CONSOLIDATED FINANCIAL STATEMENTS
GILDAN ACTIVEWEAR INC.
(EXPRESSED IN US DOLLARS)


---



46

MANAGEMENTS
 RESPONSIBILITY
 FOR FINANCIAL REPORTING

The accompanying consolidated financial statements have been prepared by
management and approved by the Board of Directors of the Company. The
consolidated financial statements were prepared in accordance with accounting
principles generally accepted in Canada and, where appropriate, reflect
managements best estimates and judgments. Where alternative accounting methods
exist, management has chosen those methods deemed most appropriate in the
circumstances. Management is responsible for the accuracy, integrity and
objectivity of the consolidated financial statements within reasonable limits
of materiality, and for the consistency of financial data included in the text
of the Annual Report with that contained in the consolidated financial
statements. To assist management in the discharge of these responsibilities,
the Company maintains a system of internal controls over financial reporting as
described in Managements Annual Report of Internal Control Over Financial
Reporting on page 38 of this Annual Report.

The Companys Audit and Finance Committee is appointed by the Board of
Directors annually and is comprised exclusively of outside, independent
directors. The Audit and Finance Committee meets with management as well as
with the independent auditors and internal auditors to satisfy itself that
management is properly discharging its financial reporting responsibilities and
to review the consolidated financial statements and the independent auditors
report. The Audit and Finance Committee reports its findings to the Board of
Directors for consideration in approving the consolidated financial statements
for presentation to the shareholders. The Audit and Finance Committee
considers, for review by the Board of Directors and approval by the
shareholders, the engagement or reappointment of the independent auditors. KPMG
LLP have direct access to the Audit and Finance Committee of the Board of
Directors.

The consolidated financial statements have been independently audited by
KPMG LLP, Chartered Accountants, on behalf of the shareholders, in accordance
with Canadian generally accepted auditing standards and, with respect to the
consolidated financial statements for the years ended September 30, 2007 and
October 1, 2006, in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Their report outlines the nature of
their audit and expresses their opinion on the consolidated financial
statements of the Company. In addition, our auditors have issued an attestation
report on managements assessment of the Companys internal controls over
financial reporting as of September 30, 2007.

|                                       |                                            
|-------------------------------------- | -------------------------------------------
|[Signed:
 Glenn J. Chamandy]           | [Signed:
 Laurence G. Sellyn]              
|                                       |                                            
|Glenn J. Chamandy                      | Laurence G. Sellyn                         
|President
 and Chief Executive Officer | Executive
 Vice-President,                 
|                                       | Chief
 Financial and Administrative Officer
|December
 6, 2007                      |                                            

GILDAN 2007 ANNUAL REPORT

---



47

| |                                                           | 
| | --------------------------------------------------------- | 
| | REPORT
 OF INDEPENDENT REGISTERED
 PUBLIC ACCOUNTING FIRM | 

To the Shareholders and Board of Directors of Gildan Activewear Inc.

We have audited the accompanying consolidated balance sheets of Gildan
Activewear Inc. (the Company) and subsidiaries as of September 30, 2007 and
October 1, 2006 and the related consolidated statements of earnings and
comprehensive income, shareholders equity and cash flows for the years ended
September 30, 2007, October 1, 2006 and October 2, 2005. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted
auditing standards. With respect to the consolidated financial statements for
the years ended September 30, 2007 and October 1, 2006, we also conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
and subsidiaries as of September 30, 2007 and October 1, 2006, and the results
of their operations and their cash flows for the years ended September 30,
2007, October 1, 2006 and October 2, 2005, in conformity with Canadian
generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Companys internal control over
financial reporting as of September 30, 2007, based on criteria established inInternal Control
- Integrated Framework issued by the Committee of
Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated December 6,
2007 expressed an unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.

(Signed: KPMG LLP)

Chartered AccountantsMontréal,
Canada

December 6, 2007

GILDAN 2007 ANNUAL REPORT

---



48

| |                                                           | 
| | --------------------------------------------------------- | 
| | REPORT
 OF INDEPENDENT REGISTERED
 PUBLIC ACCOUNTING FIRM | 

To the Shareholders and Board of Directors of Gildan Activewear Inc.

We have audited Gildan Activewear Inc.s (the Company) internal control
over financial reporting as of September 30, 2007, based on the criteria established in Internal Control
- Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Companys
management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting as presented in the section entitled Managements Annual Report on
Internal Control over Financial Reporting included in Managements Discussion
and Analysis of Financial Condition and Results of Operations. Our
responsibility is to express an opinion on the Companys internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over the financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the Companys assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of September 30, 2007,
based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

We also have conducted our audits on the consolidated financial statements
in accordance with Canadian generally accepted auditing standards. With respect
to the consolidated financial statements for the years ended September 30, 2007
and October 1, 2006, we also have
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our report dated December 6, 2007
expressed an unqualified opinion on those consolidated financial statements.

(Signed: KPMG LLP)

Chartered AccountantsMontréal, Canada

December 6, 2007

GILDAN 2007 ANNUAL REPORT

---



49

| |                                                                       
| | ----------------------------------------------------------------------
| | CONSOLIDATED
BALANCE SHEETS                                           
| | SEPTEMBER
 30, 2007 AND OCTOBER 1, 2006 
 (IN THOUSANDS OF US DOLLARS)

|                                                                              |  |   |         |  |   |         | 
|----------------------------------------------------------------------------- |  | - | ------- |  | - | ------- | 
|                                                                              |  |   | 2007    |  |   | 2006    | 
|Assets                                                                        |  |   |         |  |   |         | 
|Current
 assets:                                                              |  |   |         |  |   |         | 
|Cash and cash equivalents                                                     |  | $ | 9,250   |  | $ | 29,007  | 
|Accounts receivable                                                           |  |   | 206,088 |  |   | 165,870 | 
|Inventories                                                                   |  |   | 239,963 |  |   | 200,653 | 
|Prepaid expenses and deposits                                                 |  |   | 7,959   |  |   | 5,757   | 
|Future income taxes (note 14)                                                 |  |   | 2,610   |  |   | 5,298   | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  |   | 465,870 |  |   | 406,585 | 
|                                                                              |  |   |         |  |   |         | 
|Property,
 plant and equipment (note 4)                                       |  |   | 377,617 |  |   | 302,677 | 
|Other
 assets (note 6)                                                        |  |   | 11,426  |  |   | 4,501   | 
|Assets
 held for sale (note 16)                                               |  |   | 6,610   |  |   | -       | 
|Intangible
 assets (note 5)                                                   |  |   | 2,024   |  |   | 9,513   | 
|Future
 income taxes (note 14)                                                |  |   | 10,939  |  |   | -       | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  | $ | 874,486 |  | $ | 723,276 | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  |   |         |  |   |         | 
|Liabilities and Shareholders Equity                                          |  |   |         |  |   |         | 
|Current
 liabilities:                                                         |  |   |         |  |   |         | 
|Bank indebtedness (note 7)                                                    |  | $ | -       |  | $ | 3,500   | 
|Accounts payable and accrued
 liabilities                                     |  |   | 116,683 |  |   | 117,984 | 
|Income taxes payable                                                          |  |   | 2,949   |  |   | 2,269   | 
|Current portion of long-term
 debt (note 8)                                   |  |   | 3,689   |  |   | 21,820  | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  |   | 123,321 |  |   | 145,573 | 
|                                                                              |  |   |         |  |   |         | 
|Long-term
 debt (note 8)                                                      |  |   | 55,971  |  |   | 12,041  | 
|Future
 income taxes (note 14)                                                |  |   | 24,612  |  |   | 29,443  | 
|Non-controlling
 interest in consolidated joint venture                       |  |   | 6,932   |  |   | 5,654   | 
|                                                                              |  |   |         |  |   |         | 
|Shareholders equity (note 9):                                                |  |   |         |  |   |         | 
|Share capital                                                                 |  |   | 88,061  |  |   | 86,584  | 
|Contributed surplus                                                           |  |   | 3,953   |  |   | 2,365   | 
|                                                                              |  |   |         |  |   |         | 
|Accumulated other
 comprehensive income                                       |  |   | 26,248  |  |   | 26,248  | 
|Retained earnings                                                             |  |   | 545,388 |  |   | 415,368 | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  |   | 571,636 |  |   | 441,616 | 
|                                                                              |  |   |         |  |   |         | 
|Total
 shareholders equity                                                   |  |   | 663,650 |  |   | 530,565 | 
|                                                                              |  |   |         |  |   |         | 
|Commitments
 and contingent liabilities (note 12)
 Subsequent event (note 21) |  |   |         |  |   |         | 
|                                                                              |  |   |         |  |   |         | 
|                                                                              |  | $ | 874,486 |  | $ | 723,276 | 
|                                                                              |  |   |         |  |   |         | 

See accompanying notes to consolidated financial
statements.

|                                              |                     
|--------------------------------------------- | --------------------
|On behalf of the Board:
/s/ Glenn J. Chamandy | /s/ Pierre Robitalle
|                                              |                     
|Glenn J. Chamandy                             | Pierre Robitaille   
|Director                                      | Director            

GILDAN 2007 ANNUAL REPORT

---



50

| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | CONSOLIDATED
STATEMENTS OF 
EARNINGS AND COMPREHENSIVE INCOME                                                                
| | YEARS
 ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
 (IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)

|                                                                  |  |   |         |   |   |         |  |   |         | 
|----------------------------------------------------------------- |  | - | ------- | - | - | ------- |  | - | ------- | 
|                                                                  |  |   | 2007    |   |   | 2006    |  |   | 2005    | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Sales                                                             |  | $ | 964,429 |   | $ | 773,190 |  | $ | 653,851 | 
|Cost
 of sales                                                    |  |   | 655,280 |   |   | 521,095 |  |   | 450,570 | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Gross
 profit                                                     |  |   | 309,149 |   |   | 252,095 |  |   | 203,281 | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Selling,
 general and administrative expenses                     |  |   | 110,979 |   |   | 84,388  |  |   | 73,846  | 
|Restructuring
 and other charges (note 16)                        |  |   | 28,012  |   |   | 20,386  |  |   | 11,776  | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Earnings
 before the undernoted items                             |  |   | 170,158 |   |   | 147,321 |  |   | 117,659 | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Depreciation
 and amortization                                    |  |   | 38,777  |   |   | 32,383  |  |   | 25,615  | 
|Interest,
 net                                                    |  |   | 4,898   |   |   | 3,067   |  |   | 4,615   | 
|Non-controlling
 interest in income of consolidated joint venture |  |   | 1,278   |   |   | 260     |  |   | 34      | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|                                                                  |  |   | 44,953  |   |   | 35,710  |  |   | 30,264  | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Earnings
 before income taxes                                     |  |   | 125,205 |   |   | 111,611 |  |   | 87,395  | 
|Income
 tax (recovery) expense (note 14)                          |  |   | (4,815  | ) |   | 4,782   |  |   | 1,352   | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Net
 earnings and comprehensive income                            |  | $ | 130,020 |   | $ | 106,829 |  | $ | 86,043  | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|                                                                  |  |   |         |   |   |         |  |   |         | 
|Earnings
 per share (note 15):                                    |  |   |         |   |   |         |  |   |         | 
|Basic                                                             |  | $ | 1.08    |   | $ | 0.89    |  | $ | 0.72    | 
|Diluted                                                           |  |   | 1.07    |   |   | 0.88    |  |   | 0.72    | 
|                                                                  |  |   |         |   |   |         |  |   |         | 

See accompanying notes to consolidated financial
statements.

