Everlast® 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 2007 second quarter and six-months ended June 30, 2007.

For the second quarter ended June 30, 2007, net revenues increased 24% to $12.2 million, compared to $9.8 million in the same period in 2006. Growth in net revenue resulted from a 28% increase in sporting goods sales to a record $8.7 million. The increase resulted from expanded distribution and continued strong sell-through. Net licensing revenues increased 15% to approximately $3.5 million vs. $3.0 million in the second quarter of 2006. The growth was driven by organic increases in licensing income by our worldwide licensees, particularly in South Korea, Chile and in select categories in the United States.

In the second quarter of 2007, the Company's gross margin was 54.1%, compared with 45.7% in the second quarter a year ago. The improvement was generated by a 14.2 percent improvement in sporting goods gross margins. The increase in sporting goods gross margins was due to a combination of higher initial margins on new products, logistical and operational efficiencies, and improvements in sourcing, benefiting from initiatives implemented since the second half of fiscal 2006. This was slightly offset by the revenue mix shift toward equipment.

Second quarter operating income grew 36% to $2.1 million, or 17.5% of net revenues, versus the year-ago level of $1.6 million, or 15.9% of net revenues. This increase was primarily driven by higher revenues and improved gross profit margins, partially offset by planned increases in both marketing development initiatives and increased overhead costs within general and administrative expenses to support our Global Brand Integration.

During the second quarter of 2007, the Company recorded a $4.2 million pre-tax non-recurring merger related charge related to a merger agreement, as amended, signed on June 28, 2007 with Brands Holdings Limited, a private company limited by shares incorporated in England and Wales, EWI Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Brands Holdings Limited (?Brand Holdings?) The $4.2 million pre-tax charge is made up of approximately $470,000 in costs associated with a follow-on common stock offering that we have agreed to cancel as a condition to the closing of this merger, $745,000 in transaction costs related to the pending merger and $3.0 million termination fee incurred as a result of the termination of the Hidary Group Acquisition LLC merger agreement signed on June 1, 2007.

Adjusted earnings per diluted share for the second quarter of 2007, adding back approximately $0.63 of non-recurring merger related transaction costs and $0.05 of non-cash expense associated with stock-based compensation, was $0.21 per diluted share, a 62% increase over adjusted earnings of $0.13 per diluted share in 2006. The second quarter 2006 amount adds back approximately $0.03 of non-cash expense associated with stock-based compensation. Reported basic and diluted loss per share for the second quarter of 2007 was $(0.46) compared with earnings per diluted share of $0.10 in second quarter of 2006.

Seth Horowitz, Chairman, President and Chief Executive of Everlast Worldwide Inc., said ?We are very proud of the strong results we achieved for the second quarter. The 24% increase in net revenues and continued improvement in gross margins is enabling us to invest in our brand for both short-term and long-term growth to help us reinforce the premier brand our consumers have come to expect. Our sporting goods business continues to see strong sell-ins and sell-through, as evidenced by the 28% quarter over quarter increase, which has been consistent with the 25% plus percent year-over-year quarterly growth experienced in the last four sequential quarters. The additional volume and the significant reductions in sporting goods equipment product and logistical costs are enabling us to achieve significant improvements in our sporting goods gross margin, as demonstrated by the 14.2 percent improvement in the second quarter margins over the prior year quarter. Also strong, our licensing business grew at a 15% rate this quarter fueled by strong wholesale sales in South Korea, Chile, and licensed categories in North America.?

Mr. Horowitz continued, ?We continue to implement our Global Brand Integration, which is benefiting our entire business. We recently launched a U.S. trade print media campaign centered around our new tag-line, ?Greatness is Within?? which also includes our refreshed Everlast logo and global company icon. This marketing message has been and will be communicated and tailored around our product deployment and targeted to capitalize on the growing consumer trends of product categories ?Train, Compete, Live? within our sporting goods equipment, apparel and footwear product offerings. This strategy enables us to maximize the global positioning of our brand, utilizing the strengths of training, competitive and athleisure and sportswear products that we have exhibited in select territories and select categories and now aimed to achieve on a global basis. We have recently implemented this strategy by partnering with major sporting goods stores across the U.S. to build out Everlast concept and focus shops, including Dicks Sporting Goods stores, The Sports Authority stores and Big 5 Sporting Goods stores. ?

About Everlast Worldwide Inc.

