Good day, everyone, and welcome to the Hanesbrands' quarterly investor conference call and webcast. We are pleased to be here today to provide an update on our progress after our fourth quarter of 2019.

Hopefully, everyone has had a chance to review the news release we issued earlier today. The news release, updated FAQ document and a replay of this call can be found in the Investors section of our hanes.com website.

On the call today, we may make forward-looking statements, either in our prepared remarks or in the associated question-and-answer session. These statements are based on current expectations or beliefs 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 and may be found on our website, as well as in our news releases. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made.

Unless otherwise noted, today's references to our consolidated financial results, as well as our 2020 guidance, exclude all restructuring and other action related charges and expenses. Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's press release.

With me on the call today are Gerald Evans, our Chief Executive Officer; and Scott Lewis, our Chief Accounting Officer and Interim Chief Financial Officer. For today' call, Gerald and Scott will provide some brief remarks, and then, we'll open it up to your questions.

I will now turn the call over to Gerald.

Thank you, TC. Hanesbrands delivered a solid fourth quarter with record cash flow.

Over our results we are once again right in line with our guidance and demonstrate that our multiyear strategy to improve our business is working. Key highlights in the quarter include operating cash flow that exceeded the high end of our guidance for both the quarter and the full year.

We delivered on our commitment to bring our leverage back within our target range. We saw continued strong performances in International, Consumer-Direct and Champion.

And adjusted gross margin improved 130 basis points over prior year driven by increases in both our U.S. Innerwear and U.S.

Activewear segments. And U.S.

innerwear's operating profit and operating margin increased over prior year, with both metrics exceeding our guidance in the quarter despite lower than expected revenue. We believe this is an indication that U.S.

Innerwear's profit has begun to stabilize. In addition to U.S.

innerwear's fourth quarter profit performance, we saw two additional developments that point to improving revenue and profit trends in 2020. First, our intimates business improved sequentially and was in line with our expectations for the quarter.

The strong performance was driven by our Bra business which increased over the prior year as our revitalization efforts and product innovations such as EasyLite and DreamWire continued to gain traction. And second, while early store resets by a major retailer had a short-term impact on basic sales in the quarter, we're pleased with the longer term potential this reset holds for our business.

Within the stores that have been reset, we're gaining shelf space and we're gaining market share. Once completed, we believe this reset should have a positive impact on our basics business beginning in the second half of this year.

Over the past several years we have executed a strategy to diversify our business and position the company for increased earnings growth and shareholder returns. To accomplish this we set five specific goals and we've delivered on each as highlighted by our fourth quarter and full-year results.

First, we have diversified our revenue. International revenue now accounts for 36% of sales, up from 11% in 2013.

Consumer-Direct revenue which represented 30% of fourth quarter sales and 25% of full-year sales is up from 9% in 2013. And on a constant currency basis, global Champion excluding C9 generated more than $1.9 billion of revenue in 2019, an increase of more than $1.1 billion in just three years.

Second, we've consistently delivered organic revenue growth. The fourth quarter marked our tenth consecutive quarter of constant currency growth and we accomplished this despite challenges in our U.S.

business that included a muted holiday and a $46 million headwind from exited programs. Third, we've positioned the business for higher levels of profitability over the next several years by exiting unprofitable businesses and restructuring our supply chain to lower cost.

We believe our supply chain restructuring initiatives have positioned U.S. innerwear and the company for improving margins over the next two years.

We also believe this represents an important milestone for U.S. innerwear as it remains a critical driver of our strong cash flow.

Fourth, we're generating higher levels of operating cash flow and 2019 operating cash flow increased 25% over the prior year to more than $800 million. This is approximately $200 million higher than our cash flow from just three years ago.

And fifth, we have reduced our net debt by more than $1.1 billion in less than two years. We ended the year at 2.9 times levered on a net debt to adjusted EBITDA basis which is a full turn lower than our peak.

Now that we're back within our long-term range of 2 to 3 times our priority for 2020 is to use our excess free cash to buy back stock. The focus of our entire organization for the past several years has been on strengthening our business to return to a model that is able to magnify sales growth into faster operating profit growth and ultimately even faster EPS growth.

