Everlast Worldwide Inc. reported reported record net revenues for its continuing operations of $12.5 million for its fiscal 2005 second quarter ended June 30, 2005, representing an increase of 36% over net revenues of $9.2 million in the prior year period. The increase in net revenues was attributable to net sales from continuing apparel operations and sporting goods, which increased 41% to $9.5 million compared with $6.8 million in the second quarter of fiscal 2004. Net licensing revenues advanced 22% to $2.9 million compared with $2.4 million in the prior period. For the six-months ended June 2005, net revenues increased 29% to $24.7 million, over the 2004 corresponding period, led by a 35% increase in licensing revenues along with a 28% increase in continuing apparel operations and sporting goods net sales.
During the second quarter the company's operating results were impacted by certain unusual and non-recurring events aggregating $600,000 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, causing the company to air ship in product before quota restrictions went into affect and enabling us to maintain customer relationships and ensure future business; and $230,000 in higher promotion and marketing development funds to our customers for products sold in connection with “The Contender” reality television show, which funds were used to markdown out of season apparel due to programming delays the show experienced from November to March. Operating income and earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for these costs would have been $626,000 and $1 million, respectively for the quarter ending June 30, 2005, as compared to $448,000 and $900,000 over the 2004 comparable period. For the six months ended June 30, 2005, our adjusted operating income and EBITDA was $1.3 million and $2.1 million, respectively, as compared to $1 million and $2 million, respectively over the 2004 comparable period. Net income adjusted for these non-recurring costs was approximately breakeven, or $ nil per share from continuing operations for the three months ended June 30, 2005 and $56,000, or $0.02 per basic share, for the six months ended June 30, 2005 period. Reported net loss was $596,000, or $0.18 per common share, for the quarter ended June 30, 2005 and the reported net loss for the six months ended June 30, 2005 was $689,000, or $0.21 per common share.
“Our second quarter historically has been our most challenging one, yet we achieved tremendous growth in net revenues with a 36% increase over last year, led by a 41% increase in continuing apparel and sporting goods net sales. During the quarter we incurred $600,000 of unusual and non-recurring costs that impacted our operating results. Our operating income from continuing operations, adjusted for these costs, was $626,000 and $1.3 million for the quarter and six months ended June 30, 2005 periods, respectively. I am pleased with the significant increases in our net revenues over the 2004 periods. Our results of operations and financial condition continue to benefit from our strategic initiatives that we have undertaken over the last twelve months. We believe we will show double digit increases in EBITDA and income from continuing operations over the next six months as compared to 2004 period amounts,” said George Q Horowitz, chairman and chief executive officer of Everlast Worldwide Inc.
EVERLAST WORLDWIDE INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $9,539,000 $6,765,000 $18,660,000 $14,629,000
Net license revenues 2,938,000 2,401,000 6,038,000 4,477,000
Net revenues 12,477,000 9,166,000 24,698,000 19,106,000
Cost of goods sold 8,237,000 4,401,000 15,775,000 10,197,000
Gross profit 4,240,000 4,765,000 8,923,000 8,909,000
Operating expenses:
Selling and
shipping 2,045,000 2,453,000 4,218,000 4,136,0008
General and
administrative 1,671,000 1,636,000 3,267,000 3,294,000
Restructuring and
non-recurring
charges 273,000 - 273,000 -
Costs in connection
with warrant
issuance - - 182,000 -
Amortization 228,000 228,000 456,000 456,000
4,217,000 4,317,000 8,396,000 7,886,000
Income from
continuing operations 23,000 448,000 527,000 1,023,000
Other income (expense):
Interest expense and
financing costs (523,000) (309,000) (1,077,000) (624,000)
Interest expense on
redeemable
participating
preferred stock - (63,000) (214,000)
Investment income 5,000 4,000 11,000 8,000
(518,000) (368,000) (1,066,000) (830,000)
Income (loss) before
(benefit) provision for
income taxes from
continuing operations (495,000) 80,000 (539,000) 193,000
(Benefit) provision
for income taxes (144,000) (111,000) (167,000) 238,000
Net loss from continuing
operations ($351,000) ($31,000) ($372,000) ($45,000)
Income (loss) from
discontinued component,
net of tax (245,000) 110,000 (317,000) 312,000
Net income (loss)
available to common
stockholders ($596,000) $79,000 ($689,000) $267,000
Basic earnings (loss)
per share from
continuing operations ($0.11) ($0.01) ($0.12) ($0.01)
Diluted earnings (loss)
per share from
continuing operations ($0.11) ($0.01) ($0.12) ($0.01)
Basic income (loss)
per share from
discontinued component ($0.07) $0.04 ($0.09) $0.10
Diluted income (loss)
per share from
discontinued component ($0.07) $0.04 ($0.09) $0.10
Net basic earnings (loss)
per share ($0.18) $0.03 ($0.21) $0.09
Net diluted earnings
(loss) per share ($0.18) $0.03 ($0.21) $0.09
