Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Gildan Activewear Inc. Earnings Conference Call. My name is Lacey, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Sophie Argiriou, Director of Investor Relations. Please proceed.

Thank you, Lacey. Good morning, everyone, and thank you for joining us. This morning, we issued our press release announcing our earnings results for the second quarter of fiscal 2011 and our interim shareholder report containing management's discussion and analysis and consolidated financial statement. These documents will be filed with the Canadian Securities Regulatory authority and the U.S. Securities Commission and are also available on our website at www.gildan.com. Joining me here this morning are Glenn Chamandy, our President and Chief Executive Officer; and Laurence Sellyn, our Executive Vice President and Chief Financial and Administrative Officer. Laurence will provide a brief overview of our second quarter financial results and our business outlook. After which, we will open the call to questions. Before we begin, let me remind everyone that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve unknown and known risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company’s filings with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory authority that may affect the company’s future results. I would now like to turn the call over to Laurence.

Good morning. This morning, we reported our fifth consecutive quarter of record quarterly results. In addition, we substantially increased our earnings guidance for the full fiscal year in spite of significantly higher cotton cost in the second half of the fiscal year compared to the first six months. Sales for the second quarter were $383 million, up 17.3% from $327 million in the second quarter last year. EPS before restructuring charges was $0.53, a record for the second quarter of our fiscal year and up 29% from $0.41 per share in the second quarter of fiscal 2010. The growth in sales revenues was primarily due to the impact of higher net selling prices for activewear, which increased by close to 20% as a result of successive selling price increases and lower promotional activity. In addition, unit sales volumes for activewear and underwear increased by 6% in spite of continuing low finished goods inventory and capacity constraints, which prevented the company from maximizing its market share and fully servicing distributor demand to replenish inventories. Although we were able to sequentially increase our market share to approximately 63% compared to approximately 58% in the first quarter, according to the CREST report, replenishment of Gildan inventories in the distributor channel was lower than in the second quarter of fiscal 2010. At the end of the quarter our share of distributor inventory was 52% compared to our market share of 63%, and we currently continue to have a significant open order position. We continue to achieve good growth in international and other screenprint markets, despite of our low inventory levels and capacity constraints. Sales of socks were down by 24% due to lower retailer inventory replenishment, the discontinuation of a large uneconomic sock program in the third quarter of fiscal 2010 and a lower…

Thank you, Laurence. This concludes our formal remarks. [Operator Instructions] Lacey?

[Operator Instructions] And our first question will come from the line of Spencer Churchill with Paradigm Capital.

Just talking about some of the inefficiencies that you mentioned on the distribution side of Charleston impacting margins again in the quarter, I think if I recall we sort of hoped that, that was going to be -- that was solved last quarter, so it looks like perhaps it spilled into the second quarter. Maybe you can just give an update on what's going on there and if we expect that, that should continue.

That was on a year-over-year basis, not in relation to our forecast, and the ramp-up is proceeding as planned.

The facility is running as scheduled and is operating in a normal course of business today without issues and within cost projections that we've set forth.

Okay, great. And then maybe just in terms of the full year guidance, if you take out the $0.07 from Gold Toe, the range -- the bottom end of the range is a little bit above where we talked about those sort of implied EPS for your last quarter. And maybe if you could you just talk a little bit about how much of that improvement was related to price versus potentially the tax recovery you talked about in the second half and then maybe if there is any improvement in terms of the volume.

We haven't at this time reflected any increased volume in our updated guidance, so that would potentially be an upside. So what is driving the increase from our guidance at the end of the first quarter is the impact of the further March selling price, which is about price increase, which is about $0.40 for the balance of the year. That essentially offsets the further increase in cotton and the higher manufacturing costs and the cost of other purchase cost inputs and higher SG&A cost. So what we're reflecting at this time is the impact of Gold Toe and the lower tax rate.

Okay, great. Just one question, the final question I put in here. You did talk last quarter very bullishly in terms of the order book and the outlook just in terms of the general macro picture, are you still feeling as positive as you were before?

Yes, I mean, we still have quite a large order book to date. The days of inventory that we have in the channel today are lower this year over last year. We have about 70 days -- just over 70 days of inventory in the screenprint channel. Our share of inventory is under 50%, which is almost 4% lower than it was last year. And our share is felt to be flat on a year-over-year basis, so things are still tight. We're very bullish still. And we feel we're in a very good position from that point of view.

And our next question will come from the line of Claude Proulx with BMO Capital Markets.

Just one quick question. Inventories of finished product, I mean it's up 30% in dollar terms. How much is up in terms of volume? How much more inventory do you have?

Are you talking in the channel?

No, I'm talking in your warehouse, your own...

Increased finished goods inventory account for about $25 million of the increased inventory in terms of the fourth quarter.

No, I'm talking year-over-year. I mean it's up 30%. I mean I guess there's obviously higher cost in there, but there must also be in terms of units. Anything you can -- any color you can give?

