Everlast Worldwide Inc. Reports First Quarter 2006 Results First Quarter 2006 Highlights Include:

- Net revenues from continuing operations increase 20% to $10 million

- Income from continuing operations advances 83% to $1.5 million

- EBITDA from continuing operations and before non-cash stock based

compensation and warrant issuance costs improves 27% to $1.7 million

- Reported basic and diluted earnings per share for the first quarter of

2006 were $0.69 and $0.64 respectively, compared to a loss of $(0.03) per

basic and diluted share in the comparable period in 2005

- Adjusted basic and diluted earnings per common share, excluding the gain

on redemption from the Preferred Stock for the first quarter of 2006, were

both $0.12, compared to adjusted basic and diluted earnings per share from

continuing operations, excluding the loss from our discontinued components,

for the first quarter of 2005 of $0.07 and $0.06 respectively



    NEW YORK, April 27 /PRNewswire-FirstCall/ -- Everlast(R) Worldwide Inc.
 (Nasdaq:   EVST), manufacturer, marketer and licensor of sporting goods,
 apparel, footwear and other active lifestyle products under the Everlast
 brand name, today announced its financial results for its fiscal 2006 first
 quarter ended March 31, 2006.
     For the first quarter ended March 31, 2006, net revenues increased 20%
 to $10 million, as compared to $8.3 million in the same period in 2005.
 Growth in net revenue resulted from a 33% increase in sporting goods sales
 to a record $7 million, the second consecutive quarter of more than 30%
 year-over-year sales growth. Net licensing revenues for the first quarter
 of 2006 were $3 million, as compared to $3.1 million in the same period a
 year ago. In the first quarter of fiscal 2006, Everlast's net licensing
 revenues were impacted by the Company's decision not to renew its previous
 footwear license that was allowed to expire in December 2005, as well as an
 increase in licensing commissions resulting from the litigation settlement
 which requires the Company to pay commissions to the former agent of
 Everlast during 2006.
     In the first quarter of 2006, the Company's gross margin was 44.5%,
 compared with 48.1% in the first quarter a year ago. The lower gross profit
 margin was primarily due to a change in revenue mix. This was driven by
 higher sporting goods sales, which have a lower gross margin than our
 revenue stream of licensing. However, the Company's sporting goods gross
 margins did improve 330 basis points over the 2005 comparable period due to
 lower product costs, improved operational efficiencies and cost reductions
 in labor and overhead.
     The Company achieved an 83% increase in operating income to $1.5
 million, while earnings from continuing operations and before interest,
 taxes, depreciation and amortization ("EBITDA"), adjusted for non-cash
 stock based compensation and warrant issuance costs, improved 27% to $1.7
 million, as compared with $1.3 million reported in the same period a year
 ago. The increase in operating income and EBITDA was largely a result of
 increased net revenues and resulting gross margin dollars, along with a
 reduction in our operating expense ratio of 30% compared with 38.6% in the
 2005 comparable period. The operating expense decrease was primarily
 achieved by lower general and administrative expenses along with a
 reduction in non-cash equity awards and amortization expense. In the first
 quarter of 2006, the Company was required to adopt SFAS 123 (R),
 Stock-Based Compensation, which resulted in a non-cash expense of $84,000.
 In addition, the Company changed its accounting for the amortization of
 intangible assets and is no longer amortizing its trademark by $228,000 per
 quarter, based on the assessment that the Everlast trademark has an
 indefinite life.
     Reported net income from continuing operations available to common
 stockholders was $2.5 million, or $0.69 per basic share and $0.64 per
 diluted share, as compared to a net loss of $(94,000), or $(0.03) loss per
 basic and diluted share, in the 2005 comparable period. The 2006 first
 quarter results herein include the effects from the $2 million gain on the
 redemption of our Series A Preferred Stock and prepayment of related notes
 payable previously disclosed on February 8, 2006, that benefited our
 results of operations by $0.57 per basic share and $0.52 per diluted share.
 The 2005 comparable first quarter results include a loss from our
 discontinued components of $(320,000), or $(0.10) per basic share and
 $(0.09) per diluted share. Thus, from an ongoing continuing operations
 basis, the Company earned $0.12 per basic and diluted share in the 2006
 period, as compared to $0.07 and $0.06 basic and diluted earnings per share
 respectively in the 2005 comparable period.
     Seth Horowitz, Chairman, President and Chief Executive of Everlast
 Worldwide Inc., said "Our first quarter operating results and balance sheet
 reflect the benefit from all of the strategic initiatives we have
 accomplished over the past eighteen months. I am pleased with the
 profitability we achieved for our stockholders, both with and without the
 $2 million gain on the redemption of our Series A Preferred Stock and
 prepayment of related notes. Our strong operating income and EBITDA were
 derived from a combination of record sporting goods revenues, improved
