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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED June 30, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM  TO

Commission File Number: 333-110029



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Broder Bros., Co.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Michigan                                                       |  | 38-1911112                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|Six Neshaminy Interplex, 6thFloor, Trevose, PA                 |  | 19053                               
|(Address of principal executive office)                        |  | (Zip code)                          

(215) 291-6140

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



As of August 6, 2007, there were 963,637 shares of Class L, Series 1 common stock outstanding; 931,635 shares of Class L, Series 2 common stock outstanding; 2,785,656 shares of Class L, Series 3 common stock
outstanding; 2,693,147 shares of Class L, Series 4 common stock outstanding; 9,695,252 shares of Class A common stock outstanding; and 28,723,203 shares of Class B common stock outstanding.



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##### Table of Contents

BRODER BROS., CO. AND SUBSIDIARY

Quarterly Report for the Period Ended June 30, 2007

Table of Contents



|                              |  |                                                                                                         |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                         |  | PAGE
|Part I. Financial Information |  |                                                                                                        
|                              |  |                                                                                                        
|Item 1.                       |  | Consolidated Financial Statements (Unaudited)                                                           |  |     
|                              |  |                                                                                                        
|                              |  | Consolidated Balance Sheets as of June 30, 2007 and December 30, 2006                                   |  | 3   
|                              |  |                                                                                                        
|                              |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and July 1, 2006 |  | 5   
|                              |  |                                                                                                        
|                              |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and July 1, 2006           |  | 6   
|                              |  |                                                                                                        
|                              |  | Notes to Consolidated Financial Statements                                                              |  | 7   
|                              |  |                                                                                                        
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  | 15  
|                              |  |                                                                                                        
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                              |  | 23  
|                              |  |                                                                                                        
|Item 4.                       |  | Controls and Procedures                                                                                 |  | 23  
|                              | 
|Part II. Other Information    |  |                                                                                                        
|                              |  |                                                                                                        
|Item 1.                       |  | Legal Proceedings                                                                                       |  | 25  
|                              |  |                                                                                                        
|Item 1A.                      |  | Risk Factors                                                                                            |  | 25  
|                              |  |                                                                                                        
|Item 6.                       |  | Exhibits                                                                                                |  | 25  
|                              | 
|Signatures                    |  | 26                                                                                                     

Broder Bros., Co. (the Company)
is the issuer of $225.0 million aggregate principal amount of 111/4% Senior Notes due October 15, 2010. In November 2003, a total of $175.0
million aggregate principal amount of the Senior Notes (the Initial Notes) were sold in a private placement to qualified institutional buyers under Rule 144A and to persons outside of the United States under Regulation S. In
November 2004, the Company sold in a private placement an additional $50.0 million aggregate principal amount of its 111/4% Senior Notes due
2010 (the Additional Notes and together with the Initial Notes, the Senior Notes) to qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S. The Additional Notes are
additional debt securities issued under an indenture dated September 22, 2003, under which the Company previously issued the Initial Notes.

In September 2003, the Company acquired all of the outstanding capital stock of Alpha Shirt Holdings, Inc. pursuant to a stock purchase agreement entered into in July 2003. The Company acquired all of the outstanding
capital stock of NES Clothing Company in August 2004, and in September 2006, the Company acquired virtually all the assets of Amtex Imports Inc. As used herein and except as the context otherwise may require, the Company, we,
us, our, or Broder means, collectively, Broder Bros., Co. and its consolidated subsidiary. For periods after the acquisition of Alpha Shirt Holdings, Inc., Alpha refers to the former business operated
by Alpha Shirt Holdings, Inc. and which is now operated as a division of Broder Bros., Co., and for periods after the acquisition of NES Clothing Company, NES refers to the former business operated by NES Clothing Company and which is
now operated as a division of Broder Bros., Co.



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|------- | ---------------------------------------------

BRODER BROS., CO. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | ---------------- | - | -------
|                                                                                                                                                                                                                                                   |  | June 30, 2007                               |         | December 30,2006
|                                                                                                                                                                                                                                                   |  | (unaudited)                                 |         |                 
|                                                                                                                                                                                                                                                   |  | (dollars in thousands,except share amounts)
|ASSETS                                                                                                                                                                                                                                             |  |                                             |         |                  |   |        
|Current assets:                                                                                                                                                                                                                                    |  |                                             |         |                  |   |        
|Cash                                                                                                                                                                                                                                               |  | $                                           | 5,496   |                  | $ | 4,270  
|Accounts receivable, net of allowance for doubtful accounts of $6,464 at June 30, 2007 and $5,814 at December 30,
2006                                                                                                                             |  |                                             | 98,293  |                  |   | 85,103 
|Finished goods inventory                                                                                                                                                                                                                           |  |                                             | 218,151 |                  |   | 233,287
|Prepaid and other current assets                                                                                                                                                                                                                   |  |                                             | 6,756   |                  |   | 9,787  
|Deferred income taxes                                                                                                                                                                                                                              |  |                                             | 9,143   |                  |   | 8,919  
|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|Total current assets                                                                                                                                                                                                                               |  |                                             | 337,839 |                  |   | 341,366
|Fixed assets, net                                                                                                                                                                                                                                  |  |                                             | 26,763  |                  |   | 24,220 
|Goodwill                                                                                                                                                                                                                                           |  |                                             | 138,866 |                  |   | 138,412
|Other intangibles                                                                                                                                                                                                                                  |  |                                             | 55,805  |                  |   | 60,775 
|Deferred financing fees, net                                                                                                                                                                                                                       |  |                                             | 7,488   |                  |   | 8,604  
|Deferred income taxes                                                                                                                                                                                                                              |  |                                             | 9,355   |                  |   | 4,562  
|Other assets                                                                                                                                                                                                                                       |  |                                             | 2,440   |                  |   | 2,339  
|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|Total assets                                                                                                                                                                                                                                       |  | $                                           | 578,556 |                  | $ | 580,278
|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                                               |  |                                             |         |                  |   |        
|Current liabilities:                                                                                                                                                                                                                               |  |                                             |         |                  |   |        
|Current portion of long-term debt and capital lease obligations                                                                                                                                                                                    |  | $                                           | 3,831   |                  | $ | 3,008  
|Accounts payable                                                                                                                                                                                                                                   |  |                                             | 118,746 |                  |   | 97,275 
|Accrued expenses                                                                                                                                                                                                                                   |  |                                             | 21,054  |                  |   | 23,195 
|Accrued interest                                                                                                                                                                                                                                   |  |                                             | 7,269   |                  |   | 6,600  
|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|Total current liabilities                                                                                                                                                                                                                          |  |                                             | 150,900 |                  |   | 130,078
|Long-term debt and capital lease obligations, net of current portion                                                                                                                                                                               |  |                                             | 332,077 |                  |   | 341,289
|Deferred income taxes                                                                                                                                                                                                                              |  |                                             | 32,005  |                  |   | 33,590 
|Other long-term liabilities                                                                                                                                                                                                                        |  |                                             | 13,308  |                  |   | 9,313  
|Redeemable securities                                                                                                                                                                                                                              |  |                                             | 265     |                  |   | 365    
|                                                                                                                                                                                                                                                   |  |                                             |         |                  |   |        
|Total liabilities                                                                                                                                                                                                                                  |  |                                             | 528,555 |                  |   | 514,635
|Commitments and contingencies                                                                                                                                                                                                                      |  |                                             |         |                  |   |        
|                                                                                                                                                                                                                                                   |  |                                            
|Shareholders equity:                                                                                                                                                                                                                              |  |                                             |         |                  |   |        
|Class L, Series 1 common stock; par value $0.01 per share; 2,000,000 shares authorized; 963,637 shares issued and outstanding (aggregate
liquidation preference of $36,637 and $34,440 as of June 30, 2007 and December 30, 2006, respectively)    |  |                                             | 10      |                  |   | 10     
|Class L, Series 2 common stock; par value $0.01 per share; 2,000,000 shares authorized; 931,635 shares issued and outstanding (aggregate
liquidation preference of $26,496 and $24,651 as of June 30, 2007 and December 30, 2006, respectively)    |  |                                             | 10      |                  |   | 10     
|Class L, Series 3 common stock; par value $0.01 per share; 4,000,000 shares authorized; 2,778,057 shares issued and outstanding (aggregate
liquidation preference of $105,622 and $99,288 as of June 30, 2007 and December 30, 2006, respectively) |  |                                             | 28      |                  |   | 28     
|Class L, Series 4 common stock; par value $0.01 per share; 4,000,000 shares authorized; 2,685,802 shares issued and outstanding (aggregate
liquidation preference of $76,384 and $71,066 as of June 30, 2007 and December 30, 2006, respectively)  |  |                                             | 27      |                  |   | 27     
|Class A common stock; par value $0.01 per share; 15,000,000 shares authorized; 9,695,252 shares issued and outstanding                                                                                                                             |  |                                             | 102     |                  |   | 102    



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##### Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                             |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | June 30, 2007                               |         |   | December 30,2006 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (unaudited)                                 |         |   |                  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (dollars in thousands,except share amounts) |        
|Class B common stock; par value $0.01 per share; 35,000,000 shares authorized; 28,644,854 shares issued and outstanding                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                             | 287     |   |                  |   | 287     |  
|WarrantsClass L, Series 3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                             | 1,477   |   |                  |   | 1,477   |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                             | 123,214 |   |                  |   | 122,880 |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                             | (11     | ) |                  |   | (15     | )
|Accumulated deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                             | (72,020 | ) |                  |   | (56,154 | )
|Treasury stock; 615,859 and 615,859 shares of Class A common stock; 302,485 and 274,249 shares of Class B common stock; 36,363 and 36,363
shares of Class L, Series 1 common stock; 35,156 and 35,156 shares of Class L, Series 2 common stock; 29,337 and 26,599 shares of Class L, Series 3 common stock; 28,360 and 25,713 shares of Class L, Series 4 common stock; 5,930 and 5,930 Class L,
Series 1 warrants; and 1,369 and 1,065 Class L, Series 3 warrants, at cost, at June 30, 2007 and December 30, 2006, respectively |  |                                             | (3,123  | ) |                  |   | (3,009  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                             |         |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                             | 50,001  |   |                  |   | 65,643  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                             |         |   |                  |   |         |  
|Total liabilities and shareholders equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $                                           | 578,556 |   |                  | $ | 580,278 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                             |         |   |                  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