Well, I would say that the percentage of inventory that is up is inventory that's actually being used to support our growth strategy. So we have also allocated this year more inventories to our business in Europe is growing and et cetera, so the actual quantities of dozens is in the neighborhood of about $1.5 million, just slightly north of that this quarter, but a lot of that inventory is not necessarily saying it's for sale. The actual way we look at it is how much inventory do we have in our North Carolina warehouse let's say, for example, and that's just lightly over where it was last year at this time. That answers your question. So we're very tight. We're still tight on inventory. And we're still the strong backorder base, and we're very bullish in terms of the outlook going forward in this next quarter.

I'm asking because you're saying that the potential upside would come from volume. So if it's not in your inventory it will have to come from...

None in Q3, that's for sure.

Okay. But in Q4, you could have some additional production?

Q4, we'll have additional production.

And our next question will come from the line of Eric Tracy with FBR Capital Markets. Eric Tracy - FBR Capital Markets & Co.: I guess if we could just speak to the price increases that have come through, I guess in aggregate, what do those price increases look like to date including the 7.5% in March? And then I guess how do we think about that on a go-forward basis? If we assume cotton at the current levels of $1.50 as we head into FY '12, how much further in price would need to be taken to offset, I guess. I'm trying just to get a sense of where we are from a pricing standpoint, what incremental might have to look like and then sort of the assumptions around elasticity going forward as well.

Well I think that, first of all, the price increases aggregately worked out to about 26% in wholesale and that's from July of last year through March this year. But put that in retrospect, I guess the way to look at this also is that the actual average price of a T-shirt that we're selling today -- because we have a mix, we have sleeves and there's golf shirts, but just the T-shirt, which is the lion share of our sales. After the 26% price increase, the average price of a T-shirt is about $1.75, which is what we sell to let's say, for example, our end users, our distributors, which is 1/3 less than it was in 1993, believe it or not. So despite the fact that we've had inflation, we have over the 15 years had significant deflation. That is quantifies basically if you take on $1.75, you take a shirt, let' say for example, and you say we'll post all these increases, we're running at $1.35 to $1.40 with a $0.40 increase per unit. The actual cost of the end unit, as we look at the supply chain and you look at the retail price of the shirt that's being sold in the souvenir shop or, I don't know wherever you look and buy product. If you look at most items, they're selling anywhere between $10 and $30. If you take $20, that $0.40 along the way is being absorbed. So the end user is not necessarily spending or paying much more money for the shirts just because of the fact that the supply chain is quite -- the whole value chain is quite large. So the way we look at it is that I think we're still, as an industry, very competitively priced. And that realistically,…

We're thinking that we're trying for a 2% market growth in the back half, it's what we're looking at, which is similar to what we've seen in the first four months of this year. Eric Tracy - FBR Capital Markets & Co.: Okay. And then if I could, I have to touch on the sock business, the core sock business down 24%. I believe that the business has been negative for going on two years now and it seems to be there's timing and replenishment issues that seem to be recurring. We can just maybe speak to the visibility you have to turning that and understanding now with the Gold Toe acquisition that is going to potentially mask a lot of the core issues. But I'm just trying to get at the visibility that you have and maybe what some of the issues and how you reconcile those going forward.

Well, to start with, look, we've consciously brought the volume down ourselves as we discontinued product lines that didn't meet our criteria. And that's what we've been doing over the last couple of years. The reduction in unit volume is a couple million dozen in the quarter, which represented about 800,000 dozens of the last of the discontinued product, because either we're discontinuing product on a year-over-year basis because we're closing it out or we have to complete the program for the retailers, so we basically are completely finished with the discontinued side. And we had about 1.2 million of destocking from one of our largest customers due to some of the late shipping that we had last quarter. So we shipped, those are shipping issues we had in Q1. We shipped goods later in the season, later in the quarter, that affected the replenishment for this quarter. What we're projecting for the balance of the year is flat sales in terms of socks. So we feel that we're at a plateau right now. But all the volume in which we're selling on a go-forward basis is what we considered fits our criteria. It's more the branded-type products. We've gotten rid of and shed ourselves of a lot of the no-name type brands. So we're focusing on where we think we can add value in the long run. And our whole focus is going to be supply retailers branded private labels as well as develop our own brands, Gildan, and as well as those brands that we purchased through the Moretz acquisition. So we feel very comfortable with our positioning and we're very bullish on our whole opportunity as we had some major initiatives even in our own Gildan branding sock program, which is selling very well at retail today. So overall, we're very excited and we're going to continue to ramp up our Rio Nance IV facility. The plant is going to be continued to be ramped as we discussed in our investor script. And partly through the remaining Gildan volume, but also with the implementation of the cost that we're going to move from both of in-field, our facility , which is going to significantly obviously increase our margins because we'll be able finish those goods at much lower price than they have been outsourcing them in the past.

To just add to what Glenn said, I think the way we would position this impact of Gold Toe is to enhance our core business, not to mask the performance of the business.

Yes. Eric Tracy - FBR Capital Markets & Co.: Right, okay. And then just lastly, Laurence, I guess on the -- if you could just quantify for us the sort of incremental tax recovery component for Q3 and Q4, what that contribution is?

