Broder Bros. reported third quarter sales rose 4.7 percent to $220.5 million from $210.7 million for the third quarter 2010. Adjusted EBITDA was up 48 percent excluding a year-ago inventory gain.

Income from operations for the third quarter 2011 was $12.7 million compared to $13.0 million for the third quarter 2010. Net income for the third quarter 2011 was $8.3 million, or $0.80 per diluted share, compared to $6.6 million, or $0.66 per diluted share, for the third quarter 2010.

For the third quarter 2011, the company reported earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $15.3 million compared to EBITDA of $16.3 million for the third quarter 2010. Third quarter 2010 earnings included $6.3 million in inventory gains associated with higher cotton apparel prices. These inventory gains increased gross profit by $6.3 million.

Results include the impact of certain restructuring and other highlighted charges discussed below. Excluding these highlighted charges, EBITDA was $15.2 million for the third quarter 2011 compared to $16.5 million for the third quarter 2010. Excluding the $6.3 million inventory gain recorded in the third quarter 2010, third quarter 2010 Adjusted EBITDA was $10.2 million. The year-over-year improvement in EBITDA of $5.0 million, or 48%, was driven by higher gross margins.

Third quarter 2011 gross profit was $39.8 million compared to $41.1 million for the third quarter 2010. Third quarter 2011 gross margin was 18.0% compared to 19.5% one year prior. Excluding the $6.3 million in inventory gains, third quarter 2010 gross margin was 16.5%. The increase in gross margin exclusive of the inventory gain recorded in the third quarter 2011 was due to management's continued focus on improved pricing and purchasing activities.

The company's major suppliers announced price increases in January 2011 and again in late March 2011 or early April 2011 following three price increases announced from July 2010 through December 2010. Third quarter 2011 gross profit included no benefit resulting from apparel price increases. The company increased its selling prices in response to each of the price increases from manufacturers. However, due to competitive factors, the company did not raise selling prices on a per unit basis more than the company's costs rose.

According to data provided by CREST, the U.S. imprintable activewear market shrank 6% in units sold during the third quarter 2011. The company's units sold shrank by 8% during the period when using the comparable period used by CREST, which was July 1, 2011 through September 30, 2011. The company's third quarter 2011 began June 26, 2011 and ended September 24, 2011.

Highlighted Charges

The credit to restructuring charges recorded in the third quarter 2011 consisted of a $0.2 million credit resulting from an amendment to a subleases at our former Philadelphia, PA distribution center partially offset by $0.1 million in interest accretion on restructuring charges for closed facilities. The credit to restructuring charges during the nine months ended September 2011 was due to a gain of approximately $2.2 million on the purchase of a leased facility in Wadesboro, NC. The net purchase price of the facility was less than the present value of the remaining lease payments due under the lease, which was set to expire in March 2014.

Restructuring charges recorded during the third quarter 2010 consisted of interest accretion. Restructuring charges recorded for during nine months ended September 25, 2010 consisted of interest accretion on restructuring charges for closed facilities net of a reversal of restructuring charges due to the company entering into a sublease at its former Philadelphia, PA distribution center. Other highlighted charges consisted mainly of severance.

Liquidity Position

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. Historically, borrowing levels have reached peaks during the middle of a given fiscal year and low points during the last quarter of the fiscal year. Borrowings under the revolving credit facility were $141.2 million at September 2011 compared to $115.3 million at December 2010 and $112.1 million at September 2010. The increase in revolver debt was mainly due to higher levels of working capital at September 2011. Borrowing base availability at September 2011, December 2010 and September 2010 was $67.3 million, $40.0 million and $36.2 million, respectively.

The company's inventory and accounts receivable balances at September 2011 increased by $70.1 million and $1.2 million, respectively, over September 2010 levels. The increase in inventory was driven by higher cotton apparel prices and timing of fleece receipts. The price increases resulted in a higher inventory investment to meet the company's customers' need for product availability, at an increased price per unit, as well as higher accounts receivable to fund customers' needs for credit.

The face value of the 2013 Notes outstanding was $117.9 million at September 2011 and December 2010 and $109.6 million at September 2010. Guidance provided by the FASB for troubled debt restructuring, however, requires the 2013 Notes to be recorded on the balance sheets as the total future cash payments for the 2013 Notes, including both principal and interest payments. The 2013 Notes were recorded on the balance sheets at $153.2 million at September 2011 and $160.3 million at December 2010 and June 2010. As a result of capitalizing the cash interest payments for the 2013 Notes, the company does not anticipate recognizing any interest expense on the 2013 Notes through their maturity. The company paid $7.1 million for each semi-annual cash interest payment due in October 2011 and April 2011.

