Broder Bros. Co. reported that net sales for the fiscal year 2003 were $487.8 million compared to $429.7 million for fiscal year 2002. The loss from operations for fiscal year 2003 was $6.0 million, compared to income from operations of $9.8 million in fiscal year 2002. Net loss was $12.4 million in fiscal year 2003, compared to a net loss of $1.4 million in fiscal year 2002.
On September 22, 2003, the Company acquired Alpha Shirt Holdings, Inc., the parent of Alpha Shirt Company. Results herein include the results of Alpha from the acquisition date of September 22, 2003 through December 27, 2003. Pro forma results reflect the operations of Broder, Alpha and other acquired businesses for the full periods presented. Operating results for 2003 include previously anticipated restructuring charges resulting from the acquisition and integration of Alpha and certain other charges described herein.
On a pro forma basis, full year net sales were $798.6 million compared to $858.9 million in the 2002 period. Pro forma income from operations for fiscal year 2003 was $5.8 million, compared to $26.7 million in fiscal year 2002. Pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) was $27.5 million in fiscal year 2003, compared to $47.2 million in fiscal year 2002.
The Alpha division generated fourth quarter 2003 net sales of $108.3 million and gross profit of $22.9 million; and the Broder division generated fourth quarter net sales of $93.6 million and gross profit of $12.9 million. These results include the impact of certain charges.
“Our primary objectives in integrating our Broder and Alpha businesses were to ensure minimal disruption to our customers by maintaining two very distinct brands in the marketplace, to realize the obvious synergies of duplicative infrastructure and overhead, and to compare and apply best practices across businesses”, commented Vince Tyra, CEO of Broder Bros., Co. Tyra continued, “When we compared the historical results of our Broder and Alpha businesses, we noted distinct differences in approach and results. Notably, we observed less efficient inventory turns performance in our Broder distribution centers, more efficient variable labor performance in our Broder distribution centers, and a stronger merchandising, sales and marketing culture in our Alpha business. These observations have laid the foundation for establishing priorities in integrating our businesses.”
Following the September 22, 2003 merger, Broder closed two distribution centers during the fourth quarter: a smaller duplicative distribution center in Fullerton, CA, and more significantly, the 330,000 square foot Broder hub distribution facility in Wadesboro, NC. The closure of the Wadesboro facility was enabled by a change in the inventory replenishment strategy for the Broder business to more resemble the strategy used by the Alpha business. Following these closures, Broder expects to achieve annual operating expense savings of $4.0 to $4.5 million. The closure of the Wadesboro, NC facility and the resulting inventory reduction synergy contributed to a $20.4 million decrease in Broder division inventory levels from December 28, 2002 to December 27, 2003.
In addition, Brader said it has identified two additional duplicative distribution centers which they intend to close by the end of 2004.
First quarter revenues for 2004 reflect positive momentum with double digit volume increases more than offsetting a continued decline in average selling prices.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 27, 2003 & DECEMBER 28, 2002 (dollars in millions) Unaudited 2003 2002 (1) Net sales $487.8 $429.7 Cost of sales 411.1 363.5 Gross profit 76.7 66.2 Warehousing, selling and administrative expenses 62.6 48.2 Management fee 0.6 0.8 Restructuring and asset impairment charges 9.1 -- Depreciation and amortization 10.4 7.4 Operating expenses 82.7 56.4 Income (loss) from operations (6.0) 9.8 Interest expense 14.6 11.4 Loss on debt conversion/retirement 0.3 - Other income (0.3) (0.3) Total other expense 14.6 11.1 Loss before income taxes (20.6) (1.3) Income tax provision (benefit) (8.2) 0.1 Net loss $(12.4) $(1.4) (1) Certain reclassifications have been made to 2002 results to conform to the 2003 presentation. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 27, 2003 & DECEMBER 28, 2002 (dollars in millions) Unaudited 2003 2002 (1) Net sales $798.6 $858.9 Cost of sales 663.6 718.0 Gross profit 135.0 140.9 Warehousing, selling and administrative expenses 97.8 94.0 Restructuring and asset impairment charges 9.1 -- Depreciation and amortization 22.3 20.3 Operating expenses 129.2 114.3 Income from operations 5.8 26.6 Interest expense 26.6 26.5 Loss on debt conversion/retirement 0.3 -- Other expense (income) 0.3 (0.3) Total other expense 27.2 26.2 Income (loss) before income taxes (21.4) 0.4 Income tax provision (benefit) (8.5) 0.8 Net income (loss) $(12.9) $(0.4) Reconciliation to EBITDA Interest expense, net 26.6 26.5 Income tax expense (benefit) (8.5) 0.8 Depreciation and amortization 22.3 20.3 Pro Forma EBITDA $27.5 $47.2 (1) Certain reclassifications have been made to 2002 results to conform to the 2003 presentation.