Everlast Worldwide Inc. Reports Record First Quarter 2007 Results

Share Name	Share Symbol	Market	Type
Everlast Worldwide (MM)	NASDAQ:EVST	NASDAQ	Common Stock

Everlast (NASDAQ:EVST)
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Everlast� Worldwide Inc. (Nasdaq: EVST), manufacturer, marketer and licensor of sporting goods, apparel, footwear and other active lifestyle products under the Everlast brand name, today announced its financial results for its fiscal 2007 first quarter ended March 31, 2007. For the first quarter ended March 31, 2007, net revenues increased 24% to $12.4 million, compared to $10.0 million in the same period in 2006. Growth in net revenue resulted from a 30% increase in sporting goods sales to a record $9.0 million, the third consecutive quarter of more than 30% year-over-year sales growth. The increase resulted from expanded distribution and continued strong sell-through for the Everlast brand. Net licensing revenues increased 11% to approximately $3.3 million vs. $3.0 million in the first quarter of 2006. The growth was driven by organic increases in licensing income by our worldwide licensees, particularly in the United Kingdom, South Korea, and Chile. This growth offset the termination of a European equipment licensee, who was not acting in accordance with our product quality and distribution standards. This licensee has since been replaced and shipping of equipment in Europe will resume in Q3 of this year. In the first quarter of 2007, the Company�s gross margin was 49.2%, compared with 44.5% in the first quarter a year ago. The increase in gross profit margin was achieved with an increase in revenues from the more highly profitable licensing business and 780 basis points improvement in sporting goods gross margins. The increase in sporting goods gross margins was due to a combination of higher initial margins on new products, logistical and operational efficiencies, and improvements in sourcing, benefiting from initiatives implemented in the second half of fiscal 2006. First quarter operating income grew 53% to $2.2 million, or 17.9% of net revenues, versus the year-ago level of $1.5 million, or 14.6% of net revenues. This increase was primarily driven by higher revenues and improved gross profit margins, partially offset by planned increases in both marketing development initiatives and increased overhead costs within general and administrative expenses to support our Global Brand Integration. Adjusted earnings per diluted share for the first quarter of 2007, adding back approximately $0.04 of non-cash expense associated with stock-based compensation, was $0.20 per diluted share, 43% increase over adjusted earnings of $0.14 per diluted share in 2006. The first quarter 2006 amount adds back approximately $0.02 of non-cash expense associated with stock-based compensation, and excludes the $0.52 non-recurring gain on the redemption of our Series A Preferred Stock and prepayment of related notes payable recorded in the first quarter of fiscal 2006. The EPS growth was achieved in spite of a 13% increase in diluted shares outstanding compared to the year ago period. Seth Horowitz, Chairman, President and Chief Executive of Everlast Worldwide Inc., said �We are very proud of the record results we achieved for this first quarter. The 24% increase in net revenues and continued improvement in gross margins is enabling us to invest in our brand for both short-term and long-term growth to help us become the premier brand our consumers expect. Our recently concluded market research provided us with consumer perceptions of the brand, identified global market opportunities and enabled us to set forth a clear strategy for worldwide growth. We have established a clear, consistent and cohesive brand and product direction and we have the network of licensees to execute it. There is, however, the need for greater investment in product development, creative marketing executions, and direct-to-consumer business initiatives. We believe our aspiration to be a necessary part of the lives of active consumers worldwide who train, compete and live within our brand ethos of strength, dedication, individuality and authenticity can be met, achieving premier athletic brand status, with this investment into research and development of products and materials and marketing executions that can then be executed efficiently and effectively and provide significant profitable return by our strong team of 72 licensees.