print market.

For the first nine months, discontinued operations reported a loss per diluted share of $0.70 – a loss of $0.03 in the first quarter, a loss of $0.66 in the second quarter, and a loss of $0.01 in the third quarter.

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