Broder Bros. Reduces Q1 Loss

For the first quarter 2010, the Company reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $0.9 million compared to an EBITDA loss of ($2.3) million for the first quarter 2009.  A reconciliation of EBITDA to net loss is set forth at the end of this press release.

Results include the impact of certain restructuring and other highlighted charges discussed below.  Excluding these highlighted charges, EBITDA was $1.4 million for the first quarter 2010 compared to an EBITDA loss of ($1.2) million for the first quarter 2009.  The improvement in EBITDA was driven by higher gross margins and higher unit volumes.

First quarter 2010 gross profit was $26.9 million compared to $25.0 million for the first quarter 2009.  The increase in gross profit was due to higher unit volumes and improved gross margins.  First quarter 2010 gross margin was 17.5% compared to 16.5% in the first quarter 2009.  Consistent with management's expectations, the Company began to regain lost market share during the first quarter 2010.  The Company's unit shipments were 4% better than the prior year compared to a 3% increase in overall industry unit shipments as reported by STARS. 

Highlighted Charges

Results for the three months ended March 27, 2010 and March 28, 2009 include certain charges as follows:

Restructuring charges recorded during the first quarter 2009 consisted primarily of severance costs related to a reduction in force that occurred in March 2009. Other highlighted charges include approximately $0.4 million in inventory management consulting charges and $0.1 million in consulting charges related to the exchange offer.

Business Outlook

As noted earlier in this earnings release, the STARS data confirms that the Company has begun to regain lost market share.  The timing associated with beginning to regain lost market share was in line with management's expectations following completion of the Company's financial restructuring which occurred in the second quarter 2009.

Management remains focused on regaining lost market share and building the liquidity to both retire the 2010 Notes in October 2010 and to pay cash interest on the 2013 Notes in 2010.  The April 2010 interest payment on the 2013 Notes was made in additional 2013 Notes.

Inventory quality was strong and fulfillment remained exceptional during the first quarter 2010.  The Company instituted its three-part guarantee to customers in the third quarter 2009. The Company promised that it would be in stock in key styles and colors, that it would fulfill orders accurately and that the Company would not be undersold.  These guarantees continue to restore the confidence of the Company's customers.  In addition, management's initiatives to rationalize pricing, improve selling effectiveness and improve marketing communications appear to be contributing to the Company's gross profit growth.

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.  Historical borrowing levels have reached peaks during the middle of a given year and low points during the last quarter of the year.  Borrowings under the revolving credit facility were $121.0 million at March 27, 2010 compared to $100.8 million at December 26, 2009 and $131.8 million at March 28, 2009.  The increase in revolver debt was mainly due to increases in inventory and accounts receivable and a decrease in accounts payable.  Borrowing base availability at March 27, 2010, December 26, 2009 and March 28, 2009 was $10.8 million, $31.5 million and $25.7 million, respectively. 

Management believes that it has the ability to manage cash flow and working capital levels, particularly inventory and accounts payable, to allow the Company to meet its current and future obligations, pay scheduled principal and interest, and provide funds for working capital, capital expenditures and other needs of the business for at least fiscal 2010.