Everlast Worldwide Inc. saw net revenues from continuing operations increase 29% for the year 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 55 cents per basic common share and 47 cents per diluted common share, as compared to a net loss from continuing operations of $53,000, or 2 cents 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 the company's Series A Preferred Stock and prepayment of related notes payable that was disclosed on February 8, 2006, that will be included in the first quarter fiscal 2006 results of operations. Reported net loss available to common stockholders under GAAP, which includes loss from our discontinued components in 2005 and 2004, was $948,000, or 28 cents per basic common share in 2005, as compared to a $1.0 million loss, or 33 cents 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 a loss of $0.3 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 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 18 cents per basic common share and 16 cents per diluted common share, as compared to a net loss from continuing operations of $1.2 million, or 38 cents 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 13 cents per basic share, for the 2005 period as compared to a reported net loss of $1.2 million, or 37 cents 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 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 53 cents 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.”
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
