EVST Everlast Worldwide (MM)

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 third quarter and nine-months ended September 30, 2006. For the third quarter ended September 30, 2006, net revenues increased 27% to $13.4 million, as compared to $10.6 million in the same period in 2005. Net licensing revenues for the third quarter of 2006 were $3.0 million, as compared to $2.8 million in the same period a year ago. As was announced in the first quarter, licensing revenues have been impacted by the Company�s decision not to renew its previous footwear license as well as an increase in licensing commissions resulting from the litigation settlement which requires the Company to pay commissions to a former agent of Everlast during 2006. These two factors negatively impacted licensing revenues in the second quarter by approximately $425,000. Revenues from sporting goods for the third quarter were $10.5 million, a record, as compared to $7.8 million in 2005, an increase of 35%. The increase was the result of organic growth, driven by new products, new channels of distribution and strong consumer awareness of our brand as a result of the airing of Season 2 of The Contender, which premiered July 18, 2006. Gross margin for the quarter improved to 42.7%, compared with 42.0% in the third quarter a year ago. The higher gross profit margin was achieved from improved margins on sporting goods equipment due to some operational efficiencies and product cost reductions. The Company achieved a record 29% increase in operating income from continuing operations to $2.2 million, versus the year-ago level of $1.7 million. The increase in operating income resulted from improved gross margins. Operating expenses, as a percentage of net revenues, remained flat, at approximately 26% of net revenues as the Company incurred and anticipated higher marketing and advertising costs associated with Season 2 of The Contender. Adjusted earnings per diluted share, excluding the $0.03 effects of stock based compensation, and $0.06 effects of warrant issuance costs, for the third quarter of fiscal 2006 was $0.25 per diluted share, as compared to a net income from continuing operations of $0.16 per diluted share, in the 2005 comparable period. The Company believes that this is a more appropriate comparison as stock compensation and warrant costs were not included in the third quarter year-ago calculation. Seth Horowitz, Chairman, President and Chief Executive of Everlast Worldwide Inc., said, �We are thrilled to be able to report record results from continuing operations this quarter. Everlast clearly has a tremendous amount of momentum, and we feel very good about the overall direction of the brand. We�re seeing growth across all aspects of our business, starting with our base sporting goods segment. Participation continues to rise in boxing and mixed martial arts, and Everlast is uniquely positioned to benefit from the trend. We�re constantly adding innovation to our sporting goods and working with our licensees to capitalize on the strength of the Everlast brand.� Mr. Horowitz continued, �the Company is reiterating the following financial guidance for fiscal year 2006, although results are expected to be towards the high end of the following ranges: Net revenues ranging between $46 to $48.5 million EBITDA (excluding the effects of non-cash equity awards) ranging between $8.7 to $9.3 million Diluted earnings per share (excluding the effects of stock-based compensation expense) between $0.68 and $0.73� �We are also introducing guidance for 2007, as follows: Net revenues ranging between $53 to $55 million EBITDA (excluding the effects of non-cash equity awards) ranging between $10.4 to $10.8 million Diluted earnings per share between $0.93 and $0.98, which excludes the impact of about $0.20 per share in stock based compensation expenses.� The Company will be conducting a conference call today to discuss its third quarter 2006 results of operations and financial condition by hosting a conference call at 4:30 p.m. Eastern Time. Parties interested in participating in the conference call may dial-in at (800) 289-0726, while international callers may dial-in at (913) 981-5545. The conference call will be webcast and can be accessed at www.viavid.net. A recording of the conference call will be available until November 16, 2006 by dialing (888) 203-1112 or (719) 457-0820 for international callers, and entering the passcode of 2704176. 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��, 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. 