GILDAN 2007 ANNUAL REPORT

---



51

| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | CONSOLIDATED
STATEMENTS 
OF SHAREHOLDERS EQUITY                                                                         
| | YEARS
 ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AMOUNTS)

|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ------------- | ----------- | ----------- | - | ------------- | - | ----------- | ----- | ------------- | - | ------ |  | - | ------- |  | - | ------- | -
|                                                                                                             |  |               |             |             |   |               |   | Accumulated |       |               |   |        | 
|                                                                                                             |  | Common Shares |             |             |   | other         |   |             |       | Total         |  
|                                                                                                             |  |               |             | Contributed |   | comprehensive |   | Retained    |       | shareholders |  
|                                                                                                             |  | Number        |             | Amount      |   | surplus       |   | income      |       | earnings      |   | equity | 
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        | 
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Balance, October 3, 2004                                                                                     |  |               | 118,794,824 |             | $ | 78,170        |   | $           | 681   |               | $ | 26,248 |  | $ | 222,496 |  | $ | 327,595 |  
|Stock-based compensation related to stock
 options and restricted share units                                |  |               | -           |             |   | -             |   |             | 1,050 |               |   | -      |  |   | -       |  |   | 1,050   |  
|Shares issued under employee share
 purchase plan                                                            |  |               | 19,832      |             |   | 200           |   |             | -     |               |   | -      |  |   | -       |  |   | 200     |  
|Shares issued pursuant to exercise of stock
 options                                                         |  |               | 1,094,404   |             |   | 5,672         |   |             | -     |               |   | -      |  |   | -       |  |   | 5,672   |  
|Ascribed value credited to share capital
 from exercise of stock options                                     |  |               | -           |             |   | 135           |   |             | (135  | )             |   | -      |  |   | -       |  |   | -       |  
|Net earnings                                                                                                 |  |               | -           |             |   | -             |   |             | -     |               |   | -      |  |   | 86,043  |  |   | 86,043  |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Balance, October 2, 2005                                                                                     |  |               | 119,909,060 |             |   | 84,177        |   |             | 1,596 |               |   | 26,248 |  |   | 308,539 |  |   | 420,560 |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Stock-based compensation related to stock
 options and restricted share units(note 10 (b))                   |  |               | -           |             |   | -             |   |             | 908   |               |   | -      |  |   | -       |  |   | 908     |  
|Shares issued pursuant to business acquisition
 (note 3)                                                     |  |               | 20,000      |             |   | 460           |   |             | -     |               |   | -      |  |   | -       |  |   | 460     |  
|Shares issued under employee share
 purchase plan(note 10 (a))                                               |  |               | 16,642      |             |   | 360           |   |             | -     |               |   | -      |  |   | -       |  |   | 360     |  
|Shares issued pursuant to exercise of
 stock options (note 10 (b))                                           |  |               | 281,966     |             |   | 1,448         |   |             | -     |               |   | -      |  |   | -       |  |   | 1,448   |  
|Ascribed value credited to share capital
 from exercise of stock options                                     |  |               | -           |             |   | 139           |   |             | (139  | )             |   | -      |  |   | -       |  |   | -       |  
|Net earnings                                                                                                 |  |               | -           |             |   | -             |   |             | -     |               |   | -      |  |   | 106,829 |  |   | 106,829 |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Balance, October 1, 2006                                                                                     |  |               | 120,227,668 |             |   | 86,584        |   |             | 2,365 |               |   | 26,248 |  |   | 415,368 |  |   | 530,565 |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Stock-based compensation related to stock
 options and restricted share units(note 10 (b))                   |  |               | -           |             |   | -             |   |             | 1,814 |               |   | -      |  |   | -       |  |   | 1,814   |  
|Shares issued under employee share
 purchase plan(note 10 (a))                                               |  |               | 18,279      |             |   | 530           |   |             | -     |               |   | -      |  |   | -       |  |   | 530     |  
|Shares issued pursuant to exercise of
 stock options (note 10 (b))                                           |  |               | 149,034     |             |   | 786           |   |             | -     |               |   | -      |  |   | -       |  |   | 786     |  
|Shares issued pursuant to exercise of
 restricted share units (note 10 (b))                                  |  |               | 26,917      |             |   | -             |   |             | -     |               |   | -      |  |   | -       |  |   | -       |  
|Ascribed value credited to share capital
 from exercise of stock options and Treasury restricted share units |  |               | -           |             |   | 226           |   |             | (226  | )             |   | -      |  |   | -       |  |   | -       |  
|Share repurchases                                                                                            |  |               | (2,437      | )           |   | (65           | ) |             | -     |               |   | -      |  |   | -       |  |   | (65     | )
|Net earnings                                                                                                 |  |               | -           |             |   | -             |   |             | -     |               |   | -      |  |   | 130,020 |  |   | 130,020 |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  
|Balance,
 September 30, 2007                                                                                 |  |               | 120,419,461 |             | $ | 88,061        |   | $           | 3,953 |               | $ | 26,248 |  | $ | 545,388 |  | $ | 663,650 |  
|                                                                                                             |  |               |             |             |   |               |   |             |       |               |   |        |  |   |         |  |   |         |  

See accompanying notes to consolidated financial
statements.

GILDAN 2007 ANNUAL REPORT

---



52

| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | CONSOLIDATED
STATEMENTS OF CASH FLOWS                                                              
| | YEARS
 ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
 (IN THOUSANDS OF US DOLLARS)



|                                                                                                |  |   |          |   |   |         |   |   |         |  
|----------------------------------------------------------------------------------------------- |  | - | -------- | - | - | ------- | - | - | ------- | -
|                                                                                                |  |   | 2007     |   |   | 2006    |   |   | 2005    |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Cash flows from (used in) operating
 activities:                                                |  |   |          |   |   |         |   |   |         |  
|Net earnings                                                                                    |  | $ | 130,020  |   | $ | 106,829 |   | $ | 86,043  |  
|Adjustments for:                                                                                |  |   |          |   |   |         |   |   |         |  
|Depreciation and amortization                                                                   |  |   | 42,270   |   |   | 32,383  |   |   | 25,615  |  
|Impairment loss and write-down
 of property, plant and equipment (note 16)                      |  |   | 3,560    |   |   | 15,149  |   |   | 6,783   |  
|(Gain) loss on disposal of assets
 held for sale and property, plant and equipment              |  |   | (1,198   | ) |   | 1,197   |   |   | 590     |  
|Stock-based compensation costs                                                                  |  |   | 1,814    |   |   | 908     |   |   | 1,050   |  
|Future income taxes                                                                             |  |   | (8,919   | ) |   | 1,764   |   |   | 176     |  
|Non-controlling interest                                                                        |  |   | 1,278    |   |   | 260     |   |   | 34      |  
|Unrealized foreign exchange loss                                                                |  |   | 3,226    |   |   | 843     |   |   | 2,552   |  
|Changes in non-cash working
 capital balances:                                                  |  |   |          |   |   |         |   |   |         |  
|Accounts receivable                                                                             |  |   | (36,392  | ) |   | (41,058 | ) |   | (22,694 | )
|Inventories                                                                                     |  |   | (39,310  | ) |   | (35,435 | ) |   | (17,790 | )
|Prepaid expenses and deposits                                                                   |  |   | (2,202   | ) |   | 95      |   |   | (1,082  | )
|Accounts payable and accrued
 liabilities                                                       |  |   | (3,327   | ) |   | 11,046  |   |   | 11,979  |  
|Income taxes payable                                                                            |  |   | 343      |   |   | 740     |   |   | (6      | )
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|                                                                                                |  |   | 91,163   |   |   | 94,721  |   |   | 93,250  |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Cash flows from (used in) financing
 activities:                                                |  |   |          |   |   |         |   |   |         |  
|Increase in amounts drawn
 under revolving long-term credit facility                            |  |   | 49,000   |   |   | -       |   |   | -       |  
|Repayment of other long-term
 debt                                                              |  |   | (23,201  | ) |   | (23,866 | ) |   | (24,739 | )
|Increase in other long-term
 debt                                                               |  |   | -        |   |   | 691     |   |   | 12,086  |  
|(Decrease) increase in bank
 indebtedness                                                       |  |   | (3,500   | ) |   | (17,830 | ) |   | 3,980   |  
|Repayment of capital leases                                                                     |  |   | -        |   |   | (186    | ) |   | (157    | )
|Proceeds from the issuance of
 shares                                                           |  |   | 1,316    |   |   | 1,808   |   |   | 5,872   |  
|Repurchase of shares                                                                            |  |   | (65      | ) |   | -       |   |   | -       |  
|Contribution by
 non-controlling interest                                                       |  |   | -        |   |   | -       |   |   | 2,500   |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|                                                                                                |  |   | 23,550   |   |   | (39,383 | ) |   | (458    | )
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Cash flows from (used in) investing
 activities:                                                |  |   |          |   |   |         |   |   |         |  
|Purchase of property, plant
 and equipment                                                      |  |   | (134,282 | ) |   | (80,183 | ) |   | (86,124 | )
|Acquisition of Kentucky Derby
 Hosiery Co., Inc. (note 3)                                       |  |   | -        |   |   | (19,911 | ) |   | -       |  
|Proceeds from the sale of assets
 held for sale                                                 |  |   | 6,668    |   |   | 5,027   |   |   | 4,087   |  
|Net increase in other assets                                                                    |  |   | (7,075   | ) |   | (986    | ) |   | (1,811  | )
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|                                                                                                |  |   | (134,689 | ) |   | (96,053 | ) |   | (83,848 | )
|Effect of exchange rate changes on cash
 and cash equivalents denominated in foreign currencies |  |   | 219      |   |   | (80     | ) |   | 187     |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Net (decrease) increase in cash and cash
 equivalents during the year                           |  |   | (19,757  | ) |   | (40,795 | ) |   | 9,131   |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Cash and cash equivalents, beginning of
 year                                                   |  |   | 29,007   |   |   | 69,802  |   |   | 60,671  |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Cash and cash equivalents, end of year                                                          |  | $ | 9,250    |   | $ | 29,007  |   | $ | 69,802  |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  
|Supplemental disclosure of cash flow
 information (note 17 (c))                                 |  |   |          |   |   |         |   |   |         |  
|                                                                                                |  |   |          |   |   |         |   |   |         |  

See accompanying notes to consolidated financial
statements.

GILDAN 2007 ANNUAL REPORT

---



53

| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
 CONSOLIDATED 
 FINANCIAL STATEMENTSYEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Gildan Activewear Inc. (the Company) is incorporated under the Canada
Business Corporations Act. Its principal business activity is the manufacture
and sale of activewear, socks and underwear. The Companys fiscal year ends on
the first Sunday following September 28. All references to 2007, 2006 and 2005
represent the fiscal years ended September 30, 2007, October 1, 2006 and
October 2, 2005, respectively.

All share and per share data in these consolidated financial statements
reflect the effect of the two-for-one stock splits declared in May 2005 and May
2007. See note 9 (b).

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1   | ACCOUNTING CHANGES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(a) | 2007 Accounting changes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | Effective at the commencement of its 2007 fiscal
 year, the Company adopted the Canadian Institute of Chartered
 Accountants (CICA) Handbook Sections 1530, Comprehensive Income, 3251,
 Equity, 3855, Financial Instruments - Recognition and Measurement, 3861,
 Financial Instruments - Disclosure and Presentation, and 3865, Hedges.
 These new Handbook Sections, which apply to fiscal years beginning on or
 after October 1, 2006 on a prospective basis, provide comprehensive
 requirements for the recognition and measurement of financial instruments, as
 well as standards on when and how hedge accounting may be applied. Handbook Section
 1530 also establishes standards for reporting and displaying comprehensive
 income. Comprehensive income is defined as the change in equity from
 transactions and other events from non-owner sources. Other comprehensive
 income refers to items recognized in comprehensive income but that are
 excluded from net earnings calculated in accordance with generally accepted
 accounting principles.                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Under
 these new standards, all financial instruments are classified into one of the
 following five categories: held-for-trading, held-to-maturity investments, loans and
 receivables, available-for-sale financial assets or other financial
 liabilities. All financial instruments, including derivatives, are included
 on the consolidated balance sheet and are measured at fair market value with
 the exception of loans and receivables, held-to-maturity investments and
 other financial liabilities, which are measured at amortized cost. Subsequent
 measurement and recognition of changes in fair value of financial instruments
 depend on their initial classification. Held-for-trading financial
 investments are measured at fair value and all gains and losses are included
 in net earnings in the period in which they arise. Available-for-sale
 financial instruments are measured at fair value with revaluation gains and
 losses included in other comprehensive income until the asset is removed from
 the balance sheet.                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The
 standards require derivative instruments to be recorded as either assets or
 liabilities measured at their fair value unless exempted from derivative
 treatment as a normal purchase and sale. Certain derivatives embedded in
 other contracts must also be measured at fair value. All changes in the fair
 value of derivatives are recognized in earnings unless specific hedge
 criteria are met, which requires that a company must formally document,
 designate and assess the effectiveness of transactions that receive hedge
 accounting. Derivatives that qualify as hedging instruments must be
 designated as either a cash flow hedge, when the hedged item is a future
 cash flow, or a fair value hedge, when the hedged item is a recognized
 asset or liability. The unrealized gains and losses related to a cash flow
 hedge are included in other comprehensive income. For a fair value hedge,
 both the derivative and the hedged item are recorded at fair value in the
 consolidated balance sheet and the unrealized gains and losses from both
 items are included in earnings. Any derivative instrument that does not
 qualify for hedge accounting is marked-to-market at each reporting date and
 the gains or losses are included in net earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | As a
 result of the adoption of these standards, the Company has classified its
 cash equivalents as available for sale. The Company has also classified its
 accounts receivable as loans and receivables, and its accounts payable and
 long-term debt as other financial liabilities, all of which are measured at
 amortized cost. The adoption of these new standards also resulted in the
 reclassification of an amount of $26.2 million previously recorded in
 Cumulative translation adjustment to Accumulated other comprehensive
 income on the consolidated balance sheets. As at October 1, 2006 and
 September 30, 2007, all outstanding forward foreign exchange contracts were
 reported on a mark-to-market basis and the gains or losses were included in
 earnings, because the Company elected not to follow hedge accounting for
 these derivatives. The adoption of these standards had no impact on the
 consolidated statements of earnings.                                                                                                                                                                                                                                                                                                                    

