##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 MESSAGE FROM THE PRESIDENT AND CEO
         1




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
   Glenn J. Chamandy
  2




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##### 



Gildan Activewear Inc.
Consolidated Balance Sheets
 January 1, 2006
    
    
    October 2, 2005
    
    
    January 2, 2005(unaudited)
    
    
    (audited)
    
    
    (unaudited)Current assets:Cash and cash equivalents
    
    $
    90,296
    
    
    $
    69,802
    
    
    $
    52,381Accounts receivable
    
    
    51,699
    
    
    
    108,646
    
    
    
    49,099Inventories
    
    
    178,844
    
    
    
    134,861
    
    
    
    142,575Prepaid expenses and deposits
    
    
    3,265
    
    
    
    4,394
    
    
    
    5,872Future income taxes
    
    
    11,162
    
    
    
    10,135
    
    
    
    8,818335,266
    
    
    
    327,838
    
    
    
    258,745Fixed assets
    
    
    265,338
    
    
    
    260,615
    
    
    
    234,992Assets held for sale
    
    
    5,027
    
    
    
    5,027
    
    
    
    Other assets
    
    
    4,014
    
    
    
    4,036
    
    
    
    3,739Total assets
    
    $
    609,645
    
    
    $
    597,516
    
    
    $
    497,476Current liabilities:Bank indebtedness
    
    $
    3,980
    
    
    $
    3,980
    
    
    $
    Accounts payable and accrued liabilities
    
    
    80,220
    
    
    
    86,843
    
    
    
    65,562Income taxes payable
    
    
    2,274
    
    
    
    2,206
    
    
    
    2,364Current portion of long-term debt
    
    
    19,853
    
    
    
    19,859
    
    
    
    19,711106,327
    
    
    
    112,888
    
    
    
    87,637Long-term debt
    
    
    27,386
    
    
    
    27,288
    
    
    
    41,153Future income taxes
    
    
    32,754
    
    
    
    31,386
    
    
    
    29,235Non-controlling interest
    
    
    5,286
    
    
    
    5,394
    
    
    
    2,860Shareholders equity:Share capital (note 3)
    
    
    85,037
    
    
    
    84,177
    
    
    
    78,579Contributed surplus
    
    
    1,873
    
    
    
    1,596
    
    
    
    881Retained earnings
    
    
    324,734
    
    
    
    308,539
    
    
    
    230,883Cumulative translation adjustment
    
    
    26,248
    
    
    
    26,248
    
    
    
    26,248437,892
    
    
    
    420,560
    
    
    
    336,591Total liabilities and shareholders equity
    
    $
    609,645
    
    
    $
    597,516
    
    
    $
    497,476
  3




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##### 



Gildan Activewear Inc.
Consolidated Statements of Earnings
 Three months endedJanuary 1, 2006
    
    
    January 2, 2005(unaudited)
    
    
    (unaudited)Sales
    
    $
    120,310
    
    
    $
    108,957Cost of sales
    
    
    77,415
    
    
    
    76,577Gross profit
    
    
    42,895
    
    
    
    32,380Selling, general and administrative expenses
    
    
    18,063
    
    
    
    16,32724,832
    
    
    
    16,053Depreciation and amortization
    
    
    7,430
    
    
    
    5,880Interest expense, net
    
    
    566
    
    
    
    1,201Non-controlling interest in loss of consolidated joint venture
    
    
    (108
    )
    
    
    Earnings before income taxes
    
    
    16,944
    
    
    
    8,972Income tax expense
    
    
    749
    
    
    
    585Net earnings
    
    $
    16,195
    
    
    $
    8,387Basic E.P.S. (note 4)
    
    $
    0.27
    
    
    $
    0.14Diluted E.P.S. (note 4)
    
    $
    0.27
    
    
    $
    0.14
 Consolidated Statements of Retained Earnings
 Three months endedJanuary 1, 2006
    
    
    January 2, 2005(unaudited)
    
    
    (unaudited)Retained earnings, beginning of the period
    
    $
    308,539
    
    
    $
    222,496Net earnings
    
    
    16,195
    
    
    
    8,387Retained earnings, end of the period
    
    $
    324,734
    
    
    $
    230,883
  4




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##### 



Gildan Activewear Inc.
Consolidated Statements of Cash Flows
 Three months endedJanuary 1, 2006
    
    
    January 2, 2005(unaudited)
    
    
    (unaudited)Cash flows from (used in) operating activities:Net earnings
    
    $
    16,195
    
    
    $
    8,387Adjustments for:Depreciation and amortization
    
    
    7,430
    
    
    
