T C Robillard – Vice President-Investor Relations Rich Noll – Chairman and Chief Executive Officer Gerald Evans – Chief Operating Officer Rick Moss – Chief Financial Officer.

Omar Saad – Evercore ISI Eric Tracy – Brean Capital Susan Anderson – FBR Joan Payson – Barclays Michael Binetti – UBS Taposh Bari – Goldman Sachs Anna Andreeva – Oppenheimer Capital John Kernan – Cowen and Company Ike Boruchow – Wells Fargo Jay Sole – Morgan Stanley Jim Duffy – Stifel Carla Casella – JP Morgan.

Good day, ladies and gentlemen, and thanks for standing by. Welcome to the HanesBrands’ Third Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to hand the meeting over to T C Robillard, Vice President, Investor Relations. Please go ahead sir..

Good day, everyone, and welcome to the HanesBrands’ quarterly investor conference call and webcast. We are pleased to be here today to provide an update on our progress after the third quarter of 2015. Hopefully, everyone has had a chance to review the news release we issued earlier today.

The news release and the replay of the call can be found in the Investors section of our hanes.com website. On the call today we may make forward-looking statements, either in our prepared remarks or in the associated question-and-answer session.

These statements are based on current expectations or beliefs and are subject to certain risks and uncertainties that may cause actual results to differ materially. These risks are detailed in our various filings with the SEC, and may be found on our website as well as in our news releases.

The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Unless otherwise noted, today’s references to our consolidated financial results, as well as our 2015 guidance, exclude all one-time charges and expenses.

Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today’s press release. With me on the call today are Rich Noll, our Chief Executive Officer; Gerald Evans, our Chief Operating Officer; and Rick Moss, our Chief Financial Officer.

For today’s call, Rich will highlight a few big-picture themes, Gerald will focus on key highlights within our business operations and Rick will focus on certain financial aspects of our results. I will now turn the call over to Rich..

Thank you, T.C. We had another great quarter. Earnings per share increased 16%, driven by strong core revenue growth, continued margin expansion and contributions from acquisitions. We bought back stock as we entered the next phase of our cash deployment strategy.

And we took up our operating profit guidance for the third time this year due to the continued margin strength within our business. Our strong third quarter performance is simply a continuation of what we’ve been doing all year, driving great results for our shareholders. We generated EPS growth of 16% in each of the first three quarters.

And the midpoint of our guidance implies fourth quarter EPS growth of 25%, further demonstrating that we have the right set of strategies to create significant long-term value for our shareholders. Looking at our results, we delivered on everything in the quarter that we told you we would.

Revenue growth was strong, even with the impact from anticipated retail inventory adjustments, our shipments rebounded in the quarter. Core revenue increased 3% in constant currency and is up nearly 1.5% year-to-date.

Our Champion business continued its strong performance with 33% sales growth in the sporting goods, mid-tier and department store channels. Our intimates business, which we said would turn in the quarter, increased 9% over last year.

And even our basics business which saw the full impact of the inventory destocking, delivered strong results with sales up slightly in the quarter. We also continued to see meaningful contributions from our acquisition strategy.

Our Maidenform acquisition, it’s still paying dividend with the additional synergies contribution to core margin expansion in the quarter, while DBA and Knights Apparel continue to add nicely to earnings. Our cash deployment strategy entered a new phase in the quarter as we spent over $300 million buying back stock.

Repurchases added about $0.01 to EPS in the quarter and are expected to add about $0.01 to EPS in each of the next three quarters. In terms of guidance, based on the current momentum in our business, we are once again raising our operating profit and EPS outlook for the year.

In fact, since the beginning of the year, we have increased our operating profit guidance $40 million and our EPS guidance, $0.07. That’s the great thing about our business model. We have a lot of ways to drive strong results in a wide variety of situations. In summary, we feel great about our business.

We’re on track to deliver 17% to 18% EPS growth for the year, once again demonstrating there are strategies to create long-term shareholder value are working extremely well. And with that I’ll turn the call over to Gerald..

Thanks Rich. We delivered another quarter of great results. You’ve heard us use that phrase many, many times over the past several years. And while it may sound like a broken record, it should is a great song. The strong third quarter results position us to the end of the year, above the high end of our original EPS outlook.