GILDAN 2007 ANNUAL REPORT

---



54

| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
 CONSOLIDATED 
 FINANCIAL STATEMENTSYEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1                                                                                                                                                                                                                                                 | ACCOUNTING CHANGES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b)                                                                                                                                                                                                                                               | Future accounting changes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | Capital Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | In
 December 2006, the CICA issued Section 1535, Capital Disclosures. This
 section established standards for disclosing information about an entitys
 capital and how it is managed. This Section is effective for fiscal periods
 beginning on or after October 1, 2007. This new standard relates to
 disclosure only and will not impact the financial results of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | Financial Instruments - Disclosure and Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | In
 December 2006, the CICA issued Section 3862, Financial Instruments -
 Disclosure, and Section 3863, Financial Instruments - Presentation. These
 sections replace the existing Section 3861, Financial Instruments - Disclosure
 and Presentation. These sections are effective for fiscal periods beginning
 on or after October 1, 2007. Disclosure standards are enhanced and expanded
 to complement the changes in accounting policy adopted in accordance with
 Section 3855, Financial Instruments - Recognition and Measurement. These new
 standards relate to disclosure only and will not impact the financial results
 of the Company.                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | In
 June 2007, the CICA issued Section 3031, Inventories, which replaces
 Section 3030 and harmonizes the Canadian standards related to inventories
 with International Financial Reporting Standards (IFRS). This Section
 provides changes to the measurement and more extensive guidance on the
 determination of cost, including allocation of overhead; narrows the
 permitted cost formulas; requires impairment testing; and expands the
 disclosure requirements to increase transparency. This Section applies to
 interim and annual financial statements beginning on or after January 1,
 2008. The Company has not yet determined what the impact of adopting this
 standard will have on its consolidated financial statements.                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | International Financial Reporting
 Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | In
 2005, the Accounting Standards Board of Canada (AcSB) announced that
 accounting standards in Canada are to converge with IFRS. In May 2007, the
 CICA published an updated version of its Implementation Plan for
 Incorporating International Financial Reporting Standards into Canadian
 GAAP. This plan includes an outline of the key decisions that the CICA will
 need to make as it implements the Strategic Plan for publicly accountable
 enterprises that will converge Canadian generally accepted accounting
 standards with IFRS. It is anticipated that the decision on the changeover
 date from current Canadian GAAP to IFRS will be made by the CICA by March 31,
 2008. While IFRS uses a conceptual framework similar to Canadian GAAP, there
 are significant differences in accounting policy which must be addressed. The
 Company is currently assessing the future impact of these new standards on
 its consolidated financial statements.
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2                                                                                                                                                                                                                                                 | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The
 consolidated financial statements are expressed in U.S. dollars and have been
 prepared in accordance with accounting principles generally accepted in
 Canada. The principal accounting policies of the Company are summarized as
 follows:
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(a)                                                                                                                                                                                                                                               | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | The
 accompanying consolidated financial statements include the accounts of the
 Company and its subsidiaries and a joint venture for which the Company is
 considered the primary beneficiary. All significant intercompany balances and
 transactions have been eliminated on consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b)                                                                                                                                                                                                                                               | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                  | The
 Company considers all liquid investments with maturities of three months or
 less when acquired to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

GILDAN 2007 ANNUAL REPORT

---



55

| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
 CONSOLIDATED 
 FINANCIAL STATEMENTSYEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2   | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                              
|(c) | Inventories:                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                              
|    | Inventories
 are stated at the lower of cost and market value. Cost is established based
 on the first-in, first-out method. Market value is defined as replacement
 cost for raw materials and net realizable value for work in process and
 finished goods.
|    |                                                                                                                                                                                                                                                              
|(d) | Property, plant and equipment:                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                              
|    | Property,
 plant and equipment are recorded at cost. Depreciation is calculated on a
 straight-line basis at the following annual rates:                                                                                                                     

| |                             |              |  
| | --------------------------- | ------------ | -
| | Asset                       | Rate         |  
| |                             |              |  
| | Buildings
 and improvements | 2 1/2% to 20 | %
| | Equipment                   | 6 2/3% to 25 | %
| |                             |              |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Assets
 not in service include expenditure incurred to-date for plant expansions which
 are still in process and equipment not yet in service as at the balance sheet
 date. Depreciation on these assets commences when the assets are put into
 service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(e) | Intangible assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Intangible
 assets, which represent customer contracts and customer relationships
 included in the acquisition of Kentucky Derby Hosiery Co., Inc., are being
 amortized on a straight-line basis over a period of fifteen years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(f) | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Long-lived
 assets, consisting of property, plant and equipment and intangible assets
 with finite lives, are reviewed for potential impairment whenever events and
 changes in circumstances indicate that the carrying amounts of such assets
 may not be recoverable. An impairment loss would be recognized when the
 estimated undiscounted future cash flows expected to result from the use of
 an asset and its eventual disposition are less than its carrying amount. The
 amount of the impairment loss recognized is measured as the amount by which
 the carrying value for an asset exceeds the fair value of the asset, with
 fair value being determined based upon discounted cash flows or appraised
 values, depending on the nature of the asset.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(g) | Deferred charges:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Plant
 start-up costs are deferred and amortized on a straight-line basis over two
 years. The amortization of these charges is included in Depreciation and
 amortization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(h) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Monetary
 assets and liabilities of the Canadian and foreign operations denominated in
 currencies other than U.S. dollars are translated at the rates of exchange at
 the balance sheet date. Other balance sheet items, denominated in currencies
 other than U.S. dollars, are translated at the rates prevailing at the
 respective transaction dates. Income and expenses, denominated in currencies
 other than U.S. dollars, are translated at average rates prevailing during
 the year. Gains or losses on foreign exchange are recorded in the
 consolidated statements of earnings.                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The
 foreign subsidiaries are considered to be integrated foreign operations, and
 their accounts have been translated using the temporal method with
 translation gains and losses included in the consolidated statements of
 earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(i) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Sales
 are recognized upon shipment of products to customers, since title passes
 upon shipment. At the time of sale, estimates are made for customer price
 discounts and rebates based upon existing programs. Accruals required for new
 programs, which relate to prior sales, are recorded at the time the new
 program is introduced. Sales are recorded net of these program costs and a
 provision for estimated sales returns, which is based on historical
 experience and other known factors, and exclude sales taxes.                                                                                                                                                                                                                                   

GILDAN 2007 ANNUAL REPORT

---



56

| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
 CONSOLIDATED 
 FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
 (IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2   | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(j) | Cost of sales and gross profit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Cost
 of sales includes all raw material costs, manufacturing conversion costs,
 sourcing costs and transportation costs incurred until the receipt of
 finished goods at the Companys distribution facilities, but excludes
 depreciation expense. Cost of sales also includes costs relating to
 purchasing, receiving and inspection activities, manufacturing
 administration, third-party manufacturing services, insurance, internal
 transfers of finished goods, and customs and duties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Gross
 profit is the result of sales less cost of sales. The Companys gross margins
 may not be comparable to this metric as reported by other companies, since
 some entities include depreciation expense and distribution costs in cost of
 sales, whereas the Company includes them in depreciation and amortization and
 selling, general and administrative expenses, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(k) | Selling, general and administrative expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Selling,
 general and administrative (SG&A) expenses include costs incurred
 subsequent to the receipt of finished goods at the Companys distribution
 facilities, excluding depreciation expense and costs of inter-warehouse
 transfers of finished goods. The principal components of SG&A expenses
 include warehousing and handling costs, the cost of shipping goods to
 customers, selling and administrative personnel costs, advertising and
 marketing expenses, leased facilities and equipment cost, professional fees,
 and other general and administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(l) | Product introduction expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Product
 introduction expenditures are one-time fees paid to retailers to allow the
 Companys products to be placed on store shelves. These fees are recognized
 as a reduction in revenue when incurred unless the Company receives a benefit
 over a period of time and certain other criteria are met, such as
 recoverability and enforceability. In this case, these fees are recorded as
 an asset and are amortized as a reduction of revenue over the term of the
 arrangement. The Company evaluates the recoverability of these assets on a
 quarterly basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(m) | Cotton and yarn procurements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The
 Company contracts to buy cotton and yarn with future delivery dates at fixed
 prices in order to reduce the effects of fluctuations in the prices of cotton
 used in the manufacture of its products. These contracts are not used for
 trading purposes. The Company commits to fixed prices on a percentage of its
 cotton and yarn requirements up to eighteen months in the future. If market
 prices for cotton and yarn fall significantly below the committed future
 purchase prices, the Company estimates the costs of cotton and yarn that are
 not recoverable in future sales of finished goods, and records a charge to
 earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(n) | Financial instruments and hedging relationships:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The
 Company may periodically use derivative financial instruments, such as
 forward foreign exchange contracts, to manage risks related to fluctuations
 in exchange rates. Derivative financial instruments are not used for trading
 purposes. Forward foreign exchange contracts are entered into with maturities
 not exceeding twenty-four months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | When
 the Company utilizes derivatives in hedge accounting relationships, the
 Company formally documents all relationships between hedging instruments and
 hedged items, as well as its risk management objective and strategy for
 undertaking various hedge transactions. This process includes linking all
 derivatives to specific assets and liabilities on the balance sheet or to
 specific firm commitments or anticipated transactions. The Company also formally
 assesses, both at the hedges inception and on an ongoing basis, whether the
 derivatives that are used in hedging transactions are effective in offsetting
 cash flows of hedged items. When hedging instruments become ineffective
 before their maturity or the hedging relationship is terminated, deferred
 gains or losses on such instruments continue to be deferred and charged to
 earnings in the same period as the corresponding gains or losses for the
 hedged items; gains and losses realized subsequently as a result of
 marking-to-market are charged directly to earnings. If the hedged item ceases
 to exist due to its maturity, expiry, cancellation or exercise before the
 hedging instrument expires, deferred gains or losses are charged to earnings.
 Any derivative instrument that does not qualify for hedge accounting is
 marked-to-market at each reporting date and the gains or losses are included
 in earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | As at
 October 1, 2006 and September 30, 2007, all outstanding forward foreign
 exchange contracts were reported on a mark-to-market basis, and the gains or
 losses were included in earnings. The Company elected not to apply hedge
 accounting for these derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

