Hanesbrands Inc. (NYSE:HBI) Q2 2018 Earnings Conference Call Transcript
Aug 01, 2018 • 08:30 am ET
the quarter at 3.9 times on a net debt to EBITDA basis, which was consistent with the prior quarter. We expect to be approaching the high end of our target leverage range of 2 to 3 times by year-end, and as we move through 2019, we expect to be back within our target range.
Turning to guidance. Since our last update in May, the dollar has strengthened, creating a $30 million revenue headwind in the second half as compared to our prior guidance. Despite this headwind, we reiterated our full year outlook for revenue, operating profit, earnings per share and cash flow. We continue to expect acquisition contributions of $180 million. Given the strong performance of our key growth initiatives, we now expect organic revenue growth for the full year to be slightly better than our prior 1% projection.
As it relates to our full year operating profit, our guidance reflects the impact from the stronger dollar. Our outlook also continues to include approximately $35 million of net input costs inflation, $30 million from acquisition contributions as well as the benefits from acquisition synergies and cost savings initiatives.
With respect to our third quarter guidance, at the midpoint, our revenue outlook reflects an $18 million headwind from exchange rates, acquisition contributions of approximately $55 million and organic growth of 2%. We expect US Innerwear sales to be down between 1% and 2%, reflecting growth in basics and improving trends in intimates. We expect organic constant currency growth in US Activewear and International.
In terms of operating margin, at the midpoint, our third quarter guidance implies approximately 30 basis points of margin expansion and reflects acquisition synergies, leverage from organic growth as well as price increases for certain seasonal programs. This is offsetting higher input costs, which are trending to our initial expectations as well as slightly elevated distribution costs to support Champion's accelerating growth.
So in closing, we're pleased with the way the year is progressing. We're well positioned for accelerating revenue, profit and cash flow growth in the second half and we feel good about our full year guidance. Looking forward, as we highlighted at our Investor Day, we're focused on executing our long-term strategies to generate significantly higher levels of cash flow and improving shareholder returns over the next several years.
And with that, I'll turn the call back over to T.C.
That concludes our prepared remarks. We will now begin taking your questions and we'll continue as time allows. Since there may be a number of you who would like to ask a question, I'll ask that you limit yourselves to one question and a single follow-up and then reenter the queue to ask any additional questions. I'll now turn the call back over to the operator to begin the question-and-answer session.