Everlast Worldwide Inc. earned $1.1 million, or 28 cents a share, in its fourth quarter, against a loss of $433,000 a year ago. Excluding year-ago charges related to its move to license out its men’s apparel business, Q4 operating income from continuing operations grew 68% to $2.9 million from $1.7 million. Net revenues increased 32% to $18.7 million from $14.1 million. Net licensing revenues were $3.3 million versus $3.1 million.

Everlast said licensing revenues were impacted by a decision not to renew its previous footwear license, as well as an increase in licensing commissions resulting from the litigation settlement which required the Company to pay commissions to a former agent of Everlast during 2006. These two factors negatively impacted licensing revenues in the fourth quarter by approximately $400,000. The increase in licensing revenue was driven by strong athletic lifestyle product sell-throughs in both South Korea and the U.K. and strong Hand-Exercise expansion and distribution worldwide. Revenues from sporting goods for the fourth quarter were a record $15.4 million, up 40% from $11 million in the year-ago period. The increase resulted from new products, expanded distribution and continued strong demand for the Everlast brand during the holiday season.

The profit increase from continuing operations was driven by higher revenues, improved gross profit margins in the equipment business, and 400 basis points of leverage in the company's expense base. The expense leverage was due both to cost control initiatives and to economies of scale.

Gross margin dollars increased 30% to $7.3 million in the fourth quarter. Gross margins decreased slightly to 39.3% due to a shift in the sales mix of the comparatively lower-margined sporting goods business compared to the highly profitable licensing business. However, the sporting goods business saw a 360 basis point increase in gross profit margins versus the year-ago period. The higher gross profit margin on sporting goods was achieved by a combination of higher product margins on new products, logistical and operational efficiencies, and improvements in sourcing.

For the year ended December 31, 2006, net revenues increased 20% to $51.9 million, versus $43.3 million in the same period in 2005. Net licensing revenues were $12.3 million, versus $12.0 million. Licensing revenues were up despite the $1.7 million impact associated with the transition of the footwear license and the increase in licensing commissions resulting from the previously discussed litigation, increasing 18% on a comparable basis. Growth in licensing was a result of the emergence of several new licensees, including the U.K. and South Korea as well as new market penetration from historically strong licensees in Italy, Brazil and Chile. Revenues from sporting goods for the year ended December 31, 2006 were up 27% to a record $39.6 million, versus $31.3 million in 2005. Similar to the fourth quarter, growth was driven by the introduction of new products and new distribution as well as by continued increases in the appeal of the Everlast brand in a variety of categories.

Gross margin dollars increased 19% to $22 million for the year. While the overall gross margin percentage in 2006 was flat to 2005 due to a higher mix of wholesale sporting goods to licensing revenues, gross margin in the company's wholesale sporting goods business improved 400 basis points versus the 2005 level. The improvement in gross margin resulted from higher margins on new products, logistical and operational efficiencies, and sourcing improvements.

The company achieved a record 55% increase in operating income from continuing operations to $8.1 million or 15.6% of net revenues, versus the year-ago level of $5.2 million or 12.1% of net revenues. The increase in operating income resulted from both the growth in revenues as well as a 380 basis point improvement in the company's expense margin, which dropped to 26.8% of revenues versus the year-ago level of 30.6%.

Seth Horowitz, chairman, president and CEO, said “We are very proud of the record results we achieved for this quarter and for the past year. The Everlast brand is built on strength, dedication, individuality and authenticity. We aspire to be a necessary part of the lives of active consumers worldwide. Based on our brand equity and rich heritage we took several steps in achieving this aspiration. Our team accomplished some very specific goals and objectives we set for ourselves at the beginning of 2006, including elimination of the Series A Preferred Stock and related profit sharing dividend instrument. Management also initiated the implementation of a cohesive worldwide brand and product strategy which we believe will result in increased demand for our products. We strategically grew our wholesale and licensing businesses, we improved our product margins significantly, we streamlined our operations and reduced our costs, and most importantly, we continued to improve and advance the position of our brand image around the world. After 97 years of existence, we find ourselves at a new level of brand success, with a platform for profitable revenue growth in 2007 and beyond”

Looking ahead, Everlast increased its guidance for fiscal 2007. It now expects to report net revenues in the range of $56 to $58 million versus its prior guidance of $53 to $55 million; EBITDA in the range of $11.3 to $11.7 versus the prior range of $10.4 to $10.8 million; and now anticipate earnings per fully diluted share, excluding an expected $0.20 of non-cash expenses for stock based compensation of between $0.96 and $1.01 per diluted share. Our fully diluted shares are expected to be approximately 4.4 million shares as compared to 4.1 million outstanding in the year ago period.

On December 2004, Everlast entered into its largest licensing agreement in its history, whereby it licensed its U.S. women's apparel business to Jacques Moret, effective January 2005. Effective January 2006, the company expanded its relationship with Jacques Moret whereby it licensed its United States men's apparel business. The company still makes the majority of its equipment in house.