GILDAN 2007 ANNUAL REPORT

---



57

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTSYEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2   | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(o) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The
  Company utilizes the asset and liability method for accounting for income
  taxes which requires the establishment of future tax assets and liabilities,
  measured at substantively enacted tax rates, for all temporary differences
  caused when the tax bases of assets and liabilities differ from those
  reported in the financial statements. Future income tax assets are evaluated
  and, if realization is not considered to be more likely than not, a valuation
  allowance is recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The
  Companys income tax provision is based on domestic laws in the various
  countries in which it operates as well as applicable international tax
  treaties. These tax rules and regulations are subject to interpretation and
  require estimates and assumptions that may be challenged by taxation
  authorities. The Companys estimates of income tax assets and liabilities are
  periodically reviewed and adjusted as circumstances warrant, such as changes
  to tax laws and administrative guidance, and the resolution of uncertainties
  through either the conclusion of tax audits or expiration of prescribed time
  limits within the relevant statutes. The final results of government tax
  audits and other events may vary materially compared to estimates and
  assumptions used by management in determining the provision for income taxes
  and in valuing income tax assets and liabilities.                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(p) | Stock-based compensation and other stock-based payments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Effective
  the commencement of its 2004 fiscal year, the Company follows the fair
  value-based method to account for all transactions where services are
  received in exchange for stock-based compensation and other stock-based
  payments. For stock options and Treasury restricted share units, compensation
  cost is measured at the fair value at the date of grant and is expensed over
  the awards vesting period. For non-Treasury restricted share units, the
  compensation cost is ultimately measured based on the market price of the
  Companys shares at the vesting date and is recognized by amortizing the cost
  over the vesting period. The offsetting liability is marked-to-market until
  the vesting date with any changes in the market value of the Companys shares
  resulting in a change in the measure of compensation cost for these awards,
  which is recorded in the periods in which these changes occur.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In
  fiscal 2006, the Company changed its accounting policy to estimate
  forfeitures of stock options and restricted share units when determining
  stock-based compensation. In prior years, the Company accounted for
  forfeitures as they occurred. This change in accounting policy had no
  significant impact on the financial position of the Company or on the results
  of its operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | For
  employee share purchase plans, the Companys contribution, on the employees
  behalf, is recognized as compensation expense with an offset to share
  capital, and consideration paid by employees on purchase of stock is also
  recorded as an increase to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(q) | Employee future benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The
  Company offers group defined contribution plans to eligible employees whereby
  the Company matches employees contributions up to a fixed percentage of the
  employees salary. Contributions by the Company to trustee-managed investment
  portfolios or employee associations are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(r) | Earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Basic
  earnings per share are computed by dividing net earnings by the weighted
  average number of common shares outstanding for the year. Diluted earnings
  per share are computed in the same manner, except that the weighted average
  number of common shares outstanding for the period is increased to include
  additional shares from the assumed exercise of options, if dilutive, and the
  issuance of restricted share units. The number of additional shares is
  calculated by assuming that outstanding options are exercised and that the
  proceeds from such exercises, as well as the amount of unrecognized
  stock-based compensation are used to repurchase common shares at the average
  share price for the period.                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(s) | Environmental expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Environmental
  expenditures that relate to current operations are expensed or capitalized as
  appropriate. Expenditures that relate to an existing condition caused by past
  operations and which are not expected to contribute to current or future
  operations are expensed. Liabilities are recorded when environmental
  assessments and/or remedial efforts are likely, and when the costs, based on
  a specific plan of action in terms of the technology to be used and the
  extent of the corrective action required, can be reasonably estimated.                                                                                                                                                                                                                                                                                                                                                                                      

GILDAN 2007 ANNUAL REPORT

---



58

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2   | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(t) | Business acquisitions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The
  Company accounts for business acquisitions using the purchase method.
  Accordingly, the purchase price of a business acquisition is allocated to its
  identifiable net assets including identifiable intangible assets, on the
  basis of estimated fair values as at the date of purchase, with any excess
  being assigned to goodwill. When the amounts assigned to identifiable net
  assets exceed the cost of the purchase, resulting in negative goodwill, the
  excess is applied, to the extent possible, to certain non-current assets,
  with the balance recorded as an extraordinary gain.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(u) | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The
  preparation of financial statements in conformity with generally accepted
  accounting principles requires management to make estimates and assumptions
  that affect the reported amounts of assets and liabilities and disclosure of
  contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
  expenses during the reporting period. Financial results as determined by actual events could differ materially from
  those estimates.                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Significant
  areas requiring the use of management estimates and assumptions include the
  allowance for doubtful accounts, inventory obsolescence, income tax assets
  and liabilities, stock-based compensation costs, the fair value of
  identifiable tangible and intangible assets in a business combination and the
  useful life and recoverability of property, plant and equipment and
  intangible assets.                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3   | BUSINESS ACQUISITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Effective July 6, 2006, the Company acquired 100% of the common shares of
Kentucky Derby Hosiery Co., Inc. (Kentucky Derby), a U.S. hosiery
manufacturer with corporate headquarters in Hopkinsville, Kentucky. The total
purchase price of $20,371, including transaction costs, was paid in cash,
except for $460 which was settled through the issuance of common shares of the
Company. The purpose of the acquisition was to enhance and accelerate the
Companys strategy to enter the North American mass-market retail channel as a
supplier of socks, underwear and activewear.

The Company accounted for this acquisition using the purchase method and
the results of Kentucky Derby have been consolidated with those of the Company
from the date of acquisition.

The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition:

|                                                |  |   |        | 
|----------------------------------------------- |  | - | ------ | 
|                                               
|Assets acquired:                                |  |   |        | 
|Accounts receivable                             |  | $ | 15,081 | 
|Income taxes receivable                         |  |   | 775    | 
|Inventory                                       |  |   | 30,357 | 
|Prepaid expenses                                |  |   | 1,458  | 
|Property, plant and equipment                   |  |   | 6,993  | 
|Customer contracts and
  customer relationships |  |   | 9,866  | 
|                                               
|                                                |  |   | 64,530 | 
|Liabilities assumed:                            |  |   |        | 
|Bank indebtedness                               |  |   | 17,350 | 
|Accounts payable and accrued
  liabilities      |  |   | 16,734 | 
|Long-term debt                                  |  |   | 10,075 | 
|                                               
|                                                |  |   | 44,159 | 
|Net assets acquired                             |  | $ | 20,371 | 
|                                               
|Consideration:                                  |  |   |        | 
|Cash                                            |  | $ | 19,000 | 
|20,000 common shares                            |  |   | 460    | 
|Transaction costs                               |  |   | 911    | 
|                                               
|                                                |  | $ | 20,371 | 
|                                               

GILDAN 2007 ANNUAL REPORT

---



59

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|  |                                 
|- | --------------------------------
|3 | BUSINESS ACQUISITION (CONTINUED)

Immediately following the acquisition, the Company repaid the entire
amount of bank indebtedness and $3,987 of long-term debt.

The value of the shares issued as consideration for the business
acquisition was $23.00 per share, which was determined using the Companys
average closing share price on the New York Stock Exchange over a reasonable
period before and after the date on which the terms of the purchase
consideration were agreed to and announced.

Included in the purchase price allocation was an accrual of $1,500 for
estimated costs, which includes severance and other employee related costs for the
restructuring and integration of the operations of Kentucky Derby. During
fiscal 2007, $775 was paid relating to severance and other employee related costs. The
restructuring and integrating process is expected to be completed during the
first half of fiscal 2008. As at September 30, 2007, the balance of $725 is
included in Accounts payable and accrued liabilities.

|  |                              
|- | -----------------------------
|4 | PROPERTY, PLANT AND EQUIPMENT

|                             |  |      |         |                            |   |                  |  |   |         | 
|---------------------------- |  | ---- | ------- | -------------------------- | - | ---------------- |  | - | ------- | 
|                             |  |      |         |                            |   |                  |  |   | 2007    | 
|                            
|                             |  | Cost |         | Accumulated
  depreciation |   | Net book
  value | 
|                            
|                            
|Land                         |  | $    | 22,951  |                            | $ | -                |  | $ | 22,951  | 
|Buildings
  and improvements |  |      | 125,916 |                            |   | 22,503           |  |   | 103,413 | 
|Equipment                    |  |      | 315,841 |                            |   | 103,218          |  |   | 212,623 | 
|Assets
  not in service      |  |      | 38,630  |                            |   | -                |  |   | 38,630  | 
|                            
|                             |  | $    | 503,338 |                            | $ | 125,721          |  | $ | 377,617 | 
|                            
|                             |  |      |         |                            |   |                  |  |   |         | 
|                             |  |      |         |                            |   | 2006             | 
|                            
|                             |  | Cost |         | Accumulated
  depreciation |   | Net book
  value | 
|                            
|                             |  |      |         |                            |   |                  |  |   |         | 
|Land                         |  | $    | 21,669  |                            | $ | -                |  | $ | 21,669  | 
|Buildings
  and improvements |  |      | 109,949 |                            |   | 19,442           |  |   | 90,507  | 
|Equipment                    |  |      | 264,020 |                            |   | 107,530          |  |   | 156,490 | 
|Assets
  not in service      |  |      | 34,011  |                            |   | -                |  |   | 34,011  | 
|                            
|                             |  | $    | 429,649 |                            | $ | 126,972          |  | $ | 302,677 | 
|                            

Assets not in service include expenditures incurred to-date for plant
expansions which are still in process and equipment not yet in service as at
the balance sheet date.

|  |                  
|- | -----------------
|5 | INTANGIBLE ASSETS

|                                                                     |  |      |        |      |   |       |  
|-------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ----- | -
|                                                                     |  | 2007 |        | 2006 |  
|                                                                    
|                                                                    
|Customer
  contracts and customer relationships (note 3)             |  | $    | 9,866  |      | $ | 9,866 |  
|Less
  reversal of valuation allowance on acquired future tax assets |  |      | (7,340 | )    |   | -     |  
|Less
  accumulated amortization                                      |  |      | (502   | )    |   | (353  | )
|                                                                    
|                                                                     |  | $    | 2,024  |      | $ | 9,513 |  
|                                                                    

In the fourth quarter of fiscal 2007, the Company determined that it was
more likely than not that it would be able to realize the future income tax
assets with respect to its wholly-owned subsidiary, Kentucky Derby, which were
not originally recognized at the date of acquisition. In accordance with
generally accepted accounting principles, this benefit was recorded as a
reduction of the unamortized intangible asset related to this acquisition.

GILDAN 2007 ANNUAL REPORT

---



60

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|  |             
|- | ------------
|6 | OTHER ASSETS

|                                                                                |  |      |        |      |   |       | 
|------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ----- | 
|                                                                                |  | 2007 |        | 2006 |  
|                                                                               
|                                                                                |  |      |        |      |   |       | 
|Long-term
  prepaid expenses and other                                          |  | $    | 5,482  |      | $ | 1,131 | 
|Plant
  start-up costs, net of accumulated amortization of $1,603 (2006 - $808) |  |      | 2,548  |      |   | 1,590 | 
|Long-term
  receivable                                                          |  |      | 2,251  |      |   | 758   | 
|Deferred
  corporate transaction costs in connection with acquisition (note 21) |  |      | 1,070  |      |   | -     | 
|Deposits                                                                        |  |      | 75     |      |   | 581   | 
|Prepaid
  equipment rental                                                      |  |      | -      |      |   | 441   | 
|                                                                               
|                                                                                |  | $    | 11,426 |      | $ | 4,501 | 
|                                                                               

|  |                  
|- | -----------------
|7 | BANK INDEBTEDNESS

The Companys joint venture, CanAm, has a revolving line of credit in the
amount of $4,000. The borrowings are due on demand and bear interest at 30-day
LIBOR plus 2.0% (7.12% at September 30, 2007; 7.58% at October 1, 2006). The
line of credit is secured by a first ranking security interest on the assets of
the joint venture.

As at October 1, 2006, the joint venture had utilized $3,500 of its line
of credit. The balance was paid in full during fiscal 2007.

|  |               
|- | --------------
|8 | LONG-TERM DEBT

|                                                                                                                                                                                                                    |  |      |        |      |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | 
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                    |  | 2007 |        | 2006 |  
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                   
|Secured:                                                                                                                                                                                                            |  |      |        |      |   |        | 
|Senior
  notes (a)                                                                                                                                                                                                  |  | $    | -      |      | $ | 17,500 | 
|Term loan, repayable in
  monthly instalments, bearing interest at 30-day LIBOR plus 2.50% (7.62% at
  September 30, 2007; 8.07% at October 1, 2006), maturing in September 2012;
  secured by assets (c)           |  |      | 6,659  |      |   | 9,657  | 
|Term loan, repayable in
  monthly instalments, bearing interest at a fixed rate of 6%, maturing in
  December 2008; secured by equipment (c)                                                                        |  |      | 407    |      |   | 734    | 
|Municipal bonds, repayable in
  annual instalments, bearing interest at variable rates (4.15% at September
  30, 2007; 3.85% at October 1, 2006), maturing in January 2010; secured by
  building and equipment (d) |  |      | 2,144  |      |   | 2,860  | 
|Notes payable to bank due in
  monthly instalments, bearing interest at fixed rates ranging from 4.39% to
  5.38%, maturing from December 2007 to June 2009; secured by equipment (d)                               |  |      | 974    |      |   | 2,128  | 
|Note payable to bank due in
  monthly instalments, bearing interest at a fixed rate of 4.84%, maturing in
  October 2009; secured by equipment (d)                                                                  |  |      | 438    |      |   | 647    | 
|Note payable to bank due in
  monthly instalments, bearing interest at NY Prime plus 0.25% (8.50% at
  October 1, 2006) (d)                                                                                         |  |      | -      |      |   | 195    | 
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                    |  |      | 10,622 |      |   | 33,721 | 
|                                                                                                                                                                                                                    |  |      |        |      |   |        | 
|                                                                                                                                                                                                                   
|Current portion of secured
  debt                                                                                                                                                                                   |  |      | 3,652  |      |   | 21,712 | 
|                                                                                                                                                                                                                   
|                                                                                                                                                                                                                    |  | $    | 6,970  |      | $ | 12,009 | 
|                                                                                                                                                                                                                   

