Everlast Worldwide Inc. Reports Year-End and Fourth Quarter 2005 Results

    NEW YORK, Feb. 28 /PRNewswire-FirstCall/ -- Everlast(R) Worldwide Inc.
 (Nasdaq:   EVST), manufacturer, marketer and licensor of sporting goods, apparel
 and footwear under the Everlast brand name, today announced its financial
 results for the fourth quarter and year ended December 31, 2005. On December
 14, 2005, Everlast announced the signing of a licensing agreement whereby it
 licensed its United States men's apparel category to Jacques Moret, Inc.
 effective January 1, 2006. Accordingly, Everlast has reported its results of
 operations on a GAAP basis, which includes the application of SFAS No. 144,
 "Accounting for the Disposal of Long-Lived Assets," which requires Everlast to
 report its results of operations of its men's apparel business as a
 discontinued component. Investors may refer to the December 14, 2005 press
 release describing the licensing agreement and the attached table for further
 details of the reconciliation of GAAP operating income from continuing
 operations to reported EBITDA.
     For the year ended December 31, 2005, net revenues from these continuing
 operations increased 29% to a record $43.3 million as compared to $33.5
 million in 2004. The net revenue growth was achieved by a 32% increase in net
 licensing revenue to $12 million as compared to $9.1 million in 2004, along
 with an increase in sporting goods net revenues of $6.8 million to a record
 $31.3 million, a 28% increase over 2004. The Company achieved a 392% increase
 in operating income from continuing operations to $5.2 million, while earnings
 from continuing operations, and before interest, taxes, depreciation and
 amortization ("EBITDA"), adjusted for certain non-recurring and one-time
 charges aggregating $469,000, increased to $7.3 million compared with $2.4
 million reported in the 2004 comparable period. 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
 29.5% (excluding 1% of certain non-recurring and one-time charges mentioned
 above) compared with 41.4% in the 2004 comparable period. Net income from
 continuing operations available to common stockholders was $1.8 million, or
 $0.55 per basic common share and $0.47 per diluted common share, as compared
 to a net loss from continuing operations of ($53,000), or ($0.02) loss per
 basic and diluted common share, in the 2004 comparable period. The results
 herein do not include the effects from the $2 million gain on the redemption
 of our Series A Preferred Stock and prepayment of related notes payable that
 was disclosed on February 8, 2006, that will be included in our first quarter
 fiscal 2006 results of operations. Reported net loss available to common
 stockholders under GAAP, which includes our loss from our discontinued
 components in 2005 and 2004, was ($948,000), or ($0.28) per basic common share
 in 2005, as compared to a ($1.0) million loss, or ($0.33) per basic share loss
 in 2004.
     For the fourth quarter of fiscal 2005, net revenues advanced 34.8% to a
 record $14.1 million as compared to net revenues of $10.5 million in 2004. The
 increase was derived from record sporting goods sales of $11 million, which
 achieved a 31% increase over the 2004 period, along with a 49% increase in
 record net licensing revenues. The Company achieved a 349% increase in
 operating income from continuing operations to $1.7 million, while earnings
 from continuing operations, and before interest, taxes, depreciation and
 amortization ("EBITDA"), increased to $2.2 million compared with ($0.3)
 million reported in the 2004 comparable period. The increase in operating
 income and EBITDA was largely a result of our increased net revenues and
 resulting gross margin dollars along with a reduction in our operating expense
 ratio of 27.8% compared with 33.3% in the 2004 comparable period.
     Net income from continuing operations available to common stockholders was
 $630,000, or $0.18 per basic common share and $0.16 per diluted common share,
 as compared to a net loss from continuing operations of ($1.2 million), or
 ($0.38) loss per basic and diluted common share, in the 2004 comparable
 period. Reported net loss available to common stockholders under GAAP, which
 includes our loss from our discontinued components in 2005 and 2004, was
 ($433,000), or ($0.13) per basic share, for the 2005 period as compared to a
 reported net loss of ($1.2) million, or ($0.37) per basic share, in 2004.
     "Over the past five years, the management of Everlast Worldwide has taken
 the brand to new heights of consumer awareness through innovative marketing
 and merchandising programs. The execution of this brand-building strategy has
 resulted in a worldwide and world class licensing business model that has
 resulted in the achievement of record net licensing revenues in 2005 of $12
 million, a 32% increase over 2004 levels. Coupled with a growing and
 flourishing sporting goods business that set record net revenues of $31
 million in 2005, a 28% increase over the 2004 comparable period, this has
 allowed the Company to achieve income from continuing operations and EBITDA of
 $5.2 million and $7.3 million, respectively, along with basic earnings from
 continuing operations of $0.55 cents per share," said Seth Horowitz, Chairman,
 President and Chief Executive of Everlast Worldwide Inc.
     Mr. Horowitz continued, "We believe our 2005 EBITDA and earnings from
 continuing operations are truer benchmarks of our performance and should be
 measured against for future years. The Jacques Moret men's license agreement
 has not only allowed us to focus our talents and efforts on our professional
 and retail boxing equipment and worldwide licensing businesses, but also
 enabled us to further identify and eliminate certain corporate overhead costs
 which will favorably impact our 2006 earnings and EBITDA. Furthermore, our
 recent announcement concerning the closing of our four-year $25 million Term
 Facility, with our senior lender Wells Fargo Century, and subsequent
 redemption of the Series A Preferred Stock and prepayment of Notes Payable,
 achieves one of the Company's financial objectives by simplifying our prior
 complex capital structure and providing an immediate benefit to existing
 common shareholders with a gain on the extinguishment of the Series A
 Preferred Stock and notes payable in the aggregate of $2.0 million, or $0.53
 per diluted share."
     Mr. Horowitz concluded, "One of our objectives in 2006 is to expand our
 licensing business into untapped geographic locations, including India and
 China. We also plan to grow our existing licensing programs across Europe with
 licensees in manufacturing, marketing and distributing in our core competency
 categories of apparel, sporting goods, boxing equipment and footwear. We will
 also work closely with our current licensees to help further enhance the
 merchandising and sales execution of their existing Everlast businesses. In
 addition, we are continuously looking at ways to reduce costs in our
 manufacturing, importing and distribution of our sporting goods business. We
 believe our recent mesh-packaging launch, unveiled at the Super-Show in
 Orlando last month, is a perfect example of a cost containment initiative that
 increases customer value while decreasing our cost of goods.  Moreover, new
 and expanded sales distribution into Target, Home Depot and Sharper Image will
 benefit the sporting goods net revenues in 2006. For the year ended 2006, we
 expect EBITDA and earnings per share to grow by double-digit increases over
 2005 reported amounts from continuing operations."
 
