Gildan Announces Resolution of Canada Revenue Agency Audit
December 11 2008 - 6:00AM
Marketwired
Gildan Activewear Inc. (TSX: GIL)(NYSE: GIL)
- One-Time Charge for Fiscal 1999 Restructuring
- No Other Adjustments to Reported Income Taxes for Fiscal Years
2000-2003
- No Change to Transfer Pricing Methodology or Income Tax
Provision for Subsequent Years
Gildan Activewear Inc. (TSX: GIL)(NYSE: GIL) today announced
that it had reached a final agreement with the Canada Revenue
Agency ("CRA") with respect to the audit of the Company's tax
filings for its 2000-2003 fiscal years. Except for a one-time
charge as described below, no significant income tax adjustments to
previously reported income tax rates or after-tax income for the
2000-2003 fiscal years have resulted from the CRA audit. Based on
the results of the audit, and the outcome of its discussions with
the CRA regarding Gildan's transfer pricing methodology and other
audit matters, the Company continues to be comfortable with its
income tax provisions for fiscal years subsequent to the period
covered by the audit. The Company has a low consolidated tax rate
because the majority of its profits are earned and taxed in Central
America and the Caribbean Basin, where its sales, marketing and
manufacturing functions are managed and performed.
Gildan has agreed to a one-time tax assessment in respect of the
restructuring of its international wholesale business and the
related transfer of assets to its Barbados subsidiary in fiscal
1999. The assessment has resulted in a charge in the fourth quarter
of fiscal 2008, amounting to approximately U.S. $27 million or U.S.
$0.22 per share, including a provision for provincial taxes. The
Company accepted the one-time assessment in order to avoid a
lengthy negotiation process with the tax authorities, which could
have resulted in prolonged uncertainty with regard to Gildan's
overall effective income tax rate. The Company will also make an
additional cash payment of approximately U.S. $17 million of income
tax liabilities which had previously been recorded and reserved in
prior years and reflected in the Company's income tax rate as
reported for these years. The cash payment of the Company's total
income tax liabilities does not constrain the Company's liquidity
or financing flexibility to pursue its organic growth strategy and
consider selective acquisitions.
Profile
Gildan is a vertically-integrated marketer and manufacturer of
quality branded basic apparel. The Company is the leading supplier
of activewear for the screenprint channel in the U.S. and Canada.
It is also a leading supplier to this market in Europe, and is
establishing a growing presence in Mexico and the Asia-Pacific
region. The Company sells T-shirts, sport shirts and fleece in
large quantities to wholesale distributors as undecorated "blanks",
which are subsequently decorated by screenprinters with designs and
logos. Consumers ultimately purchase the Company's products, with
the Gildan label, in venues such as sports, entertainment and
corporate events, and travel and tourism destinations. The
Company's products are also utilized for work uniforms and other
end-uses to convey individual, group and team identity. The Company
is also a leading supplier of private label and Gildan branded
socks primarily sold to mass-market retailers. In addition, Gildan
has an objective to become a significant supplier of men's and
boys' underwear and undecorated activewear products to mass-market
retailers in North America.
Certain statements included in this press release may constitute
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities
legislation and regulations. Such forward-looking statements
involve assumptions and known and unknown risks, uncertainties and
other factors, including, but not limited to: general economic
conditions such as commodity prices, currency exchange rates,
interest rates and other factors over which we have no control; the
impact of economic and business conditions, industry trends and
other external, political and social factors in the countries in
which we operate; the intensity of competitive activity; changes in
environmental, tax, trade, employment and other laws and
regulations; our ability to implement our strategies and plans; our
ability to complete and successfully integrate acquisitions; our
reliance on a small number of significant customers; changes in
consumer preferences, customer demand for our products and our
ability to maintain customer relationships and grow our business;
the fact that our customers do not commit to minimum quantity
purchases; the seasonality of our business; our ability to attract
and retain key personnel; our reliance on computerized information
systems; changes in accounting policies and estimates; and
disruption to manufacturing and distribution activities due to
labour disruptions, bad weather, natural disasters and other
unforeseen adverse events which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. You should not place undue reliance on
these forward-looking statements, which are made only as of the
date of this press release. We refer you to the Company's filings
with the Canadian securities regulatory authorities and the U.S.
Securities and Exchange Commission, as well as the "Risks and
Uncertainties" section of the 2007 Annual MD&A, as subsequently
updated in our first, second and third quarter 2008 MD&A, for a
discussion of the various factors that may affect the Company's
future results.
Contacts: Gildan Activewear Inc. Laurence G. Sellyn, Executive
Vice-President, Chief Financial and Administrative Officer
514-343-8805 lsellyn@gildan.com Gildan Activewear Inc. Patrice
Ouimet, Vice-President, Corporate Development and Enterprise Risk
Management 514-340-8933 pouimet@gildan.com Gildan Activewear Inc.
Benoit Leroux, Director, Corporate Development 514-343-8898
bleroux@gildan.com
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