 gross margins on our sporting goods sales, and lower operating expenses. We
 have achieved these strong first quarter results, which met most of our
 internal goals and objectives, knowing our licensing revenues would be
 impacted by our decision to end sales of footwear with Footstar/Meldisco,
 we now have the opportunity to re-license this category for sales at a
 higher level of distribution in the months to come. In addition to
 partnering with the right footwear licensee, we continue to move forward
 into 2006 and beyond by gaining entry into two of the largest, emerging
 markets: India and China. While the retail infrastructure is limited in
 both countries, Everlast is looking for the right licensing partner in each
 country. Each licensee must be able to create its own retail environment,
 potentially creating Everlast concept shops, or have tremendous support
 from the existing retail infrastructure and the capability to build the
 brand in many product categories. We demand excellence in quality and a
 company dedicated to the success of Everlast."
     Mr. Horowitz continued, "Our first quarter sporting goods margins are
 already benefiting from the effects of our cost containment initiatives in
 the areas of manufacturing, importing and distributing our sporting goods
 products. Our gross margins will also continue to benefit from the strong
 top line growth we are experiencing. This quarter marks our second
 consecutive period of revenue growth greater than 30% year-over-year, a
 result of expanded distribution with our traditional sporting goods and
 mass retailers, along with new channels of distribution. One of the new
 distributors is Bed, Bath and Beyond, which will carry certain products in
 the Fall of 2006 for a holiday promotion offering. As we continue to
 monitor our cost structure and look at ways to reduce product costs,
 logistics and corporate overhead, our internally generated cash flows will
 continue to reduce our revolving line of credit and term facility debt
 service, which we have already benefited from in the first quarter of 2006.
 These benefits, in part, helped to achieve a working capital improvement of
 more than $4 million from December 2005."
     About Everlast Worldwide Inc.
     Everlast Worldwide Inc. manufactures, markets and licenses sporting
 goods, apparel, footwear and other active lifestyle products under the
 Everlast brand name. Since 1910, Everlast has been the preeminent brand in
 the world of boxing and is among the most dominant brands in the overall
 sporting goods and apparel industries. Over the past 96 years, Everlast
 products have become the "Choice of Champions(TM)", having been used for
 training and professional fights by many of the biggest names in the sport.
 Everlast is the market leader in nearly all of its product categories,
 responsible for leading eight of the top ten boxing equipment products in
 sales. In addition to producing and marketing the equipment and
 accessories, Everlast Worldwide Inc. licenses its brand to providers of
 men's and women's sportswear and active wear, children's wear, footwear,
 watches, cardiovascular exercise equipment, nutritional foods and
 gym/duffel bags to name just a few categories. At the retail level,
 Everlast's licensed products generate more than $700 million in revenues.
 The company's Web site can be found at http://www.everlast.com.
     Statements made in this Press Release that are estimates of past or
 future performance are based on a number of factors, some of which are
 outside of the Company's control. Statements made in this Press Release
 that state the intentions, beliefs, expectations or predictions of Everlast
 Worldwide, Inc. and its management for the future are forward-looking
 statements. It is important to note that actual results could differ
 materially from those projected in such forward-looking statements.
 Information concerning factors that could cause actual results to differ
 materially from those in forward- looking statements is contained from time
 to time in filings of Everlast Worldwide with the U.S. Securities and
 Exchange Commission. Copies of these filings may be obtained by contacting
 Everlast Worldwide or the SEC.
                     EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                                      Three Months Ended
                                                           March 31,
 
                                                      2006          2005
                                                  (Unaudited)    (Unaudited)
 
     Net sales                                    $ 6,967,000    $ 5,224,000
     Net license revenues                           3,003,000      3,100,000
     Net revenues                                   9,970,000      8,324,000
 
     Cost of goods sold                             5,529,000      4,320,000
 
     Gross profit                                   4,441,000      4,004,000
 
     Operating expenses:
       Selling and shipping                         1,566,000      1,205,000
       Stock based compensation and costs in
        connection with warrant issuance               84,000        182,000
       General and administrative                   1,337,000      1,596,000
       Amortization                                         -        228,000
                                                    2,987,000      3,211,000
 