Our performance year-to-date underscores two core facets of our company. The first, our business model is well tested and it has been able to consistently deliver strong returns for our shareholders in any environment. And the second, we are aligned across our organization to execute on our long-term strategies.

Let me start with an update on DBApparel and Knights Apparel. We are thrilled with these acquisitions are unfolding. Beyond their sizable synergy benefits, these acquisitions also provide us with significant future growth opportunities.

And with the strong management teams we gained through these acquisitions, we are confident DBA and Knights can create value for shareholders, for many years. Looking at DBA, the business continues to perform well.

Sales and profits were above plan for the quarter, as we continue to gain market share in key product categories within our core countries. We have already begun implementing some of our supply chain integration activities.

These were actions that fell outside of the scope of the Works Council process, such as renegotiating vendor contracts and proving efficiency and quality, as well as implementing expense control programs. In terms of the Works Council I am pleased to announce that we completed the final consultation in September.

With the integration now in full swing, we expect the synergy benefits to ramp in 2016. Longer term, as we integrate their operations, we believe DBA provides us with us a great platform for future acquisitions in Europe. Turing to Knights Apparel, their business continues to perform extremely well.

Sales attracting to our full-year plan, while operating profit is coming in slightly ahead of plan. As we began the integration process, we reinforced our view that the combination of Gear for Sports and Knights Apparel provides us with significant long-term growth opportunities.

The integration of these businesses will give us the infrastructure, the capability and the systems to deliver to a broad set of retail customers, across the entire graphic apparel market. And our goal overtime is to expand from the $3 billion licensed collegiate apparel market to the broader $20 billion graphic apparel market.

Switching to our segments, innerwear sales increased 3% in the quarter. A strong result, given the roughly $20 million retail inventory adjustment in basics. The real highlight was our intimates business, which increased 9% in the quarter, driven by our Hanes and Bali bras.

With our brand consolidation strategy mainly behind us, we are able to see the full power of our new initiatives. We began advertising behind the ComfortFlex Fit platform in both Hanes and Bali, during the quarter and the response has been tremendous.

Our Hanes Ultimate and Hanes Platinum collections, which are sold in mid-tier and department stores, are exceeding our initial expectations. Shifting to Activewear, we are driving increased Champion distribution as our brand strategy continues to resonate with both consumers and retailers.

This is was evident in our third quarter results as Champion sales, and the sporting goods, mid-tier and department store channels increased 33% over the last year. Our Activewear business also continues to benefit from our Innovate-to-Elevate strategy, as margins increased 230 basis points over the last year to a record 18.8%.

Then turning to our core international business, which excludes DBA and the impact of the retailer exit from Canada, sales in constant currency increased 14% over the last year. So to sum up, our business continue to perform extremely well.

Our categories are healthy, our brands are strong and our strategies continue to deliver double-digit EPS growth. And we believe that this is something you’ll see for many years to come. I will now turn the call over to Rick..

Thanks, Gerald. It was four years ago, this month that I was on my first Hanesbrands earnings call as CFO. And reflecting that, I’m amazed at how much our business has evolved. Over this time, we’ve added approximately $1.4 billion of revenue in a much more diversified manner.

Our international business has roughly doubled and is now about 20% of our sales. Our largest customer accounts for about 20% of our revenue today, down from the peak of 28%. And we now have limited exposure to low margin commodity product categories.

Over that same timeframe, we’ve also significantly increased profitability as operating profit has nearly doubled, while margins have increased approximately 500 basis points. And we strengthened our balance sheet.

Our net debt EBITDA ratio was decreased from four times to around 2.5 times today and is on its way to roughly two times by the end of the year. And we’ve deployed over $2 billion in cash to create shareholder value through dividends, acquisitions, and share repurchases.

Our strong performance over the past several years has been driven by a set of strategies that are designed to leverage our brand expertise, our company-owned supply chain and a corporate culture centered on continuous improvement.

We have strategies to drive growth organically, as well as strategies to drive growth by wisely investing our cash flow, and going forward, we are confident that these can continue to generate strong returns as they are both scalable and repeatable. Now let me take you through some of the highlights from the quarter as they relate to our strategies.