That's about $0.05 relative to our previous forecast. Eric Tracy - FBR Capital Markets & Co.: It's $0.05 for the entire back half?

Yes.

And our next question will come from the line of Kenric Tyghe with Raymond James.

I just want to confirm, you mentioned you've covered cotton for the fourth quarter at $1.60, if I heard you correctly, Laurence. Could you also just speak to the extent to which, if any, you've looked at the first quarter of '12, particularly given the sharp reset lower in the near dated cotton future?

Well, we were personally purchasing cotton. We're obviously taking advantage of some of the downside in the quarter -- I mean the reduction in pricing and the recent production. The one thing to remember when you are looking at cotton though, which I think is an important fact, is that the cotton that we're currently purchasing now is the July period. So May is now off the board and we're purchasing what they call the July period. And the way that cotton is being sold to the industry is basically you have to buy it, the cotton period is for June, July, August September and October. And this period is coming off the board in the middle of June. So by the middle of June, everybody who's consuming cotton and their requirements through October, they'll be fixed and purchased by the middle of June, which is roughly about 30 -- usually 30 working days from today. And at that point in time, that cotton will obviously be plus with people's cost of goods sold through the next 6 to 9 months of inventory levels into '12. And so you'll have, I think, even though the price has come down from its highs, people will have cotton at the high level, at the lower level, but potentially I think that cotton prices will still be fairly higher growth as we head to 2012 as an industry, not necessarily our prices.

Just to follow up on that, has the basis point spread, I think as you referred it to before, relative to actual futures prices, has that started to narrow with the futures trading lower as well? I mean is there less, I guess, risk on the cost to carry from producers? I know you've previously highlighted that as an issue against the contracts as we see them publicly.

Well, it's actually gotten a little worse beyond because what the merchants want in terms of the risk reward is because the inversion of cotton today between months of December and March, when people are buying cotton you have a choice between buying December and covering yourself all the way through March on December futures or taking the risk on the inversion, which is, let's say, $0.10 a pound today. So the fact is that the merchants were actually got caught off guard with this inversion and they may not be taking the same risk, but they have on a go-forward basis. And that's one of the reasons why even though cotton futures look lower, the costs potentially could be still quite high. So that's a fact that we still have to look at. So I mean I think at the end of the day, the reality is that based on where we are today, the wool socks and cotton and I'd say that the cotton will remain to be bullish, let's say for example, into next year. It's going to take not just 2012, but may take up into 2013 before we start seeing it come down to more normalized levels and the new normal may not be Gildan normal, normal could be $1. We don't know. I think that's sort of the view we have.

Just a quick follow-up -- rather, a quick final question. Your guidance and discussion around your European business, particularly given continued strong volume growth, continued market share gains, and demand pull, it's just looking increasingly too conservative, perhaps increasingly conservative, perhaps even too conservative. Could you just sort of walk us through what your thinking is currently on the European business, given what appears to be traction ahead of your own expectations and prior commentary?

I mean I will just say at one point is that looking at our European business right now, which we're very bullish on is we still have the reins on it because the thing is we're very tight on capacity. So as good as it is, it could be a lot better to be honest with you because we're very tight today. And we set a plan in Europe to do so much and we're not going to exceed that plan because we don't want to allocate any more inventory for that market as we made the plan originally at the beginning of the year and the rest of that passes out into the North American markets to maintain our service levels here. I think the real opportunity for us is we're building Rio Nance V as fast as we possibly can. The plant will start operations in September and be ramped up as quickly as we can in '12, our fiscal '12. And as we ramp up that facility, we'll have ample capacity to support the replenishment of our inventories here in North America, as well as other growth opportunities that we have in other markets in which we're selling.

And our next question will come from the line of Jessy Hayem with TD Securities.

Most of my questions have been answered. I just wanted to follow up again on the sock business. When you mentioned, Glenn, you expect flat sock sales, you were referring to unit volumes for the rest of the year, right?

Yes, that's correct.

And so obviously no opportunity to recoup some of the lost business with the retailers?

Well, the thing is in the back half of the year first of all, we're raising prices in the back half of the year, which we haven't mentioned on the call yet is that we have quite a large price increase going through in August, which obviously is required to support the higher raw material costs, et cetera. So our view in retail is that we're planning unit volume flat just because of the unknown in terms of the price increases. And retail is a little different because in the unit volume we're flat, but a lot of the pricing that is in the market could be let's say, for example, half sizes. So instead of selling 10, you sell one less in a pack, let's say for example, so that maintains the, let's say for example, the volume will be maintained and that's how you pass on the selling prices to the consumers. So we're projecting somewhat flat volume of sales, but we will have price increases that will support growth in volume and revenue.

The other thing to emphasize, Jessy, that we mentioned in the formal comments is that the management teams of Gildan and Gold Toe have already been working very closely together to identify and start to drive significant organic growth opportunities in both business, which we see as a very significant upside for organic sales growth as we go forward.