BRODER BROS., CO. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2007 and July 1, 2006



|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|----------------------------------------------- |  | ---------------------------------- | ------- | - | ---------------- | - | ------- | ------------- |  | - | ------------ | - |  | - | ------- | -
|                                                |  | Three Months Ended                 |         |   | Six Months Ended |  
|                                                |  | June 30, 2007                      |         |   | July 1, 2006     |   |         | June 30, 2007 |  |   | July 1, 2006 |  
|                                                |  | (unaudited) (dollars to thousands) |        
|Net sales                                       |  | $                                  | 249,399 |   |                  | $ | 259,541 |               |  | $ | 449,977      |   |  | $ | 469,159 |  
|Cost of sales                                   |  |                                    | 205,833 |   |                  |   | 212,520 |               |  |   | 370,246      |   |  |   | 384,138 |  
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Gross profit                                    |  |                                    | 43,566  |   |                  |   | 47,021  |               |  |   | 79,731       |   |  |   | 85,021  |  
|Warehousing, selling and administrative         |  |                                    | 39,232  |   |                  |   | 36,773  |               |  |   | 76,056       |   |  |   | 74,384  |  
|Restructuring and asset impairment charges, net |  |                                    | (941    | ) |                  |   | 940     |               |  |   | 6,233        |   |  |   | 1,771   |  
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Total operating expenses                        |  |                                    | 38,291  |   |                  |   | 37,713  |               |  |   | 82,289       |   |  |   | 76,155  |  
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Income (loss) from operations                   |  |                                    | 5,275   |   |                  |   | 9,308   |               |  |   | (2,558       | ) |  |   | 8,866   |  
|Other (income) expense                          |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Interest                                        |  |                                    | 9,315   |   |                  |   | 9,353   |               |  |   | 19,551       |   |  |   | 18,691  |  
|Change in fair value of interest rate swaps     |  |                                    | (86     | ) |                  |   | (120    | )             |  |   | (112         | ) |  |   | (270    | )
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Total other expense                             |  |                                    | 9,229   |   |                  |   | 9,233   |               |  |   | 19,439       |   |  |   | 18,421  |  
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Income (loss) before income taxes               |  |                                    | (3,954  | ) |                  |   | 75      |               |  |   | (21,997      | ) |  |   | (9,555  | )
|Income tax provision (benefit)                  |  |                                    | 411     |   |                  |   | 284     |               |  |   | (6,505       | ) |  |   | (4,029  | )
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  
|Net loss                                        |  | $                                  | (4,365  | ) |                  | $ | (209    | )             |  | $ | (15,492      | ) |  | $ | (5,526  | )
|                                                |  |                                    |         |   |                  |   |         |               |  |   |              |   |  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



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BRODER BROS., CO. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2007 and July 1, 2006



|                                                                               |  |                        |          |   |              |   |          |  
|------------------------------------------------------------------------------ |  | ---------------------- | -------- | - | ------------ | - | -------- | -
|                                                                               |  | Six Months Ended       |         
|                                                                               |  | June 30,2007           |          |   | July 1, 2006 |  
|                                                                               |  | (unaudited)            |         
|                                                                               |  | (dollars in thousands) |         
|Cash flows from operating activities                                           |  |                        |          |   |              |   |          |  
|Net loss                                                                       |  | $                      | (15,492  | ) |              | $ | (5,526   | )
|Adjustments to reconcile net loss to net cash provided by operating activities |  |                        |          |   |              |   |          |  
|Depreciation                                                                   |  |                        | 4,678    |   |              |   | 3,538    |  
|Amortization                                                                   |  |                        | 5,961    |   |              |   | 7,318    |  
|Provision for losses on accounts receivable                                    |  |                        | 1,059    |   |              |   | 901      |  
|Deferred income taxes                                                          |  |                        | (6,394   | ) |              |   | (4,028   | )
|Stock-based compensation                                                       |  |                        | 234      |   |              |   | 103      |  
|Loss on disposal of fixed assets                                               |  |                        | 45       |   |              |   | 129      |  
|Change in fair value of interest rate swaps                                    |  |                        | (112     | ) |              |   | (270     | )
|Asset impairment charges                                                       |  |                        |         |   |              |   | 107      |  
|Changes in operating accounts                                                  |  |                        |          |   |              |   |          |  
|Accounts receivable                                                            |  |                        | (14,249  | ) |              |   | (16,438  | )
|Finished goods inventory                                                       |  |                        | 15,136   |   |              |   | (18,284  | )
|Prepaid and other current assets                                               |  |                        | 2,930    |   |              |   | 2,980    |  
|Accounts payable                                                               |  |                        | 14,814   |   |              |   | 45,122   |  
|Accrued liabilities and other                                                  |  |                        | 1,604    |   |              |   | (345     | )
|                                                                               |  |                        |          |   |              |   |          |  
|Net cash provided by operating activities                                      |  |                        | 10,214   |   |              |   | 15,307   |  
|                                                                               |  |                        |          |   |              |   |          |  
|                                                                               |  |                       
|Cash flows from investing activities                                           |  |                        |          |   |              |   |          |  
|Acquisition of fixed assets                                                    |  |                        | (3,297   | ) |              |   | (3,541   | )
|                                                                               |  |                        |          |   |              |   |          |  
|Net cash used in investing activities                                          |  |                        | (3,297   | ) |              |   | (3,541   | )
|                                                                               |  |                        |          |   |              |   |          |  
|                                                                               |  |                       
|Cash flows from financing activities                                           |  |                        |          |   |              |   |          |  
|Borrowings on revolving credit agreement                                       |  |                        | 210,200  |   |              |   | 202,400  |  
|Repayments on revolving credit agreement                                       |  |                        | (220,600 | ) |              |   | (224,400 | )
|Payment for treasury stock purchase                                            |  |                        | (114     | ) |              |   | (2,037   | )
|Proceeds from payment of employee note receivable                              |  |                        |         |   |              |   | 463      |  
|Payments of principal on capital lease obligations                             |  |                        | (1,833   | ) |              |   | (625     | )
|Change in book overdraft                                                       |  |                        | 6,656    |   |              |   | 12,535   |  
|                                                                               |  |                        |          |   |              |   |          |  
|Net cash used in financing activities                                          |  |                        | (5,691   | ) |              |   | (11,664  | )
|                                                                               |  |                        |          |   |              |   |          |  
|Net increase in cash                                                           |  |                        | 1,226    |   |              |   | 102      |  
|Cash at beginning of period                                                    |  |                        | 4,270    |   |              |   | 3,305    |  
|                                                                               |  |                        |          |   |              |   |          |  
|Cash at end of period                                                          |  | $                      | 5,496    |   |              | $ | 3,407    |  
|                                                                               |  |                        |          |   |              |   |          |  
|Supplemental disclosure of cash flow information                               |  |                        |          |   |              |   |          |  
|Assets acquired as a result of capital lease obligations                       |  | $                      | 3,969    |   |              | $ | 193      |  
|                                                                               |  |                        |          |   |              |   |          |  

The accompanying notes are an integral part of the consolidated financial statements.



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##### Table of Contents

BRODER BROS., CO. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. The Company and Summary of
Significant Accounting Policies

Description of the Company

Broder Bros., Co. and its consolidated subsidiary (the Company) is a national wholesale distributor of imprintable sportswear and related
products which include undecorated or blank T-shirts, sweatshirts, polo shirts, caps, bags and other imprintable accessories that are decorated primarily for advertising and promotional purposes. Products are sold to screen printers,
embroiderers and advertising specialty companies through distribution centers strategically located throughout the United States. These customers decorate the Companys products with corporate logos, brands and other images and then sell the
imprinted sportswear and accessories to a highly diversified range of end-customers, including Fortune 1000 companies, sporting venues, concert promoters, athletic leagues, educational institutions and travel resorts.

In September 2003, the Company acquired all of the outstanding capital stock of Alpha Shirt Holdings, Inc. (Alpha). In August 2004, the
Company acquired all of the shares of beneficial interest of NES, a leading distributor of imprintable sportswear in New England. Immediately after consummation of those acquisitions, Alpha and its subsidiaries and NES and its subsidiary were merged
with and into Broder Bros., Co., except for ASHI, Inc., which became a direct, wholly owned non-operating subsidiary of the Company until it also was subsequently merged with and into Broder Bros., Co. in fiscal year 2005. In addition, the Company
acquired substantially all of the assets of Amtex Imports Inc. in September 2006.

The Company operates on a 52/53-week year basis with the
year ending on the last Saturday of December. The three and six months ended June 30, 2007 and July 1, 2006 each consisted of thirteen and twenty-six weeks, respectively. Fiscal periods are identified according to the calendar period that
they most accurately represent. For example, the quarterly period ended July 1, 2006 is referred to herein as the three months ended June 30, 2006 and the balance sheet date of July 1, 2006 is referred to herein as
June 30, 2006.

Basis of Presentation of Unaudited Interim Financial Information

The unaudited consolidated financial information herein has been prepared in accordance with generally accepted accounting principles and is in accordance
with the Securities and Exchange Commission (SEC) regulations for interim financial reporting. In the opinion of management, the financial statements include all adjustments, consisting only of normal recurring adjustments, that are
considered necessary for a fair statement of the Companys financial position, results of operations and cash flows for the interim periods. Operating results for the three and six months ended June 30, 2007 are not necessarily indicative
of results that may be expected for the entire year. This financial information should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2006 of the Company, which are included in the
Form 10-K filed with the SEC on April 2, 2007.

Accounting Changes

On December 31, 2006, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation
of FASB Statement No. 109 (FIN 48). Among other things, FIN 48 requires application of a more likely than not threshold to the recognition and de-recognition of tax positions. It further requires that a change in
judgement related to prior years tax positions be recognized in the quarter of such change. The December 31, 2006 transition reduced the Companys retained earnings by $0.4 million which includes the adjustment to the liability for
unrecognized tax benefits of $1.8 million which is reported in other long-term liabilities on the Companys consolidated balance sheet at June 30, 2007. See Note 7 for additional information.

Use of Estimates

The preparation of
financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements. These assumptions also affect the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

Inventory

Inventory
is stated at the lower of cost or market using the first-in, first-out method. Inventory consists of finished goods held for sale. The Companys reported inventory cost consists of the cost of product, net of vendor incentives related to unsold
inventory, and certain costs incurred to bring inventory to its existing condition or location, including freight-in, purchasing, receiving, inspection and other material handling costs. Amounts due to the Company related to vendor incentives are
recorded as reductions to vendor payables.



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The Company maintains an allowance for potential losses on the disposal of its discontinued and
slow-moving inventory. The allowance for excess and discontinued inventory balances at June 30, 2007 and December 31, 2006 were approximately $8.5 million and $8.6 million, respectively.

Income Taxes

The Company accounts
for income taxes in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). SFAS No. 109 requires an asset and liability approach which requires the recognition of deferred
income tax assets and deferred income tax liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date.

A valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will
not be realized. No valuation allowance was recorded as of December 31, 2006 since the Company had sufficient deferred tax liabilities to shield its deferred tax assets and was not relying on projected, future taxable income to be able to
realize its deferred tax assets. Due to the Companys continued net operating losses and its net deferred tax asset position excluding naked credits, the Company recorded a valuation allowance of $1.0 million during the three months ended
June 30, 2007 (see Note 7).

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments  An Amendment of SFAS Nos. 133 and 140 (SFAS No. 155). SFAS No. 155 is
effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. One of the primary objectives of SFAS No. 155 is to simplify the accounting for
certain hybrid financial instruments by permitting fair value accounting for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. The Companys adoption of SFAS No. 155 has not had
a material effect on its financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS No. 157). SFAS No. 157 clarifies that the term fair value is intended to mean a market-based measure, not an entity-specific measure and gives the highest priority to quoted prices in
active markets in determining fair value. SFAS No. 157 requires disclosures about (1) the extent to which companies measure assets and liabilities at fair value, (2) the methods and assumptions used to measure fair value and
(3) the effect of fair value measures on earnings. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of SFAS No. 157 on its financial position, results of
operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). SFAS No. 159 permits entities to measure at fair value, at specified election dates, many financial instruments and certain other assets and liabilities that are not otherwise
required to be measured at fair value. Subsequent changes in fair value will be required to be reported in earnings each reporting period. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the impact of SFAS No. 159 on its financial position, results of operations and cash flows.