Everlast Worldwide Inc. is a leading designer, manufacturer and marketer of boxing and fitness related sporting goods equipment under the well-recognized Everlast brand name and a worldwide licensor of the Everlast brand for apparel, footwear, sporting goods equipment and other active lifestyle products and accessories. Since 1910, Everlast has been the preeminent brand in the world of boxing and among the most recognized brands in the overall sporting goods and apparel industries. In order to capitalize on the rich heritage and authenticity of the Everlast brand, the company has extended the Everlast brand outside of the boxing ring into complementary product categories. Our strategy is to continue to leverage the unique qualities represented by the Everlast brand?Strength, Dedication, Individuality and Authenticity ? to become a leading global athletic brand and a necessary part of the lives of consumers who train, compete and live an active lifestyle.

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

Six Months Ended
June 30, June 30,
 
2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Net sales $8,674,000 $6,798,000 $17,723,000 $13,765,000
Net license revenues 3,482,000 3,039,000 6,809,000 6,042,000
Net revenues 12,156,000 9,837,000 24,532,000 19,807,000
 
Cost of goods sold 5,585,000 5,340,000 11,878,000 10,869,000
 
Gross profit 6,571,000 4,497,000 12,654,000 8,938,000
 
Operating expenses:
Selling and shipping 2,259,000 1,320,000 4,327,000 2,886,000
General and administrative 1,983,000 1,476,000 3,618,000 2,813,000
Stock-based compensation 202,000 135,000 363,000 219,000
4,444,000 2,931,000 8,308,000 5,918,000
 
Operating income 2,127,000 1,566,000 4,346,000 3,020,000
 
Other income (expense):
Non-recurring merger related costs (4,215,000) - (4,215,000) -

Gain on early extinguishment of preferred stock and prepayment of notes payable, net

- - - 2,032,000
Interest expense and financing costs, net (848,000) (823,000) (1,761,000) (1,482,000)
(5,063,000) (823,000) (5,976,000) 550,000
 
(Loss) income before (benefit) provision for income taxes

(2, 936,000)

743,000

(1,630,000)

3,570,000

 
(Benefit) provision for income taxes (1,066,000) 341,000 (494,000) 684,000
 
Net (loss) income ($1,870,000) $402,000 ($1,136,000) $2,886,000
 
Basic weighted average common shares outstanding 4,078,000 3,883,000 4,072,000 3,750,000
Diluted weighted average common shares outstanding

4,078,000

4,157,000

4,072,000

4,033,000

 
Net basic (loss) earnings per share ($0.46) $0.10 ($0.28) $0.77
Net diluted (loss) earnings per share ($0.46) $0.10 ($0.28) $0.72

Note: As a result of the net loss per share for the three and six months ended June 30, 2007, the denominator for fully diluted shares excludes the effects of stock options, warrants and other equity consideration aggregating to 307,000 and 336,000 respectively, as the results would be anti-dilutive. The basic per share affect of the non-cash stock based compensation and non-recurring merger related transaction costs, net of tax, is $0.68 per basic share.

EVERLAST WORLDWIDE INC. & SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 
June 30,

December 31,

2007 2006
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 150,000 $ 216,000
Accounts and licensing receivables - net 9,984,000 15,649,000
Inventories 9,577,000 8,766,000
Prepaid expenses and other current assets   1,703,000   1,098,000
Total current assets 21,414,000 25,729,000
 
Property and equipment, net 6,321,000 6,235,000
Goodwill 6,718,000 6,718,000
Trademarks, net 22,664,000 22,664,000
Restricted cash 1,136,000 1,109,000
Other assets   2,485,000   2,821,000
$ 60,738,000 $ 65,276,000
 
LIABILITIES AND STOCKHOLDERS' EQUITY

 

 
Current liabilities:
Due to factor 8,882,000 9,079,000
Accounts payable 4,418,000 5,638,000
Current maturities of long term debt 4,040,000 3,953,000
Mortgage payable 2,320,000 2,419,000
Accrued expenses and other liabilities   971,000   1,696,000
Total current liabilities 20,631,000 22,785,000
 
Other liabilities 1,380,000 667,000
Long term debt, net of current maturities   17,785,000   19,161,000
Total liabilities   39,796,000   42,613,000
 
Stockholders' equity:

Common stock, par value $.002;
19,000,000 shares authorized,
4,080,023 outstanding

10,000 10,000
Paid-in capital 17,811,000 17,380,000
Retained earnings   3,848,000   6,000,000
21,669,000 23,390,000
Less treasury stock   (727,000)   (727,000)
Total stockholders' equity   20,942,000   22,663,000
$ 60,738,000 $ 65,276,000

Share
© Business Wire - 2007

Latest news about Everlast Worldwide Inc.

EVERLAST WORLDWIDE INC. & SUBSIDIARIES
 

RECONCILIATION OF OPERATING INCOME TO EBITDA
EXCLUDING CERTAIN NON-CASH CHARGES

 
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Operating income as reported GAAP basis $2,127,000 $1,566,000 $4,346,000)0 $3,020,000