Even in the second half?

Not in the second half. But one thing else, Jessy, that the thing for us is that even though we're considering ourselves to be flat, what we've also done is we've taken the time to reduce our capacity in the States, so we managed some investment, we're building up Rio Nance IV right now so we shed the capacity that we have available to us in the States by lowering -- the customers are going to lower our cost and that's one of the things that largely proportioned our margins in retail as we get to the end of this year. Our margins are going to increase significantly just as we get all those cost savings from Rio Nance IV. So we reduced capacity in the States, we're ramping up Rio Nance IV. That ramp-up sort of coincides with our ability to supply a flattish-type market. And as we continue to ramp it, we're also going to migrate production now from the Gold Toe operations and achieve our synergies from Gold Toe. And as we go forward to next year, we're going to have slightly higher margins because Rio Nance IV will be fully ramped up. And just reminding you that the cost difference in Rio Nance IV relative to the U.S. production is expecting $1.50 a dozen and we closed down over 10 million dozens of production.

Right. Okay, great. And just a a clarification. The price increases that are coming through at retail, is this socks and underwear and any other business you have at retail?

Yes. The price increases, they're going to be combination of socks, underwear and also product changes. So there are certain cases we change products, which reduce cost of that product. So not necessarily all reflecting the selling price. Some of which become cost reduction. But if you quantify, there's probably going to be in about the 15% range for the August period. And then we'll evaluate as we go forward depending on what happens with the price of cotton over the next four weeks. There could even be potential further increases even in the holiday of October.

And our next question will come from the line of Mark Petrie with CIBC World Markets.

You touched on this, Glenn, but wonder if you can just sort of give us a broad update in terms of the status of Rio Nance V, as well as sort of the transition of capacity from the U.S. to Rio Nance IV?

The transition from Rio Nance IV is complete because we've closed the remaining factories we have in the United States down at the end of Q2. And we're in the process of ramping up Rio Nance IV, which will be completely ramped up, the bulk of it will be done by September. There'll be a bounce that's going to happen in Q1 only because of some equipment that's only arriving in October until it gets installed and running, so it will be 90% ramped probably by September and the balance will happen in Q1 of '12. And Rio Nance V is basically full speed ahead. We're going to start the operations in that plant, remitting will start some time in end of August and the buy houses will start in September. And the equipment will continue to be installed and the plant will be ramped over the course of '12. And it will be ramped up based on obviously the opportunities at hand, but the plant capacity is roughly about 30 million dozen worth of mix of T-shirts.

That's sort of the target by end of 2012?

Well, it depends on -- that's obviously dependent by the volumes. So it depends obviously, on the opportunities but that's definitely a good bulk. And really to support the big chunk of what we're going to have available to us for 2012, because one thing you have to understand is that when we start the factory, we're really starting in the beginning of October, for all intents and purposes, and then we're going to have a ramp-up period. So the portion of what we ramp between beginning of the year till July, let's say, is really going to affect and give us ability to support sales in the period of '12. And then after that, really it's going to be whatever the capacity is we'll be supporting through '15 and that's the way we look at it over a two-year process.

Okay, thanks. And just capacity in Bangladesh right now?

Our capacity in Bangladesh is, we're building that up to over 4.5 to 5 million dozen level and that will still be built up probably by the end of this fiscal year as we said, that probably be realistically, I would say Q1 of next year is when it's going to happen. But it's growing everyday right now as we speak.

And the delays there are just...

Delays there are just a little longer, we're expanding one of the knitting facilities. It's not a big operation. I mean we're already producing there close to 10 million dozen as we speak so the incremental production is not that large relative to the overall mix. It's just a question of logistics and we need to get a little bit of land and it's going a little longer than we anticipated. But overall, we're pretty [indiscernible] but just a little later than were expecting.

Our next question will come from the line of Susan Sansbury with Miller Tabak. Susan Sansbury - Miller Tabak + Co., LLC: Glenn, the subject came up earlier, not on this call, but on other conference calls. The question is on a go-forward basis, as cotton prices come down to whatever level, in the past the industry used to pass through the cost savings. What do you expect to happen on a go-forward basis this time around, is it going to be different? That's my first question.

Well, I think it's going to be different, Susan, for a couple of reasons. I think that the other cost inflation that we're going to be incurring are going to be quite substantial, we believe, in the future. So a lot of the cotton reductions as they do happen and we don't expect cotton to make a material impact in reduction before even the earliest, at least towards the end of next year, if it does happen. And at that same time, if you look at -- when you read, I mean they're saying in China wages are going to go up at 17% and double over the next three to five years. Our power costs are going up, transportation, financial cost we think are going to be substantially higher. So with all the other inflationary factors, a lot of what we see will be offset, probably offset by some of these other inflationary factors. The other thing I think you have to remember is if the inflation does go slightly lower, the reality for Gildan I think, when we look at our business, is that our objective is not necessarily the margin of the increase. Obviously, there's some timing issues going back and forth. But at the end of the day, we're going to make enough dollars on a T-shirt in terms of margin dollars. So as we see cotton going up, our margins actually shrank and as we see cotton coming down slightly, we'll basically have higher margins on cotton, potentially lower selling prices. So they won't have a big effect on our earnings on a go-forward basis, but that's sort of I guess the way to look at it. I hope that answers your question. Susan Sansbury - Miller Tabak + Co., LLC: Okay. Yes, that's very helpful. Second question goes back to Gold Toe. Laurence, when you talked about the margins there, you said that interest expense was, whatever it was, a huge amount, and it reflected the LBO debt. What should we assume from this point forward?