2. Comprehensive Loss



|                                                                 |  |                            |        |   |                          |   |      |      |  |   |         |   |  |   |        |  
|---------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ---- | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                 |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                 |  | 2007                       |        |   | 2006                     |   |      | 2007 |  |   | 2006    |  
|                                                                 |  | (dollars in thousands)     |       
|Net loss                                                         |  | $                          | (4,365 | ) |                          | $ | (209 | )    |  | $ | (15,492 | ) |  | $ | (5,526 | )
|Amortization of SFAS 133 transition adjustment, net of taxes (a) |  |                            | 3      |   |                          |   | 4    |      |  |   | 4       |   |  |   | 9      |  
|                                                                 |  |                            |        |   |                          |   |      |      |  |   |         |   |  |   |        |  
|Comprehensive loss                                               |  | $                          | (4,362 | ) |                          | $ | (205 | )    |  | $ | (15,488 | ) |  | $ | (5,517 | )
|                                                                 |  |                            |        |   |                          |   |      |      |  |   |         |   |  |   |        |  

---

|(a) | Net of taxes of $1 and $2, respectively, for the three months ended June 30, 2007 and 2006 and net of taxes of $2 and $4, respectively, for the six months ended June 30,
2007 and 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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3. Acquisition

In September 2006, the Company acquired substantially all of the assets of Amtex Imports Inc. (Amtex), a regional imprintable activewear distributor with a single location in Northlake, IL. The Amtex
acquisition facilitated the Companys entry into the Chicago market. Total consideration paid was approximately $7.1 million, consisting of $6.5 million in cash, the issuance of a $0.3 million promissory note payable to the former owner of
Amtex and approximately $0.3 million in transaction costs. In accordance with SFAS No. 141, Business Combinations, the purchase price paid in the Amtex acquisition has been allocated to the assets acquired and liabilities assumed.
The preliminary purchase price allocation is expected to be finalized during the last half of fiscal 2007 following the working capital settlement in accordance with the terms of the asset purchase agreement.

The following table sets forth the preliminary allocation of the purchase price to assets acquired and liabilities assumed and the amortizable lives for
each of the intangible assets:



|                                       |  |                       |        |  
|-------------------------------------- |  | --------------------- | ------ | -
|                                       |  | (Dollars inthousands) |       
|Accounts receivable                    |  | $                     | 3,348  |  
|Inventory                              |  |                       | 7,992  |  
|Other assets                           |  |                       | 13     |  
|Fixed assets                           |  |                       | 88     |  
|Customer relationships (3 years)       |  |                       | 800    |  
|Trademarks/tradename (1 year)          |  |                       | 200    |  
|Non-compete agreement (4 years)        |  |                       | 210    |  
|Goodwill                               |  |                       | 1,432  |  
|Accounts payable and other liabilities |  |                       | (7,029 | )
|                                       |  |                       |        |  
|Purchase price                         |  | $                     | 7,054  |  
|                                       |  |                       |        |  

Amtexs results of operations have been included in the consolidated financial statements
since the date of acquisition.

4. Long-Term Debt and Capital Lease Obligations

Long-term debt and capital lease obligations consisted of the following at the dates indicated below:



|                                                                              |  |                        |         |                   |   |        
|----------------------------------------------------------------------------- |  | ---------------------- | ------- | ----------------- | - | -------
|                                                                              |  | June 30, 2007          |         | December 31, 2006
|                                                                              |  | (dollars in thousands)
|Revolving credit facility                                                     |  | $                      | 100,000 |                   | $ | 110,400
|Senior notes                                                                  |  |                        | 225,000 |                   |   | 225,000
|Promissory note payable (to former owner of Amtex)                            |  |                        | 300     |                   |   | 300    
|Unamortized debt premium                                                      |  |                        | 844     |                   |   | 969    
|Capital lease obligations                                                     |  |                        | 9,764   |                   |   | 7,628  
|                                                                              |  |                        |         |                   |   |        
|                                                                              |  |                        | 335,908 |                   |   | 344,297
|Less: current portion                                                         |  |                        | 3,831   |                   |   | 3,008  
|                                                                              |  |                        |         |                   |   |        
|Total long-term debt and capital lease obligations, excluding current portion |  | $                      | 332,077 |                   | $ | 341,289
|                                                                              |  |                        |         |                   |   |        

Principal payments on the revolving credit facility, senior notes and capital lease obligations
for the next five years ending June 30 are as follows:



|     |  |                        |        
|---- |  | ---------------------- | -------
|     |  | (dollars in thousands)
|2008 |  | $                      | 3,831  
|2009 |  |                        | 2,928  
|2010 |  |                        | 3,077  
|2011 |  |                        | 225,184



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##### Table of Contents

|           |  |                       
|---------- |  | ----------------------
|           |  | (dollars in thousands)
|2012       |  | 100,044               
|Thereafter |  |                      

Revolving Credit Facility

In August 2006, the Company entered into an Amended and Restated Credit Agreement (Credit Agreement), and amended and restated the Companys revolving credit agreement, dated as of September 22,
2003, by and among the Company, the lenders thereto and the agents named therein (the Revolver Agreement). Certain of the lenders under the Credit Agreement were also lenders under the Revolver Agreement. Subject to compliance with the
terms of the Indenture governing the Senior Notes and the Credit Agreement, the Company may borrow up to $225 million under the Credit Agreement for working capital, capital expenditures, permitted acquisitions and other corporate purposes. The
Credit Agreement matures on August 31, 2011.

The Credit Agreement provides for a committed $225.0 million senior secured revolver
facility (the Revolver Facility), which includes a $20.0 million seasonal stretch tranche (the Seasonal Stretch). The Credit Agreement provides for interest based upon a fixed spread over the lenders LIBOR lending rate
and represents a more favorable rate than that of the Revolver Agreement. In addition, the Credit Agreement is secured by first priority interest in substantially all of the assets of the Company. An unused line fee is charged of 0.25% on the
Revolver Facility and 0.5% on the Seasonal Stretch.

The Credit Agreement contains both affirmative and negative covenants which, among
other things, may require the Company to meet a minimum consolidated fixed charge coverage ratio, as defined in the Credit Agreement, and places limits upon disposals of assets, mergers and acquisitions, further indebtedness, transactions with
affiliates and other customary restrictions. The occurrence of certain of these events may accelerate the timing of required repayments.

Total unused credit facility fees under the Credit Agreement were approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2007, respectively. The effective interest rate at June 30, 2007 was 6.8%
and the weighted average interest rate on borrowings under the Credit Agreement for the six months ended June 30, 2007 was 6.8%. As of June 30, 2007, outstanding borrowings on the Credit Agreement were $100.0 million, which left $83.7
million of available borrowing capacity as determined by borrowing base availability. The effective interest rate at December 31, 2006 was 6.8%. As of December 31, 2006, outstanding borrowings on the revolving credit facility were $110.4
million, which left $68.3 million of available borrowing capacity as determined by borrowing base availability.

The Company incurred $0.8
million in debt issuance costs in connection with the Credit Agreement. These costs are being amortized to interest expense on a straight-line basis over the life of the Credit Agreement.

The Credit Agreement also contains a provision for up to $25.0 million of letters of credit, subject to borrowing base availability and total amounts
outstanding under the Credit Agreement of $225.0 million. As of June 30, 2007 and December 31, 2006, the Company had approximately $8.0 million and $12.5 million, respectively, of outstanding letters of credit primarily related to
commitments for the purchase of inventory.

On April 2, 2007, the Company provided notice to the administrative agent for the credit
facility of the occurrence and cure of a default under Article VIII(g)(ii) of the Credit Agreement. A default existed under the indenture governing the Senior Notes and the Credit Agreement as a result of the failure by the Company to file its
Annual Report on Form 10-K for the year ended December 30, 2006 with the Securities and Exchange Commission (SEC) within the time period specified in the SECs rules and regulations as required by Section 4.03 of the
indenture, which was March 30, 2007. The Annual Report on Form 10-K for the year ended December 30, 2006 was filed with the SEC on April 2, 2007. As of June 30, 2007, the Company was in compliance with all covenants under the
Credit Agreement.

Senior Notes

In September 2003, the Company completed a private offering of $175.0 million 111/4% senior notes due 2010. The proceeds of the private offering were used to finance the Alpha acquisition, repay existing indebtedness and to pay related
fees and expenses. In November 2004, the Company completed a private offering of an additional $50.0 million 111/4% senior notes due 2010. The
proceeds of the private placement were used to repay borrowings under the revolving credit facility. All senior notes were issued under the same indenture. The senior notes are guaranteed on a senior unsecured basis by all existing and future
material domestic subsidiaries, and pay interest semi-annually in arrears on April 15 and October 15 of each year.

The indenture governing the senior notes and the revolving credit facility, among other things, (i) restrict the ability of the Company and its subsidiaries, including the guarantor of the senior notes, to incur additional
indebtedness, issue shares of preferred



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##### Table of Contents

stock, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates, (ii) prohibit certain
restrictions on the ability of certain of the Companys subsidiaries, including the guarantor of the senior notes, to pay dividends or make certain payments to the Company and (iii) place restrictions on the ability of the Company and its
subsidiaries, including the guarantor of the senior notes, to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets. The indenture related to the senior
notes and the revolving credit facility also contain various covenants which limit the Companys discretion in the operation of its businesses. On April 2, 2007, the Company provided notice to the trustee for the indenture of the
occurrence and cure of a default under Section 4.03 of the indenture. A default existed under the indenture governing the Senior Notes and the Credit Agreement as a result of the failure by the Company to file its Annual Report on Form 10-K for
the year ended December 30, 2006 with the SEC within the time period specified in the SECs rules and regulations as required by Section 4.03 of the Indenture, which was March 30, 2007. The Annual Report on Form 10-K for the year
ended December 30, 2006 was filed with the SEC on April 2, 2007. As of June 30, 2007, the Company was in compliance with all covenants under the indenture.

Interest Rate Swaps

As a condition of its revolving credit facility that was retired in September
2003, the Company was required to enter into interest rate protection agreements (swaps). The Company does not use derivatives for speculative purposes. The Company had an outstanding interest rate swap agreement with a commercial bank
that had a notional amount of $10.0 million at June 30, 2007 and December 31, 2006. The interest rate swap agreement matures in October 2008.

The Company is exposed to credit loss in the event of nonperformance by the counterparty. The Company does not anticipate nonperformance to be likely. The Company has elected to not apply hedge accounting for this
swap agreement. The fair value of this interest rate swap approximated $(0.2) million and $(0.3) million at each of June 30, 2007 and December 31, 2006, respectively. The swaps are classified on the consolidated balance sheets based on the
expected timing of the cash flows related to the swaps. Approximately $0.2 million and $0.3 million were classified as other long-term liabilities at June 30, 2007 and December 31, 2006, respectively.

Redeemable Securities

During 2004,
Bain Capital sold shares of its common stock of the Company to certain executives at their fair market value. These shares may be put to the Company at their fair market value if the executive is terminated for any reason other than for cause, or if
the executive resigns with good reason as defined in the applicable employment agreement and are recorded as other long-term liabilities on the consolidated balance sheets at June 30, 2007 and December 31, 2006 in accordance with SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. An executive who held Company shares left the Company during 2007 and the Company purchased such executives shares,
which resulted in increases to additional paid-in capital and treasury stock at June 30, 2007. See Note 5.