Shipments rebounded in the quarter as we indicated they would. Even with the impact from the retail inventory adjustment, our core revenue increased 3% in constant currency, it was up nearly a 1.5% year-to-date.

This is a perfect example of why we remind investors not to over react to any single quarter, because wallet business may fluctuate from quarter-to-quarter, over time our shipments tend to equal our sellthrough due to the replenishment nature of our categories.

Core operating margins continue to expand up approximately 90 basis points over the last year. Driven by additional Maidenform synergies, benefits from Innovate-to-Elevate and the continued leverage of our core SG&A. Turning to our cash deployment strategies, acquisitions continue to add to our earnings growth.

DBA and Knights Apparel generated roughly $29 million in operating profit in the quarter. We also began repurchasing stock in the quarter spending approximately $311 million to buyback roughly 10.7 million shares, which added just under $0.01 to third quarter EPS.

Turning to guidance, we raised our operating profit guidance to a range of $880 million to $890 million from our prior range of $855 million to $875 million to reflect the strong margin performance in our business.

We also raised our EPS guidance to a range of $1.66 to $1.68 from our previous range of $1.61 to $1.66 due to our increased profit guidance and contributions from share repurchases. We also expect interest and other expense to increase to roughly $115 million, partially offset by a slightly lower tax rate of approximately 12%.

I should also mention that the IRS just completed a substantial two-year audit, the results of which validate the sustainability of our tax strategies and further reinforce the benefits of our company-owned global supply chain.

Turning to the fourth quarter, our guidance implies a little over $1.5 billion in sales, which reflects about $20 million of seasonal programs that shift in Q3 rather than – earlier than initially expected.

When you adjusted for last year’s 53rd week our guidance implies core revenue growth in constant currency of about 3% for both the fourth quarter and the second half.

Fourth quarter operating profit is estimated to be $231 million to $241 million implying an operating margin range of roughly 15% to 16% for about the fourth quarter and the second half. At the midpoint of our guidance this would represent about 130 basis point improvement over the last year second half margins.

And fourth quarter EPS is estimated to be a range of $0.44 to $0.46, which includes about $0.01 from share repurchases. So in summary, our business strategies continue to deliver great results and this is reflected in our increased guidance for the year. And we’re now on pace to deliver 17% to 18% EPS growth this year.

And as we look forward, our growth strategies position us to continue to drive solid double-digit earnings growth for the next several years. And with that I’ll turn the call back over to T. C..

Thanks Rick. That concludes the recap of our performance for the third quarter. We will now begin taking your questions and will continue as time allows. Since there may be a number of you who would like to ask a question, I'll ask that you limit yourself to one question and a single follow-up then re-enter the queue to ask any additional questions.

I will now turn the call back over to the operator to begin the question-and-answer session.

Operator?.

Thank you. [Operator Instructions] Our first question comes from the line of Omar Saad from Evercore ISI..

Hi thanks. Great quarter guys. Thanks for all the information..

Thanks for the remark..

Thanks Omar..

A quick question on the P&L and the gross margin line, and the sales look great. Help me understand the dynamic there. It looks like it had been expanding at a faster rate, and maybe slowed a little bit this quarter.

Is there a mix shift thing going on, or is there some other dynamic there we should understand especially as we look into 4Q and longer term? There's been some concern in the marketplace around pricing pressure and things like that..

No actually I wanted to – this is Rick. It’s actually a very simple thing, nice apparel in the quarter impact there our gross profit margin by that 50 basis points negatively. Absent from that our gross profit margin would have been up..

Okay, great; that's really helpful. Thanks, Rick. And then one follow-up, I heard you mention the graphic apparel market, a $20 billion number. I know you've exited the screen print business, but you're building some graphic capabilities. Help us understand.

What is this market you're talking about? Is this the fashion market? Is it a basics market? What's the opportunity there, and how far out are we talking about maybe potentially harvesting some of that market share in a market that big?.

Yes Omar, this is Gerald. It’s certainly not a fashion business, it’s basic graphic apparel that is both licensed as well as generic graphics across various retail channels.

