Everlast Worldwide Inc. reported record net revenues from continuing operations of $12.6 million for the third quarter ended September 30, 2005, which was a 13% increase from $11.1 million during the same period last year. The increase in net revenues was attributed to net sales from continuing apparel operations and sporting goods, which increased 13% to $9.8 million compared with $8.6 million in the third quarter of fiscal 2004. Net licensing revenues also advanced 13% to $2.8 million compared with $2.5 million in the prior period.
For the nine months ended September 2005, net revenues from continuing operations increased 23% to a record $37.3 million, over the 2004 comparable period, led by a 27% increase in licensing revenues along with a 22% increase in continuing apparel operations and sporting goods net sales. Gross profit margins grew 40 basis points to 37.7%, compared with the prior year period.
For the third quarter ended September 2005, the company achieved a 443% increase in operating income from continuing operations to $1.2 million, while earnings before interest, taxes, depreciation and amortization increased to $1.6 million compared with $21,000 reported in the 2004 comparable period. The increase in operating income and EBITDA was largely a result of a reduction in operating expense ratio of 28.2% compared with 40.5% in the 2004 comparable period. Net income from continuing operations available to common stockholders was $391,000, or 12 cents per basic share, as compared to a net loss from continuing operations of $134,000, or 4 cents loss per basic per share, in the 2004 comparable period. Net income, after $216,000 in costs associated with the discontinued women's business component, was $175,000, or 5 cents per basic share, as compared with a net loss of $249,000, or 8 cents per basic share in the corresponding 2004 period.
During the nine months ended September 30, 2005, the company's operating results, as previously disclosed, were impacted by certain non-recurring and one-time charges aggregating $555,000 consisting of: $273,000 for a minimum withdrawal pension liability settlement with the former union representing employees of the Bronx, New York facility which was closed in December 2003; $100,000 of higher air freight charges associated with the United States' imposition of tariff and import quota restrictions on products manufactured in China; and a non-cash charge aggregating $182,000 in connection with the issuance of warrants to Contender Partners LLC. Accordingly, Everlast's adjusted operating income and EBITDA was $2.3 million and $3.5 million, respectively, as compared to $674,000 and $1.8 million, respectively over the 2004 comparable period. The increase in adjusted operating income and EBITDA from continuing operations was again largely a result of a reduction in our operating expense ratio to 30.5% from 40.9% in the 2004 corresponding period. Net income from continuing operations, adjusted for these non-recurring costs, was $352,000, or 11 cents per basic share as compared to a loss of $177,000 or 6 cents per common share.
“As you can see from these third quarter highlights, our results of operations have benefited from the initiatives we implemented in late 2004 and early 2005,” said Seth Horowitz, president and COO. “These initiatives included the licensing of our women's business, the signing of other new and exciting licensing deals, and the strategic product placement deal done in connection with The Contender reality television show which has provided a platform to facilitate year-to-date revenue increases in men's apparel and sporting goods equipment of 23%. In addition, we improved operating margins through a reduction in product costs and other cost containment programs. As a result of these and other initiatives, we achieved significant period over period growth in our operating income and EBITDA from continuing operations, highlighted by a third quarter profit from continuing operations of 12 cents per basic share, which is a 16 cents per share improvement over the comparable 2004 period.”
Mr. George Q Horowitz, chairman and CEO added, “I expect revenues from our licensing, apparel and sporting goods equipment businesses to continue to achieve double digit increases through existing merchandising and marketing strategies, along with our recently announced continued participation in the second season of The Contender reality television show, produced by Mark Burnett, and scheduled to air on ESPN in April 2006. The cost containment programs put in place, along with these anticipated revenue increases, will allow us to show improved operating margins in the quarters ahead.”
EVERLAST WORLDWIDE INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $9,780,000 $8,627,000 $28,440,000 $23,256,000
Net license revenues 2,807,000 2,475,000 8,845,000 6,952,000
Net revenues 12,587,000 11,102,000 37,285,000 30,208,000
Cost of goods sold 7,841,000 6,958,000 23,616,000 17,155,000
Gross profit 4,746,000 4,144,000 13,669,000 13,053,000
Operating expenses:
Selling and shipping 1,877,000 2,528,000 6,095,000 66,640,008
General and
administrative 1,444,000 1,737,000 4,711,000 5,031,000
Restructuring and
non-recurring
charges - - 273,000 -
Costs in connection
with warrant
issuance - - 182,000 -
Amortization 228,000 228,000 684,000 684,000
3,549,000 4,493,000 11,945,000 12,379,000
Income (loss) from
continuing operations 1,197,000 (349,000) 1,724,000 674,000
Other income (expense):
Interest expense and
financing costs (555,000) (336,000) (1,632,000) (960,000)
Interest income
(expense) on
redeemable
participating
preferred stock - 200,000 - (14,000)
Investment income 6,000 4,000 17,000 13,000
(549,000) (132,000) (1,615,000) (961,000)
Income (loss) before
(benefit) provision for
income taxes from
continuing operations 648,000 (481,000) 109,000 (287,000)
Provision (benefit) for
income taxes 257,000 (347,000) 90,000 (110,000)
Net income (loss) from
continuing operations $391,000 ($134,000) $19,000 ($177,000)
Income (loss) from
discontinued component,
net of tax (216,000) (115,000) (534,000) 195,000
Net income (loss)
available to common
stockholders $175,000 ($249,000) ($515,000) $18,000
Basic earnings (loss)
per share from
continuing operations $0.12 ($0.04) $0.01 ($0.06)
Diluted earnings
(loss) per share from
continuing operations $0.09 ($0.04) $0.00 ($0.06)
Basic income (loss) per
share from discontinued
component ($0.06) ($0.04) ($0.16) $0.06
Diluted income (loss)
per share from
discontinued component ($0.05) ($0.04) ($0.14) $0.06
Net basic earnings
(loss) per share $0.05 ($0.08) ($0.15) $0.01
Net diluted earnings
(loss) per share $0.04 ($0.08) ($0.14) $0.01