We're currently financing the portion of the purchase price, so we didn't finance out of our surplus cash on our bank revolver where we pay 1% interest. So that's what I would be assuming the balance of this year. Susan Sansbury - Miller Tabak + Co., LLC: Yes, but the debt, you didn't assume the debt, Gold Toe's debt?

We pay $350 million, Susan, of which $100 million was financed through our surplus cash and $250 million has been financed by drawing down on our bank debt and we're paying 1% all-in interest off in our bank debt. Susan Sansbury - Miller Tabak + Co., LLC: Okay. So there's going to be no effective decline in Gold Toe's interest expense?

Well, pre-acquisition, the company was paying 10% on much higher debt. So one of the reasons, if you look at the reconciliation we provided from their earnings to our pro forma earnings, it's because we're no longer carrying that huge, high cost, debt burden that they had before the acquisition. Susan Sansbury - Miller Tabak + Co., LLC: All right. So you've made that adjustment, in other words, when you came up with the...

That's reflected in EPS accretion of $0.07.

And our next question will come from the line of Ken Stumphauzer with Sterne Agee. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Just couple of quick questions. First, I was wondering if you could comment on unit volumes for the industry in April. There was some commentary out there from Broder Bros that there might have been a slowdown.

Well, you can look at one month, I would say that the 4 months combined represented about a plus 2% for the industry, which is sort of what we've forecasted on a go-forward basis. The preliminary numbers may, of course, they show a decline, but that's basically factoring less days than there was last year. So if you factor the less days, it becomes a slighter decline. But overall that's just -- we think it's just the timing and you have to really look at, take one month, look at the 4 months of this fiscal year where you've got a good understanding. And from talking to distributors, business is doing good so far in May, so complete your [ph], May is going -- so far, it's going very well. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: So do you think that was representative of pre-buy in from the most recent price increase?

There could have been a little bit of people, printers saying hey, the prices are going up next week, take in a little bit more inventory, that could happen. And that's why you can't take in one month, you have to look at the period of time because that's more representative of the market as a whole.

And that's why we don't provide monthly statements of what we do in the quarter. We only do it on a quarterly basis because you cannot extrapolate the trend from one month and we've seen that throughout our history, year after year. You have to look at the longer period of time. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: But just to summarize, you guys think that's an aberration, it's not a trend?

Yes. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Okay. And then secondly, I was wondering if -- I want to touch on your commentary on acquisitions, Laurence. One, I was wondering if you could talk about prospective deal sizes, what you'd feel comfortable with after swallowing a pretty sizable deal recently. And then, secondly, just given the nature of the Gold Toe acquisition, being part of it is essentially an outsourced model, whether you would consider buying a fully outsourced brand.

We're going to continue to look at -- if you look at our growth prices, basically in our full growth drivers in the company, one is to continue driving, win market share at screenprint, we'll grow our mass-market, lower our cost, look for new geographical opportunities or other categories in which Gildan is currently not doing business. And Gold Toe fit into the retail opportunity, but we're looking still as a company to grow in all the areas of opportunity for us. And as part of our acquisition criteria, as long as we can do a tuck-in acquisition that meets our capital requirements and return on capital, that will help facilitate the growth in any one of our divisions. Those are opportunities that we believe will continue to add to shareholder value. We're looking to grow our business internationally. We're looking to definitely drive our brand strategies, so there could be potentially other brands in the future that could be acquired. And we're also looking to look for new channels of distribution that we can [indiscernible] from wholesale, trying the same T-shirt to wholesalers to retailers and to international, to find other ways we can continue to grow. And we're also looking to expand geographically to other manufacturing areas, like we did in Bangladesh, which is, that was just a steppingstone for us in terms of developing our new geographical hub and there, potentially, could be more expansion opportunities there as well. So could be a combination of different events, but we're looking to mitigate risks and as well as things that can create shareholder value and find ways to [indiscernible] complement it to our organic growth. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: But as far as deal size, what would you guys feel comfortable with? And then, secondly, I guess what I was trying to ask is just given the nature of the Gold Toe acquisition, would you consider buying something that wouldn't necessarily be plugged into your global supply chain? Or is that off the table?