And we’d be looking to do is take advantage of our vertical capabilities that we have now from manufacturing through design to the printing, to the selling, to the various retail channels in which we operate. There’s certainly other license properties that go across, as well as developing that graphic, generic graphic business.

And so I’ll certainly be looking as we get into 2016 and beyond to begin to focus beyond the collegian apparel market into those various areas..

Thank you. And our next question comes from the line of Eric Tracy from Brean Capital..

Hi guys good afternoon and I’ll add my congrats..

Thanks Eric, how are you doing?.

Alright, so Rich or Gerald, for you. Obviously there's been a lot of discussion around what's going on within the mass markets, in particular one of the larger accounts. You guys delivered against that despite some of those inventory adjustments.

Maybe just speak again broadly of what you're seeing in the channel, how you guys are driving share, and the visibility through holiday if not into spring that you see in that channel..

Yes, let me first just talk about the overall consumer environment, now that Gerald talk a little bit more specifically about some of that basic destocking that you are asking about.

When we look at the overall consumer environment it’s clearly mixed, it is a little uncertain out there, although it has been like that to be honest for many, many years. So it’s probably the new normal if you will. We’ve talked about back-to-schools, started out fairly slow.

Your heard that from retailers it was actually down a little bit; it tended to build strength into September, September being positive. And so we felt good about that trend.

But I think it's a little bit of a show-me holiday at the end of the day, you’ll see we actually refined our overall sales guidance, down just slightly, although Rick will tell you about half of that currency and the other half is just sort of being prudent about what the environment looks like.

That said, we feel really good about the overall momentum in our business. Our shares are solid. We're feeling good about our innovation and we’re feeling good about our Innovate-to-Elevate and its ability to drive margins.

Gerald you want to talk about some of the destocking?.

Sure, as we had anticipated, we did see the $20 million of retail inventory destocking in basics in a major retailer. As we exited the quarter in September we came out with our inventories in line across all of our retailers. And we are now seeing our order patterns really realign to normal patterns against POS.

We don't anticipate a further pull down as we look toward the fourth quarter. So we think we’re well positioned. And as Rich said, as the holiday develops we're prepared..

Perfect. Then my follow-up I guess for either you, Rich, or maybe Rick. As we think about DB, now the Works Council process behind, starting to integrate, maybe just speak to how that ramp – the cadence of that ramp for next year.

Where are the most – the earliest opportunities for synergies are to manifest as we move through the year?.

At the end of the day we're tracking right to our expectations as we've talked to you about all along. We said that we expected the Works Council process to be over sometime in the fall, and we'd begin executing in Q4 and Q1 next year. And in terms of the specific ramp up, clearly it is going to ramp up from here.

We feel good about our long-term guidance and hitting the €100 million, operating profit with DBApparel. In terms of specifically, though, we've yet to begun developing our 2016 plans we’ll embark upon that process pretty soon. And will give you a little bit more specific guidance on those – on the exact ramp up in 2016 on the fourth quarter call..

Thank you. And our next question comes from the line of Susan Anderson from FBR..

Good evening, guys; congrats on a really good quarter..

Thanks Susan..

I was wondering if you could talk about the intimates. Obviously very strong in the quarter, a nice reversal to see.

Is some of that helping driving that is just we’re beyond kind of the SKU rationalization and that's done? Or is it just simply the ebbs and flows as a category that you always talk about and that clearly flowed through this quarter?.

Yes, Susan, we had a very strong intimates quarter. And a lot of it is putting the drag of the brand consolidation behind us and getting our new initiatives and our brand clarification on the floor.

We got – not only do we get our brands clarified, we were able to get our new initiatives, including the Hanes program, on the floor begin to advertise behind it. They did extremely well out of the gate. In fact all of our core intimates brands did well out of the gate.

We advertised behind the ComfortFlex Fit programs, as well and they performed well..

We are optimistic about not the future [indiscernible]:.

Great. Then as a follow-up on the Activewear category, obviously very solid margins there. It looks like I2E is really working. Maybe if you could talk about what you're doing different now and what's driving that..

Well, from the standpoint of I2E we certainly are continuing to drive same level of innovation through the Activewear business we drive through all of our businesses. The strength of the core Champion brand and in our licensed collegiate apparel business as well are driving a nice margin mix through that business..

