Broder Bros., Co. reported third quarter 2008 net sales inched up 2.4% to $252.3 million from $246.4 million a year ago. Income from operations was $7.8 million compared to a loss from operations of $3.1 million for the third quarter 2007. The Q308 net loss for the imprintable sportswear company was $900,000 compared to an $11.6 million for the third quarter 2007.


Broder supplies imprintable apparel and accessories to screenprinters, embroiderers, promotional products distributors, athletic dealers, and other businesses.

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $12.3 million for the third quarter compared to EBITDA of $1.9 million a year ago. Excluding the impact of certain restructuring, integration and other charges, EBITDA was $13.3 million for the third quarter 2008 and $7.6 million for the third quarter 2007.

 

Third quarter 2008 gross profit was $43.9 million compared to $40.1
million for the third quarter 2007. Third quarter 2008 gross margin was
17.4% compared to gross margin of 16.3% in the prior period. The increase in gross profit was attributable to higher gross profit per unit in trade brands, partially offset by lower unit volumes and lower gross profit per unit in private label brands.

For the nine months, net sales were $706.6 million compared to $696.4 million for the nine months ended September 2007. Income from operations was $12.4 million compared to loss of $5.6 million the prior year. Net loss was $14.9 million compared to net loss of $27.1 million a year ago. EBITDA was $26.3 million compared to EBITDA of $9.4 million for the nine months ended September 2007. Excluding special charges, EBITDA for the nine months was $29.4 million compared to EBITDA of $25.9 million for the nine months ended September 2007.


Looking ahead, the company said it continues executing various initiatives to improve performance. According to industry data gathered from the company and many of its competitors by AC Nielsen and reported by STARS, the company gained market share during the third quarter. The company experienced a 1% decline, measured in units shipped, for the third quarter 2008 while the rest of the industry experienced a 4% decline in units shipped. The market share gain can be attributed to improved inventory availability and the impact of regional sales management.


Based on detailed competitive analysis, the company believes that its inventory availability in most of its sales regions is superior to that of its competitors. Sales managers hired in the fourth quarter 2007 to better manage the company's inside and outside sales forces continue to help the company gain market share by targeting the sales force on customers with major potential; avoiding unproductive, inter-division competition; and increasing the number and productivity of sales calls.

 

The company has begun to devote additional resources to using pricing and an improved understanding of price elasticities to increase gross profit. Management believes that the initial actions taken have begun to produce results since gross margins have expanded. In addition, the company reduced its operating expenses during the third quarter 2008 primarily due to personnel in the new distribution centers continuing to become more efficient, the elimination of a sweepstakes program that was in effect during the third and fourth quarters 2007, and the consolidation of functions that had not been fully consolidated following acquisitions.

  

                      CONSOLIDATED STATEMENTS OF OPERATIONS

     FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 27, 2008 AND SEPTEMBER 29,

                                       2007

                              (dollars in millions)

                                   (Unaudited)


                                        Three Months Ended  Nine Months Ended

                                            2008     2007     2008     2007


    Net sales                              $252.3   $246.4   $706.6   $696.4

    Cost of sales (exclusive of

     depreciation and amortization

     as shown below)                        208.4    206.3    584.0    576.6

        Gross profit                         43.9     40.1    122.6    119.8


    Warehousing, selling and

     administrative expenses                 30.6     34.5     93.3     99.3

    Restructuring and asset impairment

     charges, net                             0.2      4.5      1.1     10.7

    Management fee                            0.7     (0.9)     1.6      0.0

    Stock-based compensation                  0.1      0.1      0.3      0.4

    Depreciation and amortization             4.5      5.0     13.9     15.0

        Operating expenses                   36.1     43.2    110.2    125.4


        Income (Loss) from operations         7.8     (3.1)    12.4     (5.6)


    Interest expense, net of change in

     fair value of interest rate swaps        8.6      9.2     27.1     28.7

      Other expenses                          8.6      9.2     27.1     28.7


        Loss before income taxes             (0.8)   (12.3)   (14.7)   (34.3)


    Income tax provision (benefit)            0.1     (0.7)     0.2     (7.2)


        Net Loss                            $(0.9)  $(11.6)  $(14.9)  $(27.1)


    Reconciliation to EBITDA

      Interest expense, net of change in

       fair value of interest rate swaps      8.6      9.2     27.1     28.7

      Income tax provision (benefit)          0.1     (0.7)     0.2     (7.2)

      Depreciation and amortization           4.5      5.0     13.9     15.0


    EBITDA                                  $12.3     $1.9    $26.3     $9.4