These shares have been
recorded on the consolidated balance sheets at each of the following dates:



|                  |  |                        |  |                           |     |                           |   |                        |  |   |      
|----------------- |  | ---------------------- |  | ------------------------- | --- | ------------------------- | - | ---------------------- |  | - | -----
|                  |  | Number of Shares       |  | Common Stock at Par Value |     | AdditionalPaid-in Capital |   | Liquidation Preference
|                  |  | (dollars in thousands)
|June 30, 2007     |  |                        |  |                           |     |                           |   |                        |  |   |      
|Class B           |  | 78,348                 |  | $                         | 0.8 |                           | $ | 16                     |  | $ |     
|Class L, Series 3 |  | 7,600                  |  |                           | 0.1 |                           |   | 135                    |  |   | 289.0
|Class L, Series 4 |  | 7,345                  |  |                           | 0.1 |                           |   | 113                    |  |   | 208.9
|December 31, 2006 |  |                        |  |                           |     |                           |   |                        |  |   |      
|Class B           |  | 106,584                |  | $                         | 1.1 |                           | $ | 23                     |  | $ |     
|Class L, Series 3 |  | 10,338                 |  |                           | 0.1 |                           |   | 185                    |  |   | 369.5
|Class L, Series 4 |  | 9,992                  |  |                           | 0.1 |                           |   | 156                    |  |   | 264.1

5. Related Party Transactions

In connection with the Alpha acquisition, the Company amended and restated its existing advisory services agreement with Bain Capital (the Advisory Services Agreement). The Advisory Services Agreement is a
discretionary, contingency-based agreement, subject to certain conditions and limitations set forth therein. Before any such management fees may be paid, EBITDA, as defined in the amended and restated Advisory Services Agreement, after giving effect
to payment of the management fee, must be greater than $52.0 million in order for Bain Capital to earn a fee. The Company believes that the terms of such Advisory Services Agreement with Bain Capital are no less favorable than those that could have
been obtained pursuant to a similar agreement with an unrelated third party.



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Under the Advisory Services Agreement, for the first two full fiscal years following the Alpha
acquisition and related equity investment by Bain Capital, Bain Capital could be paid a management fee for strategic, financial and other advisory services up to an annual maximum of $1.5 million at the discretion of the Companys board of
directors. The Advisory Services Agreement states that for each full fiscal year beginning in fiscal 2006, Bain Capital may be paid a fee up to an annual maximum of $3.0 million at the discretion of the Companys board of directors. The Company
paid Bain Capital a fee of $3.0 million for fiscal 2006. During the three and six months ended June 30, 2007, the Company recorded management fee expense of $0.6 million and $0.9 million, respectively. During the three and six months ended June
30, 2006, the Company recorded management fee expense of $0.9 million and $1.2 million, respectively. The management fee expense accrual is included in accrued expenses in the consolidated balance sheet.

The Advisory Services Agreement also requires the Company to pay investment banking fees in the
amount of one percent of certain prescribed transactions. Bain Capital was paid fees of approximately $0.4 million upon the completion of the NES acquisition in August 2004, $0.5 million upon completion of the private placement of $50.0 million
aggregate principal amount of the Companys 111/4% senior notes offering in November 2004, and approximately $0.1 million upon the completion of
the Amtex acquisition in September 2006.

In March 2007, the Company entered into a separation agreement with its former chief
financial officer. The agreement provided for, among other items, payments to the former executive in an aggregate amount of approximately $0.5 million, payable in a single lump sum, and the purchase by the Company of equity securities owned by the
former executive for an aggregate purchase price of approximately $0.1 million. The payment to the former executive was made in consideration for a twenty-four month extension of a non-compete period, which resulted in a thirty-six month non-compete
period, as well as a transition bonus payment for services rendered in connection with the former executives separation from the Company. The non-compete agreement is being amortized during the period March 2007 through February 2010 and is
included in depreciation and amortization within warehousing, selling and administrative in the consolidated statement of operations data.

6. Commitments and Contingencies

Self-Insured Health Plan

The Company maintains a self-insured health plan for some of its employees. The Company has purchased stop loss insurance to supplement the health plan,
which will reimburse the Company for individual claims in excess of $0.1 million annually or aggregate claims exceeding approximately $5.4 million. At June 30, 2007 and December 31, 2006, approximately $0.5 million and $0.4 million,
respectively, was included in accrued liabilities for self-insured health plan costs.

Litigation

The Company is a party to various lawsuits arising out of the normal conduct of its business, none of which, individually or in the aggregate, are
expected to have a material adverse effect on the Companys results of operations or financial position.

Employment Agreements

The Company has entered into employment agreements with certain employees, which provide that the employee will not compete in the wholesale distribution
of imprintable sportswear and accessories business for a specified period after their respective termination dates. The employment agreements also define employment terms including salary, bonus and benefits to be provided to the respective
employees.

Advisory Agreement

In
connection with the acquisition of Alpha, the Company entered into a new Advisory Services Agreement with Bain Capital in September 2003. See Note 5.

7. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local
jurisdictions. In general, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2002.

As disclosed in Note 1, the Company accounts for income taxes in accordance with the provision of SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). In accordance with SFAS
No. 109, a valuation allowance is recorded to reduce



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deferred tax assets when it is more likely than not that a tax benefit will not be realized. No valuation allowance was recorded as of December 31, 2006
since the Company had sufficient deferred tax liabilities to shield its deferred tax assets and was not relying on projected, future taxable income to be able to realize its deferred tax assets. Due to the Companys continued net operating
losses and its net deferred tax asset position excluding naked credits, the Company recorded a valuation allowance of $1.0 million during the three months ended June 30, 2007. The valuation allowance for deferred tax assets at June 30, 2007
relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with the provisions of SFAS No. 109, which
requires that a valuation allowance be established and maintained when it is more likely than not that all or a portion of deferred tax assets will not be realized. The valuation allowance established in 2007 was primarily attributable
to the recording of deferred tax assets associated with federal and state tax loss carryforwards at full value which required a valuation allowance.

On December 31, 2006, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which became effective for fiscal years beginning after
December 15, 2006. FIN 48 creates a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized
in the financial statements. The provisions of FIN 48 apply to all material tax positions in all taxing jurisdictions for all open tax years. FIN 48 establishes a two-step process for evaluating tax positions. Step 1  Recognition, requires the
Company to determine whether a tax position, based solely on its technical merits, has a likelihood of more than 50 percent (more likely than not) that the tax position taken will be sustained upon examination. Step 2  Measurement,
which is only addressed if Step 1 has been satisfied, requires the Company to measure the tax benefit as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate
settlement.

Under FIN 48 the Company determined that certain income tax positions did not meet the more-likely-than-not recognition
threshold and, therefore, required a 100% reserve. Accordingly, as of December 31, 2006, the Company recorded a non-cash cumulative transition charge of approximately $0.4 million, recorded as a reduction to beginning retained earnings.
The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2006, the Company has accrued $0.1 million in interest and penalties. The total amount of unrecognized tax
benefits as of December 31, 2006 was $1.8 million. There have been no material changes to the unrecognized tax benefits or accrued interest and penalties as of June 30, 2007. The total amount of unrecognized tax benefits that, if
recognized, would affect the effective tax rate is approximately $0.4 million.

It is expected that the amount of unrecognized tax benefits
will change during the next 12 months; however, the Company does not anticipate any adjustments which would lead to a material impact on its results of operations or financial position.

8. Segment Information

In accordance with SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information, the Company has three operating segments: the Broder division; the Alpha division; and the NES division. Operating segments are defined as components of the business for which separate information is
available and is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The following table presents information used by the Companys chief operating decision makers in
deciding how to allocate resources and in assessing performance.

Statement of Operations Information



|              |  |                             |        |       |   |         |  |              |        |        |   |         |  |     |        |              |   |         |  |   |        |  |   |        
|------------- |  | --------------------------- | ------ | ----- | - | ------- |  | ------------ | ------ | ------ | - | ------- |  | --- | ------ | ------------ | - | ------- |  | - | ------ |  | - | -------
|              |  | Three Months Ended June 30,
|              |  | 2007                        |        | 2006 
|              |  | Broder                      |        | Alpha |   | NES     |  | Consolidated |        | Broder |   | Alpha   |  | NES |        | Consolidated
|              |  | (dollars in thousands)     
|Net sales     |  | $                           | 97,207 |       | $ | 119,087 |  | $            | 33,105 |        | $ | 249,399 |  | $   | 98,685 |              | $ | 125,700 |  | $ | 35,156 |  | $ | 259,541
|Cost of sales |  |                             | 81,010 |       |   | 96,616  |  |              | 28,207 |        |   | 205,833 |  |     | 81,777 |              |   | 101,710 |  |   | 29,033 |  |   | 212,520
|              |  |                             |        |       |   |         |  |              |        |        |   |         |  |     |        |              |   |         |  |   |        |  |   |        
|Gross profit  |  | $                           | 16,197 |       | $ | 22,471  |  | $            | 4,898  |        | $ | 43,566  |  | $   | 16,908 |              | $ | 23,990  |  | $ | 6,123  |  | $ | 47,021 
|              |  |                             |        |       |   |         |  |              |        |        |   |         |  |     |        |              |   |         |  |   |        |  |   |        



|              |  |                           |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |        |  |   |        
|------------- |  | ------------------------- | ------- | ----- | - | ------- |  | ------------ | ------ | ------ | - | ------- |  | --- | ------- | ------------ | - | ------- |  | - | ------ |  | - | -------
|              |  | Six Months Ended June 30,
|              |  | 2007                      |         | 2006 
|              |  | Broder                    |         | Alpha |   | NES     |  | Consolidated |        | Broder |   | Alpha   |  | NES |         | Consolidated
|              |  | (dollars in thousands)   
|Net sales     |  | $                         | 178,808 |       | $ | 214,392 |  | $            | 56,777 |        | $ | 449,977 |  | $   | 178,101 |              | $ | 230,739 |  | $ | 60,319 |  | $ | 469,159
|Cost of sales |  |                           | 148,695 |       |   | 173,557 |  |              | 47,994 |        |   | 370,246 |  |     | 147,418 |              |   | 186,518 |  |   | 50,202 |  |   | 384,138
|              |  |                           |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |        |  |   |        
|Gross profit  |  | $                         | 30,113  |       | $ | 40,835  |  | $            | 8,783  |        | $ | 79,731  |  | $   | 30,683  |              | $ | 44,221  |  | $ | 10,117 |  | $ | 85,021 
|              |  |                           |         |       |   |         |  |              |        |        |   |         |  |     |         |              |   |         |  |   |        |  |   |        



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Balance Sheet Information



|                                                        |  |                        |        |       |   |         |  |              |        |  |   |        
|------------------------------------------------------- |  | ---------------------- | ------ | ----- | - | ------- |  | ------------ | ------ |  | - | -------
|                                                        |  | Broder                 |        | Alpha |   | NES     |  | Consolidated
|                                                        |  | (dollars in thousands)
|As of June 30, 2007                                     |  |                        |        |       |   |         |  |              |        |  |   |        
|Accounts receivable, net                                |  | $                      | 33,908 |       | $ | 48,300  |  | $            | 16,085 |  | $ | 98,293 
|Inventory                                               |  |                        | 74,705 |       |   | 119,020 |  |              | 24,426 |  |   | 218,151
|Fixed assets, net                                       |  |                        | 15,108 |       |   | 8,732   |  |              | 2,923  |  |   | 26,763 
|Goodwill, intangible assets and deferred financing fees |  |                        | 21,110 |       |   | 176,905 |  |              | 4,144  |  |   | 202,159
|Accounts payable                                        |  |                        | 44,711 |       |   | 52,564  |  |              | 21,471 |  |   | 118,746
|                                                        |  |                        |        |      
|As of December 31, 2006                                 |  |                        |        |       |   |         |  |              |        |  |   |        
|Accounts receivable, net                                |  | $                      | 30,643 |       | $ | 42,732  |  | $            | 11,728 |  | $ | 85,103 
|Inventory                                               |  |                        | 83,272 |       |   | 123,401 |  |              | 26,614 |  |   | 233,287
|Fixed assets, net                                       |  |                        | 15,585 |       |   | 6,839   |  |              | 1,796  |  |   | 24,220 
|Goodwill, intangible assets and deferred financing fees |  |                        | 22,490 |       |   | 179,927 |  |              | 5,374  |  |   | 207,791
|Accounts payable                                        |  |                        | 19,972 |       |   | 68,808  |  |              | 8,495  |  |   | 97,275 

9. Restructuring and Asset Impairment Charges

Following the acquisitions of Alpha and NES, the Company executed restructuring activities designed to reduce its cost structure by closing distribution
centers, disposing of the related fixed assets and reducing its corporate workforce. During the fourth quarter of 2003, the Companys Broder division recorded approximately $7.0 million in distribution center closure costs related to the
closure of its Wadesboro, NC distribution center. The charge included the fair value of the future lease obligations as of the cease-use date, net of expected sublease rentals. The future lease obligation is expected to be paid over the remaining
lease term, which expires in March 2014. During the year ended December 31, 2004, the Companys Broder division also recorded approximately $0.8 million in lease termination and other costs for the fair value of future lease obligations
related to the closure of its Cleveland, OH distribution center. The future lease obligation was paid over the remaining lease term, which expired in May 2007.