In light of the Gold Toe production, what we've plugged in to our supply chain, but what will happen is that we're going to be the leader of the brand that they have in categories that could be plugged in to our supply chain like, potentially, underwear and activewear type products. So that's the value of driving brands because they may not be -- and in the brand business you can't expect to actually manufacture it. All the products, I mean we know what our key sweet spot is in terms of what we want to produce and the key thing for us is to buy brands that we can actually let Gold Toe as a good example. We don't make it for ourselves. That's something that is not Gildan's skill set. We make no white athletic stocks. And a portion of their production will be migrated to our low-cost model, but we'll continue to further manage the existing relationships to supply these other products. But given they benefit as we go through brand extension and product expansion into potentially underwear or activewear and some of the brands they have. And that's really what we lever into the plant over at Rio Nance V, which involves a low-cost capacity. I don't think, Ken, we'd want to be too specific about locking ourselves in on the criteria for acquisition opportunity. This was definitely significant enough to meet impact that was easily digestible from an operating and financial point of view. We're comfortable with that size and as we did the 350, it's a good size. We will be responsive to opportunities that meet all of our criteria and are complementary with our organic growth strategy.

And our next question will come from the line of David Glick with Buckingham Research.

Laurence, just looking through your implied guidance for the fourth quarter, it suggests gross margins in the 23% to 23.5% range, which if we're correct in our calculations. And obviously, that's sort of the peak of negative comparisons on cotton year-over-year. And you touched on some advantages you're going to have in moving sock production from the U.S. to Honduras. But if you could give us some sense on how we think about kind of the go-forward run rate for gross margins and how that relates to operating margins. Obviously, the acquisition of Gold Toe and the mix there impacts that. But there's a lot of volatility in gross margins this year and maybe help us think about, given the prevailing price of cotton, how we should be thinking about that line of the income statement?

Well, the fourth quarter is the quarter where the cost of cotton that's flowing through our cost of sales is higher than the impact of the selling price increases that was implemented so far. And if cotton were continue to be at that kind of level, then I guess we would evaluate further selling price increases. We have a wide range wide range for Q4 and hopefully we'll be able to also take advantage of further volume opportunity, be at the high end of the range. Gold Toe is definitely going to be accretive to our margins. High-margin business is going to significantly impact our margins. And obviously, we're going to manage the different variables to achieve our ongoing goals in terms of returning capital and EPS goals as we go forward.

And maybe just one more point as you look on a go-forward basis is we've been able to increase the pricing, let's say for example, to compensate for cotton up to $1.50. At the same time, the company is rigorously looking at ways to reduce cost as we went through in our investor trip that we have significant cost savings that haven't materialized yet in our cost of goods sold like, for example, our biomass production that's going in Honduras is going to be a significant savings, and that's only going to be a next year phenomenon. We have a year-over-year starting to begin next year. We're going to have a significant reduction in socks cost because of the closure of our U.S. capacity. So that's, again, our strength and our success as a company is continue looking and what we said is that we have over $140 million of synergy of cost savings that will occur over the next 24-plus months. And some of those are in play right now and they'll make a big factor in '12. And to Laurence's point is that we have -- these are prices to cover $1.50. If we see cotton trading at in excess of this as we go forward, there's definitely room for further price increases. So we're not alone in this. This is a global phenomenon. That's really the beauty of -- not the beauty, but that's the -- we held it, we are living in with that. The cost of cotton or raw materials inflation is affecting every single, everybody in our industry, anyway, globally. So what we also said is that we're more competitive as an industry with this impaired line. I mean the cost of Asia has soared over the last 18 months and is continuing to rise to our industry, not just ourselves again, but all our competitors are doing very well in terms of selling their capacity. Business is pretty strong and it's been pretty conducive with the price increases so far and hopefully it will continue in the go-forward future.

As I've said, compared with other global competitors, we have not only a lookout manufacturing position, but significant opportunity to continue to widen our cost advantage generally, for a significant cost reduction.

So Laurence, is it fair to say that given all those variables that you can manage, you're not looking to move backwards on what's implied about a 14% operating margin this year?

I mean we're obviously committed to our growth strategy, which means not just the top line growth but achieving our EPS growth objective as we go forward in driving our goals for positive return in capital. And I guess what we're trying to say is we have a lot of different levers that we can use to achieve our profit goals that was always achieved in the past and we continue to be committed to.

And our next question will come from the line of Tal Woolley with RBC Capital Markets.

I was just wondering if you could speak to me a little bit about how your -- you talked a little bit about the wholesale channel, but maybe you could talk a little bit too about the retailers now versus, say, six months ago. What their sort of outlook? Has there been much change in their outlook for your categories? Any change in inventory or stocking strategies going into next year? I'm just trying to get a sense of how confident they feel about the market going forward, given the rise in the cost of goods.

