Broder Bros. Co. announced that net sales for the first quarter 2004 were $176.8 million compared to $75.9 million for the first quarter 2003. Loss from operations for the first quarter 2004 was $800,000, compared to a loss from operations of $1.8 million for the first quarter 2003. Net loss was $4.9 million for the first quarter 2004, compared to a net loss of $2.5 million for the first quarter 2003. These results include the impact of certain 2004 restructuring and integration related charges discussed below.
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.
First quarter 2004 net sales of $176.8 million improved over pro forma net sales of $166.4 million for the first quarter 2003. The first quarter 2004 loss from operations of $(0.8) million was flat as compared to the first quarter 2003 pro forma loss from operations. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $4.0 million for the first quarter 2004, improved over pro forma EBITDA of $3.9 million for the first quarter 2003.
First quarter 2004 results included $0.7 million of severance related restructuring charges incurred in connection with the 2003 corporate headquarters consolidation plan. First quarter 2004 results also included additional warehousing, selling and administrative costs of $0.5 million which are directly attributable to the Company's ongoing integration efforts, including expenses related to the information systems integration, integration related travel and relocation of certain key personnel to the Philadelphia headquarters.
On May 10, 2004 the Company successfully completed the second of four stages of its information systems integration plan. This stage integrated the Broder and Alpha purchasing, forecasting and inventory control and costing systems. As previously announced, the Company's restructuring and integration activities are expected to continue throughout 2004. In addition to the information systems and corporate headquarters consolidation plans, and the distribution center closures in fiscal year 2003, the Company has identified two additional duplicative distribution centers which it intends to close by the end of 2004, as previously announced.
The Company has two operating segments. The Broder division generated first quarter 2004 net sales of $79.8 million and gross profit of $11.7 million. The Alpha division generated first quarter 2004 net sales of $97.0 million and gross profit of $19.4 million.
On a pro forma basis, the Broder division generated first quarter 2003 net sales of $78.1 million and gross profit of $12.4 million, and the Alpha division generated first quarter 2003 net sales of $88.3 million and gross profit of $15.5 million.
“We are pleased to report solid first quarter results and continued progress in our integration and growth strategy,” said Vince Tyra, Chief Executive Officer of Broder Bros., Co. “Pro forma EBITDA increased by 33%, excluding the effect of restructuring and integration related charges. This was driven by our ability to successfully execute on our multi-brand strategy, which enabled us to achieve a 6% increase in pro forma revenues during a period in which average selling prices continued to decline. For the balance of the year, we expect average selling prices to continue to reflect declines relative to last year due to capacity and operating efficiency dynamics within our supplier base, net of increased raw material costs to the supplier base. For this reason, we continue to invest in our direct sourced brands, anchored by the success and momentum of our Devon & Jones brand which has doubled its volume in 2004 relative to 2003.”
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 27, 2004 AND MARCH 29, 2003
(dollars in millions)
(Unaudited)
Actual Actual Pro Forma
2004 2003 2003 *
Net sales $176.8 $75.9 $166.4
Cost of sales 145.7 64.0 138.5
Gross profit 31.1 11.9 27.9
Warehousing, selling and
administrative expenses 26.4 12.0 24.1
Management fee - 0.2 -
Restructuring charges 0.7 - -
Depreciation and amortization 4.8 1.5 4.6
Operating expenses 31.9 13.7 28.7
Loss from operations (0.8) (1.8) (0.8)
Interest expense, net 7.3 2.3 6.7
Other expense (income) - (0.1) (0.1)
Total other expense 7.3 2.2 6.6
Loss before income taxes (8.1) (4.0) (7.4)
Income tax benefit (3.2) (1.5) (2.8)
Net loss $(4.9) $(2.5) $(4.6)
Reconciliation to EBITDA
Interest expense, net 7.3 2.3 6.7
Income tax benefit (3.2) (1.5) (2.8)
Depreciation and amortization 4.8 1.5 4.6
EBITDA $4.0 $(0.2) $3.9
