Gildan reported third quarter net earnings of $52.4 million and diluted EPS of 43 cents, after recording a restructuring charge in the quarter of $4.6 million after-tax or U.S. four cents per share, which was primarily related to the previously announced restructuring of the Company's manufacturing facilities.

Before reflecting the restructuring charge, adjusted net earnings and adjusted diluted EPS for the third quarter of fiscal 2007 amounted to $57.0 million or 47 cents, up respectively 33.2% and 34.3% from net earnings of $42.8 million and diluted EPS of 35 cents in the third quarter of fiscal 2006. The growth in EPS compared to last year was due to higher gross margins for activewear, continuing growth in activewear unit sales volumes, and the five cents per share benefit of an income tax recovery related to a prior year. These positive factors were partially offset by increased selling, general and administrative and depreciation expenses, and the continuing dilutive impact of the acquisition of Kentucky Derby Hosiery, which negatively impacted EPS by U.S. $0.03 in the third quarter. Although the impact of the Kentucky Derby Hosiery acquisition will continue to be slightly dilutive in the fourth quarter of fiscal 2007, the integration process will be complete by the fiscal year-end.

Sales in the third quarter amounted to $291.6 million, up 24.7% from $233.9 million in the third quarter of last year. The increase in sales revenues was due to $30.5 million of sock sales pursuant to the acquisition of Kentucky Derby Hosiery and an 11.6% increase in unit sales volumes for activewear, partially offset by a slight reduction in unit selling prices for activewear of approximately 0.5% compared to last year.

The growth in activewear unit sales was primarily due to continuing market share penetration in all product categories in the U.S. distributor channel. Growth in overall industry shipments from U.S. distributors to screenprinters in the June quarter was 3%.

Growth in Gildan's activewear sales in international markets in the third quarter was strong. Unit shipments in Europe increased by 26.8% compared with the third quarter of fiscal 2006.

In June, the Company began shipment of a major private label sock program to a large national retailer.

Gross margins in the third quarter of fiscal 2007 were 32.4%, the same as in the third quarter of fiscal 2006. Higher margins for activewear were offset by the impact of margins from the sale of socks, which do not yet reflect the cost synergies from the rationalization of the Company's sock manufacturing operations. The Company's major new branded and private label retail sock programs have been priced based on the ramped-up cost structure for its new Honduran sock facility. However, in the third quarter, a large proportion of socks for these programs continued to be supplied from U.S. sock manufacturing facilities, which as previously announced will be closed by the end of August 2007, as well as from high-cost outside contractors. Excluding the impact of sock sales, gross margins in the third quarter of fiscal 2007 were 34.7%. The increase in gross margins for activewear compared to last year was due to further manufacturing efficiencies, partially offset by lower selling prices and higher cotton costs.

Selling, general and administrative expenses in the third quarter were $28.4 million, or 9.7% of sales, compared to $22.0 million, or 9.4% of sales, in the third quarter of last year. The increase in selling, general and administrative expenses was due to the impact of the acquisition of Kentucky Derby Hosiery, higher distribution costs, and increased administration and information technology costs to support the Company's continuing growth. The increase of $2.1 million in depreciation and amortization expenses was due to the Company's continuing investments in capacity expansion, combined with the impact of the Kentucky Derby Hosiery acquisition.

Restructuring and other charges in the third quarter amounted to U.S. $4.6 million, or four cents per share, and were related to the previously announced restructuring of the Company's operations. The Company expects that these restructuring and other charges in fiscal 2007 will total 22 cents per share.

The Company recognized previously unrecorded tax benefits in the amount of $5.7 million relating to a prior taxation year which became statute-barred in the third quarter of fiscal 2007. Excluding the impact of this income tax recovery, as well as the impact of the restructuring charge, the effective income tax rate for the third quarter was 4.6%.

Year-to-date Sales and Earnings

Sales for the nine months ended July 1, 2007 were $709.6 million, up 31.9% compared to the same period last year. The growth in sales reflected $105.9 million of sock sales, an increase of 12.2% in unit sales volumes for activewear and a higher-valued activewear product-mix, partially offset by a decrease in unit selling prices for activewear.