The Companys NES division recorded approximately $0.8 million in aggregate restructuring charges during fiscal 2004 and fiscal 2005 related to cash severance and related benefit payments for NES corporate staff
reductions resulting from the continuing integration of NES into the Company. Approximately $0.1 million of the severance and related benefits charges were reversed during fiscal 2006.

During fiscal 2005, the Company initiated a strategy to create multi-division distribution centers which is expected to provide the Company with several
key advantages, including improvement of inventory availability, reduction of inventory levels and a moderate reduction of operating expenses. During fiscal 2005, the Company recorded approximately $1.0 million in Atlanta distribution center closure
costs due to the opening of another distribution center in the Atlanta market. The Atlanta charge consisted of the fair value of the future lease obligations, net of expected sublease rentals of approximately $0.7 million, and approximately $0.3
million in non-cash fixed asset impairment charges related to the disposal of distribution center fixed assets. The future lease obligation is expected to be paid over the remaining lease term, which expires in December 2009.

During the first quarter of 2006, the Company recorded restructuring charges related to its distribution center and call center consolidation
initiatives. During 2006, the Company reduced the number of call centers it operates from seven to three. The Company consolidated its distribution centers in its Texas, California and Midwest markets. The Companys Broder division recorded a
restructuring and asset impairment charge of approximately $0.8 million, consisting of $0.6 million in distribution center closure costs for the fair value of the future lease obligations and approximately $0.1 million in severance and related
benefits, and $0.1 million in non-cash fixed asset impairment charges related to the disposal of distribution center fixed assets. The future lease obligation is expected to be paid over the remaining lease term, which expires in December 2007.

During 2006, the Alpha division La Mirada, CA distribution center was consolidated into a new dual-branded Broder-Alpha facility in
Fresno, CA. As a result, the Alpha division recorded approximately $2.1 million in distribution center closure costs for the fair value of the future lease obligations, net of a $0.5 million reduction for estimated sublease payments, and
approximately $0.2 million in severance and benefits related charges. The future lease



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obligations are expected to be paid out over the remaining lease term, which ends in 2009. The Broder division Louisville, KY distribution center was
consolidated into a new facility in Chicago, IL. The Broder division recorded approximately $0.2 million in distribution center closure costs for the fair value of the future lease obligations and approximately $0.1 million in severance and benefits
related charges. The future lease obligations are expected to be paid out over the remaining lease term, which ends in 2007.

During 2006,
the Company reduced the number of call centers it operates from seven to three. As a result, the Company recorded restructuring charges of approximately $0.9 million, consisting of approximately $0.4 million of cash severance and related benefit
payments and $0.5 million in call center closure costs representing the fair value of the future lease obligations. The future lease obligations are expected to be paid over the remaining lease terms, which expire at various dates through March
2015.

During the first quarter of 2007, the Company recorded restructuring charges related to its distribution center consolidation
initiative. The Company consolidated its distribution centers in its New York and North Carolina markets and further consolidated its Midwest market. The Broder division Plymouth, MI and St. Louis, MO distribution centers were consolidated into a
new facility in Chicago, IL. Also during the first quarter of 2007, the Company consolidated the Amtex distribution center into the Companys new Chicago, IL facility. The Broder division Albany, NY distribution center is consolidating into a
tri-branded Broder-Alpha-NES facility in Middleboro, MA. The NES division Charlotte, NC distribution center is consolidating into a new tri-branded Broder-Alpha-NES facility in Atlanta, GA. As a result of the distribution center closures, the
Company recorded approximately $7.2 million in restructuring charges, consisting of $6.5 million in distribution center closure costs for the fair value of lease obligations and $0.7 million in severance and related benefits. The future lease
obligations are expected to be paid over the remaining lease terms, which end on dates beginning June 2008 and ending March 2015.

During
the second quarter of 2007, the Company committed to a plan to close its Alpha division Philadelphia, PA distribution center and open a new tri-branded facility near Harrisburg, PA and to close its Alpha division Ft. Wayne, IN distribution center
and consolidate it into the multi-branded facility in Chicago, IL during the third quarter of 2007. The Company recorded approximately $0.7 million in severance and related benefit obligations during the second quarter of 2007. The Company
expects to record approximately $4.2 million in lease termination and other costs when the facilities close during the third quarter of 2007. In addition, the Company executed two sublease agreements for its LaMirada, CA distribution center and
recorded a reduction to the restructuring charge of approximately $1.5 million.

Restructuring activity is summarized as follows:



|                                       |  |                              |       |                      |   |               |  |   |                                     |   |                          |   |   |  |   |       
|-------------------------------------- |  | ---------------------------- | ----- | -------------------- | - | ------------- |  | - | ----------------------------------- | - | ------------------------ | - | - |  | - | ------
|                                       |  | Balance at December 31, 2006 |       | Restructuring Charge |   | Cash Payments |  |   | Non-Cash Items Expensed Immediately |   | Balance at June 30, 2007
|                                       |  | (dollars in thousands)      
|Distribution center closure costs      |  |                              |       |                      |   |               |  |   |                                     |   |                          |   |   |  |   |       
|Lease termination and other costs, net |  | $                            | 7,698 |                      | $ | 4,854         |  | $ | (935                                | ) |                          | $ |  |  | $ | 11,617
|Severance and related benefits         |  |                              | 91    |                      |   | 1,379         |  |   | (637                                | ) |                          |   |  |  |   | 833   
|Call center closure costs              |  |                              |       |                      |   |               |  |   |                                     |   |                          |   |   |  |   |       
|Lease Termination and other costs      |  |                              | 438   |                      |   |              |  |   | (57                                 | ) |                          |   |  |  |   | 381   
|                                       |  |                              |       |                      |   |               |  |   |                                     |   |                          |   |   |  |   |       
|                                       |  | $                            | 8,227 |                      | $ | 6,233         |  | $ | (1,629                              | ) |                          | $ |  |  | $ | 12,831
|                                       |  |                              |       |                      |   |               |  |   |                                     |   |                          |   |   |  |   |       

The total of $12.8 million in accrued restructuring costs is recorded as $3.7 million in current
liabilities and $9.1 million in long-term liabilities at June 30, 2007.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

GENERAL

We are a leading distributor of imprintable sportswear and accessories
in the United States. Imprintable sportswear and accessories is an estimated $8 billion U.S. market in wholesale revenues and includes undecorated or blank T-shirts, sweatshirts, polo shirts, fleece, outerwear, caps, bags and other
imprintable accessories that are decorated primarily for advertising and promotional purposes. We source product from more than 70 suppliers, including Hanes, Russell, Fruit of the Loom, Anvil and Gildan. Other exclusive or
near-exclusive suppliers include retail brands such as Adidas Golf, Columbia Sportswearand Champion.



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We consider the term near-exclusive to represent those arrangements where, although not contractually entitled to exclusivity, we believe we are
the only distributor to offer these products in an annual catalog to the imprintable sportswear industry. In addition to our distribution suppliers, we develop and source products from over 16 countries to support our private label brand
initiatives, which include the brandsDevon & Jones, HYP, Authentic Pigment, Desert Wash, Harvard Square, Chestnut Hill, Great Republic and Harriton. Our products are sold to over 70,000 customers, primarily
advertising specialty companies, screen printers, embroiderers and specialty retailers who decorate our blank product with corporate logos, brands and other promotional images. Our decorator customers then sell imprinted sportswear and accessories
to a highly diversified range of end-consumers, including Fortune 1000 companies, sporting venues, concert promoters, athletic leagues, educational institutions and travel resorts. We believe our end-consumers are increasingly recognizing
imprintable sportswear and accessories as highly differentiated, cost-effective, advertising and promotional tools that help them grow their respective businesses and brand images.

Results of Operations

The following table sets forth the amounts and the percentages of net sales
that items in the consolidated statement of operations constituted for the periods indicated:



|                                                  |  |                             |       |   |                           |       |    |      |   |       |      |  |       |   |  |   |       |   |  |       |    |  |   |       |   |  |       |   
|------------------------------------------------- |  | --------------------------- | ----- | - | ------------------------- | ----- | -- | ---- | - | ----- | ---- |  | ----- | - |  | - | ----- | - |  | ----- | -- |  | - | ----- | - |  | ----- | --
|                                                  |  | Three Months Ended June 30, |       |   | Six Months Ended June 30, |      
|                                                  |  | 2007                        |       |   | 2006                      |       |    | 2007 |   |       | 2006 | 
|Net Sales                                         |  | $                           | 249.4 |   |                           | 100.0 | %  |      | $ | 259.5 |      |  | 100.0 | % |  | $ | 450.0 |   |  | 100.0 | %  |  | $ | 469.1 |   |  | 100.0 | % 
|Cost of sales                                     |  |                             | 205.8 |   |                           | 82.5  |    |      |   | 212.5 |      |  | 81.9  |   |  |   | 370.3 |   |  | 82.3  |    |  |   | 384.1 |   |  | 81.9  |   
|                                                  |  |                             |       |   |                           |       |    |      |   |       |      |  |       |   |  |   |       |   |  |       |    |  |   |       |   |  |       |   
|Gross profit                                      |  |                             | 43.6  |   |                           | 17.5  |    |      |   | 47.0  |      |  | 18.1  |   |  |   | 79.7  |   |  | 17.7  |    |  |   | 85.0  |   |  | 18.1  |   
|Warehousing, selling, and administrative expenses |  |                             | 34.1  |   |                           | 13.7  |    |      |   | 32.0  |      |  | 12.3  |   |  |   | 66.0  |   |  | 14.7  |    |  |   | 65.0  |   |  | 13.8  |   
|Depreciation and amortization                     |  |                             | 5.2   |   |                           | 2.1   |    |      |   | 4.7   |      |  | 1.8   |   |  |   | 10.1  |   |  | 2.2   |    |  |   | 9.3   |   |  | 2.0   |   
|Restructuring and asset impairment charges        |  |                             | (0.9  | ) |                           | (0.4  | )  |      |   | 1.0   |      |  | 0.4   |   |  |   | 6.2   |   |  | 1.4   |    |  |   | 1.8   |   |  | 0.4   |   
|                                                  |  |                             |       |   |                           |       |    |      |   |       |      |  |       |   |  |   |       |   |  |       |    |  |   |       |   |  |       |   
|Income (loss) from operations                     |  |                             | 5.2   |   |                           | 2.1   |    |      |   | 9.3   |      |  | 3.6   |   |  |   | (2.6  | ) |  | (0.6  | )  |  |   | 8.9   |   |  | 1.9   |   
|Interest expense, net                             |  |                             | 9.2   |   |                           | 3.7   |    |      |   | 9.2   |      |  | 3.5   |   |  |   | 19.4  |   |  | 4.3   |    |  |   | 18.4  |   |  | 3.9   |   
|Income tax provision (benefit)                    |  |                             | 0.4   |   |                           | 0.2   |    |      |   | 0.3   |      |  | 0.1   |   |  |   | (6.5  | ) |  | (1.4  | )  |  |   | (4.0  | ) |  | (0.8  | ) 
|                                                  |  |                             |       |   |                           |       |    |      |   |       |      |  |       |   |  |   |       |   |  |       |    |  |   |       |   |  |       |   
|Net Loss                                          |  | $                           | (4.4  | ) |                           | (1.8  | )% |      | $ | (0.2  | )    |  |      | % |  | $ | (15.5 | ) |  | (3.4  | )% |  | $ | (5.5  | ) |  | (1.2  | )%
|                                                  |  |                             |       |   |                           |       |    |      |   |       |      |  |       |   |  |   |       |   |  |       |    |  |   |       |   |  |       |   

