Broder Bros., Co. announced net sales of $262.1 million for the second quarter ended June 25, 2005, compared to $227.3 million for the second quarter of 2004. Second quarter 2005 income from operations was $12.2 million compared to income from operations of $8.4 million for second quarter 2004. Second quarter 2005 net income was $2.0 million compared to net income of $0.9 million for the second quarter 2004.

Second Quarter 2005 Results Compared to Prior Year Pro Forma

Second quarter 2005 net sales were $262.1 million compared to pro forma net sales of $267.0 million for the second quarter 2004. Second quarter 2005 income from operations of $12.2 million compared to pro forma income from operations of $9.5 million for the second quarter 2004. Second quarter 2005 earnings before interest, taxes, depreciation and amortization (EBITDA) was $17.1 million compared to pro forma EBITDA of $14.0 million for the second quarter 2004.

Actual and pro forma results include the impact of certain restructuring, integration and other highlighted charges discussed below. Excluding these highlighted charges, second quarter 2005 EBITDA was $17.8 million, compared to $17.1 million pro forma EBITDA for the second quarter 2004.

During the second quarter 2005, the company continued to be impacted by capacity constraints of certain key trade brand suppliers, which led to decreased supplier promotional activity and ultimately led to lower unit volume sales relative to the prior year. Decreased unit volumes were partially offset by increased average selling prices driven higher by a combination of the trade brand supplier capacity constraints and improved mix of higher price point private label and exclusive brand products.


Year to Date Results Compared to Prior Year and Pro Forma


For the six months ended June 2005, net sales of $459.8 million improved over actual revenues of $404.1 million but were lower than pro forma revenues of $471.2 million for the six months ended June 2004. Income from operations for the six months ended June 2005 was $11.1 million compared to actual income from operations of $7.6 million and pro forma income from operations of $9.5 million for the six months ended June 2004. EBITDA of $21.1 million for the six months ended June 2005 improved over actual EBITDA of $16.8 million and pro forma EBITDA of $20.4 million for the six months ended June 2004.

Excluding the highlighted charges denoted herein, EBITDA for the six months ended June 2005 was $22.9 million compared to $24.7 million on a pro forma basis for the six months ended June 2004.

Restructuring and Integration Activities

Throughout 2004 the company successfully completed various restructuring and integration activities related to the September 2003 combination of the Broder and Alpha businesses. In addition, during 2005 the company completed integration activities related to the August 2004 acquisition of NES. As a result of the Alpha and NES restructuring and integration activities, the company has realized operating expense synergies related to reduction of certain redundant general and administrative positions, and has successfully closed six distribution centers: three closures in 2003, two in 2004 and one in 2005.

Pro Forma Segment Results

The company has three operating segments. The Broder division generated second quarter 2005 net sales of $99.2 million compared to $104.1 million in the second quarter 2004. The Alpha division generated second quarter 2005 net sales of $126.0 million compared to net sales of $123.2 million in the second quarter 2004. The NES division generated net sales of $36.9 million in the second quarter 2005 compared to pro forma net sales of $39.7 million in the second quarter 2004.

Business Outlook

“As in the first quarter, we were constrained by the availability of trade products,” commented Vince Tyra, chief executive officer. “This not only affected our revenue but also our profitability since it adversely affected our growth incentives with one vendor in particular. Although suppliers are adding significant capacity, we do not expect capacity constraints to abate until the end of the third quarter. To maintain our long-term customer relationships, we have not exploited this short-term situation with higher unit margins.”

“Our private label and retail brand products performed well in the quarter,” continued Tyra. “Year over year, our private label sales were up 40%. The improved mix that resulted from that growth improved our overall margins. The task that confronts us following the successful launches of several private brands is to reduce inventory and debt to more normal levels. We are confident that we can increase the efficiency of our supply chain by improving our demand planning and replenishment processes.”