For the first nine months of fiscal 2007, net earnings amounted to $89.2 million, or 73 cents per share on a diluted basis compared to net earnings of $90.0 million, or 74 cents per share, for the same period in fiscal 2006. Before the impact of restructuring and other charges, adjusted net earnings increased to $111.5 million, or 92 cents per share on a diluted basis. The increase in adjusted net earnings and adjusted diluted EPS was due to favourable manufacturing efficiencies, growth in activewear unit sales volumes, a higher-valued product-mix for activewear and the income tax recovery recorded in the third quarter, partially offset by lower unit selling prices for activewear, higher cotton costs, increased selling, general and administrative and depreciation expenses and the dilutive impact of the Kentucky Derby Hosiery acquisition.

Cash Flow

During the third quarter of fiscal 2007, cash flow from operating activities less cash flow from investing activities amounted to $3.1 million. The Company used $45.7 million to finance seasonal accounts receivable, and used $32.9 million for capital investments, primarily for the ramp-up of the Company's major textile and sock manufacturing expansion projects in Honduras. The Company continues to have significant unused debt financing capacity and flexibility to invest in capital expenditures for further capacity expansion and cost reduction initiatives in excess of its current plans, as well as to pursue potential acquisition opportunities.

EPS and Capital Expenditure Guidance for Full Year Fiscal 2007 and 2008

The Company expects that the impact of the Kentucky Derby Hosiery acquisition will continue to be slightly dilutive to EPS in the fourth quarter of fiscal 2007. Consequently, the Company now expects adjusted diluted EPS before restructuring charges for the fourth quarter to be approximately 38 cents, up 27% from the corresponding quarter of fiscal 2006, and one penny per share below its previous EPS guidance range for the quarter. Adjusted diluted EPS before restructuring charges for the full fiscal year is still projected to be approximately $1.30 per share, up 24% compared to fiscal 2006.

The Company has initiated its EPS guidance for fiscal 2008 with a range of $1.80 – $1.85 per share on a diluted basis, up approximately 39% – 42% from fiscal 2007. The projected growth in EPS in fiscal 2008 is driven primarily by the impact of relocating the Canadian textile operations and completing the ramp-up of the Company's offshore textile facilities in Honduras and the Dominican Republic, unit volume growth in activewear, and the expected EPS accretion from having completed the integration of Kentucky Derby Hosiery.

The projected cost reductions from consolidating textile and sock manufacturing include the impact of consuming the balance of previously manufactured fleece and sock inventories in the first half of fiscal 2008. The positive impact of net manufacturing efficiencies and unit volume growth have been assumed to be partially offset by higher selling, general and administrative and depreciation expenses and projected increases in cotton costs in the latter part of fiscal 2008. Although selling price increases for most product-lines in the screenprint channel have been announced, with effect from October 1, 2007, the Company has assumed flat year-over-year overall selling prices in its fiscal 2008 EPS guidance. The Company considers it premature at this stage to anticipate the benefit of more favourable pricing, even though significantly higher futures for cotton costs are likely to result in upward pressure on industry selling prices. In addition, the Company will continue to aggressively pursue further new retail programs in activewear and underwear, in addition to the programs included in its projections for fiscal 2008.

The Company has currently projected capital expenditures of approximately $155 million for fiscal 2008, primarily to complete the ramp-up of the fleece and sock facilities in Honduras, and for the new energy and chemical cost reduction projects announced by the Company in May. Fiscal 2008 capital expenditures also include the construction of a building for a new sock facility to support the Company's projected continuing growth in sales. The estimated total capital cost of the new facility, to be expended primarily over the next 24 months, is approximately $40 million. Projected capital expenditures for fiscal 2008 also include approximately U.S. $20 million of expenditures in Honduras which were previously projected to be incurred in fiscal 2007. The carryover of fiscal 2007 expenditures relates primarily to a minor delay in the timing of the delivery of equipment, and to a delay in beginning the energy cost reduction project in Honduras. Free cash flow (defined as cash flow from operating activities less cash flow from investing activities, including the carryover capital expenditures from fiscal 2007) is projected to be in excess of $90 million in fiscal 2008