     About Everlast Worldwide Inc.
     Everlast Worldwide Inc. manufactures, markets and licenses sporting goods
 and apparel 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
 
                                (Tables Follow)
 
 
 
                     EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                          Three Months Ended            Year Ended
                              December 31,              December 31,
 
                           2005         2004         2005         2004
                        (Unaudited)  (Unaudited)   (Audited)    (Audited)
 
     Net sales          $10,982,000   $8,370,000  $31,271,000  $ 24,438,000
     Net license
      revenues            3,136,000    2,107,000   11,982,000    9,059,000
     Net revenues        14,118,000   10,477,000   43,253,000   33,497,000
 
     Cost of goods sold   8,463,000    7,683,000   24,807,000   18,553,000
 
     Gross profit         5,655,000    2,794,000   18,446,000   14,944,000
 
     Operating expenses:
     Selling and
      shipping            1,735,000    1,506,000    5,178,000   6,262,0008
     General and
      administrative      1,950,000    1,755,000    6,660,000    6,706,000
     Restructuring and
      non-recurring
      charges                14,000            -     287,000             -
     Costs in connection
      with warrant
      issuance                    -            -     182,000             -
     Amortization           228,000      228,000     913,000       913,000
                          3,927,000    3,498,000  13,220,000    13,881,000
 
     Income (loss) from
      continuing
      operations          1,728,000     (695,000)  5,226,000     1,063,000
 
     Other income (expense):
     Interest expense
      and financing
      costs                (604,000)    (331,000) (2,238,000)   (1,087,000)
     Proceeds from life
      insurance benefit,
      net                   653,000            -     653,000             -
     Loss on litigation    (692,000)           -     (692,000)           -
     Investment income        4,000        4,000      22,000        17,000
 
                           (639,000)    (327,000) (2,255,000)   (1,070,000)
 
     Income (loss) before
      provision for income
      taxes from continuing
      operations          1,089,000   (1,022,000)  2,971,000        (7,000)
 
     Provision (benefit)
      for income taxes      459,000      164,000   1,145,000        46,000
 
     Net income (loss) from
      continuing
      operations           $630,000  ($1,186,000) $1,826,000      ($53,000)
 
     Income (loss) from
      discontinued
      components,
      net of tax         (1,063,000)      32,000  (2,774,000)     (973,000)
 