GILDAN 2007 ANNUAL REPORT

---



61

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


YEARS ENDED SEPTEMBER
30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)


|  |                             
|- | ----------------------------
|8 | LONG-TERM
  DEBT (CONTINUED)

|                                                                                                  |  |   |        |  |   |        | 
|------------------------------------------------------------------------------------------------- |  | - | ------ |  | - | ------ | 
|                                                                                                 
|                                                                                                  |  |   | 2007   |  |   | 2006   | 
|                                                                                                 
|                                                                                                  |  |   |        |  |   |        | 
|Unsecured:                                                                                        |  |   |        |  |   |        | 
|Revolving term credit facility (b)                                                                |  | $ | 49,000 |  | $ | -      | 
|Term loans, bearing interest at rates up to 5% per
annum,maturing at
  various dates through 2008 |  |   | 38     |  |   | 140    | 
|                                                                                                 
|                                                                                                  |  |   | 49,038 |  |   | 140    | 
|                                                                                                  |  |   |        |  |   |        | 
|Current portion of unsecured debt                                                                 |  |   | 37     |  |   | 108    | 
|                                                                                                 
|                                                                                                  |  | $ | 49,001 |  | $ | 32     | 
|                                                                                                 
|                                                                                                 
|Total secured and unsecured long-term debt                                                        |  | $ | 55,971 |  | $ | 12,041 | 
|                                                                                                 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The notes bore interest
  at 9.51% on $13,750 and 9.88% on $3,750, and were secured by tangible and
  intangible property of the Company. The combined effective interest rate on
  the senior notes for fiscal 2007 and 2006 was 9.59%. The notes were repaid in
  May 2007.                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b) | The Company has a
  committed revolving long-term credit facility for a maximum of $300,000,
  which matures in June 2012. The facility is unsecured. As at September 30,
  2007, $49,000 was drawn under this facility bearing a combined effective
  interest rate of 6.16%. There were no amounts drawn under this facility at
  October 1, 2006. On October 30, 2007, the Company increased its revolving
  long-term credit facility to a maximum of $400,000.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(c) | These term loans have
  been entered into by CanAm, the Companys joint venture with Frontier
  Spinning Mills, Inc.                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The fixed assets of
  CanAm serve as collateral for the long-term borrowings of CanAm. Other creditors of CanAm do not have any recourse to the
  general credit of the Company.                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(d) | As a result of the
  acquisition of Kentucky Derby, described in note 3, the Company assumed the
  obligations entered into by Kentucky Derby.                                                                                                                                                                                                                                                                                                                     

Under various financing
arrangements with its bankers and other long-term lenders, the Company is
required to meet certain covenants. The Company was in compliance with all of
these covenants as at September 30, 2007 and October 1, 2006.

Principal payments due on
long-term debt are as follows:

|            |  |   |        | 
|----------- |  | - | ------ | 
|           
|Fiscal year |  |   |        | 
|           
|            |  |   |        | 
|2008        |  | $ | 3,689  | 
|2009        |  |   | 2,843  | 
|2010        |  |   | 2,371  | 
|2011        |  |   | 1,634  | 
|2012        |  |   | 49,123 | 
|           
|            |  | $ | 59,660 | 
|           

GILDAN 2007 ANNUAL REPORT

---



62

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS


YEARS ENDED SEPTEMBER
30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005 
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)


|  |                       
|- | ----------------------
|9 | SHAREHOLDERS
  EQUITY

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On December 1, 2004, the
  Board of Directors adopted a shareholder rights plan, which became effective
  that same day. At the annual and special meeting of the shareholders on
  February 2, 2005, the shareholders approved a resolution confirming the
  ratification of the shareholder rights plan. The objectives of the
  shareholder rights plan are to provide the Board of Directors and the shareholders with
  additional time to assess any unsolicited take-over bid for the Company and,
  where appropriate, pursue other alternatives for maximizing shareholder
  value.                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | On May 4, 2005, the
  Board of Directors of the Company declared a two-for-one stock split,
  effected in the form of a stock dividend, applicable to all of its issued and
  outstanding common shares, to shareholders of record on May 20, 2005. On May
  2, 2007, the Board of Directors of the Company declared a two-for-one stock
  split, effected in the form of a stock dividend, applicable to all of its
  issued and outstanding common shares, to shareholders of record on May 18,
  2007. All share and per share data in these consolidated financial statements
  reflect the effect of the stock splits on a retroactive basis.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(c) | Accumulated
  other comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | At the commencement of
  fiscal 2004, the Company adopted the U.S. dollar as its functional and
  reporting currency. The change in the functional currency for the prior
  periods resulted in a currency translation adjustment of $26,248, which is reflected
  in the accumulated other comprehensive income.                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(d) | Share
  capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | Authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | First preferred shares,
  without limit as to number and without par value, issuable in series and
  non-voting. Second preferred shares, without limit as to number and without
  par value, issuable in series and non-voting. As at September 30, 2007 and
  October 1, 2006 none of the first and second preferred shares were issued.
  Common shares authorized without limit as to number and without par value.                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Issued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | As at September 30, 2007
  there were 120,419,461 (2006 - 120,227,668) common shares issued and
  outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10  | STOCK-BASED
  COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(a) | Employee
  share purchase plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | The Company has an employee share purchase
  plans which allow eligible employees to authorize payroll deductions of up to
  10% of their salary to purchase from Treasury, common shares of the Company
  at a price of 90% of the then current stock price as defined in the plans. Employees purchasing shares under the plans
  must hold the shares for a minimum of one year. The Company has reserved
  2,800,000 common shares for issuance under the plans. As at September 30,
  2007, a total of 140,433 (2006 - 122,154) shares were issued under these plans.
  Included as compensation costs in Selling, general and administrative
  expenses is $51 (2006 - $31) relating to the employee share purchase plans.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | Stock
  options and restricted share units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | The Companys Long Term
  Incentive Plan (the LTIP) includes stock options and restricted share
  units. The LTIP allows the Board of Directors to grant stock options,
  dilutive restricted share units (Treasury RSUs) and non-dilutive restricted
  share units (non-Treasury RSUs) to officers and other key employees of the
  Company and its subsidiaries. On February 2, 2006, the shareholders of the Company
  approved an amendment to the LTIP to fix at 6,000,316 the number of common
  shares that are issuable pursuant to the exercise of stock options and the
  vesting of Treasury RSUs. As at September 30, 2007, 3,843,140 common shares
  remained authorized for future issuance under this plan.  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The exercise price
  payable for each common share covered by a stock option is determined by the
  Board of Directors at the date of the grant, but may not be less than the
  closing price of the common shares of the Company on the trading day
  immediately preceding the effective date of the grant. Stock options vest
  equally over a two to five-year period from the date of grant, and expire no
  more than ten years after the date of the grant.                                                                                                                                                                                                                                                                

GILDAN 2007 ANNUAL REPORT

---



63

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


YEARS ENDED SEPTEMBER
30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005(IN THOUSANDS OF US DOLLARS,
EXCEPT SHARE AND PER SHARE AMOUNTS)


|   |                                                                
|-- | ---------------------------------------------------------------
|10 | STOCK-BASED
  COMPENSATION (CONTINUED)                         
|  
|   | (b)     
  Stock options and restricted share units (continued)
|   |                                                                
|   | Changes in outstanding
  stock options were as follows:        

|                                          |  |        |           |                                     |                       |       | 
|----------------------------------------- |  | ------ | --------- | ----------------------------------- | --------------------- | ----- | 
|                                         
|                                          |  | Number |           | Weighted
  average
  exercise price |                      
|                                         
|                                          |  |        |           |                                     | (in Canadian dollars) |      
|Options outstanding,
  October 2, 2005    |  |        | 1,137,556 |                                     | $                     | 6.31  | 
|Exercised                                 |  |        | (281,966  | )                                   |                       | 6.19  | 
|                                         
|Options outstanding,
  October 1, 2006    |  |        | 855, 590  |                                     |                       | 6.35  | 
|Granted                                   |  |        | 180,632   |                                     |                       | 27.28 | 
|Exercised                                 |  |        | (149,034  | )                                   |                       | 5.54  | 
|Forfeited                                 |  |        | (34,630   | )                                   |                       | 27.25 | 
|                                         
|Options
  outstanding, September 30, 2007 |  |        | 852,558   |                                     | $                     | 10.08 | 
|                                         

The weighted average fair
value of each option granted in fiscal 2007 was estimated on the date of grant
using the Black-Scholes pricing model with the following weighted average
assumptions:

|                        |  |  |            |  
|----------------------- |  |  | ---------- | -
|                       
|Risk free interest rate |  |  | 3.9        | %
|Expected volatility     |  |  | 29.0       | %
|Expected life           |  |  | 4.66 years |  
|Expected dividend yield |  |  | nil        |  
|                       

The grant date weighted
average fair value of options granted in fiscal 2007 was CA$8.57.

The following table
summarizes information about stock options outstanding and exercisable at
September 30, 2007:

|                             |                |        |                     |                                       |                       |                                                           |       |        |  |                                       |  |  |                       |  |   |      | 
|---------------------------- | -------------- | ------ | ------------------- | ------------------------------------- | --------------------- | --------------------------------------------------------- | ----- | ------ |  | ------------------------------------- |  |  | --------------------- |  | - | ---- | 
|                            
|                             |                |        | Options outstanding |                                       | Options exercisable   |                                                          
|                             |                |        |                     |                                       |                       |                                                          
|Range of
  exercise
  prices |                | Number |                     | Weighted
  average
  exercise
  price |                       | Weighted
  average
  remaining
  contractual
  life (yrs) |       | Number |  | Weighted
  average
  exercise
  price | 
|                            
|(in Canadian dollars)        |                |        |                     |                                       | (in Canadian dollars) |                                                           |       |        |  |                                       |  |  | (in Canadian dollars) | 
|$                            | 1.29  -   2.44 |        |                     | 77,576                                |                       | $                                                         | 2.05  |        |  | 1.29                                  |  |  | 77,576                |  | $ | 2.05 | 
|$                            | 5.00  -   5.39 |        |                     | 65,060                                |                       |                                                           | 5.24  |        |  | 4.09                                  |  |  | 65,060                |  |   | 5.24 | 
|$                            | 6.06  -   6.88 |        |                     | 338,778                               |                       |                                                           | 6.35  |        |  | 3.00                                  |  |  | 338,778               |  |   | 6.35 | 
|$                            | 8.50  - 10.22  |        |                     | 225,142                               |                       |                                                           | 8.68  |        |  | 3.52                                  |  |  | 225,142               |  |   | 8.68 | 
|$                            | 27.17 - 30.67  |        |                     | 146,002                               |                       |                                                           | 27.29 |        |  | 6.02                                  |  |  | -                     |  |   | -    | 
|                            
|                             |                |        |                     | 852,558                               |                       | $                                                         | 10.08 |        |  |                                       |  |  | 706,556               |  | $ | 6.52 | 
|                            