Three months ended June 30, 2007 compared to the three months ended June 30, 2006

Net Sales. Net sales decreased by approximately $10.1 million, or 3.9%, from $259.5 million for the three months ended June 30, 2006 to $249.4
million for the three months ended June 30, 2007. This decrease resulted from the combination of a decrease in average selling prices and product mix (estimated impact of $7.9 million) and a decrease in unit volume (estimated impact of $2.2
million). Trade brand units declined on lower volume and higher margin products as we continued to sell fewer low margin white T-shirts. Lower pricing in key styles did not increase volumes and revenues. Insufficient private label inventory levels
in key styles during the second and third quarters of 2006 contributed to volume declines during the second quarter of 2007 relative to the prior period due to a greater than anticipated loss of placement of some important products in customer
programs. During the remainder of 2007, we expect our trade and private label brand revenues to approximate 2006 revenues as we implement various new marketing initiatives and as we work toward completing our distribution center consolidation plan
which is expected to improve inventory service levels.

Gross Profit. Gross profit decreased by $3.4 million, or 7.2%, from $47.0
million for the three months ended June 30, 2006 to $43.6 million for the three months ended June 30, 2007. The decrease in gross profit was attributable to lower unit volumes and lower selling prices in trade brand products. Gross margin
was 17.5% and 18.1% for June 30, 2007 and 2006, respectively.

Warehousing, Selling and Administrative Expenses (Including
Depreciation and Amortization). Warehousing, selling and administrative expenses, including depreciation and amortization, increased $2.6 million, or 7.1%, from $36.7 million for the three months ended June 30, 2006 to $39.3 million for the
three months ended June 30, 2007. The increase was primarily the result of: (i) approximately $1.6 million in incremental travel and training costs and duplicative rent expense attributable to the opening of multi-branded distribution
centers; (ii) approximately $1.3 million in higher marketing costs resulting from various marketing initiatives to stimulate unit volumes; (iii) approximately $0.5 million in higher depreciation and amortization resulting from fixed asset
additions in our new multi-branded distribution centers; (iv) approximately $0.9 million in higher workers compensation and



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benefits costs; (v) approximately $0.4 million in higher legal and recruiting professional fees; offset by (vi) a $0.9 million reduction in bonus
expense resulting from less than expected profitability during fiscal 2007; (vii) $0.8 million decrease in consulting costs attributable to an inventory and supply chain improvement initiative during 2006; (viii) decreased amortization of
prepaid catalog costs of $0.4 million due to the incremental amortization that was recorded during 2006 related to our accelerated mailing date of October 2006 for our 2007 catalogs; and (ix) less variable operating expense of approximately
$0.3 million resulting from a reduction in unit volumes and efficiency improvements in our distribution centers and call centers. During the remainder of 2007, we expect to record additional incremental travel and training costs and duplicative rent
expenses attributable to the opening of multi-branded distribution centers. The distribution center consolidation initiative is expected to be completed during the fourth quarter of 2007.

Restructuring and Asset Impairment Charges. As more fully described Note 9 to the Consolidated Financial Statements included in this Form 10-Q, we
recorded restructuring charges of $(0.9) million and $1.0 million during the three months ended June 30, 2007 and 2006, respectively. The reversal of restructuring charges recorded during the three months ended June 30, 2007 was the result
of executing a sublease for our La Mirada, CA distribution center. The restructuring charges recorded during the second quarter of 2006 resulted from our plan to reduce the number of call centers we operated from seven to three and consisted of $0.5
million in call center closure costs representing the fair value of future lease obligations and $0.5 million of cash severance and related benefit payments. We expect to record additional restructuring charges during the remainder of 2007 as we
continue to execute our distribution center consolidation initiative, which as noted above, is expected to be completed during 2007. We do not expect to achieve significant operating expense reductions resulting from the distribution center
consolidation initiative. Cost savings resulting from operating fewer distribution centers are effectively offset by incremental operating costs of larger distribution centers. We are consolidating facilities to improve inventory availability which
is expected to improve performance and drive growth.

Loss from Operations. As a result of the factors described above, income from
operations decreased by approximately $4.1 million, from income of $9.3 million for the three months ended June 30, 2006 to income of $5.2 million for the three months ended June 30, 2007.

Interest Expense. Interest expense, was $9.2 million for the three months ended June 30, 2006 and June 30, 2007. We expect debt levels
to improve moderately throughout fiscal 2007 relative to fiscal 2006, which will have a favorable impact on resulting interest expense. The favorable impact could be offset by higher interest rates on variable rate debt.

Income Taxes. Income tax expense was approximately $0.4 million for the three months ended June 30, 2007 compared with income tax expense of
$0.3 million for the three months ended June 30, 2006. The difference between the U.S. federal statutory rate and the effective benefit rate relates primarily to the state and local taxes and meals and entertainment. Due to the Companys
continued net operating losses and its net deferred tax asset position excluding naked credits, the Company recorded a valuation allowance of $1.0 million during the three months ended June 30, 2007. The valuation allowance for deferred tax assets
at June 30, 2007 relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with the provisions of SFAS
No. 109, which requires that a valuation allowance be established and maintained when it is more likely than not that all or a portion of deferred tax assets will not be realized. The valuation allowance established in 2007 was primarily
attributable to the recording of deferred tax assets associated with federal and state tax loss carryforwards at full value which required a valuation allowance.

Net Loss. As a result of the factors described above, net loss increased by $4.2 million, from a net loss of $(0.2) million for the three months ended June 30, 2006 to a net loss of $(4.4) million for the
three months ended June 30, 2007.

Six months ended June 30, 2007 compared to the six months ended June 30, 2006

Net Sales. Net sales decreased by approximately $19.1 million, or 4.1%, from $469.1 million for the six months ended June 30, 2006 to $450.0
million for the six months ended June 30, 2007. This decrease resulted from the combination of a decrease in unit volume (estimated impact of $11.9 million) and a decrease in average selling prices and product mix (estimated impact $7.1
million). Trade brand units declined on lower volume and higher margin products as we continued to sell fewer low margin white T-shirts. Lower pricing in key styles did not increase volumes and revenues. Insufficient private label inventory levels
in key styles during the second and third quarters of 2006 contributed to volume declines during the six months ended June 30, 2007 compared to the first half of 2006 due to a greater than anticipated loss of placement of some important
products in customer programs.

Gross Profit. Gross profit decreased by $5.3 million, or 6.2%, from $85.0 million for the six months
ended June 30, 2006 to $79.7 million for the six months ended June 30, 2007. The decrease in gross profit was attributable to lower unit volumes in trade and private label brand products and lower average selling prices in trade brand
products. Gross margin was 17.7% and 18.1% for the six months ended June 30, 2007 and 2006, respectively.

Warehousing, Selling and
Administrative Expenses (Including Depreciation and Amortization). Warehousing, selling and administrative expenses, including depreciation and amortization, increased $1.8 million, or 2.4%, from $74.3 million for the six months ended
June 30, 2006 to $76.1 million for the six months ended June 30, 2007. The increase was primarily the result of: (i) approximately $2.8 million in incremental travel and training costs and duplicative rent expense attributable to the
opening of



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multi-branded distribution centers; (ii) approximately $0.8 million in higher depreciation and amortization resulting from fixed asset additions in our
new multi-branded distribution centers; (iii) approximately $1.6 million in higher workers compensation and benefits costs; and (iv) approximately $0.5 million in higher legal and recruiting professional fees; offset by (v) a
$1.7 million decrease in consulting costs attributable to an inventory and supply chain improvement initiative during 2006; (vi) a $0.9 million reduction in bonus expense resulting from less than expected profitability during fiscal 2007;
(vii) decreased amortization of prepaid catalog costs of $0.8 million due to the incremental amortization that was recorded during 2006 related to our accelerated mailing date of October 2006 for our 2007 catalogs; and (viii) less variable
operating expense resulting from a reduction in unit volumes and efficiency improvements in our distribution centers and call centers.

Restructuring and Asset Impairment Charges. As more fully described Note 9 to the Consolidated Financial Statements included in this Form 10-Q, we recorded restructuring charges of $6.2 million and $1.8 million during the six months
ended June 30, 2007 and 2006, respectively. The restructuring charges recorded during the six months ended June 30, 2007 consisted of $6.3 million in lease termination and other costs plus $1.4 million in severance and related
benefits charges resulting from our distribution center consolidation initiative, offset by an $(1.5) million reversal of restructuring charges previously recorded due to executing a sublease for our La Mirada, CA distribution center. During the
first quarter of 2007, we consolidated our distribution facilities in the Northeast, Southeast and Midwest markets by closing distribution centers in New York, North Carolina, Michigan and Missouri. During the six months ended June 30, 2006, we
recorded restructuring charges consisting of $0.5 million in call center closure costs and $0.5 million of cash severance and related benefit payments in accordance with the consolidation of call centers from seven to three, and we also recorded an
$0.8 million restructuring charge related to the consolidation of our Broder Houston facility into the existing Alpha Houston facility, which now operates as a dual-branded Alpha-Broder facility. The restructuring charge recorded during the six
months of 2006 consisted of $0.6 million in lease termination and other costs, approximately $0.1 million in severance and related benefits and $0.1 million in non-cash fixed asset write-offs.

Income (Loss) from Operations. As a result of the factors described above, income from operations decreased by approximately $11.5 million, from
income from operations of $8.9 million for the six months ended June 30, 2006 to a loss of $(2.6) million for the six months ended June 30, 2007.

Interest Expense. Interest expense, net increased by $1.0 million from $18.4 million for the six months ended June 30, 2006 to $19.4 million for the six months ended June 30, 2007. The net increase
was due to higher average outstanding balances on variable rate debt, lower interest rates on the revolver balance and a $0.1 million net negative effect of changes in the fair value of interest rate swaps ($0.1 million and approximately $0.3
million net positive effect of a favorable change for the six months ended June 30, 2007 and 2006, respectively). We expect debt levels to improve moderately throughout fiscal 2007 relative to fiscal 2006, which will have a favorable impact on
resulting interest expense. The favorable impact could be offset by higher interest rates on variable rate debt.