     Income from continuing operations              1,454,000       793,0000
 
     Other income (expense):
       Gain on early extinguishment of preferred
        stock and prepayment of notes payable, net  2,032,000              -
       Interest expense and financing costs          (668,000)      (552,000)
       Investment income                                9,000          4,000
                                                    1,373,000       (548,000)
 
     Income before provision for income
     taxes from continuing operations               2,827,000        245,000
 
     Provision for income taxes                       343,000         19,000
 
     Net income from continuing operations         $2,484,000       $226,000
 
     Loss from discontinued component, net of tax           -      ($320,000)
 
     Net income (loss) available to common
      stockholders                                 $2,484,000       ($94,000)
 
     Basic earnings per share from continuing
      operations                                        $0.69          $0.07
     Diluted earnings per share from continuing
      operations                                        $0.64          $0.06
     Basic loss per share from discontinued component       -         ($0.10)
     Diluted loss per share from discontinued component     -         ($0.09)
     Net basic earnings (loss) per share                $0.69         ($0.03)
     Net diluted earnings (loss) per share              $0.64         ($0.03)
 
 
 
 
                     EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                                                     March 31,   December 31,
                                                         2006           2005
     ASSETS
 
     Current assets:
       Cash and cash equivalents                     $232,000        $58,000
       Accounts and licensing receivables - net     8,022,000     11,117,000
       Inventories                                  5,295,000      6,997,000
       Inventories of discontinued component                -        940,000
       Prepaid expenses and other current assets    1,211,000      2,761,000
         Total current assets                      14,760,000     21,873,000
 
        Property and equipment, net                 6,267,000      6,213,000
        Goodwill                                    6,718,000      6,718,000
        Trademarks, net                            22,664,000     22,664,000
        Restricted cash                             1,071,000      1,059,000
        Other assets                                2,789,000      2,914,000
                                                  $54,269,000    $61,441,000
 
     LIABILITIES, REDEEMABLE PARTICIPATING PREFERRED
      STOCK AND STOCKHOLDERS' EQUITY
 
     Current liabilities:
       Due to factor                                4,998,000     13,028,000
       Accounts payable                             1,863,000      3,159,000
       Current maturities of long term debt         2,775,000      2,141,000
       Accrued expenses and other liabilities       1,070,000      3,252,000
         Total current liabilities                 10,706,000     21,580,000
 
       License deposits payable                       438,000        465,000
       Long term debt, net of current maturities   24,839,000     26,531,000
     Total liabilities                             35,983,000     48,576,000
 
     Stockholders' equity:
     Common stock, par value $.002; 19,000,000
      shares authorized, 3,870,471 and
      3,378,743 outstanding                            10,000          8,000
     Class A common stock, par value $.01;
      100,000 shares authorized; 100,000 shares
      issued and outstanding                                -          1,000
     Paid-in capital                               15,244,000     12,307,000
     Retained earnings                              3,759,000      1,276,000
                                                   19,013,000     13,592,000
     Less treasury stock                             (727,000)      (727,000)
         Total stockholders' equity                18,286,000     12,865,000
                                                  $54,269,000    $61,441,000
 
 
 
                     EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
    RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA EXCLUDING
              CERTAIN NON-CASH CHARGES FROM CONTINUING OPERATIONS
 
                                                        Three Months Ended
                                                            March 31,
 
                                                       2006          2005
                                                  (Unaudited)    (Unaudited)
 
     Income from continuing operations as
      reported GAAP basis                          $1,454,000       $793,000
 
     Adjustments:
     Depreciation and amortization included
      in operating income                             160,000        363,000
     Non-cash stock based compensation and
      non-cash costs in connection with
      warrant issuance                                 84,000        182,000
 
     Adjusted EBITDA (Earnings excluding certain
      costs before interest, taxes, depreciation
      and amortization)                            $1,698,000     $1,338,000
 
 
     Note: To supplement its financial statements presented on a GAAP basis,
           the Company uses non-GAAP additional measures of EBITDA adjusted to
           exclude certain non-cash costs in connection with stock based
           compensation and warrant issuance costs. The Company believes that
           the use of these additional measures is appropriate to enhance an
           overall understanding of its past financial performance. These
           adjustments to the Company's GAAP results are made with the intent
           of providing both management and investors with a more complete
           understanding of the underlying operational results and trends and
           its marketplace performance. The presentation of this additional
           information is not meant to be considered in isolation or as a
           substitute for net earnings or earnings per share prepared in
           accordance with generally accepted accounting principles in the
           United States.
 
 

SOURCE Everlast Worldwide Inc.

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