    5,880Future income taxes
    
    
    227
    
    
    
    (183
    )Loss on disposal and writedown of fixed assets
    
    
    40
    
    
    
    325Stock-based compensation expense
    
    
    277
    
    
    
    200Other
    
    
    147
    
    
    
    (159
    )24,316
    
    
    
    14,450Net changes in non-cash working capital balances:Accounts receivable
    
    
    56,829
    
    
    
    37,701Inventories
    
    
    (43,983
    )
    
    
    (25,504
    )Prepaid expenses and deposits
    
    
    1,129
    
    
    
    (2,560
    )Accounts payable and accrued liabilities
    
    
    (6,277
    )
    
    
    (12,087
    )Income taxes payable
    
    
    58
    
    
    
    23632,072
    
    
    
    12,236Cash flows from financing activities:Net increase in long-term debt
    
    
    92
    
    
    
    906Proceeds from the issuance of shares
    
    
    860
    
    
    
    409952
    
    
    
    1,315Cash flows used in investing activities:Purchase of fixed assets, net of disposals
    
    
    (12,374
    )
    
    
    (22,089
    )Increase in other assets
    
    
    (107
    )
    
    
    (54
    )(12,481
    )
    
    
    (22,143
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (49
    )
    
    
    302Net increase (decrease) in cash and cash equivalents
during the period
    
    
    20,494
    
    
    
    (8,290
    )Cash and cash equivalents, beginning of period
    
    
    69,802
    
    
    
    60,671Cash and cash equivalents, end of period
    
    $
    90,296
    
    
    $
    52,381
  5




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders
First quarter ended January 1, 2006
 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS  (For the period ended January 1, 2006)  (Tabular amounts in thousands of U.S. dollars, except per share data)  (unaudited)
 1. Basis of presentation:
     2. Significant accounting policies:
  3. Share capital:
 January 1, 2006
    
    
    October 2, 2005
    
    
    January 2, 2005(audited)Shares
    
    
    Book Value
    
    
    Shares
    
    
    Book Value
    
    
    Shares
    
    
    Book ValueAuthorized without limit as to number and without par value:First preferred shares, issuable in series, non-votingSecond preferred shares, issuable in series, non-votingCommon sharesIssued and outstanding:Common shares:Total outstanding, beginning of period
    
    
    59,955
    
    
    $
    84,177
    
    
    
    59,397
    
    
    $
    78,170
    
    
    
    59,398
    
    
    $
    78,170Shares issued under employee share purchase
plan
    
    
    2
    
    
    
    54
    
    
    
    10
    
    
    
    200
    
    
    
    2
    
    
    
    33Shares issued pursuant to exercise of stock
options
    
    
    82
    
    
    
    806
    
    
    
    547
    
    
    
    5,807
    
    
    
    38
    
    
    
    376Total outstanding, end of period
    
    
    60,039
    
    
    $
    85,037
    
    
    
    59,954
    
    
    $
    84,177
    
    
    
    59,438
    
    
    $
    78,579
   6




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders
First quarter ended January 1, 2006
 4. Earnings per share:
  Three months endedJanuary 1, 2006
    
    
    January 2, 2005Basis earnings per share:Basic weighted average number of common shares outstanding
    
    
    59,970
    
    
    
    59,407Basic earnings per share
    
    $
    0.27
    
    
    $
    0.14Diluted earnings per share:Basic weighted average number of common shares outstanding
    
    
    59,970
    
    
    
    59,407Plus impact of stock options and restricted share units
    
    
    589
    
    
    
    363Diluted weighted average number of common shares outstanding
    
    
    60,559
    
    
    
    59,770Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.14
 5. Guarantees:
    6. Financial instruments:
  Notional U.S.Notional amount
    
    
    Exchange rate
    
    
    Maturity

    
    equivalent2006:Buy contracts:Foreign exchange contracts
    
    CA$
    
    
    30,800
    
    
    
    0.7997 to 0.8506
    
    
    January to September
2006
    
    $
    25,585Sell contracts:Foreign exchange contracts
    
    £
    
    
    3,330
    
    
    
    1.8707 to 1.8851
    
    
    January to September 2006
    
    $
    6,248
    
    
    7,786
    
    
    
    1.1802 to 1.3721
    
    
    January to September 2006
    
    $
    10,372CA$
    
    
    10,000
    
    
    
    0.8602
    
    
    January 2006
    
    $
    8,6022005:Buy contracts:Foreign exchange contracts
    
    CA$
    
    
    42,840
    
    
    