GILDAN 2007 ANNUAL REPORT

---



64

| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006
AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10 | STOCK-BASED COMPENSATION (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | (b)      Stock options and restricted share units (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | A
  Treasury RSU represents the right of an individual to receive one common
  share on the vesting date without any monetary consideration being paid to
  the Company. With the exception of a special, one-time award, which vests at
  the end of an eight-year period, all other Treasury RSUs awarded to date vest
  at the end of a five-year vesting period. The vesting of 50% of the Treasury
  RSUs are dependent upon the financial performance of the Company relative to
  a benchmark group of Canadian publicly listed companies. Compensation expense
  relating to the Treasury RSUs is recognized in the financial statements over
  the vesting period based on the fair value of the Treasury RSUs on the date
  of the grant and estimates relating to forfeitures and the probability of the
  performance objectives being met. The fair value of the Treasury RSUs granted
  is equal to the market price of the common shares of the Company at the time
  of grant.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Changes
  in outstanding Treasury RSUs were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                                |  |        |          |                                      |   |       | 
|----------------------------------------------- |  | ------ | -------- | ------------------------------------ | - | ----- | 
|                                               
|                                                |  | Number |          | Weighted
average fair
value per unit |  
|                                               
|                                                |  |        |          | (in Canadian dollars)                |  
|                                               
|Treasury
  RSUs outstanding, October 2, 2005    |  |        | 712,000  |                                      | $ | 11.74 | 
|Granted                                         |  |        | 241,000  |                                      |   | 22.86 | 
|Forfeited                                       |  |        | (120,000 | )                                    |   | 12.78 | 
|                                                |  |        |          |                                      |   |       | 
|Treasury
  RSUs outstanding, October 1, 2006    |  |        | 833,000  |                                      |   | 14.81 | 
|Granted                                         |  |        | 240,000  |                                      |   | 31.22 | 
|Settled
  through the issuance of common shares |  |        | (26,917  | )                                    |   | 10.61 | 
|Forfeited                                       |  |        | (104,768 | )                                    |   | 14.19 | 
|                                                |  |        |          |                                      |   |       | 
|Treasury RSUs outstanding, September 30, 2007   |  |        | 941,315  |                                      | $ | 18.83 | 
|                                                |  |        |          |                                      |   |       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of
  September 30, 2007, none of the outstanding Treasury RSUs were vested. The
  compensation expense included in Selling, general and administrative
  expenses and Costs of sales, in respect of the options and Treasury RSUs,
  was $1,814 (2006 - $908). The counterpart has been recorded as contributed
  surplus. When the shares are issued to the employees, the amounts previously
  credited to contributed surplus are transferred to share capital.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Changes
  in outstanding non-Treasury RSUs were as follows:                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                  |  |        |         |  
|------------------------------------------------- |  | ------ | ------- | -
|                                                 
|                                                  |  | Number |        
|                                                 
|                                                  |  |        |         |  
|Non-Treasury
  RSUs outstanding, October 1, 2006  |  |        | -       |  
|Granted                                           |  |        | 69,628  |  
|Settled                                           |  |        | (88     | )
|Forfeited                                         |  |        | (13,264 | )
|                                                  |  |        |         |  
|Non-Treasury RSUs outstanding, September 30, 2007 |  |        | 56,276  |  
|                                                  |  |        |         |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Non-Treasury
  RSUs have the same features as Treasury RSUs, except that their vesting
  period is a maximum of three years and they will be settled in cash at the
  end of the vesting period. The settlement amount is based on the Companys
  stock price at the vesting date. As of September 30, 2007, the weighted
  average fair value per non-Treasury RSU was CA$39.39. No common shares are
  issued from treasury under such awards and they are, therefore, non-dilutive.
  As of September 30, 2007, none of the outstanding non-Treasury RSUs were
  vested.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The
  compensation expense included in Selling, general and administrative
  expenses and Costs of sales, in respect of the non-Treasury RSUs, was $440
  (2006 - nil).                                                                                                                                                                                                                                                                                                                                                                                                 

GILDAN 2007 ANNUAL REPORT

---



65

| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006
AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------
|11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | DEFERRED SHARE UNIT PLAN
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                         
|The
  Company has a deferred share unit plan for independent members of the
  Companys Board of Directors who must receive 50% of their annual board
  retainers in the form of deferred share units (DSUs). The value of these
  DSUs is the market price of the Companys common shares at the time of
  payment of the retainers or fees. DSUs granted under the plan will be
  redeemable and the value thereof payable in cash only after the director
  ceases to act as a director of the Company. As at September 30, 2007, there
  were 11,504 (2006 - 3,982) DSUs outstanding at a value of $453 (2006 - $96). This
  amount is included in Accounts payable and accrued liabilities. The DSU
  obligation is adjusted each quarter based on the market value of the
  Companys common shares. The Company includes the cost of the DSU plan in
  Selling, general and administrative expenses.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Changes
  in outstanding DSUs were as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                     |  |        |        |  
|------------------------------------ |  | ------ | ------ | -
|                                     |  | Number |       
|                                    
|                                     |  |        |        |  
|DSUs
  outstanding, October 2, 2005  |  |        | 5,332  |  
|Granted                              |  |        | 2,994  |  
|Settled                              |  |        | (4,344 | )
|                                     |  |        |        |  
|DSUs
  outstanding, October 1, 2006  |  |        | 3,982  |  
|Granted                              |  |        | 7,522  |  
|                                     |  |        |        |  
|DSUs outstanding, September 30, 2007 |  |        | 11,504 |  
|                                     |  |        |        |  

|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|12  | COMMITMENTS AND CONTINGENT LIABILITIES                                                                                         
|    |                                                                                                                                
|(a) | The
  minimum annual lease payments under operating leases for premises, equipment
  and aircraft are approximately as follows:

|            |  |   |        | 
|----------- |  | - | ------ | 
|           
|Fiscal year |  |   |        | 
|           
|            |  |   |        | 
|2008        |  | $ | 6,881  | 
|2009        |  |   | 6,910  | 
|2010        |  |   | 6,236  | 
|2011        |  |   | 5,670  | 
|2012        |  |   | 4,186  | 
|Thereafter  |  |   | 19,120 | 
|            |  |   |        | 
|            |  | $ | 49,003 | 
|            |  |   |        | 

|    |                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | As at
  September 30, 2007, there were contractual obligations outstanding of
  approximately $40,507 for the acquisition of property, plant and equipment
  (2006 - $46,882).                                                                                        
|    |                                                                                                                                                                                                                                                                       
|(c) | The
  Company is a party to claims and litigation arising in the normal course of
  operations. The Company does not expect the resolution of these matters to
  have a materially adverse effect on the financial position or results of
  operations of the Company.

GILDAN 2007 ANNUAL REPORT

---



66

| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006
AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | In
  November 2002, one of the Companys Mexican subsidiaries (Gildan Mexico)
  received a tax assessment from a regional taxation office relating to duties
  for the 2000 fiscal year for approximately $6,000. The substance of the
  assessment was that the Mexican taxation authorities adopted the position
  that Canadian-made textiles shipped to Gildan Mexico for sewing processing
  had not subsequently been exported from Mexico. Gildan Mexico appealed the
  assessment and was successful in obtaining a judgment in its favor.
  Notwithstanding the judgment, the regional Mexican taxation office issued a
  new assessment in March 2005 and increased the assessed amount to
  approximately $7,100, primarily comprised of interest and late payment
  penalties. Shortly after receiving the second assessment, Gildan Mexico again
  filed an appeal. In July 2006, Gildan Mexico received notification that its
  appeal of the second assessment for fiscal 2000 was unsuccessful. The Company
  received legal opinions that the tax assessment was without merit under
  Mexican law governing re-export for maquiladora operations. Additionally,
  Gildan Mexico, a maquiladora operation, provided documentation to establish
  that the textiles imported into Mexico for sewing were subsequently exported
  to the United States and Canada.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | In
  April 2007, a new law, which was passed by the Mexican Congress in December
  2006, was formally enacted. The provisions of this law allowed Gildan Mexico
  to apply for the forgiveness of all of the interest and penalties and a
  substantial amount of the principal related to this tax assessment. In May
  2007, Gildan Mexico filed an application requesting that the provisions of
  the new law be applied to its outstanding tax assessment. The Mexican
  taxation authorities accepted the application in May 2007 and Gildan Mexico
  settled the assessment with a payment of $400 during the third quarter of
  fiscal 2007. The Company had previously recorded a charge for this amount,
  which was reflected in Selling, general and administrative expenses in the
  second quarter of fiscal 2007. Gildan Mexico has been released from all
  previously tax assessed amounts by the Mexican taxation authorities.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|13                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | GUARANTEES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company,
  and some of its subsidiaries, have granted corporate guarantees, irrevocable
  standby letters of credit and surety bonds to third parties to indemnify them
  in the event the Company and some of its subsidiaries do not perform its
  contractual obligations. As at September 30, 2007, the maximum potential
  liability under these guarantees was $13,600, of which $5,500 was for surety
  bonds and $8,100 was for corporate guarantees and standby letters of credit.
  The standby letters of credit mature at various dates during fiscal 2008, the
  surety bonds are automatically renewed on an annual basis and the corporate
  guarantees mature at various dates up to fiscal 2010.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|As at
  September 30, 2007, the Company has recorded no liability with respect to
  these guarantees, as the Company does not expect to make any payments for the
  aforementioned items. Management has determined that the fair value of the
  non-contingent obligations requiring performance under the guarantees in the
  event that specified triggering events or conditions occur approximates the
  cost of obtaining the standby letters of credit and surety bonds.                                                                                                                                                                                                                                      

GILDAN 2007 ANNUAL REPORT

---



67

| |                                                                     
| | --------------------------------------------------------------------
| | NOTES TO CONSOLIDATED                                               
| | FINANCIAL STATEMENTS                                                
| | YEARS
 ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
| | (IN
 THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)   

|   |             
|-- | ------------
|14 | INCOME TAXES

The income tax provision differs
from the amount computed by applying the combined Canadian federal and
provincial tax rates to earnings before income taxes. The reasons for the
difference and the related tax effects are as follows:

|                                                                   |  |      |         |      |   |         |   |   |         |  
|------------------------------------------------------------------ |  | ---- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                                   |  |      |         |      |   |         |  
|                                                                   |  | 2007 |         | 2006 |   | 2005    |  
|                                                                   |  |      |         |      |   |         |   |   |         |  
|                                                                   |  |      |         |      |   |         |   |   |         |  
|Combined basic Canadian federal and
 provincial income taxes       |  | $    | 40,291  |      | $ | 35,459  |   | $ | 27,075  |  
|                                                                   |  |      |         |      |   |         |   |   |         |  
|Increase (decrease) in income taxes
 resulting from:               |  |      |         |      |   |         |   |   |         |  
|Effect
 of different tax rates on earnings of foreign subsidiaries |  |      | (38,288 | )    |   | (33,664 | ) |   | (29,016 | )
|Effect
 of income tax recovery                                     |  |      | (7,601  | )    |   | -       |   |   | -       |  
|Effect
 of non-deductible expenses and other                       |  |      | 783     |      |   | 2,987   |   |   | 3,293   |  
|                                                                   |  |      |         |      |   |         |   |   |         |  
|                                                                   |  | $    | (4,815  | )    | $ | 4,782   |   | $ | 1,352   |  
|                                                                   |  |      |         |      |   |         |   |   |         |  

For fiscal 2007, the income tax
recovery of $7,601 relates to previously unrecognized tax benefits of a prior
taxation year.

For fiscal 2005, the effect of
different tax rates on earnings of foreign subsidiaries was greater than the
amount computed by applying the combined Canadian tax rates to consolidated
earnings before income taxes. This occurred due to a combination of losses
incurred in the Canadian parent company that generated a recovery of income
taxes at statutory Canadian rates, and earnings in the Companys subsidiaries
that generated income tax expense at relatively low tax rates.

The components of income tax
expense (recovery) are as follows:

|                     |  |      |        |      |   |       |  |   |       | 
|-------------------- |  | ---- | ------ | ---- | - | ----- |  | - | ----- | 
|                     |  |      |        |      |   |       |  |   |       | 
|                     |  | 2007 |        | 2006 |   | 2005  | 
|                     |  |      |        |      |   |       |  |   |       | 
|                     |  |      |        |      |   |       |  |   |       | 
|Current income taxes |  | $    | 4,104  |      | $ | 3,018 |  | $ | 1,176 | 
|Future income taxes  |  |      | (8,919 | )    |   | 1,764 |  |   | 176   | 
|                     |  |      |        |      |   |       |  |   |       | 
|                     |  | $    | (4,815 | )    | $ | 4,782 |  | $ | 1,352 | 
|                     |  |      |        |      |   |       |  |   |       | 

The Company has not recognized a
future income tax liability for the undistributed earnings of its subsidiaries
in the current or prior years because the Company currently does not expect to
sell those investments, and for those undistributed earnings that would become
taxable, there is no intention to repatriate the earnings.