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. & SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS � Three Months Ended Nine Months Ended September 30, September 30, � 2006� 2005� 2006� 2005� (Unaudited) (Unaudited) (Unaudited) (Unaudited) � Net sales $10,450,000� $7,753,000� $24,215,000� $ 20,290,000� Net license revenues 2,964,000� 2,807,000� 9,006,000� 8,845,000� Net revenues 13,414,000� 10,560,000� 33,221,000� 29,135,000� � Cost of goods sold 7,691,000� 6,125,000� 18,560,000� 16,345,000� � Gross profit 5,723,000� 4,435,000� 14,661,000� 12,790,000� � Operating expenses: Selling and shipping 1,848,000� 1,086,000� 4,734,000� 3,443,0008� General and administrative 1,353,000� 1,444,000� 4,166,000� 4,711,000� Restructuring and non-recurring charges -� -� -� 273,000� Stock-based compensation and costs in connection with warrant issuance, net 357,000� -� 576,000� 182,000� Amortization -� 228,000� -� 684,000� 3,558,000� 2,758,000� 9,476,000� 9,293,000� � Income from continuing operations 2,165,000� 1,677,000� 5,185,000� 3,497,000� � Other income (expense): Gain on early extinguishment of preferred stock and prepayment of notes payable, net -� -� 2,032,000� -� Interest expense and financing costs (893,000) (554,000) (2,382,000) (1,631,000) Investment income 4,000� 6,000� 11,000� 17,000� (889,000) (548,000) (339,000) (1,614,000) Income before provision for income taxes from continuing operations 1,276,000� 1,129,000� 4,846,000� 1,883,000� � Provision for income taxes 587,000� 456,000� 1,271,000� 678,000� � Net income from continuing operations $689,000� $673,000� $3,575,000� $1,205,000� � Loss from discontinued components, net of tax -� (498,000) -� (1,720,000) � Net income (loss) available to common stockholders $689,000� $175,000� $3,575,000� ($515,000) Basic weighted average common shares outstanding 3,912,216� 3,385,858� 3,804,488� 3,282,294� Diluted weighted average common shares outstanding 4,179,959� 4,114,563� 4,115,573� 3,848,282� Basic earnings per share from continuing operations $0.18� $0.20� $0.94� $0.37� Diluted earnings per share from continuing operations $0.16� $0.16� $0.87� $0.31� Basic loss per share from discontinued component -� ($0.15) -� ($0.52) Diluted loss per share from discontinued component -� ($0.12) -� ($0.45) Net basic earnings (loss) per share $0.18� $0.05� $0.94� ($0.15) Net diluted earnings (loss) per share $0.16� $0.04� $0.87� ($0.14) EBITDA (Operating earnings excluding certain non-cash and non-recurring costs) $2,679,000� $2,075,000� $6,269,000� $5,115,000� EVERLAST WORLDWIDE INC. & SUBSIDIARIES � CONSOLIDATED BALANCE SHEETS � September 30, December 31, 2006� 2005� � ASSETS � Current assets: Cash and cash equivalents $ 261,000� $ 58,000� Accounts and licensing receivables - net 11,566,000� 11,117,000� Inventories 9,455,000� 6,997,000� Inventories of discontinued component -� 940,000� Prepaid expenses and other current assets � 1,596,000� � 2,761,000� Total current assets 22,878,000� 21,873,000� � Property and equipment, net 6,191,000� 6,213,000� Goodwill 6,718,000� 6,718,000� Trademarks, net 22,664,000� 22,664,000� Restricted cash 1,096,000� 1,059,000� Other assets � 2,621,000� � 2,914,000� $ 62,168,000� $ 61,441,000� � LIABILITIES, REDEEMABLE PARTICIPATING PREFERRED STOCK AND STOCKHOLDERS' EQUITY � Current liabilities: Due to factor 5,921,000� 13,028,000� Accounts payable 7,465,000� 3,159,000� Current maturities of long term debt 2,776,000� 2,141,000� Accrued expenses and other liabilities � 2,185,000� � 3,252,000� Total current liabilities 18,347,000� 21,580,000� � License deposits payable 435,000� 465,000� Long term debt, net of current maturities � 23,450,000� � 26,531,000� Total liabilities � 42,232,000� � 48,576,000� � Stockholders' equity: Common stock, par value $.002; 19,000,000 shares authorized, 4,028,657 and 3,378,743 outstanding 10,000� 8,000� Class A common stock, par value $.01; 100,000 shares authorized; 0 and 100,000 shares issued and outstanding -� 1,000� Paid-in capital 15,802,000� 12,307,000� Retained earnings � 4,851,000� � 1,276,000� 20,663,000� 13,592,000� Less treasury stock � (727,000) � (727,000) Total stockholders' equity � 19,936,000� � 12,865,000� $ 62,168,000� $ 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 Nine Months Ended September 30, September 30, � 2006� 2005� 2006� 2005� (Unaudited) (Unaudited) (Unaudited) (Unaudited) � Income from continuing operations as reported GAAP basis $2,165,000� $1,677,000� $5,185,000)0� $3,497,000� � Adjustments: Depreciation and amortization included in operating income 157,000� 398,000� 508,000� 1,163,000� Restructuring and non-recurring costs -� -� 273,000� Non-cash stock based compensation and non-cash costs in connection with warrant issuance 357,000� -� 576,000� 182,000� � Adjusted EBITDA (Earnings excluding certain costs before interest, taxes, depreciation and amortization) $2,679,000� $2,075,000� $6,269,000� $5,115,000� � � 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. 