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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