    0.7251 to 0.7896
    
    
    January to September 2005
    
    $
    32,573Sell contracts:Foreign exchange contracts
    
    £
    
    
    5,435
    
    
    
    1.8815 to 1.9197
    
    
    January 2005 to March 2006
    
    $
    10,317
    
    
    19,259
    
    
    
    1.3308 to 1.3721
    
    
    January 2005 to March 2006
    
    $
    26,085
 7




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders
First quarter ended January 1, 2006
 7. Segmented information:
    Three months endedJanuary 1, 2006
    
    
    January 2, 2005United States
    
    $
    106,652
    
    
    $
    95,571Canada
    
    
    7,466
    
    
    
    6,820Europe and other
    
    
    6,192
    
    
    
    6,566$
    120,310
    
    
    $
    108,957
  January 1, 2006
    
    
    October 2, 2005
    
    
    January 2, 2005(audited)Caribbean Basin and Central America
    
    $
    147,423
    
    
    $
    141,029
    
    
    $
    108,770United States
    
    
    66,823
    
    
    
    67,260
    
    
    
    41,111Canada
    
    
    46,676
    
    
    
    47,711
    
    
    
    79,711Mexico
    
    
    4,416
    
    
    
    4,615
    
    
    
    5,400$
    265,338
    
    
    $
    260,615
    
    
    $
    234,992
 8. Other information:
 Three months ended(a) The following items were included in the determination of the Companys net earnings:
    
    January 1, 2006
    
    
    January 2, 2005Depreciation expense of fixed assets
    
    $
    7,187
    
    
    $
    5,683Interest expense on long-term debt
    
    
    1,031
    
    
    
    1,319Interest expense on short-term indebtedness
    
    
    64
    
    
    
    Foreign exchange loss (gain)
    
    
    91
    
    
    
    (604
    )Amortization expense of deferred start-up costs
    
    
    184
    
    
    
    87Amortization of deferred financing costs and other
    
    
    59
    
    
    
    110Investment income
    
    
    (510
    )
    
    
    (119
    )(b) Supplemental cash flow disclosure:Cash paid during the period for:Interest
    
    $
    1,060
    
    
    $
    1,237Income taxes
    
    
    336
    
    
    
    82Non-cash transactions:Additions of fixed assets included in accounts payable and accrued liabilities
    
    
    316
    
    
    
    3,997
 January 1, 2006
    
    
    October 2, 2005
    
    
    January 2, 2005(audited)Cash and cash equivalents consist of:Cash balances with banks
    
    $
    27,136
    
    
    $
    38,802
    
    
    $
    29,581Short-term investments
    
    
    63,160
    
    
    
    31,000
    
    
    
    22,800$
    90,296
    
    
    $
    69,802
    
    
    $
    52,381
 8




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders
First quarter ended January 1, 2006
 This document contains forward-looking statements. For a description of the risk factors and
assumptions, please see the section entitled Forward-looking Statements on page 22.
 Managements Discussion And Analysis Of Financial Condition And Results Of Operations
    CORPORATE OVERVIEW
   9
       (GILDAN LOGO)
    
    Quarterly Report to Shareholders
First quarter ended January 1, 2006
   INDUSTRY OVERVIEW
   
    
    continued use of activewear for event merchandising (such as concerts, festivals,
etc.);
    
    continued evolution of the entertainment/sports licensing and merchandising businesses;
    
    the growing use of activewear for uniform applications;
    
    the growing use of activewear for corporate promotions;
    
    continued increase in use of activewear products for travel and tourism;
    
    an increased emphasis on physical fitness; and
    
    a greater use and acceptance of casual dress in the workplace.
   10




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
 RESULTS OF OPERATIONS
 Non-GAAP Financial Measures
   Sales
     11




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
 Gross Margins
  Selling, General and Administrative Expenses
  Depreciation and Interest Expense
   Income taxes
  Net Earnings
   12




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
 Balance Sheet
    Liquidity and Capital Resources
    1
 
 1
    
    See non-GAAP financial measures on page 11. 13




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
     Off-Balance Sheet Arrangements
 Operating Leases
  Derivative Financial Instruments
  14




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
    Notional
    
    
    
    
    
    
    
    
    
    Notional U.S.(in thousands)
    
    
    
    
    
    amount
    Exchange rate
    
    
    Maturity
    
    equivalent2006 :Buy contracts:Foreign exchange
contracts
    
    CA$
    
    30,800
    
    
    0.7997 to 0.8506
    
    
    January to September 2006
    
    
    $
    25,585Sell contracts:Foreign exchange
contracts
    

    
    
