we are what you wear 2008 Annual Report Hanesbrands at a Glancee powerful Hanesbrands is a strong and consumer responsible global apparell brands company focused on driving ® profi table growth through powerfulful consumer brands, an effi cient andd inteintegratedgrated worldwide supply chain, and highlyhly skilled and ®® committed world-class employees.es. revenue:revenue: $4.25 billion (2008) employees:ees: approximatelyapproximately ® 45,000 in more than 25 countries products: essential innerwear ® and outerwear apparel including T-shirts, socks, bras, underwear, sheer hosiery, activewear and casualwear customers: all channels of trade, including dollar-store, mass-merchandise, mid-tier, department-store ® and club retailers, and direct to consumers via catalogs, the Internet and company-owned retail stores brands: big, strong consumer-packaged ® brands that are some ofof thet largest in retail sales: Hanes ($5 billion+), CChampionh ($1.5 billion+), Playtex, Bali and ® JJustus My Size ($400 million+), L’eggs, barely there and Wonderbra ($200 million+) ® markets: North and South America, Europe and Asia. long-term growth goals revenues 1 to 3% annually, excluding acquisitions operating profit* 6 to 8% annually earnings per share* 10 to 20% annually *Operating profit and earnings per share growth goals exclude one-time actions and restructuring, which are not generally accepted accounting principle measures. ® To our investors: In the midst of one of the worst recessions we have seen in decades, I am pleased with the accomplishments we achieved in 2008, thankful for the resiliency of our business model and strategies, and confident in the priorities we have set for 2009. Our goal is to emerge from this economic downturn with momentum and as an even stronger company. We have been successfully executing against the same We invested in media at the second-highest level in set of Sell More, Spend Less and Generate Cash strategies the company’s history, gaining share in our key innerwear for the past three years. That consistency is paying off. segment. We moved all remaining knit textile production Our progress has been evident during the period since offshore ahead of schedule, and made significant progress in our spinoff as an independent company in 2006. building our supply chain in Asia. We paid down $139 million of debt in 2008, and we have paid down more than $420 million strong strategies Under our Sell More of debt since the spinoff. strategy, Hanesbrands has major brand-building initiatives under way in core categories with its strongest and largest brands, 2009 and long-term goals Our single including Hanes, Champion, Playtex and Bali. We are using biggest challenge in 2009 is the economic recession and our brands, the investments we make in our brands and the its impact on our top line. While it is highly unlikely in essential nature of our basic apparel products to advance this environment that we will achieve our long-term financial strategic partnerships with key retailers. growth goals in 2009, these goals remain appropriate for our With our Spend Less strategy, we are ahead of schedule company: to expand operating profit excluding actions and in realigning our global supply chain into lower-cost countries, earnings per share excluding actions at a faster rate than sales. consolidating and streamlining our organization and distribution Our priorities for operating through the economic downturn network, and leveraging the collective size and power of our are: 1) to maintain liquidity and reduce debt, 2) to gain market purchasing organization. share to mitigate revenue declines, 3) to continue to improve We have been using our Generate Cash strategy to reduce our cost competitiveness, and 4) to maintain reasonable levels our debt leverage by using free cash flow to prepay debt, and of profit and cash flow. we will continue to do so over the next 12 to 24 months. We have opportunities to mitigate the impact of the In this economic climate, we intend to stay sharply focused on recession, including a recently implemented price increase, conservatively managing inventory and costs, actively managing cost reductions, and favorable commodity costs in the second our capital structure, generating cash to pay down debt, and half. Our strategies are sound and strong, and we are executing maximizing the power of our brands and global supply chain. well. People are still wearing underwear, socks, bras, T-shirts and activewear as often as before and will need to replenish. 2008 accomplishments We had many achieve- Our cash flow should be adequate to support our debt and ments in 2008, a year in which we faced rising commodity costs to provide ample cushion to weather the storm. and an unprecedented collapse in the consumer retail sales At some point, the recession will end. Our sound business environment. We successfully controlled year-end inventories, model and our consistent execution against our strategies will paid down debt, reduced costs, executed our supply chain allow us to emerge as a stronger company. strategy ahead of schedule, and announced a price increase. In the end, we delivered diluted EPS excluding actions growth of more than 25 percent despite a 5 percent sales decline.* Richard A. Noll *Diluted EPS excluding actions is a non-GAAP measure used to better assess underlying business performance because it excludes the effect of unusual actions that are not directly related to Chairman and Chief Executive Officer operations, which was $2.09 for 2008 compared to GAAP diluted EPS of $1.34. The unusual actions in 2008 were restructuring and related charges and the tax effect on these items. March 5, 2009 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K R ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 3, 2009 or £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-32891 Hanesbrands Inc. (Exact name of registrant as specified in its charter) Maryland 20-3552316 (State of incorporation) (I.R.S. employer identification no.) 1000 East Hanes Mill Road 27105 Winston-Salem, North Carolina (Zip code) (Address of principal executive office) (336) 519-4400 (Registrant’s telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share and related Preferred Stock Purchase Rights Name of each exchange on which registered: New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes R No £ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes£ No R Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. R Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer R Accelerated filer £ Non-accelerated filer £ Smaller reporting company £ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes£ No R As of June 27, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $2,604,038,549 (based on the closing price of the common stock of $27.75 per share on that date, as reported on the New York Stock Exchange and, for purposes of this computation only, the assumption that all of the registrant’s directors and executive officers are affiliates and that beneficial holders of 5% or more of the outstanding common stock are not affiliates). As of February 2, 2009, there were 93,576,662 shares of the registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates by reference to portions of the registrant’s proxy statement for its 2009 annual meeting of stockholders. HANESBRANDS INC. 2008 annual report ON FORM 10-K TABLE OF CONTENTS Page Forward-Looking Statements . 2 Where You Can Find More Information . 2 PART 1 Item 1 Business ..................................................................................... 3 Item 1A Risk Factors . 12 Item 1B Unresolved Staff Comments . 20 Item 1C Executive Officers of the Registrant................................................................ 20 Item 2 Properties .................................................................................... 21 Item 3 Legal Proceedings.............................................................................. 21 Item 4 Submission of Matters to a Vote of Security Holders ................................................... 21 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . 22 Item 6 Selected Financial Data.......................................................................... 23 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................... 24 Item 7A Quantitative and Qualitative Disclosures about Market Risk . 58 Item 8 Financial Statements and Supplementary Data . 59 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .