GFSI, Inc., the parent company to Gear for Sports, has commenced an exchange offer which sees the company issue $134.9 million in 11% Senior Secured Notes due 2011 for the same amount of 9-5/8% Senior Subordinated Notes due in 2007. Meanwhile, GFSI in October entered into a six year license agreement with Under Armour, Inc. to market decorated Under Armour garments through GSFI's collegiate, golf and military retail sales channels. The company plans to commence product shipments in June 2006, but may incur up to $500,000 in marketing and preproduction costs prior to the initial shipments.
In a recent 10-Q filing, GFSI indicated that net sales for the fiscal first quarter ended October 1 declined 5.0% to $50.8 million, thanks to a $5.3 million decrease in Gear for Sports branded merchandise and a $2.0 million decline in the Gear collegiate and golf sales, which was attributed to Gears exit from a branding initiative with one of its major collegiate customers and the decision to limit participation in certain pro golf tournaments.
On the upside, sales of the Champion brand increased 5.0% to $23.8 million, primarily in the collegiate and resort channels, and sales of the recently introduced Sunice and Robert Trent Jones branded golf and resort apparel added $1.1 million in sales to the period.
Gross margins were up a full point to 40.0% of sales, while operating expenses rose two points to 40% of sales. Net income for the quarter fell 29.8% to $1.5 million, compared to $2.1 million for the fiscal first quarter last year.