With a lot of heavy lifting done and our program exits behind us, we believe 2020 represents an inflection point for our company, one that reveals the underlying strength of our ongoing business and unleashes the full potential of our capital allocation model to drive accelerated shareholder returns. Turning to our 2020 guidance, through the remainder of my remarks and for comparison purposes, I'll be referencing our rebased 2019 results, which adjust for the exits of C9 and Target and our DKNY Intimates license.

This will provide a clear view of the underlying trends within our business. Using the midpoint, our 2020 guidance implies approximately 3% revenue growth.

This is driven by strong performances in International, Consumer-Direct, and Champion. And while we continue to plan conservatively with respect to our U.S.

innerwear business, we expect improved revenue trends in 2020 in both basics and intimates. Our guidance for U.S.

innerwear assumes revenue growth ranging from down 1% to up 1% for the full year. And for the total company, we expect adjusted operating profit growth of 7% as our investment spending normalizes and cost savings from our supply chain restructuring flow through, particularly within our U.S.

innerwear segment where we expect operating profit to be up over prior year. With lower interest expense and lower share count, we expect adjusted earnings per share growth to accelerate to 15%.

Embedded in our guidance is $200 million of share repurchases and we expect to generate between $700 million and $800 million of operating cash flow. So in closing, we delivered solid performances for the quarter and the full year and as our 2020 outlook suggest we believe we have reached an inflection point in our business model.

With our exited programs behind us and all of our capital allocation tools at our disposal, we believe we are well positioned for accelerating earnings growth and shareholder returns over the next several years. And with that, I'll turn the call over to Scott Lewis, our Chief Accounting Officer, who is serving as Interim Chief Financial Officer.

Scott has held leading roles in our strong global finance organization since the company went public and is providing us with a seamless leadership transition to support our goals and strategies. Scott?

Thanks, Gerald. Before I discuss our fourth quarter results, I want to highlight a supplemental document on our IR website that reflects revisions to our prior period results.

These revisions primarily relate to adjustments to our income tax balances. The revisions had minor cumulative earnings per share impact of $0.01 over the three-year period from 2017 to 2019.

Additional information can be found in our FAQ document as well as in our 10-K. Now let me discuss the quarter.

Overall we reported solid fourth quarter results. Revenue, adjusted operating profit and earnings per share were in line with our guidance.

While cash flow from operations exceeded the high end of our range for the quarter shows a $1.75 billion on a constant currency basis, as well as increased slightly over prior year. Our [indiscernible] results reflect $46 million with expected headwinds in our activewear segment from the exited or commodity programs and the mass channel as well as a planned wind down of C9 and Target.

Adjusted gross margin increased 130 basis points over the last year to 41.4% driven by higher margins in both our innerwear and activewear segments. Adjusted operating profit in the quarter was $263 million and included $3 million of currency headwinds as compared to last year.

Our adjusted operating margin of 15% increased approximately 40 basis points over the prior year as our strong gross margin performance more than offset higher distribution costs and an unexpected bad debt charge of $3 million related to a retailer bankruptcy in Australia. Both adjusted and GAAP earnings per share were $0.51, an increase over the prior year of 13% and 24% respectively.

In the quarter we generated $559 million in cash flow from operations, an increase of $57 million compared to prior year. For the full-year we generated a record $803 million dollars in cash flows from operations.

With respect to the balance sheet, as compared to last year, we reduced our inventory balance by more than $150 million and we paid down over $600 million of debt. Our leverage at the end of the quarter was 3.9 times on a net debt to adjusted EBITDA basis.

This is down one full-term from our peak in the first quarter of 2018 and brings us back within our target range of 2 to 3 times. With that summary, let me take through our fourth quarter segment performance.

As compared to last year, U.S. innerwear sales declined 4%.

However, operating profit increased 5% as our operating margin expanded 210 basis points to 24.6%. The operating profit and margin exceeded our forecast in the quarter as the benefits from earlier price increases and lower distribution expenses more than offset higher commodity cost and lower unit volume.

