(Adds spokesman's comments, background and updates stock price, starting in fifth paragraph.)
DOW JONES NEWSWIRES
Hanesbrands Inc. (HBI) reached a $13.8 million settlement with the Pension Benefit Guaranty Corp., agreeing to strengthen the funding of its retirement plan.
Shares were recently down 3.6% to $21.41 amid a broad market decline. The stock is up 68% this year.
Under the agreement, the underwear and hosiery apparel maker put $7 million into the pension plan this month and will make an additional $6.8 million payment within a year. The payments are in addition to any required contributions to the plan.
The agreement stems from the closure of the company's textiles facility in Eden, N.C., earlier this year, which affected 290 workers in a pension plan that was merged into the Hanesbrands pension plan. It covers more than 30,000 workers and retirees.
A Hanesbrands spokesman said the settlement doesn't mean the company's pension plan is underfunded "by any stretch of the imagination." Hanesbrands first disclosed the lower funded status in its second-quarter report filed with the Securities and Exchange Commission. At the time, it attributed the status in part to the stock slump.
As of Thursday, the company's pension was 93% funded from the valuation at the beginning of the year. The spokesman said Hanesbrands stopped allowing new participants into the plan at the beginning of 2006, but continues to offer a 401(k).
The company, which makes Wonderbra, Champion and Playtex apparel, agreed to add to the plan to reduce risk to the PBGC insurance program. The company's plan remains ongoing and under its sponsorship, unlike other situations where the PGBC assumes responsibility for pension plans that can no longer pay benefits.
In July, the company reported its second-quarter profit slumped 47% due to lower sales across most of its businesses, falling margins and higher restructuring costs.
Pension plans have taken a hit recently and shortfalls have been an increasing concern as stocks tumbled into the early part of this year. A less-well-funded plan can also reduce balance-sheet strength, and that can have an impact upon borrowing costs and capital expenditures.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com