On the call with me today, I'm joined by Glenn Chamandy, our President and Chief Executive Officer; and Laurence Sellyn, our Executive Vice President and Chief Financial and Administrative Officer. Laurence will first be providing an overview of our second quarter financial results and our business outlook. After which, Glenn and Laurence will be taking your questions.Before we begin, I will remind everyone that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve unknown and known risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company’s filings with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory Authority that may affect the company’s future results. I would now like to turn the call over to Laurence Sellyn. Laurence G. Sellyn Thank you, Sophie. Good morning. This morning we announced our results for the second fiscal quarter, which were slightly ahead of our previous guidance, and reconfirmed our sales and EPS guidance for the full year. Also, we announced the acquisition of Anvil, which further solidifies our leadership position in the printwear market, creates potential new growth opportunities to build in relationships with consumer brands supplied by Anvil and provides attractive returns and capital and EPS accretion. We also announced plans to proceed with the modernization and refurbishment of Rio Nance I, which will begin in the third quarter of fiscal 2012 and be completed by the end of fiscal 2013. Adjusted EPS of $0.23 for the quarter were down from $0.53 per share in the second quarter last year, as the results continue to be significantly impacted by the consumption of inventories previously manufactured with high-cost cotton. The average cost of cotton in cost of goods sold in the second quarter was approximately $1.60 per pound compared with approximately $0.85 per pound a year ago, which negatively impacted year-over-year EPS by close to $0.70 per share and impacted gross margins by close to 2,000 basis points.
Selling prices in Printwear were reduced in the first fiscal quarter to align with current cotton futures and were close to the same level in the second quarter last year. The higher cost of cotton resulted in significantly reduced margins and operating income for the Printwear division, which has historically been highly profitable and a significant cash flow generator for Gildan.The reduction in printwear industry selling prices in the first fiscal quarter has helped to stimulate a recovery in industry demand in the second quarter. CREST data for the second quarter showed 4.9% growth in demand in the distributor channel compared to the second quarter of last year. Also, after being capacity constrained throughout most of fiscal 2011, we have regained our market share momentum and strongly reinforced our leadership position in the printwear market. This strong trend in demand for Gildan brand in the channel has continued into the month of April. Also, as a result of the price reduction and resulting improved visibility to plan their business, our U.S. wholesale distributors have confidence to rebuild inventories during the second quarter. Distributors restocked inventories during the quarter to normal seasonal levels. We are also increasing our penetration in all of our international screenprint markets, where unit sales volumes in the second quarter were up strongly compared to the second quarter of last year. Shipments to national accounts were flat during the second quarter compared to the second quarter of last year. We did not achieve our forecasted growth in national accounts due to weak market conditions, in which our national account customers, and the retailers which they service, were delaying replenishment of inventories. Read the rest of this transcript for free on seekingalpha.com