Well, I would say that in retail, the retailers themselves are obviously nervous because a big part of the consumer spending is affected by gas prices and food prices and all the other commodities that affect people's disposable income. So power basically is obviously, an area that could feel some pressure let's say for example, because of these other inflationary areas. I think in our area, what we focus on is core products. We're less worried about them, obviously. And also, we have ways to maneuver by reducing the offering and keeping the pricing, let's say for example, relatively stable. So if you go and buy a pack of socks today, you might save a pack of socks in the future. The price is the same for a pack, it's just one pair less. From a consumer point of view, they go to the gas station and put $80 in my gas and now I only get 3/4 of a tank instead of a full tank for the $80, I think that's, do you know what I mean? That's sort of the same philosophy. So there definitely could be less units being sold, we think, and that's why we're planning our business flat. But at the end of the day, it's something that definitely you have to be concerned about. I mean, I think it's more so in our retail business than in our wholesale business because our wholesale business is finding itself much more competitive globally and that's really where a lot of brand companies and a lot of companies that purchase T-shirts are moving back to this hemisphere on the activewear side in the wholesale market, and that's what's really driving the success, we think, in wholesale today. We're still optimistic, but we're cautiously optimistic on the retail side, but even more bullish in wholesale.

Okay. You've mentioned some of the factors that you think might balance out any sort of rollover in the cotton price over the next 12 months. I'm just wondering though, is there a point at which you would see cotton prices decline where you thought okay, yes, there might have to be something done here? Like I'm just trying to get a sense of, is there a point at which you really think, okay these price increases might not stay?

[indiscernible]. We have other inflationary factors. Cotton is not going to make a big effect even if it does come down before the end of next year. So there are quite a ways before that materializes. It's due the fact that in 30 days, people have bought enough cotton to probably handle next May. And if you look at the future price for December, that's going to cover people all the way through the third quarter of next year. And we don't see that materially changing very fast. So that's a good thing. The second thing is at the same time we have all these inflationary factors continuing to grow. I mean power has gone up, labor just continues to grow. And they'll offset this higher cost cotton. And again, in our case, we may find that our T-shirts could bear more money than we've received in the past just due to the fact that we're still competitively played and there might even be room for margin expansion. But I'll tell you, the worst case is I mean even if prices do, over time, come down what our point is that our margin dollars, their percentage in the future, the base point might have a lower percentage margin, but the actual margin dollars will still be there. And as we do lower prices, those percentages will increase as a percentage of our sales and will continue to draw good returns. So we're not really concerned. In fact, that's what's sort of, I guess I like to think of it that way. But I think there hopefully will be a good balance. There could be some upside in terms of us actually being able to keep a low risk in our possible mix.

So another way of saying that might be let's say that if there's going to be a problem it will probably be like on the demand side, not so much on the pricing, that that would be -- if there's going to be a problem, it will be because consumers just slow down?

Yes, in our case as in wholesale, I don't think it's demand really the issue because I think what's happening is that a lot of problem, demand is so strong in our industry today is the fact that people are buying more products in this hemisphere. And like what I said in the past, as a new paradigm in the shift from Asia and back into this hemisphere, retailers want to be closer and brand companies want to be closer to this hemisphere. And because of the fact that we're globally competitive, we can respond quickly. Our CSR expanders and everything else goes with our industry, that's not just Gildan, that's everybody who participates in this hemisphere. So you think that in that perspective, we're bullish on demand in the wholesale area on a go-forward basis.

Okay. And that actually just leads in my last question. You're seeing that China share of a lot of SKUs, items that you're participating has in terms of imports into the U.S., are down for the first time in a long time. I'm just trying to get a sense of, with the cotton prices, I know we talked about how the cotton price is rising. It was really causing some capacity issues, production challenges in Asia. Was it subsiding? Do those issues get better or do they get worse? It's hard for me to assess.

Well, in Asia, as much as cotton prices, I mean Asia for example, as you're hearing in places like China, for example, there's not even a lot workers in the factories. I don't think [indiscernible] for example that their capital wages almost doesn't affect that social unrest. So I think, in general, there's inflation factor that's happening in Asia, partly driven by a local consumption and people can sell in China today, even more than they were exporting before. So that's driven a lot of the phenomenon in terms of the cost advantage of it, for example, that I think have occurred, and the practice of doing business there and the lead time. So that's what's driving I think our success. And the other thing is that we're very competitive. I mean, we've spent the industry, over the last business in the wholesale market since '93. We've had the years deflated our product almost 100%. So we're so competitive. Even after this 26% increase in price, we're still selling 1/3 less we did when we entered the market back in 1993. So we're well positioned and we're very comfortable in how we're positioned not just domestically but on a global basis.

And our next question will come from the line of Susan Anderson with Citi.

I think most of my questions have been answered, but maybe if you could just touch on if you've had any reaction from the retailers in terms of price increases in the back half? I mean basically, are you seeing any push back at all?

Well, we haven't. These prices that were talking about involve with the retailers and have affected second round of price increases is effective in the beginning of August, as they set their stores. And obviously, it's never a happy time when you talk about price increases.

I don't think the retailers understand the reality.

The retailers understand exactly the global environment because they're all buying products all around the world. So it's not just ourselves that are having increases, the oil industry has significant price increases. So we're somewhat following the industry at the same time.

Okay. And then are you guys raising prices in the Gold Toe business also, or is that kind of already set in stone for this year?

