Broder Bros., Co. Announces First Quarter 2010 Results

TREVOSE, Pa., May 7 /PRNewswire/ -- Broder Bros., Co. (the "Company") today announced results for its first quarter ended March 27, 2010.

First Quarter 2010 Results Compared to Prior Year

First quarter 2010 net sales were $153.5 million compared to $151.7 million for the first quarter 2009.  Loss from operations for the first quarter 2010 was ($3.3) million compared to ($6.9) million for the first quarter 2009.  Net loss for the first quarter 2010 was ($6.0) million compared to ($14.8) million for the first quarter 2009.

For the first quarter 2010, the Company reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $0.9 million compared to an EBITDA loss of ($2.3) million for the first quarter 2009.  A reconciliation of EBITDA to net loss is set forth at the end of this press release.

Results include the impact of certain restructuring and other highlighted charges discussed below.  Excluding these highlighted charges, EBITDA was $1.4 million for the first quarter 2010 compared to an EBITDA loss of ($1.2) million for the first quarter 2009.  The improvement in EBITDA was driven by higher gross margins and higher unit volumes.

First quarter 2010 gross profit was $26.9 million compared to $25.0 million for the first quarter 2009.  The increase in gross profit was due to higher unit volumes and improved gross margins.  First quarter 2010 gross margin was 17.5% compared to 16.5% in the first quarter 2009.  Consistent with management's expectations, the Company began to regain lost market share during the first quarter 2010.  The Company's unit shipments were 4% better than the prior year compared to a 3% increase in overall industry unit shipments as reported by STARS.  

Highlighted Charges

Results for the three months ended March 27, 2010 and March 28, 2009 include certain charges as follows:

Restructuring charges recorded during the first quarter 2010 consisted of interest accretion on restructuring charges for closed facilities and other highlighted charges consisted of severance.

Restructuring charges recorded during the first quarter 2009 consisted primarily of severance costs related to a reduction in force that occurred in March 2009. Other highlighted charges include approximately $0.4 million in inventory management consulting charges and $0.1 million in consulting charges related to the exchange offer.

Business Outlook

As noted earlier in this earnings release, the STARS data confirms that the Company has begun to regain lost market share.  The timing associated with beginning to regain lost market share was in line with management's expectations following completion of the Company's financial restructuring which occurred in the second quarter 2009.

Management remains focused on regaining lost market share and building the liquidity to both retire the 2010 Notes in October 2010 and to pay cash interest on the 2013 Notes in 2010.  The April 2010 interest payment on the 2013 Notes was made in additional 2013 Notes.

Inventory quality was strong and fulfillment remained exceptional during the first quarter 2010.  The Company instituted its three-part guarantee to customers in the third quarter 2009. The Company promised that it would be in stock in key styles and colors, that it would fulfill orders accurately and that the Company would not be undersold.  These guarantees continue to restore the confidence of the Company's customers.  In addition, management's initiatives to rationalize pricing, improve selling effectiveness and improve marketing communications appear to be contributing to the Company's gross profit growth.

Liquidity Position

The Company relies primarily upon cash flow from operations and borrowings under its revolving credit facility to finance operations, capital expenditures and debt service requirements.  Borrowings and availability under the revolving credit facility fluctuate due to seasonal demands.  Historical borrowing levels have reached peaks during the middle of a given year and low points during the last quarter of the year.  Borrowings under the revolving credit facility were $121.0 million at March 27, 2010 compared to $100.8 million at December 26, 2009 and $131.8 million at March 28, 2009.  The increase in revolver debt was mainly due to increases in inventory and accounts receivable and a decrease in accounts payable.  Borrowing base availability at March 27, 2010, December 26, 2009 and March 28, 2009 was $10.8 million, $31.5 million and $25.7 million, respectively.  

Management believes that it has the ability to manage cash flow and working capital levels, particularly inventory and accounts payable, to allow the Company to meet its current and future obligations, pay scheduled principal and interest, and provide funds for working capital, capital expenditures and other needs of the business for at least fiscal 2010.  Additional information regarding the Company's liquidity position can be found in the Company's Quarterly Report for the period ended March 27, 2010 and in its 2009 Annual Report which are posted on the Company's corporate website at www.broderbrosco.com .

Selected Balance Sheet Information

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Conference Call

The Company will conduct a conference call on Friday, May 7, 2010 at 11:00 a.m. Eastern Time to discuss the first quarter 2010 results.  Thomas Myers, Chief Executive Officer, and Martin Matthews, Chief Financial Officer, will participate in the call.