In September 2011, the company sold its Wadesboro, NC facility which the company had purchased during the second quarter 2011. With the purchase and subsequent sale of the property, the company reduced its expected future cash outflows related to this facility by more than $2.5 million. The sale of the building resulted in $0.5 million in proceeds and a loss on the sale of the property and related closing cost of approximately $0.2 million.

        Selected Balance Sheet Information
        (dollars in millions)
        (Unaudited)
                                                                         September 24,  December 25,  September 25,
                                                                         2011           2010          2010
                                                                         -------------  ------------  -------------
        Accounts Receivable, Net                                         $88.3          $76.3         $87.1
        Inventory, Net                                                   264.7          173.4         194.6
        Accounts Payable, Net                                            (119.8)        (61.4)        (97.7)
        Revolving Credit Debt                                            (141.2)        (115.3)       (112.1)
                                                                         -------------  ------------  -------------
                                                                         $92.0          $73.0         $71.9
        2010 Notes                                                       $0.0           $0.0          $11.5
        2013 Notes                                                       $153.2         $160.3        $160.3
        Shareholders' Deficit                                            ($51.4)        ($80.3)       ($90.4)
        Memo:  In-transit Inventory and Accounts Payable included above
                                                                         $9.7           $7.8          $8.0


Fiscal 2011 Guidance Reaffirmed


The company announced today that it is reaffirming its Fiscal 2011
guidance of $62 million to $65 million in Adjusted EBITDA that was
announced in its second quarter 2011 earnings release.


Stockholder Consent Update


On Sept. 27, 2011, the company filed with the Securities and
Exchange Commission (“SEC”) a request to withdraw its registration
statement on Form 10, which was filed with the SEC on August 2, 2011.
Management has stopped the company's efforts to register the company's
equity securities with the SEC and to actively introduce the company to
funds and institutions with the goal of increasing awareness of the company, its strong competitive position and unusually low value
relative to earnings.


 STATEMENTS OF OPERATIONS
        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 24, 2011 AND SEPTEMBER 25, 2010
        (dollars in millions, except per share amounts)
        (Unaudited)
                                                            Three Months Ended  Nine Months Ended
                                                            ------------------  ------------------------
                                                            2011     2010       2011     2010
                                                            -------  ---------  -------  ---------------
        Net sales                                           $220.5   $210.7     $621.5   $575.7
        Cost of sales (exclusive of depreciation
                      and amortization as shown below)      180.7    169.6      498.8    469.5
                                                            -------  ---------  -------  ---------------
                      Gross profit                          39.8     41.1       122.7    106.2
        Warehousing, selling and administrative
                      expenses                              24.6     24.6       74.4     76.4
        Depreciation and amortization                       2.6      3.4        7.9      11.1
        Restructuring (credits) charges, net                (0.1)    0.1        (2.2)    (0.1)
        Stock-based compensation                            0.0      0.1        0.1      0.1
                                                            -------  ---------  -------  ---------------
                      Operating expenses                    27.1     28.2       80.2     87.5
                                                            -------  ---------  -------  ---------------
                      Income from operations                12.7     12.9       42.5     18.7
                      Interest expense                      1.7      3.0        5.8      8.7
                                                            -------  ---------  -------  ---------------
                      Income before income taxes            11.0     9.9        36.7     10.0
        Income tax provision                                2.7      3.3        8.1      3.4
                                                            -------  ---------  -------  ---------------
                      Net income                            $8.3     $6.6       $28.6    $6.6
        Net income per share
                      Basic                                 $0.82    $0.66      $2.84    $0.66
                      Diluted                               $0.80    $0.66      $2.78    $0.66
        Reconciliation to EBITDA
                      Net income                            $8.3     $6.6       $28.6    $6.6
                      Interest expense                      1.7      3.0        5.8      8.7
                      Income tax provision                  2.7      3.3        8.1      3.4
                      Depreciation and amortization         2.6      3.4        7.9      11.1
                                                            -------  ---------  -------  ---------------
        EBITDA                                              $15.3    $16.3      $50.4    $29.8
        Reconciliation to Adjusted EBITDA
                      Restructuring (credits) charges, net  (0.1)    0.1        (2.2)    (0.1)
                      Stock-based compensation              0.0      0.1        0.1      0.1
                      Other highlighted charges             0.0      0.0        0.0      0.9
                                                            -------  ---------  -------  ---------------
        Adjusted EBITDA                                     $15.2    $16.5      $48.3    $30.7