    £
    
    3,330
    
    
    1.8707 to 1.8851
    
    
    January to September 2006
    
    
    $
    6,248
    
    7,786
    
    
    1.1802 to 1.3721
    
    
    January to September 2006
    
    
    $
    10,372CA$
    
    10,000
    
    
    0.8602
    
    
    January 2006
    
    
    $
    8,6022005 :Buy contracts:Foreign exchange
contracts
    
    CA$
    
    42,840
    
    
    0.7251 to 0.7896
    
    
    January to September 2005
    
    
    $
    32,573Sell contracts:Foreign exchange
contracts
    

    
    
    £
    
    5,435
    
    
    1.8815 to 1.9197
    
    
    January 2005 to March 2006
    
    
    $
    10,317
    
    19,259
    
    
    1.3308 to 1.3721
    
    
    January 2005 to March 2006
    
    
    $
    26,085
 Contractual Obligations
  Payments Due by PeriodLess than
    
    1 - 3
    
    4 - 5
    
    After(in millions)
    
    Total
    
    1 year
    
    years
    
    years
    
    5 yearsLong-term debt
    
    $
    47.1
    
    
    $
    19.6
    
    
    $
    21.9
    
    
    $
    3.6
    
    
    $
    2.0Fixed interest payments
    
    
    3.4
    
    
    
    2.1
    
    
    
    1.3
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    29.5
    
    
    
    6.7
    
    
    
    7.1
    
    
    
    4.9
    
    
    
    10.8Purchase obligations
    
    
    80.2
    
    
    
    80.2
    
    
    
    
    
    
    
    
    
    
    
    Other long-term obligations
    
    
    50.8
    
    
    
    50.8
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    211.1
    
    
    $
    159.5
    
    
    $
    30.3
    
    
    $
    8.5
    
    
    $
    12.8
 15




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##### 



(GILDAN LOGO)
    
    Quarterly Report to Shareholders 
First quarter ended January 1, 2006
  Summary of Quarterly Results
  2006(in millions, except per share data)
    
    Q1Sales
    
    $
    120.3Net earnings
    
    
    16.2Basic EPS
    
    
    0.27Diluted EPS
    
    
    0.27Total assets
    
    $
    609.6Total long-term financial liabilities1
    
    
    65.4Weighted average # of shares outstanding (in thousands)Basic
    
    
    59,970Diluted
    
    
    60,559
 2005(in millions, except per share data)
    
    Q1
    
    Q2
    
    Q3
    
    Q4Sales
    
    $
    109.0
    
    
    $
    165.3
    
    
    $
    198.9
    
    
    $
    180.7Net earnings
    
    
    8.4
    
    
    
    14.3
    
    
    
    34.1
    
    
    
    29.2Basic EPS
    
    
    0.14
    
    
    
    0.24
    
    
    
    0.57
    
    
    
    0.49Diluted EPS
    
    
    0.14
    
    
    
    0.24
    
    
    
    0.57
    
    
    
    0.48Total assets
    
    $
    497.5
    
    
    $
    525.4
    
    
    $
    551.6
    
    
    $
    597.5Total long-term financial liabilities1
    
    
    73.2
    
    
    
    72.8
    
    
    
    58.1
    
    
    
    64.1Weighted average # of shares outstanding (in thousands)Basic
    
    
    59,407
    
    
    
    59,617
    
    
    
    59,816
    
    
    
    59,924Diluted
    
    
    59,770
    
    
    
    60,086
    
    
    
    60,270
    
    
    
    60,414
 1
    
    Sum of long-term debt, future income taxes and non-controlling interest
 16




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 2004(in millions, except per share data)
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4Sales
    
    $
    78.0
    
    
    $
    141.4
    
    
    $
    168.4
    
    
    $
    145.6Net earnings
    
    
    2.9
    
    
    
    14.3
    
    
    
    26.2
    
    
    
    16.8Basic EPS
    
    
    0.05
    
    
    
    0.24
    
    
    
    0.44
    
    
    
    0.28Diluted EPS
    
    
    0.05
    
    
    
    0.24
    
    
    
    0.44
    
    
    
    0.28Total assets
    
    $
    427.3
    
    
    $
    447.6
    
    
    $
    457.3
    
    
    $
    488.8Total
long-term financial liabilities1
    
    
    79.9
    
    
    
    81.2
    
    
    
    60.9
    
    
    
    66.0Weighted average # of shares outstanding (in thousands)Basic
    
    
    59,048
    
    
    
    59,153
    
    
    
    59,256
    
    
    
    59,270Diluted
    
    
    59,584
    
    
    