The domestic dial-in number for the call is (888) 218-8088.  The conference ID is 4185861.  To help ensure that the conference begins in a timely manner, please dial in ten minutes prior to the start of the call.

For those unable to participate in the conference call, a replay will be available beginning May 7, 2010 at 2:00 p.m. Eastern Time until May 17, 2010, at 2:00 p.m. Eastern Time. To access the replay, dial (888) 203-1112. The replay conference ID is 4185861.

About Broder Bros., Co.

Broder Bros., Co. is one of the nation's largest distributors of trade, private label, and retail apparel brands to the imprinting, embroidery and promotional product industries, serving customers since 1919. It currently has eight distribution centers across the U.S. and has the capability to deliver to approximately 80 percent of the U.S. population in one day. Via its three divisions, the Company distributes industryleading brands Anvil, Fruit of the Loom, Gildan, Hanes and Jerzees as well as retail brands Adidas Golf and Champion.

Cautionary Information Regarding ForwardLooking Statements

This press release contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward looking statements generally can be identified as such because the context of the statement includes words such as "believe," "expect," "anticipate," "will," "should" or other words of similar import.  These statements also include, but are not limited to, the Company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of Broder Bros., Co. and are subject to significant risks and uncertainties.  

Forward looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward looking statements.  The following factors, among others, could cause actual results to differ from those set forth in the forward looking statements: failure to abide by the terms of the Senior Notes or the Company's credit facility would make it difficult for the Company to operate its business in the ordinary course, and may force the Company to seek further financial restructuring; if the Company's cash provided by operating and financing activities is insufficient to fund its cash requirements, the Company may face substantial liquidity problems; slowdowns in general economic activity have detrimentally impacted the Company's customers and have had an adverse effect on its sales and profitability; the Company's ability to access the credit and capital markets may be adversely affected by factors beyond its control, including turmoil in the financial services industry, volatility in financial markets and general economic downturns; the Company's industry is highly competitive and if it is unable to compete successfully it could lose customers and sales may decline; disruption in the Company's distribution centers could adversely affect its results of operations; the Company obtains a significant portion of its products from a limited group of suppliers, and any disruption in their ability to deliver products to the Company or a decrease in demand for their products could have an adverse effect on the Company's results of operations and damage its customer relationships; the Company's relationships with most of its suppliers are terminable at will and the loss of any of these suppliers could have an adverse effect on its sales and profitability; the Company does not have any long term contracts with its customers and the loss of customers could adversely affect its sales and profitability; the Company must successfully predict customer demand for its private label and retail products to succeed; the Company relies significantly on one shipper to distribute its products to its customers and any service disruption could have an adverse effect on its sales; if any of the Company's distribution facilities were to unionize, the Company would incur increased risk of work stoppages and possibly higher labor costs; loss of key personnel or inability to attract and retain new qualified personnel could hurt the Company's business and inhibit its ability to operate and grow successfully; the Company may incur restructuring or impairment charges that would reduce its earnings; the Company may not successfully identify or complete future acquisitions or establish new distribution facilities, which could adversely affect its business; as a result of the Exchange Offer, board members serve three year terms; the Company's substantial level of indebtedness could adversely affect its financial condition and prevent it from fulfilling its obligations; the Company has ceased filing reports with the SEC; the Company's failure to comply with restrictive covenants contained in its revolving credit facility or the Indenture governing the New Notes could lead to an event of default under such instruments; despite current anticipated indebtedness levels and restrictive covenants, the Company may incur additional indebtedness in the future; and other factors, risks and uncertainties detailed in its reports posted from time to time on its website pursuant to the terms of the Indenture.  The Company assumes no obligation to update these forward looking statements.

EBITDA includes the effects of certain charges more fully described in this release.  EBITDA is defined as income before income taxes, interest expense, depreciation and amortization.  EBITDA is a measure commonly used in the distribution industry and is presented to aid in developing an understanding of the ability of the Company's operations to generate cash for debt service and taxes, as well as cash for investments in working capital, capital expenditures and other liquidity needs.  EBITDA should not be considered as an alternative to, or more meaningful than, amounts determined in accordance with generally accepted accounting principles.  EBITDA is not calculated identically by all companies, and therefore, the presentation herein may not be comparable to similarly titled measures of other companies.

SOURCE Broder Bros., Co.