They had some price increases early on in the year. There may be some potential price increases in the back half of the year, but not substantially as high because first of all cotton is a very small percentage, a smaller percentage of their sales, for example, than it is of ours. And they're selling this type of product, so there will be a small price increase, I would say, on a global perspective but on market, the same level as that in retail.

Okay. And then you talked about earlier the spread between the price increases in cotton as the highest in the fourth quarter. Is that mainly in the wholesale business? Or the retail business?

Well that's our cost that's flowing through in both segments.

Okay. And just one last question. Maybe if you could just give some color on your market share in the screenprint business. It was great to see it wasn't down in the quarter, but how should we think about that going forward like what would be your expectation for it to start growing again?

Well, there's one are that we do know is [indiscernible] category this period. I think that's one area where we're underdeveloped. As far as the overall share is concerned, we're planning really for a flattish-type share and modest growth in this market of about 2%. Only because of the strength of capacity.

For the back half of this year.

For the back half of the year. And just to be conservative I think that's sort of where we wind up.

And note, Susan, that although our share was flattish compared with the second quarter of last year. Despite our low inventories and our capacity constraints, it was significantly up from the first quarter of this year. Long term, we continue to be seeking to continue to gain share.

And ladies and gentlemen, we have time for two more questions. And that question will come from the line of Jim Duffy with Stifel, Nicolaus. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Couple of questions. Question on your retail program pipeline. What's the outlook for incremental retail program wins as you look to spring 2012? What are the channels and product categories where you see the best opportunities for shelf-space gains?

Well, we have opportunities in nearly every category, we're looking at socks, activewear products, underwear products. That's partly we're in process right now, working with retailers to look at new opportunities for spring and as well as we're going to lever the opportunities from the Gold Toe acquisitions. So in both those cases, we're focusing on new growth initiatives for spring and for fall 2012. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Glenn, is that more on the private label side or under the Gildan brand?

Our focus is going to be looking at the Gildan brand. There could be still some opportunities to enhance the existing proprietary programs that we do have today. And also to lever the brands that are available to us now at Gold Toe. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay, great. And then Laurence, a question for you. Numerous times during the call, you've mentioned improving relative cost advantage in the shift to western hemisphere manufacturing. In light of this, what do you see as an upward structural bound or resistance point on the operating margins for the business?

Well, we're probably typically down as we have generated significant cost savings is retained some of the margins, but given customers the benefit of the cost savings as well and used competitively lower prices to drive market share and I guess we would continue with that strategy.

As well as the use of our competitive advantage to enhance our quality T-shirts as well, and providing superior products to consumers or customers relative to that of our competitors. Jim Duffy - Stifel, Nicolaus & Co., Inc.: So I guess it's most appropriate to think of the financial model as being revenue driven earnings growth rather than one of operating margin expansion?

Historically, that's what we've done. We've used lower cost to drive volume and used volume to drive our top line growth to drive our EPS growth.

And our final question will come from the line of Candice Williams with Canaccord Genuity.

I was wondering if you could tell me, which Gold Toe brands lend themselves best to product expansion? And what percentage of the sales, roughly, they would represent of the total Gold Toe Moretz?

Well, the Gold Toe brand represents around 70% of the overall sales of Gold Toe Moretz. And all their brands basically are conducive to product expansion, because the way Gold Toe is structured today, they have Gold Toe, they have GP, Arrow and then different PowerSox, different brands that they have levered under the Gold Toe brand, they are sub brands of Gold Toe to maximize every channel distribution. So the beauty of every product, like the acquisition, was business chance in our brand to have every single channel distribution form in supporting growth, department specialty. So we really have relationships and products are being sold in every single channel distribution now. And that's really what's going to, we believe is not only is going to be the brand extension but it's also the relationships that we have in each one of these channels of distribution that's going to allow us to generate the more revenues and add new products and get more sales. We also have significant upside on the licenses that Gold Toe have, which is the Under Armour and New Balance license, which are very pass through and licenses in the sporting goods channel that have a lot of growth potential. So overall, we're very well positioned now with a full distribution and relationships across the whole retail sector.

Okay, I can understand the Under Armour, New Balance, Gold Toe kind of sounds like a sock thing to me. So that's where my question was coming from. But that's helpful. Thank you.

Candice, they also have All Pro as one of their brands, so they have different brands that could be levered.

And that falls into that 70%, that All Pro would be part of that Gold Toe 70%?

Yes, it is.

Okay, perfect. Okay, got it. Thank you.

[indiscernible]the underwear in the department stores, as we speak, including that, was launched last year. And so that again, the same consumer that buys socks also buys underwear. So we think theres' an opportunity to lever all of Gold Toe but it's got a big huge following. Anywhere you look, and if you talk to anybody they go, "Oh, we'll sell it."

And this concludes our question-and-answer portion of today's call. I would now like to turn the call back over to Sophie Argiriou for any closing remarks.

Thank you, everyone, for joining us. We look forward to our next earnings -- talking to you again at our next earnings call, which will be held in August. So thank you once again and have a great day.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day, everyone.