� Mr. Horowitz continued, �To deploy this brand message and carry out our growth strategy, over the next year we will be implementing a Global Brand Integration. This integration will be achieved by an extensive global marketing and product development deployment. As part of this deployment, we are excited to introduce a refreshed Everlast logo, a global company icon, uniform and consistent worldwide packaging and an advertising campaign all centered around our new tag-line, �Greatness is Within��. This marketing message will be communicated and tailored around our product deployment, targeted to capitalize on the growing consumer trends of product categories �Train, Compete, Live� within our sporting goods equipment, apparel and footwear product offerings. This strategy will allow us to maximize the global positioning of our brand, utilizing the strengths of training, competitive and athleisure and sportswear products that we have exhibited in select territories and select categories but never on a consistent global basis. �In addition, we will be re-engineering our direct-to-consumer business, which includes e-commerce and catalogs, which we believe will be a significant revenue and profit driver in 2008 and beyond. This brand message and product assortment will be communicated via direct-to-consumer and at retail in Spring 2008 domestically and by Fall of 2008 worldwide. �As we continue to execute on these initiatives, we believe we have a very scalable business platform to provide us the flexibility and strength to obtain the �premier� brand status. We believe this business platform and our business model provides us the growth drivers and opportunities which will give us the ability to invest in product and marketing development that will be executed by our existing and growing licensee base, enhance our direct-to-consumer business and provide us the flexibility to enter new markets through creative organizational structures that will collectively enhance our revenue and profitability for years to come.� �And finally, today Everlast has a proven and deep executive management team to carry out these initiatives. I am pleased to announce we have further strengthened our management team with the addition of Mark Mackay as Senior Vice President Global Licensing. Mark�s prior global experiences include extended tenures at Reebok, And 1 and Under Armour, where he helped grow their product assortments and revenues domestically and internationally within a wide variety of licensing, distribution and partnership relationships.� The Company today reported that it has increased its guidance for fiscal 2007. The Company now expects to report net revenues in the range of $58 to $60 million versus its prior guidance of $56 to $58 million; EBITDA in the range of $11.9 to $12.4 million versus the prior range of $11.3 to $11.8 million; and now anticipate earnings per fully diluted share, adding back the expected $0.20 of non-cash expense for stock based compensation of between $1.00 and $1.04 per diluted share. This guidance incorporates the planned additional spending for the previously discussed deployment of the Global Brand Integration and re-engineering of our direct-to-consumer business. Our fully diluted shares are expected to be approximately 4.4 million shares. The Company will be conducting a conference call today to discuss its first quarter 2007 results of operations and financial condition by hosting a conference call at 4:30 p.m. Eastern Time. Parties interested in participating in the conference call may dial-in at (866) 293-8970, while international callers may dial-in at (913) 312-1230. The conference call will be webcast and can be accessed at www.viavid.net. A recording of the conference call will be available until May 10, 2007 by dialing (888) 203-1112 or (719) 457-0820 for international callers, and entering the passcode of 7761314. About Everlast Worldwide Inc. Everlast Worldwide Inc. is a leading designer, manufacturer and marketer of boxing and fitness related sporting goods equipment under the well-recognized Everlast brand name and a worldwide licensor of the Everlast brand for apparel, footwear, sporting goods equipment and other active lifestyle products and accessories. Since 1910, Everlast has been the preeminent brand in the world of boxing and among the most recognized brands in the overall sporting goods and apparel industries. In order to capitalize on the rich heritage and authenticity of the Everlast brand, the company has extended the Everlast brand outside of the boxing ring into complementary product categories. Our strategy is to continue to leverage the unique qualities represented by the Everlast brand�Strength, Dedication, Individuality and Authenticity � to become a leading global athletic brand and a necessary