And let me just – this is Rich. I just want to follow-up and remind everybody.

As part of that I2E strategy it's also to drive fewer, bigger platforms, because the bigger they are, they are easier it is to internalize into our supply chain where we can actually capture that extra margin and that’s also a part of that, very much a part of that Activewear strategy. It’s been working extremely well as you can see..

Thank you. And our next question comes from the line of Joan Payson from Barclays..

Hi, good afternoon everyone..

Hi Joan..

And congratulations on the great quarter..

Thanks..

Just in terms of the intimates outperformance and rebound that you talked about a little bit, could you go into detail a little more on how Maidenform has been performing and how the synergies are tracking with that business?.

Certainly, Maidenform's integration is performing right on plan. The synergies have developed as we expected. We're internalizing the last of the Maidenform production as we speak and have really moved more to apply our Innovate-to-Elevate against the first designs.

The first of those designs actually showed up this fall in department stores as we introduce the ComfortFlex Fit styling into the Maidenform brand. Its early days, but we’re seeing results there. So Maidenform is certainly is performing to our expectations..

Great.

Then just in terms of Champion and the growth that you're seeing into the midtier and some of the new distribution channels, what response have you been getting from the new customer base and the new consumer base going hand-in-hand with that?.

Well, certainly the best measure is in POS and we’re seeing certainly strong sellthrough of the products we put out there and it really is an expansion of both distribution into new retail accounts, as well as expansion of our space within the accounts we're in, across the men's and the women's lines.

And so they are responding well through our designs in our innovation and its selling through very well..

Thank you. And our next question comes from the line of Michael Binetti from UBS..

Hey, guys congrats on a nice quarter..

Thanks Michael..

Rich, I know you guys did mention that the many years of double-digit EPS growth is still intact. There’s some, I guess, unique push and pull on 2016 as we start to lift our eyes a little bit and just think directionally about that.

And one thing in particular might be your longer-term organic growth rate that you talk about of, I think, like 2% to 4%.

Can you maybe think about, within the context of getting to double-digit EPS growth next year, is there any big pieces of the composition to getting there that would change versus what we’ve seen the last few years?.

Clearly double-digit EPS growth is our goal as I said earlier and to answer one of the other of questions, we have not begun our planning process at this point, so this is not going to be based on any detailed knowledge.

That said, there's no big macro issue that's out there that would suggest the double-digit EPS growth isn’t a reasonable goal for next year.

What I like to think of it is with all of our different ways to make money including using our cash, and so on having a goal excluding acquisitions of low-to-mid-teens growth for next year is a good goal for us to have, with acquisitions being on top of that..

And then let me ask you about the margins. A similar question, but you've had great success driving the margins.

Are the underlying drivers of the margin expansion that we've seen in the last few years intact, between commodities, your innovation platforms, the synergies? Are there some other maybe external factors or competitive forces that would change that algorithm a little bit in the near term?.

There is always lots of puts and takes and what I would call tactical dynamics going on whether it's slight commodity tailwinds or pricing dynamics or this that and the other thing. But there is no fundamental change of what's going on in the competitive landscape from what I see. So we feel good about our strategies.

They've been working and they’ll continue to work as we go forward..

Thank you. And our next question comes from the line of Taposh Bari from Goldman Sachs..

Hey, guys, good afternoon; good quarter..

Thanks, Taposh..

I was hoping you could provide some more detail around point-of-sale across main categories, particularly basics, intimates, and Champion..

Sure. If we look first at basics, as Rich touched on in some comments earlier, the back-to-school period we've just finished we saw it start slow but actually strengthen nicely coming into the September period and the true start of school, and has maintained that momentum. So we feel good about the basics business.

Certainly from an intimates standpoint we've seen POS respond as our shipments and our new products have gotten in place. And on the Champion side certainly we've seen strong POS. The strong growth can only be delivered if it's followed by strong POS, and we’re certainly seen both of those come through. So it's good.

The market is slowly moving it appears, but it's moving in the right direction overall, and a category like Activewear grows a bit faster..

Good to see. And then just another one on the mass point, so it's nice to see the destocking issue being stable now, but there's also a lot of attention associated within the media on some of your retail partners possibly turning to vendors to help fund some of their investments and possibly investing in price.