For the quarter basics revenue declined 5% due to the impact of door closings and an earlier than planned disruption from store resets at a large mass retailer. While these resets are causing short term fluctuations, we believe once completed this will have a positive impact on our basics business beginning in the second half of this year.

And with respect to our Intimates business, as expected, our trends improved sequentially driven by our bra business. For the quarter, bra revenue increased slightly and operating margins improved nearly 300 basis points over the last year as our revitalization efforts and new product innovations gained traction.

Turning to our U.S. Activewear segment, sales declined nearly 7% over the last year and were slightly better than our forecast.

[indiscernible] result was $46 million of expected year-over-year headwinds I referenced earlier. As compared to prior year, Champion activewear sales, excluding C9 increased 14%.

C9 revenue declined 26% or $26 million. And sales in the remainder of our Activewear segment declined approximately $30 million, which was better than our forecast.

Activewear's operating margin of 15.8% declined 30 basis points over the prior year. Activewear's gross margin increased in the quarter driven by the benefits of our remixing activity including a higher mix of Champion sales.

This was more than offset by higher SG&A expense including higher distribution cost. In our International segment, revenue increased nearly 7% and was above our forecast driven by stronger than expected results in better activewear and innerwear businesses.

On a constant currency basis international sales increased 10% or $60 million over the prior year with mid single-digit growth in innerwear and 22% growth in Champion. International's operating margin of 14.9% declined 130 basis points over the last year as the benefits from higher sales were more than offset as short-term FX transaction cost pressures, as well as the $3 million Australia bad debt expense I referenced earlier.

Touching briefly on our global Champion business, excluding C9, constant currency sales increased 22% over the last year and were in line with our expectation. This consisted of 22% growth in both our domestic and international Champion businesses.

And now turning to guidance, representative comparison of our ongoing business between 2020 and 2019, we've provided a supplemental table on our IR website. This table provides a rebased financial information for 2019 that adjusts for the exits of C9 and Target and the DKNY Intimates license.

During my guidance discussion, all year-over-year comparisons were referenced our rebased 2019 results. I'll also point you to our press release and FAQ document for additional guidance details.

However, I would like to share a few thoughts to frame our 2020 outlook. We expect solid growth with enhanced profitability even as the first quarter is expected to see difficult comparisons.

With a strong balance sheet our capital allocation strategy is expected to drive accelerating earnings per share growth and we've identified additional cost reduction actions those we've begun last year is to generate further profit improvements in 2021 and beyond. Our 2020 guidance demonstrates accelerating growth rates as we move down the P&L.

At the midpoint our full year guidance implies revenue growth that is approaching 3% and adjusted operating profit growth of approximately 7%. With expected benefits from lower interest expense and $200 million dollars of share repurchase planned early in the year, we expect adjusted earnings per share growth of approximately 15%.

We expect to generate $700 million to $800 million in cash flows from operations. After any additional capital allocation initiatives this year, we expect our leverage to decline 2.7 times by year end.

With respect to our restructuring and other actions, we expect approximately $50 million of charges in 2020. Approximately $10 million of these charges are costs related to the exits of C9 and the DKNY license.

Approximately $10 million related to our 2019 supply chain restructuring which were previously planned. The remainder of the charges are focused on additional actions to further reduce costs primarily within our supply chain.

In isolation we expect these restructuring actions to deliver approximately $40 million of incremental profit with $30 million coming in 2021 and remaining $10 million coming in 2022. Touching on the first quarter, we expect [indiscernible] revenue and operating profit growth due to transitory and timing issues in the International and U.S.

innerwear segments. Within U.S.

innerwear we are facing headwinds from a large socks shipment at last year's first quarter as we displaced a competitor and a large value retailer. We also expect continued short term disruption in our basics business when I previously discussed store reset at a large mass retailer.

International constant currency revenue growth is expected to slow to 2% in the quarter before returning to mid single-digit in the second quarter due to the timing of the Asia expansion this year compared to last year. And International's first quarter operating profit is expected to decline due to the increased investments to support our Asia expansion as well as short-term FX transactional cost pressures.

