Everlast Worldwide Inc. reported net revenues for its continuing operations of increased 23% to $12.2 million for its fiscal 2005 first quarter ended March 31, 2005, compared with net revenues of $9.9 million in the prior year period. Net sales from continuing apparel operations and sporting goods increased 16% to $9.1 million compared with $7.9 million in the first quarter of fiscal 2004. Net licensing revenues advanced 49% to $3.1 million compared with $2.1 million in the prior period.
For the first quarter the Company's gross margin was 38.3%, compared with 41.7% in the first quarter a year ago; the lower gross profit margin was primarily due to a change in product mix. Selling and shipping costs as a percentage of net revenues increased 1.0% to 17.8% of net revenues reflecting increased marketing and selling programs associated and in conjunction with The Contender reality television drama which premiered in March 2005. These marketing and selling efforts enabled Everlast to obtain new product placement in JC Penney's and May Department Stores, as well as expanded product placement in Kohl's and Modells. In addition, during the quarter, the Company incurred a non-cash charge in connection with the issuance of warrants to Contender Partners LLC aggregating approximately $182,000.
In spite of the increased operating expense ratio and lower gross margins, and excluding the non-cash costs for the issuance of the warrants, the Company achieved income from operations of $.7 million, which is $.1 million higher than the prior period. EBITDA for the first quarter of this year was $1.1 million as compared to $1.0 million in the prior period, before the income from operations of the discontinued women's apparel component. Adjusted basic earnings per share from continuing operations (excluding the net affect from the non-cash warrant issuance) was $0.02 in the first quarter of fiscal 2005, as compared with $ nil basic earnings per share from continuing operations in the prior period.
“Our increased marketing and promotion costs this quarter, combined with other selling efforts, enabled us to achieve record first quarter revenues, both in licensing and from continuing apparel sales. The brand building strategy we have employed demonstrates that the Everlast brand has universal appeal as evidenced by our new product placement in May Department Stores and the signing of fifteen licenses since the beginning of 2005, twelve of which are international, including expansion in Asia and Europe,” said George Q Horowitz, Chairman and Chief Executive of Everlast Worldwide Inc.
Mr. Horowitz concluded, “While the combination of product mix and increased promotion costs impacted gross and operating margins during the quarter, the Company achieved EBITDA of $1.1 million and basic earnings per share from continuing operations of $0.02 per share this quarter. Moreover, we expect to improve our gross profit margins during the remainder of 2005 through a combination of reduced product costs along with the achievement of additional operational efficiencies. After reporting very solid first quarter 2005 results, I am optimistic about the remainder of 2005. I expect our revenues to continue to grow as our Company remains focused on developing new merchandising and marketing strategies to further increase brand awareness.”
EVERLAST WORLDWIDE INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
2005 2004
(Unaudited) (Unaudited)
Net sales $ 9,121,000 $7,864,000
Net license revenues 3,100,000 2,076,000
Net revenues 12,221,000 9,940,000
Cost of goods sold 7,538,000 5,796,000
Gross profit 4,683,000 4,144,000
Operating expenses:
Selling and shipping 2,173,000 1,683,000
Costs in connection with warrant issuance 182,000 -
General and administrative 1,596,000 1,658,000
Amortization 228,000 228,000
4,179,000 3,569,000
Income from continuing operations 504,000 575,0000
Other income (expense):
Interest expense and financing costs (554,000) (315,000)
Interest expense on redeemable
participating preferred stock - (150,000)
Investment income 6,000 4,000
(548,000) (461,000)
Income (loss) before provision (benefit) for
income taxes from continuing operations (44,000) 114,000
Provision (benefit) for income taxes (23,000) 128,000
Net loss from continuing operations ($21,000) ($14,000)
Income (loss) from discontinued component,
net of tax (72,000) 202,000
Net income (loss) available to common
stockholders ($93,000) $188,000
Basic earnings (loss) per share from
continuing operations ($0.01) ($0.00)
Diluted earnings (loss) per share from
continuing operations ($0.01) ($0.00)
Basic income per share from discontinued
component ($0.02) $0.06
Diluted income per share from discontinued
component ($0.02) $0.04
Net basic earnings (loss) per share ($0.03) $0.06
Net diluted earnings (loss) per share ($0.03) $0.04
Supplementary Information:
EBITDA (Earnings before interest, taxes,
depreciation and amortization) $1,059,000 $1,419,000