Can you comment on how that plays into your plans, and if that is a material effect?.

Yes, we're constantly having various discussions with our retailers on a number of things, from promotion programs to allowances to pricing and those kinds of things. But there's nothing that's being discussed that would have a material impact on our business or impact our ability to deliver our guidance..

Yes, if I could just make a comment, Taposh, you're asking about specifically based on some things that you're hearing in the press and so on and so forth.

But generically I've actually had this question asked for me constantly over the last decade, to be honest, about – you've got large retailers, you’re smaller, how can you actually make sure that you can earn your fair share.

And at the end of the day, our strategy is all about building great strong brands, connecting with our consumers, driving innovation. And if we do that, we can help our retail partners drive their average unit ring up and help them make their space more productive, help them make more money.

And if we're taking care of that the conversations are always going to go very well. And that’s our focus, that’s what we’ve been doing and that’s where we will continue to stay the course..

Thank you. And our next question comes from the line of Anna Andreeva from Oppenheimer..

Great, thanks so much; and congratulations on really great results..

Thanks, Anna..

A follow-up on Activewear. Just curious if you could talk about what is driving that acceleration in the Champion brand.

Is it more points of distribution, any additional product categories that you can share with us, or innovation in the pipeline as we think about 2016? And any commentary on October sellthrough, to the degree that the business is weather-sensitive? There's been some weather comments from retailers. Thanks..

Certainly from the standpoint of the expansion in Activewear it's all of the things you listed. Certainly we're getting new distribution, but we're also expanding our footprint as we get into adjacent categories in the space within the accounts we're in.

And we're certainly continuing to drive new designs and innovation through the business to drive it further. All that's working extremely well, as you noted in the numbers themselves. So I think from that standpoint everything is moving very well in the business..

Weather, in terms of weather, let me tell you with a 20-year history and Gerald will vouch for this – you want it to get cold sometime between October 5 and October 15. And it seemed like that happened in the United States this year, and that's a good thing. Whether it holds or not, I will let you predict the weather.

But that's a good place for it to get cold, and it did..

And thanks guys, good luck..

Thanks..

Thank you and our next question comes from the line of John Kernan from Cowen and Company..

Good afternoon guys, thanks for taking my question and congrats on register on quarter..

Thanks..

You mentioned the synergy benefits will ramp from DBA in 2016.

Can you talk about the future acquisition platform in Europe, and how big that market is, and the acquisition environment over in Europe?.

We've said that as we integrate DBA and get it fully integrated into Haynes brands. It’s still a pretty fragmented market throughout Europe and a lot of our categories, where you’ve got local brands, with companies that are sub-scale.

And so we believe that will provide a nice platform for future acquisitions in Europe in our core categories, to then integrate that into that larger platform; and by extension it gets integrated into the full HBI global supply chain and IT infrastructure. So we think that is going to be a great platform in the future.

Now that said, we need to focus on getting the integration really moving over the next year or two to create that platform. But there’s a lot of long-term potential..

Okay, thanks; that's helpful. Then just the housekeeping question. It looks like your cash flow from operations guidance was a little bit lower this year than it was coming out of the second quarter.

Is there any type of inventory build we should be expecting that's going into the 2016? What's driving that down?.

Sure. It's actually a couple of things. We had mentioned the retail inventory destocking slowed sales a little bit. The other thing with inventory is that as we continue to internalize production for our acquisitions we are seeing a little bit higher raw material and WIP, that’s temporary. This will correct itself as we get into 2016.

And so really it’s just a shift of cash from 2015 to 2016. Nothing to worry about..

Thank you. And our next question comes from the line of Ike Boruchow from Wells Fargo..

Hi, everyone. Good afternoon; let me add my congrats. Just a real quick question as we're building our models for 2016.

I know that earlier this year you guys had commented that you put some hedges in place that would minimize the trends, I believe, the transaction risks associated with the euro, given that 15% roughly of your business is in Europe right now.

Can you talk about when those hedges roll off? Is there anything we should think about from either a margin or sales perspective as we get into 2016?.

