Broder Bros. reported second quarter net sales of $259.5 million, down 1.0% from $262.1 million last year. Income from operations for the second quarter 2006 was $9.3 million compared to $12.2 million for second quarter 2005. Second quarter 2006 net loss was $(0.2) million compared to net income of $2.0 million for second quarter 2005. Second quarter 2006 earnings before interest, taxes, depreciation and amortization (EBITDA) was $14.0 million compared to EBITDA of $17.1 million for second quarter 2005.

Results include the impact of certain restructuring, integration and other highlighted charges discussed below. Excluding these highlighted charges, EBITDA was $17.8 million for the second quarter of both 2006 and 2005.

Increased unit volume during the second quarter 2006 compared to the second quarter 2005 was offset by decreased average selling prices. Gross profit was negatively impacted as a result of the Company’s objective to cull certain underperforming private label styles, which has led to the establishment of increased reserve levels and discounting off normal selling prices to dispose of the inventory.

The Company’s Broder division generated second quarter 2006 net sales of $98.7 million compared to $99.2 million in the second quarter 2005. The Alpha division generated second quarter 2006 net sales of $125.7 million compared to net sales of $126.0 million in the second quarter 2005. The NES division generated net sales of $35.1 million in the second quarter 2006 compared to net sales of $36.9 million in the second quarter 2005.


Year-to-Date Results Compared to Prior Year

For the six months ended June 2006, net sales were $469.1 million compared to $459.8 million for the six months ended June 2005. Income from operations for the six months ended June 2006 was $8.9 million compared to $11.1 million for the six months ended June 2005. Net loss for the six months ended June 2006 was $(5.5) million compared to net loss of $(3.5) million for the six months ended June 2005. EBITDA for the six months ended June 2006 was $18.2 million compared to EBITDA of $21.1 million for the six months ended June 2005.

Excluding the highlighted charges denoted herein, EBITDA for the six months ended June 2006 was $24.7 million compared to EBITDA of $22.9 million for the six months ended June 2005.

Business Outlook

The Company continues to execute its strategy to create multi-branded distribution centers to improve inventory availability to customers, reduce overall inventory levels and obtain operational cost savings. The Company has leased a new 330,000 square foot facility in Fresno, CA, and during the third quarter 2006, expects to consolidate its Alpha division La Mirada, CA and its Broder division Fresno, CA distribution facilities into the new dual-branded Broder-Alpha facility. The Company will also open a 30,000 square foot facility in Sante Fe Springs, CA to serve as a customer pick-up operation for the Southern California market.

The Company has leased a 425,000 square foot facility in Chicago, IL, which will operate as a multi-branded distribution center. As the Company grows and shifts volume in the Chicago location, certain Midwest locations will be consolidated into Chicago beginning during the third quarter of 2006 and continuing through the first half of 2007. Similar to its strategy in California, the Company expects to operate smaller customer pick-up operations in locations that are consolidated.

During the third quarter 2006, the Company completed its previously announced strategy to consolidate its call center operations from seven locations down to three locations. The action is expected to yield annualized operational cost savings of approximately $1.6 million while improving customer service levels.


Liquidity

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. The Company expects borrowing levels will peak during the third quarter 2006 and to reach a low point during the fourth quarter of the year. Borrowings under the revolving credit facility decreased from $90.0 million at December 31, 2005 to $68.0 million at July 1, 2006. During the six months ended July 1, 2006, inventory levels increased sequentially by $18.2 million, the net effect of an increase due to seasonal requirements and a 13% improvement in days of inventory on hand.

The Company’s revolving credit facility provides for aggregate borrowings up to $225.0 million, subject to borrowing base availability. As of July 1, 2006, borrowing base availability was $116.0 million.