For the rest of the year we expect revenue and operating profit growth as we benefit from the continued momentum in our intimates business, the completion of store resets in the mass channel, expanded distribution in Asia, cost savings from our supply chain restructuring, and price increases in certain international markets to offset the cost pressures and foreign exchange rates. In closing, we delivered solid results for both the quarter and full-year.

We delivered on a number of initiatives to improve our business model. And as our outlook suggests, we believe we've reached an inflection point now, as our program exits are behind us and we've brought back our leverage within our targeted range.

We believe the combination of our strength and business model, our strong balance sheet, and all of our capital allocation tools, position us for accelerating earnings growth and total shareholder returns in 2020 and beyond. And with that, I'll turn the call back over to TC.

Thanks, Scott. That concludes our prepared remarks.

We will now begin taking your questions and we will continue as time allows. I'll turn the call back over to the operator to begin the question-and-answer session.

Operator?

Thanks for taking my question. I wanted to ask - nice quarter guys, I wanted to ask for a little bit more color around the basics reset, what's happening in kind of core basics business?

I think it sounds like something is going on at the mass retailer, sounds like an opportunity for shelf space, but may be you can give us a little bit more color on what's happening there, how to expect it to kind of flow through the P&L and timing of when that part of the business might reaccelerate again? Thanks.

Hi Omar, it's Gerald. Thanks for the question and we are pleased with the fourth quarter, our record cash flow and double-digit EPS growth and our inline guidance really speaks to what we've been doing to improve our business model.

We really do look to 2020 as an inflection point for this business and an important part of that is the underlying strength of our ongoing businesses. And then part of that is innerwear and we did see improvement from a profitability standpoint certainly at the end of 2019.

As we look to 2020 we do expect the revenue to improve as we work through the store resets in the large retailer. The large retailer started their reset at the end of last year in 2019 a little earlier than we had expected and as you see with resets you sell off of exited SKUs and businesses and so forth that can create some short-term interruption.

But what we do see and what we like is our space is expanding and with that space expansion we're seeing our share expand. So the balance of the chain resets to the first part of 2020, but we expect as we get past that and then as we get to the second half we will pick up the tailwind of that on our innerwear business and the benefit we saw from share expansion in the initial reset along with the improving trends we're seeing out of our intimates business on the revenue side we expect to offset and pick up the additional restructure - cost restructure benefits that we implemented in 2019 towards the second half.

So we really do expect a stabilization of our revenue line as we work through the balance of 2020 and we expect the operating profit to be up. And so we're very encouraged by that and that's an important punctuation on our strong cash flow as well and we see our profit growing within innerwear.

Great, thank you so much. So I have a two part question, number one is, Scott can you may be give us a little bit of a direction on how do you expect gross margin to play out for this year?

And then secondly, the press release mentioned something about identify controlled efficiencies that comes through the material weakness in internal control, can you just give us an idea of what that means and what some of the actions you've already taken and say we're continuing to take over the year to address that situation? Thank you.

Yes, hi. This is Gerald.

Let me take the gross margin part and I'll turn it over to Scott to talk about the revision part of the question. From a gross margins standpoint we would expect our gross margins to strengthen as we work through the year and we've got a number of restructure initiatives that we undertook in 2019 that will flow through in 2020 as it works its way up the balance sheet into the second half of the year.

So you would expect that to ramp along with our revenue is ramping in the first, as we get - overlap some of headwinds in the first quarter of 2020. So Scott, would you, do you want to take shot?

Yes, thanks Gerald, and good morning, and thanks for your question. About the revision just to put some context around this item, the impact of the revision adjustment had a minor cumulative earnings per share impact to us of $0.01 over the three-year period of 2017 to 2019.

And I think it is important to understand as we look forward this tax issue will not impact our tax rate. As we move forward we continue to expect the tax rate in the mid teens.

We discovered the issue as we were preparing our year-end financial statements this year and the issue revolves around or relates to the tax treatment of intercompany inventory transactions and ultimately impacted our prior period of tax balances. Now when we identified this, we've quantified it and we revised prior period financial statements to correct for these errors.

We also addressed it for other immaterial outer period and for the same time. And you mentioned the controls, and from a controls perspective, we already are making some process improvements in this area.