GILDAN 2007 ANNUAL REPORT

---



68

| |                                                                     
| | --------------------------------------------------------------------
| | NOTES TO CONSOLIDATED                                               
| | FINANCIAL STATEMENTS                                                
| | YEARS ENDED SEPTEMBER 30, 2007,
 OCTOBER 1, 2006 AND OCTOBER 2, 2005
| | (IN THOUSANDS OF US DOLLARS, EXCEPT
 SHARE AND PER SHARE AMOUNTS)   

|   |                          
|-- | -------------------------
|14 | INCOME TAXES
 (CONTINUED)

Significant components of the
Companys future income tax assets and liabilities are as follows:

|                                                          |  |      |         |      |   |         |  
|--------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                          |  |      |         |      |   |         |  
|                                                          |  | 2007 |         | 2006 |  
|                                                          |  |      |         |      |   |         |  
|                                                         
|Future income tax assets
 (liabilities):                  |  |      |         |      |   |         |  
|Non-capital
 losses and research and development expenses |  | $    | 11,872  |      | $ | 5,495   |  
|Reserves
 and accruals                                    |  |      | 2,263   |      |   | 5,561   |  
|Other                                                     |  |      | 321     |      |   | 3,665   |  
|                                                          |  |      |         |      |   |         |  
|                                                          |  |      | 14,456  |      |   | 14,721  |  
|Less
 valuation allowance                                 |  |      | (907    | )    |   | (7,340  | )
|                                                          |  |      |         |      |   |         |  
|                                                          |  |      | 13,549  |      |   | 7,381   |  
|Property,
 plant and equipment and other                  |  |      | (24,612 | )    |   | (31,526 | )
|                                                          |  |      |         |      |   |         |  
|Net future income tax liability                           |  | $    | (11,063 | )    | $ | (24,145 | )
|                                                          |  |      |         |      |   |         |  
|                                                          |  |      |         |      |   |         |  
|Presented as:                                             |  |      |         |      |   |         |  
|Current
 assets                                           |  | $    | 2,610   |      | $ | 5,298   |  
|Long-term
 assets                                         |  |      | 10,939  |      |   | -       |  
|Long-term
 liabilities                                    |  |      | (24,612 | )    |   | (29,443 | )
|                                                          |  |      |         |      |   |         |  
|                                                          |  | $    | (11,063 | )    | $ | (24,145 | )
|                                                          |  |      |         |      |   |         |  

In fiscal 2006, the Company
recorded a valuation allowance of $7,340, due to the uncertainty of recognizing
the tax benefits of unused tax losses and deductible temporary differences
arising from the acquisition of Kentucky Derby. During fiscal 2007, the Company concluded that these tax benefits
are more likely than not to be realized.
Accordingly, the valuation allowance has been reversed and applied to
reduce the unamortized portion of the intangible assets relating to the
Kentucky Derby acquisition, as indicated in note 5 to the consolidated
financial statements.

GILDAN
2007 ANNUAL REPORT

---



69

| |                                                                     
| | --------------------------------------------------------------------
| | NOTES TO CONSOLIDATED                                               
| | FINANCIAL STATEMENTS                                                
| | YEARS ENDED SEPTEMBER 30, 2007,
 OCTOBER 1, 2006 AND OCTOBER 2, 2005
| | (IN THOUSANDS OF US DOLLARS, EXCEPT
 SHARE AND PER SHARE AMOUNTS)   

|   |                   
|-- | ------------------
|15 | EARNINGS PER SHARE

A reconciliation between basic and
diluted earnings per share is as follows:

|                                                              |  |      |             |      |   |             |  |   |             | 
|------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|                                                              |  | 2007 |             | 2006 |   | 2005        | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|                                                             
|Basic earnings per share:                                     |  |      |             |      |   |             |  |   |             | 
|Basic
 weighted average number of common shares outstanding   |  |      | 120,339,830 |      |   | 120,103,366 |  |   | 119,381,932 | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|                                                             
|Basic
 earnings per share                                     |  | $    | 1.08        |      | $ | 0.89        |  | $ | 0.72        | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|                                                             
|Diluted earnings per share:                                   |  |      |             |      |   |             |  |   |             | 
|Basic
 weighted average number of common shares outstanding   |  |      | 120,339,830 |      |   | 120,103,366 |  |   | 119,381,932 | 
|Plus
 impact of stock options and Treasury RSUs               |  |      | 1,198,482   |      |   | 1,148,402   |  |   | 887,820     | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|Diluted
 weighted average number of common shares outstanding |  |      | 121,538,312 |      |   | 121,251,768 |  |   | 120,269,752 | 
|                                                              |  |      |             |      |   |             |  |   |             | 
|                                                             
|Diluted
 earnings per share                                   |  | $    | 1.07        |      | $ | 0.88        |  | $ | 0.72        | 
|                                                              |  |      |             |      |   |             |  |   |             | 

All stock options and Treasury RSUs
outstanding for fiscal 2007, 2006 and 2005 were dilutive.

|   |                                 
|-- | --------------------------------
|16 | RESTRUCTURING AND
 OTHER CHARGES

The following table summarizes the
components of restructuring and other charges:

|                                                                               |  |      |        |      |   |        |  |   |        | 
|------------------------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|                                                                               |  |      |        |      |   |        |  |   |        | 
|                                                                               |  | 2007 |        | 2006 |   | 2005   | 
|                                                                               |  |      |        |      |   |        | 
|Accelerated depreciation (a)                                                   |  | $    | 3,493  |      | $ | -      |  | $ | -      | 
|Net gain on disposal of assets held
 for sale (b)                              |  |      | (1,530 | )    |   | -      |  |   | -      | 
|Asset impairment loss and write-down
 of property, plant and equipment (a) (c) |  |      | 3,560  |      |   | 15,149 |  |   | 6,783  | 
|Severance (a) (c)                                                              |  |      | 13,619 |      |   | 2,141  |  |   | 3,688  | 
|Charge to comply with employment
 contract (d)                                 |  |      | -      |      |   | 1,456  |  |   | 1,050  | 
|Other (a)(e)                                                                   |  |      | 8,870  |      |   | 1,640  |  |   | 255    | 
|                                                                               |  |      |        |      |   |        |  |   |        | 
|                                                                               |  | $    | 28,012 |      | $ | 20,386 |  | $ | 11,776 | 
|                                                                               |  |      |        |      |   |        |  |   |        | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In September 2006, the Company
 announced a restructuring of its Canadian manufacturing operations, involving
 the closure of its textile manufacturing facility in Valleyfield, Quebec and
 the downsizing of its Montreal, Quebec knitting facility, to take effect in
 December 2006. In fiscal 2006, the Company recorded severance charges of
 $2,141 and other exit costs of $1,640 relating to this restructuring. In
 addition, in September 2006, the Company recorded an impairment loss of
 $15,149 on all Canadian textile and related manufacturing assets, and reduced
 its estimate of the remaining economic lives of these assets. The effect of
 this change in estimate, amounting to $3,493 for fiscal 2007, was classified
 as accelerated depreciation and included in Restructuring and other
 charges. The Company does not expect any further amounts to be incurred
 relating to accelerated depreciation in fiscal 2008.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | During the fourth quarter of fiscal
 2006, the Company announced the relocation and consolidation of its U.S.
 retail distribution centres and the closure of its Canadian distribution
 centre in Montreal, Quebec, effective October 2006. The Company also
 announced the closure and downsizing of the sock manufacturing capacity
 located in North Carolina and Virginia. As at September 30, 2007, assets held
 for sale include land, building and equipment at these locations. The Company
 ceased recording depreciation on these assets, which are recorded at the
 lower of their net book value or fair value less costs to sell. During fiscal
 2007, the Company sold some of the assets related to these facilities and
 recorded a net gain of $1,530.                                                                                                                                                                             

GILDAN 2007 ANNUAL REPORT

---



70

| |                                                                     
| | --------------------------------------------------------------------
| | NOTES TO CONSOLIDATED                                               
| | FINANCIAL STATEMENTS                                                
| | YEARS ENDED SEPTEMBER 30, 2007,
 OCTOBER 1, 2006 AND OCTOBER 2, 2005
| | (IN THOUSANDS OF US DOLLARS, EXCEPT
 SHARE AND PER SHARE AMOUNTS)   

|   |                                             
|-- | --------------------------------------------
|16 | RESTRUCTURING AND
 OTHER CHARGES (CONTINUED)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | On March 27, 2007, the Company
 announced plans to close its two remaining textile facilities in Montreal,
 Canada and its cutting facility in Bombay, New York, in the fourth quarter of
 fiscal 2007. In addition, the Company closed two sewing facilities in Mexico
 in March 2007, which had been supplied with fabric from Gildans Canadian
 textile operations. In fiscal 2007, the Company recorded severance costs of
 $13,619, primarily relating to these plant closures. As at September 30,
 2007, assets held for sale include land, building and equipment at these
 locations.                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Concurrent with the restructuring of
 the Canadian textile operations, the Company also announced plans to relocate
 its corporate office, which is currently located in the same facility as was
 its Montreal knitting operations, into leased premises in the Montreal area.
 In March 2007, the Company recorded a $3,560 asset impairment loss relating
 to its corporate head office facility.                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | During fiscal 2005, the Company
 closed its two Canadian yarn-spinning facilities, and relocated a major portion of its yarn-spinning equipment
 to a North Carolina spinning facility operated by CanAm. The components of
 the charge primarily included a write-down to fair value of the fixed assets
 not transferred to CanAm of $6,783 and employee severance of $3,688. The
 fixed assets not transferred to CanAm were classified as held for sale at
 their estimated fair values. Proceeds from these assets of $4,087 and $5,027
 were received in fiscal 2005 and in fiscal 2006, respectively. Severance
 costs were paid in full in fiscal 2005.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Company does not expect any
 further severance charges to be incurred relating to these closures in fiscal
 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d) | During fiscal 2004, the Company
 expensed $4,614 ($3,184 after tax) representing managements best estimate of
 the cost of financial obligations pursuant to an employment contract with the
 former Chairman and Co-Chief Executive Officer of the Company. The employment
 contract includes variable components related to the Companys financial and
 operating performance to fiscal 2009. This resulted in charges of $1,456 in
 fiscal 2006 and $1,050 in fiscal 2005. Most of the payments under this
 contract are payable in Canadian dollars. No charges were incurred in fiscal
 2007 relating to this employment contract.                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(e) | Other costs relate primarily to exit
 costs incurred in connection with the closures noted above, including
 carrying and dismantling costs associated with assets held for sale. Other
 costs also include temporary incremental duties incurred as a result of the
 closure of the Companys Mexican sewing facilities. The Company expects to
 incur additional carrying costs relating to the assets held for sale, which
 will be accounted for as restructing charges as incurred during fiscal 2008,
 until all assets related to the closures are disposed of.                                                                                         

Accounts payable and accrued
liabilities include amounts for severance costs relating to restructuring
activities and charges to comply with the employment contract, as follows:

|                                                                       |  |   |         |  
|---------------------------------------------------------------------- |  | - | ------- | -
|                                                                       |  |   |         |  
|                                                                      
|Balance, October 2, 2005                                               |  | $ | 2,782   |  
|Severance costs                                                        |  |   | 2,141   |  
|Adjustments related to variable
 components of contractual obligations |  |   | 1,456   |  
|Foreign exchange adjustment                                            |  |   | 114     |  
|Payments                                                               |  |   | (1,064  | )
|                                                                       |  |   |         |  
|Balance, October 1, 2006                                               |  |   | 5,429   |  
|Severance costs                                                        |  |   | 13,619  |  
|Foreign exchange adjustment                                            |  |   | 234     |  
|Payments                                                               |  |   | (15,034 | )
|                                                                       |  |   |         |  
|Balance, September
 30, 2007                                           |  | $ | 4,248   |  
|                                                                       |  |   |         |  

GILDAN
2007 ANNUAL REPORT

---



71

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|17  | OTHER INFORMATION                                                                      
|    |                                                                                        
|(a) | The following items were included in the determination of
  the Companys net earnings:

|                                                                    |  |      |        |      |   |        |  |   |        |  
|------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | -
|                                                                   
|                                                                    |  | 2007 |        | 2006 |   | 2005   | 
|                                                                   
|                                                                   
|Depreciation expense of
  property, plant and equipment             |  | $    | 36,891 |      | $ | 31,006 |  | $ | 24,677 |  
|Accelerated depreciation
  expense of property, plant and equipment |  |      | 3,493  |      |   | -      |  |   | -      |  
|Interest expense on long-term
  debt                                |  |      | 4,997  |      |   | 4,253  |  |   | 4,805  |  
|Interest expense on short-term
  indebtedness                       |  |      | 361    |      |   | 280    |  |   | 260    |  
|Foreign exchange gain (loss)                                        |  |      | 717    |      |   | 1,578  |  |   | (1,113 | )
|Defined contribution plan
  expense                                 |  |      | 1,360  |      |   | 1,035  |  |   | 688    |  
|Amortization expense of
  deferred start-up costs                   |  |      | 1,509  |      |   | 770    |  |   | 502    |  
|Amortization of intangible
  assets                                 |  |      | 149    |      |   | 353    |  |   | -      |  
|Amortization of deferred
  financing costs                          |  |      | 228    |      |   | 254    |  |   | 436    |  
|Investment income                                                   |  |      | 460    |      |   | 1,466  |  |   | 450    |  
|Research and development tax
  credits                              |  |      | 646    |      |   | 1,290  |  |   | 761    |  
|                                                                   