Yes, so let me remind you. This is Rich. Just give you the big picture and then I’ll turn it over to Rick to talk to your specific question. What we were doing is that making sure we were hedging out the transaction risk long enough so that we could then implement the price increases.

And in Europe, especially in some of the major economies they tend to happen are tied to the retailer’s fiscal year. And so in terms of the hedges I’ll let Rick talk about that and then Gerald will talk a little bit about the price increase progress..

Yes, I would add to what Rich said is, that the hedges run through essentially through early next year. Again, our hedging strategy whether its currency or cotton, our hedging strategy is to give the business enough runway to where can react to changes like this through appropriate pricing actions..

And certainly the way you protect your margin and then in the long run as you go out and price for the impact of currency changing. That’s in our plan that we are out working with retailers now to have those in place for spring of 2016. That’s going well..

Thank you..

Thank you. And our next question comes from the line of Jay Sole from Morgan Stanley..

Hey good afternoon..

Hey, Jay..

You mentioned the Knights Apparel mix shift impact on gross margin. Can you just talk about a couple of other factors that might have just impacted gross margin one way or other in the quarter? And I’m thinking of FX, maybe your direct business in terms of sales in that channel, cotton, and maybe just pricing overall..

There’s always the normal puts and takes from the quarter. We did see some benefits on the quarter on gross margin from a little bit lower cotton costs.

So but it was – but honestly it was the usual cast of characters that continue to drive our margin performance, which is Innovate-to-Elevate manufacturing savings, synergies, and the operating profit margin leveraging SG&A..

Okay. And then maybe just switching gears, Rich, you mentioned acquisitions.

Does the fact that [indiscernible] programs are over and the trends, the integration is going well, does that accelerate the timeline for when you think you might be able to take on another integration project, looking out into next year?.

As actually I think I said recently on a call, we’re always out there looking for an acquisition and talking to people is not something that you just decide one day, okay, let’s go do the acquisition. And as we get this integration behind us, we’re going to turn our attention towards 2016 and thinking about an acquisition.

It does take a number of things to fall into place to make sure that a deal can get done. You need a willing seller and you need great synergies. And when we get a deal done and we sign it, we’ll let you know..

Okay, thanks so much..

Thank you. And our next question comes from the line of Jim Duffy from Stifel..

Thanks; hello, everyone..

Hi, Jim..

A couple of related questions. For the fourth quarter, you guys are calling for strong operating margin improvement.

I’m curious, is that a function of gross margin opportunities, or is it more reflective of SG&A leverage?.

Jim, it’s really both. We have a strong long track record of leveraging SG&A. We expect to continue to do that in the fourth quarter and we expect to see nice gross margin in the fourth quarter as well..

Okay, helpful. And then big picture margin question. So Rich, we’re looking at 2015 EBIT margins north of mid-teens – or I’m sorry in the mid-teens. Clearly, you have a number of ongoing opportunities with DBA and Knights.

How do you think about the structural capacity for operating margins to continue to improve?.

I look at our overall business and how well our innovation in our brands are resonating with consumers. That’s going extremely well. I look at the efficiency of our supply chain. And remember because we’re one of the few companies out there that is totally is mainly vertical, we get to capture those efficiencies for us and our shareholders.

And I think we’ve got a philosophy of continuous improvement, and you’ll see that philosophy play out over time..

Thank you. [Operator Instructions] Our next question comes from the line of Carla Casella from JP Morgan..

Hi, I’m wondering if you have a sense of where you’re taking – who you’re taking share from? Or is it that you’re getting more special programs from the retailers, or where you’re gaining the most shelf space?.

Is there a specific category that you're focused on with the share question?.

Well, I was thinking mostly in the sportswear..

So in the Activewear side of things. Certainly we've seen that the Champion brand is positioning itself as a strong number three to two in that category sort of it is better positioned in the market. Again, there is certainly shares that’s come from Adidas and other players in the market as we’ve climbed up into that market..

Is it in a certain category of retail, though – meaning mass versus department store?.

The share we are gaining now is largely in that sports specialty and department store channel..

Okay, great, thanks..

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to T C Robillard for any closing comments..

Thanks. We’d like to thank everyone for attending our call today. We look forward to speaking with you soon. Have a great night..

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. And you may now disconnect. Everyone have a good day..