Income Taxes. The
income tax benefit was approximately $6.5 million and $4.0 million for the six months ended June 30, 2007 and 2006, respectively. The difference between the U.S. federal statutory rate and the effective benefit rate relates primarily to the
state and local taxes and meals and entertainment. Due to the Companys continued net operating losses and its net deferred tax asset position excluding naked credits, the Company recorded a valuation allowance of $1.0 million during the three
months ended June 30, 2007. The valuation allowance for deferred tax assets at June 30, 2007 relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss carryforwards in various jurisdictions. The
valuation allowance was calculated in accordance with the provisions of SFAS No. 109, which requires that a valuation allowance be established and maintained when it is more likely than not that all or a portion of deferred tax assets
will not be realized. The valuation allowance established in 2007 was primarily attributable to the recording of deferred tax assets associated with federal and state tax loss carryforwards at full value which required a valuation allowance.

Net Loss. As a result of the factors described above, net loss increased by $10.0 million, from a net loss of $(5.5) million for
the six months ended June 30, 2006 to a net loss of $(15.5) million for the six months ended June 30, 2007.

Liquidity and Capital Resources

Cash Flows

Six months ended
June 30, 2007 compared to the six months ended June 30, 2006

Net cash provided by operating activities was $10.2 million and
$15.3 million for the six months ended June 30, 2007 and 2006, respectively. The decrease in cash flows from operating activities was due principally to a larger net loss during the six months ended June 30, 2007 relative to the six months
ended June 30, 2006 and other changes in working capital.

Net cash used in investing activities was $3.3 million and $3.5 million for
the six months ended June 30, 2007 and 2006, respectively, and primarily represented capital expenditures.

Net cash used in financing activities was approximately $5.7 million and $11.7 million for the six months ended June 30, 2007 and 2006, respectively. The change in financing cash flows is
primarily attributable to the change in net repayments on our revolving credit facility during the six months ended June 30, 2007 compared to the six months ended June 30, 2006. Borrowings against the revolving credit facility support our
inventory purchases. Offsetting this was the decrease in our book overdraft position during the six months ended June 30, 2007 compared to the decrease in the same period of the prior year.



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Liquidity Position

In August 2006, we entered into an amended and restated credit agreement (Credit Agreement) which provides for aggregate revolver borrowings of up to $225.0 million (subject to borrowing base
availability), including provision for up to $25.0 million of letters of credit. As of June 30, 2007, outstanding borrowings on the Credit Agreement were $100.0 million, and outstanding letters of credit were $8.0 million, which left $83.7
million of available borrowing capacity as determined by borrowing base availability.

The Credit Agreement is secured by first priority
pledges of all the equity interests owned by us in our domestic subsidiaries and 65% of all equity interests in any future foreign subsidiaries. The Credit Agreement is also secured by first priority interests in, and mortgages on, substantially all
tangible and intangible assets and each of our direct and indirect domestic subsidiaries and 65% of the equity interests of any future foreign subsidiaries. Availability under the Credit Agreement is based on a borrowing base calculated using
advance rates applied to eligible accounts receivable and eligible inventory. The Credit Agreement matures in August 2011.

The Credit
Agreement contains both affirmative and negative covenants which, among other things, may require us to meet a minimum consolidated fixed charge coverage ratio, as defined in the Credit Agreement, and places limits upon capital expenditures,
disposals of assets, mergers and acquisitions, further indebtedness, transactions with affiliates and other customary restrictions. The occurrence of certain of these events may accelerate required repayment. On April 2, 2007, we provided
notice to the administrative agent for the credit facility of the occurrence and cure of a default under Article VIII(g)(ii) of the Credit Agreement. A default existed under the indenture governing the Senior Notes and the Credit Agreement as a
result of the failure by us to file our Annual Report on Form 10-K for the year ended December 30, 2006 with the Securities and Exchange Commission (SEC) within the time period specified in the SECs rules and regulations as
required by Section 4.03 of the indenture, which was March 30, 2007. The Annual Report on Form 10-K for the year ended December 30, 2006 was filed with the SEC on April 2, 2007. As of June 30, 2007, we were in compliance
with all covenants under the Credit Agreement.

In September 2003, we completed a
private offering of $175.0 million 111/4% senior notes due 2010. The proceeds of the private offering were used to finance the Alpha acquisition,
repay existing indebtedness and to pay related fees and expenses. In November 2004, we completed a private offering of an additional $50.0 million 111/4% senior notes due 2010. The proceeds of the private placement were used to repay borrowings under the revolving credit facility. All senior notes were issued under the same indenture. The senior notes are guaranteed on a senior unsecured
basis by all existing and future material domestic subsidiaries, and pay interest semi-annually in arrears on April 15 and October 15 of each year.

The indenture governing the senior notes, among other things, (1) restricts the ability of us and our subsidiaries, including the guarantor of the
senior notes, to incur additional indebtedness, issue shares of preferred stock, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates, (2) prohibits certain restrictions on the
ability of certain of our subsidiaries, including the guarantor of the senior notes, to pay dividends or make certain payments to us and (3) places restrictions on the ability of us and our subsidiaries, including the guarantor of the senior
notes, to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. The indenture related to the senior notes also contains various covenants which limit our
discretion in the operation of our businesses. On April 2, 2007, we provided notice to the trustee for the indenture of the occurrence and cure of a default under Section 4.03 of the indenture. A default existed under the indenture
governing the Senior Notes and the Credit Agreement as a result of the failure by us to file our Annual Report on Form 10-K for the year ended December 30, 2006 with the SEC within the time period specified in the SECs rules and
regulations as required by Section 4.03 of the indenture, which was March 30, 2007. The Annual Report on Form 10-K for the year ended December 30, 2006 was filed with the SEC on April 2, 2007. As of June 30, 2007, we were in
compliance with all covenants under the indenture.

We rely primarily upon cash flow from operations and borrowings under our revolving
credit facility to finance operations, capital expenditures and fluctuations in debt service requirements. Availability under the revolving credit facility fluctuates due to seasonal flows of the business, which impacts our borrowing base and our
decisions around investment in inventory and overall growth of the business. Historically, the low point of our availability arises during the first and second quarters of each fiscal year as revenues reach seasonal lows during December, January and
February, compounded by the simultaneous consumption of availability to bolster inventory levels for the ensuing season.

We expect our
distribution center consolidation initiative to lead to lower inventory levels as we progress through fiscal 2007. We believe that our ability to manage cash flow and working capital levels, particularly inventory and accounts payable, will allow us
to meet our current and future obligations during the seasonal low period, pay scheduled principal and interest payments, and provide funds for working capital, capital expenditures and other needs of the business for at least the next twelve
months. However, no assurance can be given that this will be the case, and we may require additional debt or equity financing to meet our working capital requirements.



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As a part of our business strategy, we will continue to look for acquisitions of distributors with high
local market share in regions that are not well served by our existing facilities. We have historically engaged in discussions with several potential acquisition candidates. Most of these discussions were preliminary in nature, with limited due
diligence conducted. We cannot guarantee that any acquisitions will be consummated. If we do consummate any acquisition, it could be material to our business and require us to incur additional debt under our revolving credit facility or otherwise.
There can be no assurance that additional financing will be available when required or, if available, that it will be on terms satisfactory to us.

Off
Balance Sheet Arrangements

Our revolving credit facility contains provision for up to $25.0 million of letters of credit, subject to
borrowing base availability and total amounts outstanding under the revolving credit agreement of $225.0 million. As of June 30, 2007, we had approximately $8.0 million of outstanding letters of credit primarily related to commitments for the
purchase of inventory.

We purchase product in the normal course through the use of short term purchase orders representing quantities for
normal business needs at current market prices. In addition, we are party to two supply agreements whereby we have committed to purchase a minimum of: (i) $2.5 million of product per year in 2007 and 2008; and (ii) a total of $15.0 million
at a minimum of $5.0 million of product per year through 2007. These supply agreements are more fully described in section Contractual Cash Obligations.

Contractual Cash Obligations

The following table presents the aggregate amount of future cash
outflows under our contractual cash obligations and commercial commitments as of June 30, 2007:



|                                   |  |                        |       |                  |   |              |  |              |      |               |   |       |  |   |     
|---------------------------------- |  | ---------------------- | ----- | ---------------- | - | ------------ |  | ------------ | ---- | ------------- | - | ----- |  | - | ----
|                                   |  | Payments Due by Period
|                                   |  | Total                  |       | Less than 1 year |   | 1 to 3 years |  | 4 to 5 years |      | After 5 years
|                                   |  | (dollars in millions) 
|Revolving credit facility          |  | $                      | 100.0 |                  | $ |             |  | $            |     |               | $ | 100.0 |  | $ |    
|Senior notes(1)                    |  |                        | 225.0 |                  |   |             |  |              |     |               |   | 225.0 |  |   |    
|Operating lease obligations        |  |                        | 85.7  |                  |   | 14.0         |  |              | 24.3 |               |   | 21.2  |  |   | 26.2
|Capital lease obligations          |  |                        | 10.6  |                  |   | 4.0          |  |              | 6.4  |               |   | 0.2   |  |   |    
|Supply agreements(2)               |  |                        | 6.3   |                  |   | 5.0          |  |              | 1.3  |               |   |      |  |   |    
|Expected interest payments(3)      |  |                        | 84.4  |                  |   | 26.1         |  |              | 50.9 |               |   | 7.4   |  |   |    
|Other(4)                           |  |                        | 0.3   |                  |   | 0.3          |  |              |     |               |   |      |  |   |    
|                                   |  |                        |       |                  |   |              |  |              |      |               |   |       |  |   |     
|Total contractual cash obligations |  | $                      | 512.3 |                  | $ | 49.4         |  | $            | 82.9 |               | $ | 353.8 |  | $ | 26.2
|                                   |  |                        |       |                  |   |              |  |              |      |               |   |       |  |   |     

---

|(1) | Amounts shown do not include $0.8 million of unamortized premium that will be
amortized over the term of the senior notes.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | We are party to two separate supply agreements. In one supply agreement we are
committed to purchase a minimum of $2.5 million of product per year in 2007 and 2008. Any shortfall in committed purchases for a given year may be carried forward or backward one year, subject to certain limits. If after carry forward or backward,
actual purchases still fall short of committed levels, a penalty of 7.5% of the shortfall will be incurred. In the other supply agreement we have committed to purchase a total of $15.0 million at a minimum of $5.0 million of product per year through
2007. We do not believe these purchase commitments exceed our future consumption requirements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents expected interest payments for the life of the senior notes.
|--- | -----------------------------------------------------------------------

|(4) | Represents note payable to former owner of Amtex.
|--- | -------------------------------------------------

In addition, due to the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48) on December 31, 2006, we have recorded a $1.5 million liability as of June 30, 2007 that may be payable in the future, although timing of payment cannot be reasonably
estimated. For more information, see Note 7 to the consolidated financial statements.

Inflation

Prices of imprintable sportswear and accessories have experienced deflation as suppliers have moved manufacturing to lower cost offshore locations. Price
deflation has not historically had a material effect on our operating results during the periods presented, since falling input costs for individual products have generally been passed on to customers on a constant gross profit per unit basis.
However, there can be no assurance that this trend will continue in the future.