We actually, when the process improvements that we were working through helped identify this issue. We ultimately did conclude that this was a material weakness.

We have and we will continue to refine and enhance controls in this area and we're taking this very seriously and we intend to implement these enhancements over the course of 2020.

Hi. Good morning, thanks for taking my question.

I was wondering if you could maybe quantify a bit how much the Innerwear business is impacted next year by C9, DKNY and then the door closures? And then also, how you're thinking about the growth of Champion sales in 2020 as we go throughout the year, both domestically and internationally, and the impacts of the Asia distribution expansion?

Thanks.

Sure. Let me look at - let me start with the C9 portion of your question.

It's in the rebased numbers that we looked at on the basics or the Innerwear side of things, and it was approximately $42 million of sales that was in Innerwear basics. We have recovered the vast majority of that, but it's a bit masked in the rebased numbers because as we plan for 2020, we also assumed there would be the impact of door closures of about $35 million to $40 million.

So they offset in the numbers, but I think you should take solace in knowing that we have planned conservatively on the Innerwear side and as we begin to hear about door closures in other places we have those covered in our guidance as we look toward 2020. So, we feel we've appropriately planned the Innerwear business from the standpoint of being conservative yet, and the phasing of that business as we also see the revenue and profitability ramp throughout the year.

So we feel good about that business and where it's positioned and appropriately planned from a conservative standpoint. On the Asia...?

Champion just kind of how the year maybe unfolds for growth?

Yes, from the Champion business, first of all let me just say, last year Champion had another - we finished really well in the fourth quarter. Champion was up 22% in the fourth quarter again, and it was 22% domestically and 22% internationally.

And just to give you a sense of how big that business is becoming it's about $460 million globally in the quarter and it finished up 40% for the year. So as we look at 2020, we expect to surpass the $2 billion mark.

We expect to do another year of double-digit growth for Champion. We are overlapping some very large comps in the first part of the year.

So we've planned to mid- to high-single digit growth rate for Champion in the first half of the year and a double-digit growth in the second half of the year - low-double digit growth in the second half of the year. So we're continuing to be very bullish on Champion and its ability to continue to grow.

We've seen strong POS. We saw strong POS through the holiday periods around the world as well and we are well on our way obviously to reach our $2 billion goal in 2020 two years early, and we believe we can add the next billion in the next four to five years.

Hey, good morning, everyone. Gerald, two questions.

In the FAQ, there is some commentary about finding a new C9 partner and something new revenue stream in the second half, but it sounds like it should be minimal. Just any more color on that would be really helpful.

It's interesting that you guys are able to get a partner for the brand. And then secondarily, there was a big department store that talked about a 3-year store closing program.

Just curious if you could let us know how that impacts your multi-year view of Innerwear? How tied to those 125 doors you are?

Just anything there over the next 3 years would be helpful as well.

Sure. Let me start Ike with this C9 part of the question.

C9 has continued to perform well right through the balance of 2019, really exceeded our expectations through the balance of 2019. And it's clear to us that there is a strong consumer base out there that's very loyal to that brand.

We are in the final stages of discussions with a new partner and we expect to launch that program - initial program in the second half of this year. Relatively small to start with, and as you noted, it is in our guidance at this point in time, but it has the potential to ramp nicely over time as we get the program going.

So we'll provide some more specifics on that in the coming months, but we're very pleased to have the opportunity to keep that brand in the market and satisfy those consumers. From the standpoint of the department store information, the vast majority of the business we do in Macy's is it on macys.com and in their largest stores and that's where all of our really growth comes from on that account.

As noted in the announcement, the stores targeted for closure are a small part of their total business, and while the closure list has not yet been fully communicated, we believe the doors targeted for closure do not represent a material part of our business. In regards to 2020 as I noted in my earlier comments, we had planned the possibility of additional door closures in the market and we feel that we have the initial 30 covered in our guidance, and as the list develops, we'll continue to assess that, but we feel we've got it covered in our guidance for 2020.

I think, once again, it reinforces what we've been focused on for a while is the consumers choice of where they shop and their shopping habits continues to evolve and we've been focusing over the last few years on diversifying our revenue base and where we sell and particularly developing our consumer direct piece of the business, which is - as we noted in our comments was 25% of our business in the last year. And so, macys.com is part of that, as well as pure plays, and as well as our own site.