    59,732
    
    
    
    59,718
    
    
    
    59,651
   Outlook
   
 1
    
    Sum of long-term debt, future income taxes and non-controlling interest 17




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
   CRITICAL ACCOUNTING ESTIMATES
   
    
    Sales promotional programs;
    
    Trade accounts receivable;
    
    Fixed assets;
    
    Cotton and yarn procurements; and
    
    Future income taxes.
  RISKS
  
    
    Our industry is competitive;
    
    Our industry is subject to pricing pressures;
    
    We rely on a relatively small number of significant customers;
    
    We are subject to international trade legislation that is becoming increasingly
liberalized;
    
    We currently pay income tax at a comparatively low effective rate, which could change
in the future;
    
    The price of the raw materials we buy is prone to significant fluctuations and
volatility;
    
    Our operations are subject to political, social and economic risks;
    
    Our industry is subject to fluctuation in sales demand;
 18




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 
    
    Our operations are subject to environmental regulation;
    
    We are exposed to concentration of credit risk; and
    
    We are subject to foreign exchange fluctuation risk.
  DISCLOSURE OF OUTSTANDING SHARE DATA
   19




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
   1.
    
    Free cash flow;2.
    
    Total indebtedness;3.
    
    Cash in excess of debt (net debt); and4.
    
    Adjusted net earnings and adjusted diluted earnings per share.
  (in thousands)
    
    Q1 2006
    
    
    Q4 2005
    
    
    Q1 2005Cash flows from operating activities
    
    $
    32,072
    
    
    $
    93,250
    
    
    $
    12,236Cash flows from investing activities
    
    
    (12,481
    )
    
    
    (83,848
    )
    
    
    (22,143
    )Free cash flow
    
    $
    19,591
    
    
    $
    9,402
    
    
    $
    (9,907
    )
 Q1 2006
    
    
    Q4 2005
    
    
    Q1 2005Bank indebtedness
    
    $
    (3,980
    )
    
    $
    (3,980
    )
    
    $
    Current portion of long-term debt
    
    
    (19,853
    )
    
    
    (19,859
    )
    
    
    (19,711
    )Long-term debt
    
    
    (27,386
    )
    
    
    (27,288
    )
    
    
    (41,153
    )Total indebtedness
    
    
    (51,219
    )
    
    
    (51,127
    )
    
    
    (60,864
    )Cash and cash equivalents
    
    
    90,296
    
    
    
    69,802
    
    
    
    52,381Cash in excess of debt (net debt)
    
    $
    39,077
    
    
    $
    18,675
    
    
    $
    (8,483
    )
 20




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 Adjusted Consolidated Statement of Earnings and Earnings per Share  (in thousands of dollars, except earnings per share)
 2005
    
    Audited
    
    
    
    
    
    
    AdjustedSales
    
    $
    653,851
    
    
    
    
    
    
    $
    653,851Cost of sales
    
    
    450,570
    
    
    
    
    
    
    
    450,570Gross profit
    
    
    203,281
    
    
    
    
    
    
    
    203,281Special charge
    
    
    10,726
    
    
    
    (10,726
    )1
    
    
    Selling, general and administrative expenses
    
    
    74,896
    
    
    
    
    
    
    
    74,896EBITDA
    
    
    117,659
    
    
    
    10,726
    
    
    
    128,385Depreciation and amortization
    
    
    25,615
    
    
    
    
    
    
    
    25,615Interest expense
    
    
    4,615
    
    
    
    
    
    
    
    4,615Non-controlling interest in income of
consolidated joint venture
    
    
    34
    
    
    
    
    
    
    
    34Earnings before income taxes
    
    
    87,395
    
    
    
    10,726
    
    
    
    98,121Income taxes expense
    
    
    1,352
    
    
    
    3,718
    1
    
    
    5,070Net earnings
    
    $
    86,043
    
    
    $
    7,008
    
    
    $
    93,051Basic EPS
    
    $
    1.44
    
    
    
    
    
    
    $
    1.56Diluted EPS
    
    
    1.43
    
    
    
    
    
    
    
    1.55
 1
    
    Adjustment to remove special charge relating to the closure of the Canadian
yarn-spinning facilities and the income tax effect thereon. A major portion of the Canadian
yarn-spinning equipment was transferred to a new facility in Clarkton, North Carolina, which is
operated by the Companys joint venture with Frontier Spinning Mills, Inc. 21




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##### 



(GILDAN LOGO)
    
    Quarterly Report to ShareholdersFirst quarter ended January 1, 2006
 FORWARD-LOOKING STATEMENTS
      22