Inflation in apparel prices drive Broder's inventory level
Broder Bros Co announced results for its first quarter ended March 26, 2011. First quarter 2011 net sales were $173.9 million compared to $153.5 million for the first quarter 2010. Income from operations for the first quarter 2011 was $6.5 million compared to a loss of ($3.3) million for the first quarter 2010. Net income for the first quarter 2011 was $4.3 million compared to a net loss of ($6.5) million for the first quarter 2010.
For the first quarter 2011, the Company reported earnings before interest, taxes, depreciation and amortization ("EBITDA") of $9.2 million compared to EBITDA of $0.9 million for the first quarter 2010. A reconciliation of EBITDA to net income (loss) is set forth at the end of this earnings release.
Results include the impact of certain restructuring and other highlighted charges discussed below. Excluding these highlighted charges, EBITDA was $9.3 million for the first quarter 2011 compared to $1.4 million for the first quarter 2010. The improvement in EBITDA was driven by higher gross margins and higher unit volumes.
First quarter 2011 gross profit was $34.5 million compared to $26.9 million for the first quarter 2010. First quarter 2011 gross margin was 19.8% compared to 17.5% one year prior. The increase in gross profit was attributable to an increase in units sold and management's continued focus on improved pricing and purchasing activities.
The Company's major suppliers announced cost increases in January 2011 and again in late March 2011 or early April 2011 following three cost increases announced from July 2010 through December 2010. First quarter 2011 gross profit included essentially no benefit resulting from cotton price increases. The Company increased its selling prices in response to each of the cost increases imposed by manufacturers but the Company did not raise selling prices on a per unit basis as much as the Company's costs have risen due to competitive factors.
According to data provided by CREST, the U.S. imprintable activewear market grew 7% in units sold during the first quarter 2011. The Company's units sold also grew by 7% during the period when using the comparable period used by CREST, which was January 1, 2011 through March 31, 2011. The Company first quarter 2011 began December 26, 2010 and ended March 26, 2011.
During the first quarter 2011, Company recorded restructuring charges of $0.1 million in interest accretion for closed facilities.
Highlighted charges recorded during the first quarter 2010 consisted of $0.1 million in restructuring charges due to interest accretion on restructuring charges for closed facilities and other highlighted charges of $0.4 million consisted of severance.
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.