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 third quarter and nine-months ended September 30, 2006. For the third quarter ended September 30, 2006, net revenues increased 27% to $13.4 million, as compared to $10.6 million in the same period in 2005. Net licensing revenues for the third quarter of 2006 were $3.0 million, as compared to $2.8 million in the same period a year ago. As was announced in the first quarter, licensing revenues have been impacted by the Company's decision not to renew its previous footwear license as well as an increase in licensing commissions resulting from the litigation settlement which requires the Company to pay commissions to a former agent of Everlast during 2006. These two factors negatively impacted licensing revenues in the second quarter by approximately $425,000. Revenues from sporting goods for the third quarter were $10.5 million, a record, as compared to $7.8 million in 2005, an increase of 35%. The increase was the result of organic growth, driven by new products, new channels of distribution and strong consumer awareness of our brand as a result of the airing of Season 2 of The Contender, which premiered July 18, 2006. Gross margin for the quarter improved to 42.7%, compared with 42.0% in the third quarter a year ago. The higher gross profit margin was achieved from improved margins on sporting goods equipment due to some operational efficiencies and product cost reductions. The Company achieved a record 29% increase in operating income from continuing operations to $2.2 million, versus the year-ago level of $1.7 million. The increase in operating income resulted from improved gross margins. Operating expenses, as a percentage of net revenues, remained flat, at approximately 26% of net revenues as the Company incurred and anticipated higher marketing and advertising costs associated with Season 2 of The Contender. Adjusted earnings per diluted share, excluding the $0.03 effects of stock based compensation, and $0.06 effects of warrant issuance costs, for the third quarter of fiscal 2006 was $0.25 per diluted share, as compared to a net income from continuing operations of $0.16 per diluted share, in the 2005 comparable period. The Company believes that this is a more appropriate comparison as stock compensation and warrant costs were not included in the third quarter year-ago calculation. Seth Horowitz, Chairman, President and Chief Executive of Everlast Worldwide Inc., said, "We are thrilled to be able to report record results from continuing operations this quarter. Everlast clearly has a tremendous amount of momentum, and we feel very good about the overall direction of the brand. We're seeing growth across all aspects of our business, starting with our base sporting goods segment. Participation continues to rise in boxing and mixed martial arts, and Everlast is uniquely positioned to benefit from the trend. We're constantly adding innovation to our sporting goods and working with our licensees to capitalize on the strength of the Everlast brand." Mr. Horowitz continued, "the Company is reiterating the following financial guidance for fiscal year 2006, although results are expected to be towards the high end of the following ranges: -- Net revenues ranging between $46 to $48.5 million -- EBITDA (excluding the effects of non-cash equity awards) ranging between $8.7 to $9.3 million -- Diluted earnings per share (excluding the effects of stock-based compensation expense) between $0.68 and $0.73" "We are also introducing guidance for 2007, as follows: -- Net revenues ranging between $53 to $55 million -- EBITDA (excluding the effects of non-cash equity awards) ranging between $10.4 to $10.8 million -- Diluted earnings per share between $0.93 and $0.98, which excludes the impact of about $0.20 per share in stock based compensation expenses." The Company will be conducting a conference call today to discuss its third quarter 2006 results of operations and financial condition by hosting a conference call at 4:30 p.m. Eastern Time. Parties interested in participating in the conference call may dial-in at (800) 289-0726, while international callers may dial-in at (913) 981-5545. The conference call will be webcast and can be accessed at www.viavid.net. A recording of the conference call will be available until November 16, 2006 by dialing (888) 203-1112 or (719) 457-0820 for international callers, and entering the passcode of 2704176. 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. 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. -0- *T EVERLAST WORLDWIDE INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------- 2006 2005 2006 2005 ------------ ----------- ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $10,450,000 $7,753,000 $24,215,000 $20,290,000 Net license revenues 2,964,000 2,807,000 9,006,000 8,845,000 ------------ ----------- ------------ ------------ Net revenues 13,414,000 10,560,000 33,221,000 29,135,000 ------------ ----------- ------------ ------------ Cost of goods sold 7,691,000 6,125,000 18,560,000 16,345,000 ------------ ----------- ------------ ------------ Gross profit 5,723,000 4,435,000 14,661,000 12,790,000 Operating expenses: Selling and shipping 1,848,000 1,086,000 4,734,000 3,443,0008 General and administrative 1,353,000 1,444,000 4,166,000 4,711,000 Restructuring and non-recurring charges - - - 273,000 Stock-based compensation and costs in connection with warrant issuance, net 357,000 - 576,000 182,000 Amortization - 228,000 - 684,000 ------------ ----------- ------------ ------------ 3,558,000 2,758,000 9,476,000 9,293,000 ------------ ----------- ------------ ------------ Income from continuing operations 2,165,000 1,677,000 5,185,000 3,497,000 ------------ ----------- ------------ ------------ Other income (expense): Gain on early extinguishment of preferred stock and prepayment of notes payable, net - - 2,032,000 - Interest expense and financing costs (893,000) (554,000) (2,382,000) (1,631,000) Investment income 4,000 6,000 11,000 17,000 ------------ ----------- ------------ ------------ (889,000) (548,000) (339,000) (1,614,000) ------------ ----------- ------------ ------------ Income before provision for income taxes from continuing operations 1,276,000 1,129,000 4,846,000 1,883,000 Provision for income taxes 587,000 456,000 1,271,000 678,000 ------------ ----------- ------------ ------------ Net income from continuing operations $689,000 $673,000 $3,575,000 $1,205,000 ============ =========== ============ ============ Loss from discontinued components, net of tax - (498,000) - (1,720,000) ------------ ----------- ------------ ------------ Net income (loss) available to common stockholders $689,000 $175,000 $3,575,000 ($515,000) ============ =========== ============ ============ Basic weighted average common shares outstanding 3,912,216 3,385,858 3,804,488 3,282,294 ============ =========== ============ ============ Diluted weighted average common shares outstanding 4,179,959 4,114,563 4,115,573 3,848,282 ============ =========== ============ ============ Basic earnings per share from continuing operations $0.18 $0.20 $0.94 $0.37 ============ =========== ============ ============ Diluted earnings per share from continuing operations $0.16 $0.16 $0.87 $0.31 ============ =========== ============ ============ Basic loss per share from discontinued component - ($0.15) - ($0.52) ============ =========== ============ ============ Diluted loss per share from discontinued component - ($0.12) - ($0.45) ============ =========== ============ ============ Net basic earnings (loss) per share $0.18 $0.05 $0.94 ($0.15) ============ =========== ============ ============ Net diluted earnings (loss) per share $0.16 $0.04 $0.87 ($0.14) ============ =========== ============ ============ EBITDA (Operating earnings excluding certain non-cash and non-recurring costs) $2,679,000 $2,075,000 $6,269,000 $5,115,000 ============ =========== ============ ============ *T -0- *T EVERLAST WORLDWIDE INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 2006 2005 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 261,000 $ 58,000 Accounts and licensing receivables - net 11,566,000 11,117,000 Inventories 9,455,000 6,997,000 Inventories of discontinued component - 940,000 Prepaid expenses and other current assets 1,596,000 2,761,000 ------------- ------------- Total current assets 22,878,000 21,873,000 Property and equipment, net 6,191,000 6,213,000 Goodwill 6,718,000 6,718,000 Trademarks, net 22,664,000 22,664,000 Restricted cash 1,096,000 1,059,000 Other assets 2,621,000 2,914,000 ------------- ------------- $ 62,168,000 $ 61,441,000 ============= ============= LIABILITIES, REDEEMABLE PARTICIPATING PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Due to factor 5,921,000 13,028,000 Accounts payable 7,465,000 3,159,000 Current maturities of long term debt 2,776,000 2,141,000 Accrued expenses and other liabilities 2,185,000 3,252,000 ------------- ------------- Total current liabilities 18,347,000 21,580,000 License deposits payable 435,000 465,000 Long term debt, net of current maturities 23,450,000 26,531,000 ------------- ------------- Total liabilities 42,232,000 48,576,000 ------------- ------------- Stockholders' equity: Common stock, par value $.002; 19,000,000 shares authorized, 4,028,657 and 3,378,743 outstanding 10,000 8,000 Class A common stock, par value $.01; 100,000 shares authorized; 0 and 100,000 shares issued and outstanding - 1,000 Paid-in capital 15,802,000 12,307,000 Retained earnings 4,851,000 1,276,000 ------------- ------------- 20,663,000 13,592,000 Less treasury stock (727,000) (727,000) ------------- ------------- Total stockholders' equity 19,936,000 12,865,000 ------------- ------------- $ 62,168,000 $ 61,441,000 ============= ============= *T -0- *T EVERLAST WORLDWIDE INC. & SUBSIDIARIES RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA EXCLUDING CERTAIN NON-CASH CHARGES FROM CONTINUING OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ------------------------- 2006 2005 2006 2005 ----------- ----------- ------------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Income from continuing operations as reported GAAP basis $2,165,000 $1,677,000 $5,185,000)0 $3,497,000 ----------- ----------- ------------- ----------- Adjustments: Depreciation and amortization included in operating income 157,000 398,000 508,000 1,163,000 Restructuring and non-recurring costs - - 273,000 Non-cash stock based compensation and non-cash costs in connection with warrant issuance 357,000 - 576,000 182,000 ----------- ----------- ------------- ----------- Adjusted EBITDA (Earnings excluding certain costs before interest, taxes, depreciation and amortization) $2,679,000 $2,075,000 $6,269,000 $5,115,000 =========== =========== ============= =========== 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. *T