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Seasonality

Historically, the first quarter of our fiscal year generates the lowest levels of net sales, gross profit and operating profit. During 2006, first and second quarter net sales were approximately 21.9% and 27.1%, respectively, of the total
for the year and first and second quarter gross profit was approximately 21.0% and 26.0%, respectively, of the total for the year. Due to the level of fixed operating expenses, operating profit is normally significantly lower in the first quarter of
our fiscal year. During fiscal year 2006, 100% of our operating profit was earned in the second, third and fourth quarters.

We have
historically realized, and expect to continue to realize, slightly higher gross profit in the second half of the fiscal year. On a combined basis for Broder, Alpha and NES for 2005 and 2006, approximately 52% of the Companys net sales and
gross profit occurred in the second half of the year. This seasonality is primarily a result of the sale of higher priced products during the second half of the year, such as sweatshirts and winter-oriented outerwear.

Critical Accounting Policies

Our significant
accounting policies are described in Note 1 to our consolidated financial statements included elsewhere in this report and in Note 1 to our consolidated financial statements included in our Form 10-K filed with the SEC on April 2, 2007. While
all significant accounting policies are important to our consolidated financial statements, some of these policies may be viewed as being critical. Such policies are those that are both most important to the portrayal of our financial condition and
require our most difficult, subjective and complex estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. These estimates are based upon our
historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. We believe our most critical accounting
policies are as follows:

Revenue Recognition. Revenue is recognized when title and risk of loss is transferred to the
customer, which, for the majority of our customers who have FOB shipping point terms, is upon shipment of the product to the customer. Revenue includes selling price of the product and all shipping and handling costs paid by the customer. Under
certain circumstances, customers may submit a claim for damaged or shorted shipments. Based on historical experience, we establish a reserve for potential returns at the time of sale. Revenue is further reduced at the time of sale for estimated
customer-related incentives. These incentives primarily consist of volume and growth rebates.

Accounts Receivable. We
maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which is included in bad debt expense. We determine the adequacy of this allowance by regularly reviewing our
accounts receivable aging and evaluating individual customer receivables, considering customers financial condition, credit history and current economic conditions. If the financial condition of our customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be required.

Inventories. We maintain an
allowance for potential losses on the disposal of our discontinued and slow moving inventory. Estimates for the allowance are based on past and estimated future sales of the product, historical realization of similar discontinued product, and
potential return of slow moving and discontinued product back to the mill. Cost of sales includes (i) the cost of product, (ii) inbound and outbound freight costs, (iii) the costs of purchasing, receiving, inspecting and handling, and
(iv) adjustments for various incentive programs offered to us by our vendors.

Derivative Financial Instruments. We do
not use derivatives for speculative purposes. However, we have entered into interest rate protection agreements whereby we have contracted to pay a fixed interest rate in exchange for receipt of a variable rate. We have elected not to apply hedge
accounting for the currently outstanding interest rate protection agreements. Accordingly, we record current interest rate swaps at fair value and record gains and losses on these contracts through our statement of operations. We will evaluate any
future interest rate swaps and for those which qualify and for which we choose to designate as hedges of future cash flows, the effective portion of changes in fair value will be recorded temporarily in equity, then recognized in earnings along with
the related effects of the hedged items.

Goodwill and Intangible Assets. Goodwill and intangible assets with indefinite
lives are not amortized; rather, they are tested for impairment on at least an annual basis. We perform impairment evaluations for goodwill and indefinite-lived assets at least annually in the fourth quarter, or upon a triggering event, using
discounted expected future cash flows. In addition, we have recorded other indefinite-lived intangible assets (the trade names Alpha, Alpha Shirt Company), as well as certain finite-lived intangible assets (primarily the
trade names NES Clothing and Harvard Square, and customer relationship intangibles). These finite-lived intangible assets are being amortized on a straight-line basis over their average useful lives ranging from 1 to 8 years.
Should our



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revenues and gross profit be significantly less than those achieved during 2006, we may determine that a triggering event has occurred, which would require
us to perform an evaluation for goodwill and other intangible assets. As of June 30, 2007, we had goodwill of approximately $138.4 million and indefinite-lived intangible assets of $35.6 million. If we determine our goodwill or intangibles to
be impaired, the resulting non-cash charge could be substantial.

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments  An Amendment of SFAS Nos. 133 and
140 (SFAS No. 155). SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. One of the primary
objectives of SFAS No. 155 is to simplify the accounting for certain hybrid financial instruments by permitting fair value accounting for any hybrid financial instrument that contains an embedded derivative that otherwise would require
bifurcation. The adoption of SFAS No. 155 has not had a material effect on our financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 clarifies that the term fair value is intended to mean a market-based measure, not an
entity-specific measure and gives the highest priority to quoted prices in active markets in determining fair value. SFAS No. 157 requires disclosures about (1) the extent to which companies measure assets and liabilities at fair value,
(2) the methods and assumptions used to measure fair value, and (3) the effect of fair value measures on earnings. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the
impact of SFAS No. 157 on our financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159 permits entities to measure at fair value, at specified election dates, many financial instruments and
certain other assets and liabilities that are not otherwise required to be measured at fair value. Subsequent changes in fair value will be required to be reported in earnings each reporting period. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We are currently evaluating the impact of SFAS No. 159 on our financial position, results of operations and cash flows.

Sarbanes-Oxley Section 404 Compliance

We incur certain costs associated with being an SEC
registrant because of covenants in the indenture governing our senior notes. We are currently a non-accelerated filer. For the year ending December 31, 2007, under current rules, pursuant to Section 404 of the Sarbanes-Oxley
Act, management will be required to deliver a report that assesses the effectiveness of our internal controls over financial reporting. The SEC issued a release in December 2006, however, announcing that the Commission had extended the date by which
non-accelerated filers must begin to comply with the Section 404(b) requirement to provide an auditors attestation report on internal controls over financial reporting. The deadline for the auditors attestation report has been moved
to the first annual report for fiscal years ending on or after December 15, 2008.

We have a substantial effort ahead of us to
implement appropriate processes, document the system of internal controls over key processes, assess their design, remediate any deficiencies identified and test their functionality. We began documenting and/or implementing the additional processes
and procedures necessary for Sarbanes-Oxley Section 404 compliance during 2006 and such work is scheduled for completion in the fourth quarter of 2007. Testing of annual reporting controls and the issuance of managements internal
assessment report is expected to be completed in the first quarter of 2008.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this Quarterly Report on Form 10-Q, other than historical information, may be considered forward-looking
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of forward-looking words such as believes, expects, may, will,
should, seeks, approximately, intends, plans, estimates or anticipates or the negative of these terms or other comparable words, or by discussions of strategy, plans
or intentions. Examples of forward-looking statements are statements that concern future revenues, future costs, future capital expenditures, business strategy, competitive strengths, competitive weaknesses, goals, plans, references to future
success or difficulties relating to acquisitions or similar strategic transactions and other similar information.

The forward-looking
statements in this document are based on our expectations and are necessarily dependent upon assumptions, estimates and data that we believe are reasonable and accurate but may be incorrect, incomplete or imprecise.



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Although we believe that the expectations reflected in any of our forward-looking statements are
reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change
and to inherent risks and uncertainties, such as those disclosed in this document and our other filings with the SEC. Risk factors that could cause our actual results, performance and achievements, or industry results to differ materially from
estimates or projections contained in forward-looking statements include, but are not limited to, the following:



| |  |  | the competitiveness of our industry, including competition based on price, product quality, breadth of product selection, quality of service and delivery times;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic conditions;
| | - |  | ----------------------------



| |  |  | disruptions in our distribution centers;
| | - |  | ----------------------------------------



| |  |  | evidence that a triggering event has occurred (i.e., a significant reduction in revenues or gross profit) and upon evaluation, we determine that goodwill or other
intangible assets are impaired, which could result in a substantial non-cash charge;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ability to execute on our acquisition strategy and the related integration of acquired companies, including the realization of anticipated operating synergies and
cost savings;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dependence of a significant portion of our products from a limited group of suppliers;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | ability to predict customer demand for our private label products to succeed and the ability to manage the additional complexity in our operations, including
increases to our working capital investment and increased level of inventory risk;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ability to execute on our distribution center consolidation plan, including the realization of anticipated inventory reductions and maintaining current customer
service levels;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ability to realize deferred tax assets, including the potential to record a valuation allowance against deferred tax assets in the future;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant reliance on one shipper to distribute our products to our customers; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | our substantial level of indebtedness.
| | - |  | --------------------------------------

These and other applicable risks are described under the caption Item 1A. Risk Factors in our Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC. We assume no obligation to publicly update or revise
any forward-looking statement made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report. All written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by these cautionary statements.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

As of June 30, 2007, we had $100.0 million of debt outstanding under our revolving credit facility. Our revolving credit facility is subject to variable interest rates. Accordingly, our earnings and cash flow are affected by changes in
interest rates. Assuming the June 30, 2007 level of borrowings, and further considering the interest rate protection agreements currently in place (see following paragraph), we estimate that a one percentage point increase in interest on our
variable rate debt agreements would have increased interest expense for the three and six months ended June 30, 2007 by approximately $0.2 million and $0.5 million, respectively.

We have entered into an interest rate protection agreement whereby we have contracted to pay a fixed interest rate in exchange for receipt of a variable
rate. The $10.0 million notional principal amount under an interest rate protection agreement terminates in October 2008. We have elected not to apply hedge accounting for the currently outstanding interest rate protection agreement. Accordingly, we
record our interest rate swaps at fair value on the balance sheet and record gains and losses on this contract as well as the periodic settlements of this contract through our statement of operations. We recorded other income of $0.1 million for the
three months ended June 30, 2007 and 2006, respectively and $0.1 million and $0.3 million during the six months ended June 30, 2007 and 2006, respectively.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

Our Chief Executive Officer and Interim Chief Financial Officer have evaluated the effectiveness of our disclosure controls
and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, they have concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures are effective.



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Changes in Internal Control Over Financial Reporting

There were no changes during the second quarter of fiscal 2007 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

We are involved from time to
time in routine legal matters and other claims incidental to our business. When it appears probable in managements judgment that we will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can
be reasonably estimated, liabilities are recorded in the financial statements and charges are recorded against earnings. We believe the resolution of such routine matters and other incidental claims, taking into account reserves and insurance, will
not have a material adverse effect on our financial condition or results of operations.



|Item 1A. | Risk Factors
|-------- | ------------

Our business, financial condition,
operating results and cash flows can be impacted by a number of factors, any one of which could cause our actual results to vary materially from recent months or from those anticipated. See the discussion in Item 1A. Risk Factors in
our 2006 Annual Report on Form 10-K. There have been no material changes in our risk factors from those previously disclosed in our 2006 Annual Report on Form 10-K.



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                                                  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                      
|31.1        |  | Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            | 
|31.2        |  | Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            | 
|32.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).
|            | 
|32.2        |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                |  |                   |  |                                                                             
|--------------- |  | ----------------- |  | ----------------------------------------------------------------------------
|August 14, 2007 |  | BRODER BROS., CO.
|                |  |                  
|                |  | By:               |  | /S/ THOMAS MYERS                                                            
|                |  |                   |  | Thomas Myers                                                                
|                |  |                   |  | Chief Executive Officer and Director (Principal Executive Officer)          
|                |  |                  
|August 14, 2007 |  |                   |  |                                                                             
|                |  |                  
|                |  | By:               |  | /S/ MARTIN J. MATTHEWS                                                      
|                |  |                   |  | Martin J. Matthews                                                          
|                |  |                   |  | Interim Chief Financial Officer (Principal Financial and Accounting Officer)



26