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | During fiscal 2007, the Company expensed $4,693 (2006 - $3,229; 2005 - $4,448) in Cost of sales, representing
  managements best estimate of the cost of statutory severance and pre-notice
  benefit obligations relating to employees located in the Caribbean Basin and
  Central America. As at September 30, 2007, an amount of $9,373 (2006 -
  $6,658) has been included in Accounts payable and accrued liabilities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(c) | Supplemental cash flow disclosure:                                                                                                                                                                                                                                                                                                                                                                                               

|                                                                                                  |  |      |       |      |   |        |  |   |        | 
|------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ------ |  | - | ------ | 
|                                                                                                 
|                                                                                                  |  | 2007 |       | 2006 |   | 2005   | 
|                                                                                                 
|                                                                                                 
|Cash paid during the year for:                                                                    |  |      |       |      |   |        |  |   |        | 
|Interest                                                                                          |  | $    | 5,447 |      | $ | 4,771  |  | $ | 4,516  | 
|Income taxes                                                                                      |  |      | 4,780 |      |   | 2,031  |  |   | 1,557  | 
|                                                                                                  |  |      |       |      |   |        |  |   |        | 
|Non-cash transactions:                                                                            |  |      |       |      |   |        |  |   |        | 
|Additions to property, plant
  and equipment included in accounts payable and accrued liabilities |  |      | 2,566 |      |   | 2,979  |  |   | 740    | 
|Issuance of shares on
  acquisition of Kentucky Derby                                             |  |      | -     |      |   | 460    |  |   | -      | 
|Ascribed value accredited to
  share capital from issuance of stock options and Treasury RSUs     |  |      | 226   |      |   | 139    |  |   | 135    | 
|Reversal of valuation
  allowance on acquired future tax assets                                   |  |      | 7,340 |      |   | -      |  |   | -      | 
|Proceeds on disposal of
  long-lived assets in long-term receivable                               |  |      | 1,855 |      |   | -      |  |   | -      | 
|Proceeds on disposal of
  long-lived assets in accounts receivable                                |  |      | 1,050 |      |   | -      |  |   | -      | 
|                                                                                                  |  |      |       |      |   |        |  |   |        | 
|Cash and cash equivalents
  consist of:                                                           |  |      |       |      |   |        |  |   |        | 
|Cash balances with banks                                                                          |  |      | 9,250 |      |   | 27,810 |  |   | 38,802 | 
|Short-term investments,
  bearing interest at 4.90% in 2006 and 3.67% in 2005                     |  |      | -     |      |   | 1,197  |  |   | 31,000 | 
|                                                                                                 
|                                                                                                  |  | $    | 9,250 |      | $ | 29,007 |  | $ | 69,802 | 
|                                                                                                 

GILDAN 2007 ANNUAL REPORT

---



72

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|   |                           
|-- | --------------------------
|18 | RELATED PARTY TRANSACTIONS

The Company has transactions with Frontier Spinning Mills, Inc., which
manages the operations of CanAm. These transactions are in the normal course of
operations and are measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties. The following
is a summary of the related party transactions and balances owed:

|                       |  |      |         |      |   |         |  |   |         | 
|---------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                      
|                       |  | 2007 |         | 2006 |   | 2005    | 
|                      
|                      
|Transactions:          |  |      |         |      |   |         |  |   |         | 
|Yarn purchases         |  | $    | 103,902 |      | $ | 100,432 |  | $ | 106,820 | 
|Management fee expense |  |      | 750     |      |   | 750     |  |   | 562     | 
|                       |  |      |         |      |   |         |  |   |         | 
|Balances outstanding:  |  |      |         |      |   |         |  |   |         | 
|Accounts payable       |  |      | 20,130  |      |   | 18,877  |  |   | 15,631  | 
|                      

During fiscal 2005, Frontier Spinning Mills, Inc. contributed $2,500 in cash
to CanAm.

|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|19  | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                  
|(a) | Foreign currency risk management:                                                                                                                                                                                                                                                
|    | A
  portion of the Companys sales and operating expenses are denominated in
  currencies other than U.S. dollars. From time to time, the Company uses
  forward foreign exchange contracts to hedge its foreign exchange exposure on
  cash flows related to sales and expenses.
|    |                                                                                                                                                                                                                                                                                  
|    | The
  following table summarizes the Companys commitments to buy and sell foreign
  currencies as at September 30, 2007 and October 1, 2006:                                                                                                                                    

|                            |                 |     |               |  |                  |  |                                   |  |   |        | 
|--------------------------- | --------------- | --- | ------------- |  | ---------------- |  | --------------------------------- |  | - | ------ | 
|                           
|                            | Notional amount |     | Exchange rate |  | Maturity         |  | Notional
  US dollar
  equivalent | 
|                           
|                            |                 |     |               |  |                  |  |                                   | 
|2007                        |                 |     |               |  |                  |  |                                   |  |   |        | 
|Buy contracts:              |                 |     |               |  |                  |  |                                   |  |   |        | 
|Foreign exchange contracts: |                 |    | 4,425         |  | 1.3390 to 1.4222 |  | Oct. 2007 - Dec. 2007             |  | $ | 6,025  | 
|Sell contracts:             |                 |     |               |  |                  |  |                                   |  |   |        | 
|Foreign exchange contracts: |                 |    | 13,980        |  | 1.3410 to 1.3899 |  | Oct. 2007 - Oct. 2008             |  | $ | 19,096 | 
|                            |                 | £   | 10,801        |  | 1.9640 to 2.0331 |  | Oct. 2007 - Oct. 2008             |  |   | 21,501 | 
|                            |                 | CA$ | 3,800         |  | 0.9945           |  | Oct. 2007                         |  |   | 3,821  | 
|                            |                 |     |               |  |                  |  |                                   |  |   |        | 
|2006                        |                 |     |               |  |                  |  |                                   |  |   |        | 
|Buy contracts:              |                 |     |               |  |                  |  |                                   |  |   |        | 
|Foreign exchange contracts: |                 |    | 9,756         |  | 1.2056 to 1.2696 |  | Oct. 2006 - June 2007             |  | $ | 11,934 | 
|                            |                 | CA$ | 6,250         |  | 0.8961           |  | Oct. 2006                         |  |   | 5,600  | 
|                           

A forward foreign exchange contract represents an obligation to buy or
sell a foreign currency with a counterparty. Credit risk exists in the event of
failure by a counterparty to meet its obligations. The Company reduces this
risk by dealing only with highly rated counterparties, normally major European
and North American financial institutions.

GILDAN 2007 ANNUAL REPORT

---



73

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|19  | FINANCIAL INSTRUMENTS (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(b) | Credit risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Companys financial instruments that are exposed to concentrations of credit
  risk consist primarily of cash equivalents and trade receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Company invests available cash in short-term deposits with major North
  American and European financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Companys extension of credit involves judgment and is based on an evaluation
  of each customers financial condition and payment history. The Company
  regularly monitors its credit risk exposure to its customers and takes steps
  to mitigate the risk of loss. As at September 30, 2007, the Companys top ten
  customers accounted for 61.4% (2006 - 57.0%) of the trade receivable balance,
  of which one customer represented 15.6% (2006 - 18.1%). The remaining trade
  receivable balances are dispersed among a large number of debtors across many
  geographic areas including the United States, Canada, Europe and Australasia.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | An
  allowance for doubtful accounts is maintained for credit losses consistent
  with the credit risk, historical trends, general economic conditions and
  other information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(c) | Fair value disclosure:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Fair
  value estimates are made as of a specific point in time, using available
  information about the financial instrument. These estimates are subjective in
  nature and often cannot be determined with precision.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Company has determined that the carrying values of its short-term financial
  assets and liabilities approximate their respective fair values as at the
  balance sheet dates because of the short-term maturity of those instruments.
  The fair value of the long-term receivable also approximates its carrying
  amount.                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  fair value of long-term debt approximates the carrying value of $59,660 as at
  September 30, 2007. As at October 1, 2006, the fair value of the long-term
  debt was $34,479 compared to a carrying amount of $33,861. The fair value of
  the forward foreign exchange contracts is $(794) (2006 - $502) as at September
  30, 2007. The method of calculating fair values for the financial instruments is
  described below.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  fair value of the Companys long-term debt bearing interest at fixed rates
  was calculated using the present value of future payments of principal and
  interest discounted at the current market rates of interest available to the
  Company for the same or similar debt instruments with the same remaining
  maturities. For long-term debt bearing interest at variable rates, the fair
  value is considered to approximate the carrying value. The fair value of the
  forward foreign exchange contracts was determined using quoted market values.                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d) | Interest rate risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Companys exposure to interest rate fluctuations is with respect to long-term
  debt with a carrying amount of $57,803, which bears interest at floating
  rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|20  | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The
  Company manufactures and sells activewear, socks and underwear. The Company
  operates in one business segment, being high-volume, basic, frequently
  replenished, non-fashion apparel.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(a) | Sales by major product group:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                           |  |      |         |      |   |         |  |   |         | 
|-------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                          
|                           |  | 2007 |         | 2006 |   | 2005    | 
|                          
|                          
|Activewear
  and underwear |  | $    | 826,252 |      | $ | 743,215 |  | $ | 653,851 | 
|Socks                      |  |      | 138,177 |      |   | 29,975  |  |   | -       | 
|                          
|                           |  | $    | 964,429 |      | $ | 773,190 |  | $ | 653,851 | 
|                          

GILDAN 2007 ANNUAL REPORT

---



74

NOTES TO
CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2007, OCTOBER 1, 2006 AND OCTOBER 2, 2005
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|    |                                                   |                                                                                                                                                                
|--- | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|20  | SEGMENTED INFORMATION (CONTINUED)                
|    |                                                  
|(b) | Major customers and revenues by geographic areas:
|    |                                                  
|    | (i)                                               | The
  Company has one customer accounting for greater than 10% of total sales. This
  customer accounted for 23.1% of total sales (2006 - 28.2%; 2005 - 28.2%).
|    |                                                  
|    | (ii)                                              | Sales
  were derived from customers located in the following geographic areas:                                                                                 

|                   |  |      |         |      |   |         |  |   |         | 
|------------------ |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                  
|                   |  | 2007 |         | 2006 |   | 2005    | 
|                  
|                  
|United
  States    |  | $    | 852,522 |      | $ | 680,048 |  | $ | 567,084 | 
|Canada             |  |      | 53,336  |      |   | 50,440  |  |   | 46,009  | 
|Europe
  and other |  |      | 58,571  |      |   | 42,702  |  |   | 40,758  | 
|                  
|                   |  | $    | 964,429 |      | $ | 773,190 |  | $ | 653,851 | 
|                  

|    |                                                                   
|--- | ------------------------------------------------------------------
|(c) | Property, plant and equipment by geographic area are as
  follows:

|                                      |  |      |         |      |   |         | 
|------------------------------------- |  | ---- | ------- | ---- | - | ------- | 
|                                     
|                                      |  | 2007 |         | 2006 |  
|                                     
|Caribbean
  Basin and Central America |  | $    | 294,063 |      | $ | 200,170 | 
|United
  States                       |  |      | 65,399  |      |   | 68,591  | 
|Canada                                |  |      | 17,218  |      |   | 31,407  | 
|Mexico                                |  |      | 937     |      |   | 2,509   | 
|                                     
|                                      |  | $    | 377,617 |      | $ | 302,677 | 
|                                     

|   |                 
|-- | ----------------
|21 | SUBSEQUENT EVENT

On October 15, 2007, the Company acquired 100% of the capital stock of
V.I. Prewett & Son, Inc. (Prewett), a U.S. private label supplier of basic
family socks to U.S. mass-market retailers. Prewetts corporate headquarters
are located in Fort Payne, Alabama. The Company paid $125,000 on closing, and
also placed $10,000 in escrow to provide for a further contingent increase in
the purchase price of the acquisition. The funds were drawn under the Companys
revolving long-term credit facility. The Company has not yet finalized the
allocation of the purchase price for this acquisition.

The acquisition is intended to enhance further the Companys position as a
full-product supplier of socks, activewear and underwear for the retail
channel.

|   |                    
|-- | -------------------
|22 | COMPARATIVE FIGURES

Certain comparative figures have been reclassified in order to conform
with the current years presentation.

GILDAN 2007 ANNUAL REPORT

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