So we'll continue to diversify, where we sell to meet the shifting needs of the consumer. So we feel good about where we have Innerwear going and that will continue and the Innerwear is one of our fastest growing Consumer-Direct businesses.

Thanks, good morning, guys. Nice job with the cash flows and the balance sheet.

So this gives you some newfound balance sheet flexibility into 2020, you're looking at the implied cash flow outlook for '20 well in excess of the dividend obligation and the $200 million in planned repurchases. Does the balance go to debt reduction or could you see repurchases beyond that $200 million?

Hi Jim. It's Gerald, and thanks for that.

We have definitely focused on delevering as you know, and we're very proud to have achieved that goal. It gives us a lot of flexibility and we are very disciplined on our capital allocation approach.

We have noted that our intent is to use the $200 million of excess cash to repurchase shares. That will allow us to continue to delever.

We'll assess as we work through the year, but certainly getting solidly back in our range gives us significant amount of flexibility and in exercising our full capital allocation. So we'll work through the year, but we are very pleased to be back within our range.

Hi. Thank you for taking my question.

First, with regards to your Champion guidance for next year, can you just talk about the different components in terms of Activewear and International and how you're thinking about the growth there? And then also in terms of your cash flow guidance, if you could just help with a little more color, how do we think about some of the moving pieces especially working capital?

Thanks.

Sure. Let me take the first half of that and I'll let Scott take the second half of that.

From the standpoint of Champion, we expect to continue to see the balanced growth really between International and the domestic piece, it is growing nicely. Actually the Innerwear piece of our Champion is growing at a very rapid rate as well, and it's helping drive that total strong growth that we're seeing around the world.

So we expect both the Activewear and Innerwear elements of our Champion business to grow. As we've said before, we've been very successful in the men's business.

We still have room to grow as we develop a greater share in the women's business as well as the kids business and outerwear represents a new category for us as well. So we see multiple areas that we can continue to expand the business as well as continue to grow of course, where we have distribution today.

Scott?

Yes, excellent. I appreciate your question, and good morning.

We are very proud of the record level of cash flow that we had in 2019. The team did a fantastic job this year.

We had a good improvement in our cash cycle days. We felt this takes us to a new level.

From my brief and reinforces our ability to generate cash flows. Our operating cash flows in '19, we accomplished that through strong GAAP net income and working capital management.

And as you think about 2020 cash flow levels, our guidance is $700 million to $800 million. You can arrive at that in a couple of ways and one way is looking at our 2020 GAAP net income at the midpoint is around $585 million.

If you add back our non-cash items like depreciation and amortization and stock compensation, which is typically around $180 million to $190 million. You may arrive at the mid-point within that guidance range.

Another way of thinking about it is if you look at our 2019 cash flow level of $803 million. Our 2020 GAAP net income is at the midpoint is around $20 million lower than '19 as we talked about the program exits, and just using the same working capital assumption that we had in '19, which is actually flat for that year, we arrive right within that guidance range again.

So, we thought this is a prudent way of looking at cash flows in 2020 and we like again, we're in a really good position to drive strong cash flows in 2020 and beyond. And this is helping with strong returns and again like Gerald mentioned earlier, this gives us opportunities to continue to lever for share repurchases and really drive shareholder return.

Hi, thanks for taking our questions. Would you please help us understand a bit better what drove the bra revenue increase in the fourth quarter?

And if you anticipate that carrying forward as part of the flattish rebased full-year guidance for Innerwear, despite retailer door closures? Or put another way, would you quantify what level of bra growth is baked into your 2020 plans?

Sure. From the standpoint of what drove that growth, it was - we certainly have been working on a revitalization program for some time now within the intimates business and one of our key elements of our bra expansion was innovation and we've seen both our DreamWire and our EasyLite innovations performed very well.

And as you may recall we paired that with both online, our digital support as well as TV support in the case of Bali, EasyLite. So we saw a nice traction from the standpoint of those launches and we've seen it ramp and we expect it will continue to ramp, particularly as we get through the - into the later quarters of the year.