     Net loss available
      to common
      stockholders        ($433,000) ($1,154,000)  ($948,000)  ($1,026,000)
 
     Basic earnings
     (loss) per share
      from continuing
      operations              $0.18       ($0.38)      $0.55        ($0.02)
     Diluted earnings (loss)
      per share from
      continuing operations   $0.16       ($0.38)      $0.47        ($0.02)
     Basic income (loss)
      per share from
      discontinued
      component              ($0.31)       $0.01      ($0.83)       ($0.31)
     Diluted income (loss)
      per share from
      discontinued
      component              ($0.27)       $0.01      ($0.71)       ($0.31)
     Net basic earnings
     (loss) per share        ($0.13)      ($0.37)     ($0.28)       ($0.33)
     Net diluted earnings
     (loss) per share        ($0.11)      ($0.37)     ($0.24)       ($0.33)
      EBITDA (Operating
       earnings excluding
       certain non-cash
       and non-recurring
       costs)            $2,184,000    ($325,000) $7,310,000    $2,387,000
 
 
 
                       EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
                             CONSOLIDATED BALANCE SHEETS
 
                                                  December 31,    December 31,
                                                       2005          2004
     ASSETS
 
     Current assets:
     Cash and cash equivalents                        $58,000       $649,000
     Accounts and licensing receivables - net      11,117,000      9,781,000
     Inventories                                    6,997,000     11,762,000
     Inventories of discontinued component            940,000      1,020,000
     Prepaid expenses and other current assets      2,761,000        921,000
     Total current assets                          21,873,000     24,133,000
 
     Property and equipment, net                    6,213,000      6,182,000
     Goodwill                                       6,718,000      6,718,000
     Trademarks, net                               22,664,000     23,576,000
     Restricted cash                                1,059,000      1,028,000
     Other assets                                   2,914,000      3,119,000
                                                  $61,441,000   $ 64,756,000
 
     LIABILITIES, REDEEMABLE PARTICIPATING PREFERRED STOCK AND STOCKHOLDERS'
 EQUITY
 
     Current liabilities:
     Current maturities of Series A redeemable
      participating preferred stock               $         -     $3,000,000
     Due to factor                                 13,028,000     11,316,000
     Accounts payable                               3,159,000      6,530,000
     Current maturities of long term debt           2,141,000        249,000
     Accrued expenses and other liabilities         3,252,000      1,062,000
     Total current liabilities                     21,580,000     22,157,000
 
     License deposits payable                         465,000        440,000
     Series A redeemable participating
      preferred stock                                       -     22,000,000
 
     Notes payable                                          -      4,000,000
     Other liabilities                                      -        190,000
     Long term debt, net of current maturities     26,531,000      2,643,000
     Total liabilities                             48,576,000     51,430,000
 
     Stockholders' equity:
     Common stock, par value
      $.002; 19,000,000 shares
      authorized, 3,378,743
      and 3,070,359 outstanding                         8,000          7,000
     Class A common stock, par value
      $.01; 100,000 shares authorized;
      100,000 shares issued and
      outstanding                                       1,000          1,000
     Paid-in capital                               12,307,000     11,821,000
     Retained earnings                              1,276,000      2,224,000
                                                   13,592,000     14,053,000
     Less treasury stock                             (727,000)      (727,000)
     Total stockholders' equity                    12,865,000     13,326,000
                                                  $61,441,000   $ 64,756,000
 
 
 
                     EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 
    RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA EXCLUDING
                   CERTAIN CHARGES FROM CONTINUING OPERATIONS
 
                                 Three Months Ended          Year Ended
                                    December 31,             December 31,
                                   2005       2004        2005         2004
                               (Unaudited) (Unaudited)  (Audited)    (Audited)
 
     Income (loss) from
      continuing operations
      as reported GAAP basis    1,728,000   (695,000)   5,226,000    1,063,000
 
     Adjustments:
     Depreciation and
      amortization included
      in operating income         442,000    370,000    1,615,000    1,324,000
     Restructuring and
      non-recurring costs          14,000          -      287,000            -
     Costs in connection
      with warrant issuance             -          -      182,000            -
 
     Adjusted EBITDA (Earnings
      excluding certain costs
      before interest, taxes,
      depreciation and
      amortization)            $2,184,000  ($325,000)  $7,310,000   $2,387,000
 
     Note: To supplement its financial statements presented on a GAAP basis,
 the Company uses non-GAAP additional measures of EBITDA adjusted to exclude
 certain nonrecurring restructuring costs and non-cash costs in connection with
 a warrant issuance. 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.