So we are expecting actually growth out of our intimates business next year in the guidance that we gave.

Hey, thanks guys. It seems like you took some price on the Innerwear side did help margins in that segment.

Can you just maybe talk about how your retail partners have adjusted their pricing, what sort of sell-throughs that they are seeing just basically what's the consumer reception to the price increases? And also I just wanted to make sure on the international side, you mentioned some bad debt that negatively hurt your profits this past quarter.

Was that a one-time thing or do you expect any more of that to continue in F’20? Thanks.

Sure, from the pricing question, we've implemented our pricing in Innerwear really last February, so February of 2019. You may recall at the time we were pricing because commodity is it peaked ahead of that pricing and we put that pricing in place.

So it's been in place a long time. We've generally seen that the pricing in the market is settled out around it and so forth.

What we're seeing now though is the pricing continues to lap itself that the peak of the commodities is passed, and we're actually seeing margin improvement as the commodity costs begin to ramp down and the pricing overlaps and so we're seeing that now. As we look to Innerwear in the second half of 2020, we get the added benefit of the supply chain restructurings that we had executed in 2019 will work their way out the balance sheet and give us added improvement in our operating margins and profit within Innerwear in particular.

From the standpoint of the international bad debt, that was a bankruptcy in Australia and we would expect that to be an individual event not something that's ongoing there.

Yes, thanks for taking my question. Can you give us an update on the new distribution agreements for Champion in South Korea and China?

And also do you think that the health crisis in China will affect store openings this year? Thanks.

Sure. From the standpoint of the distribution agreements we have two new partners, one in Korea and one in China, as you noted.

From the standpoint of their - how they will flow, they are planned for later in the year. So at this point in time, we do not see the current issue having an impact on that business.

You may recall that our Chinese commercial businesses is fairly small today, less than 1%. From the standpoint of that overall issue, we're taking it very seriously and it's an evolving issue.

We have stopped our own travel of our employees as well as we're watching very carefully from the standpoint of our vendors and we will keep that travel stopped until we see that the illnesses is stopped or ceased. From the standpoint of our business, we don't see it having any meaningful impact on our business at this time and we certainly are working on contingency plans, either from a sourcing standpoint or business standpoint.

But back to your original question, we feel good about those distributors and they'll have more of a second half impact.

Hey, good morning guys. Thanks for taking my question.

Gerald, you mentioned and called out Champion hitting your Target earlier than you had anticipated and you mentioned $1 billion in incremental top line that you thought the brand could generate. Can you walk us through how you're getting there and just the bridge between distribution growth in North America and International kind of how we should think about that $1 billion in revenue opportunity you're talking to?

Sure, as we began to look at it from the standpoint of the next billion, we see it has continued to be a global expansion. And in many ways some of the categories I touched on earlier, important elements of that, the drive from simply being predominantly a men's brand to one that becomes across genders and includes a kid's business as well, it would obviously include an important ramping in markets like Asia where we think there's tremendous opportunity for further expansion in our Europe markets.

And within the U.S. market, for example, we have pretty solid distribution that's where you would expect certainly us to build a bigger business across women and kids as well.

And then there are categories out there that we really don't play in such as outerwear and we also are in the midst of partnering with a company on some initial shoe offerings as well. So we see lots of avenues to grow and we would say it sort of being consistent growth over time.

Hi, you talked about both the shelf space gains and losses and I think you gave us some nice clarity on the intimates in Korea and in China. But can you just give a timing of, was that the only major change in shelf space this year or was there something else that was embedded in one of the other categories that I missed?

No, I think at this time shelf space, we're fairly stable from a shelf space and when I speak to you about that and the shelf space, I'm speaking more on the Innerwear side of things. Shelf space is fairly stable.

We do see the solidification of the basics space within the mass channels as we referred to earlier. But we feel good about our shelf space and our innovations behind it, of course on the Activewear side and Champion in particular, we're continuing to drive distribution expansion in the U.S.

as well as globally. So we have a nice trend there as well.

We'd like to thank everyone for attending our call today, and we look forward to speaking with you soon.