part of the lives of consumers who train, compete and live an active lifestyle. Statements made in this Press Release that are estimates of past or future performance are based on a number of factors, some of which are outside of the Company's control. Statements made in this Press Release that state the intentions, beliefs, expectations or predictions of Everlast Worldwide, Inc. and its management for the future are forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in filings of Everlast Worldwide with the U.S. Securities and Exchange Commission. Copies of these filings may be obtained by contacting Everlast Worldwide or the SEC. EVERLAST WORLDWIDE INC. & SUBSIDIARIES � CONSOLIDATED STATEMENTS OF INCOME � Three Months Ended March 31, � 2007� 2006� (Unaudited) (Unaudited) � Net sales $ 9,049,000� $ 6,967,000� Net license revenues � 3,327,000� � 3,003,000� Net revenues � 12,376,000� � 9,970,000� � Cost of goods sold � 6,293,000� � 5,529,000� � Gross profit 6,083,000� 4,441,000� � Operating expenses: Selling and shipping 2,069,000� 1,566,000� Stock based compensation costs 161,000� 84,000� General and administrative � 1,635,000� � 1,337,000� � 3,865,000� � 2,987,000� � Operating income � 2,218,000� � 1,454,000� � Other income (expense): Gain on early extinguishment of preferred stock and prepayment of notes payable, net -� 2,032,000� Interest expense and financing costs (917,000) (668,000) Investment income � 5,000� � 9,000� � (912,000) � 1,373,000� � Income before provision for income taxes 1,306,000� 2,827,000� � Provision for income taxes � 572,000� � 343,000� � Net income $ 734,000� $ 2,484,000� � Basic weighted average common shares outstanding 4,067,000� 3,619,000� Diluted weighted average common shares outstanding 4,431,000� 3,909,000� � Net basic earnings per share $ 0.18� $ 0.69� Net diluted earnings per share $ 0.17� $ 0.64� EVERLAST WORLDWIDE INC. & SUBSIDIARIES � CONSOLIDATED BALANCE SHEETS � March 31, December 31, 2007� 2006� � ASSETS � Current assets: Cash and cash equivalents $ 128,000� $ 216,000� Accounts and licensing receivables - net 10,138,000� 15,649,000� Inventories 8,675,000� 8,766,000� Prepaid expenses and other current assets � 1,144,000� � 1,098,000� Total current assets 20,085,000� 25,729,000� � Property and equipment, net 6,262,000� 6,235,000� Goodwill 6,718,000� 6,718,000� Trademarks, net 22,664,000� 22,664,000� Restricted cash 1,123,000� 1,109,000� Other assets � 2,640,000� � 2,821,000� $ 59,492,000� $ 65,276,000� � LIABILITIES AND STOCKHOLDERS' EQUITY � Current liabilities: Due to factor 5,981,000� 9,079,000� Accounts payable 3,282,000� 5,638,000� Current maturities of long term debt 4,040,000� 3,953,000� Mortgage payable 2,376,000� 2,419,000� Accrued expenses and other liabilities � 1,471,000� � 1,696,000� Total current liabilities 17,150,000� 22,785,000� � Other liabilities 1,382,000� 667,000� Long term debt, net of current maturities � 18,420,000� � 19,161,000� Total liabilities � 36,952,000� � 42,613,000� � Stockholders' equity: Common stock, par value $.002; 19,000,000 shares authorized, 4,066,525 outstanding 10,000� 10,000� Paid-in capital 17,541,000� 17,380,000� Retained earnings � 5,716,000� � 6,000,000� 23,267,000� 23,390,000� Less treasury stock � (727,000) � (727,000) Total stockholders' equity � 22,540,000� � 22,663,000� $ 59,492,000� $ 65,276,000� EVERLAST WORLDWIDE INC. & SUBSIDIARIES � RECONCILIATION OF OPERATING INCOME TO EBITDA EXCLUDING CERTAIN NON-CASH CHARGES � Three Months Ended March 31, � 2007� 2006� (Unaudited) (Unaudited) � Operating income as reported GAAP basis $ 2,218,000� $ 1,454,000� � Adjustments: Depreciation and amortization included in operating income 217,000� 160,000� Non-cash stock based compensation � 161,000� � 84,000� � Adjusted EBITDA (Earnings excluding certaincosts before interest, taxes, depreciation andamortization) $ 2,596,000� $ 1,698,000� Note: To supplement its financial statements presented on a GAAP basis, the Company uses non-GAAP additional measures of EBITDA adjusted to exclude certain non-cash costs in connection with stock based compensation and warrant issuance costs. The Company believes that the use of these additional measures is appropriate to enhance an overall understanding of its past financial performance. These adjustments to the Company's GAAP results are made with the intent of providing both management and investors with a more complete understanding of the underlying operational results and trends and its marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings or earnings per share prepared in accordance with generally accepted accounting principles in the United States.

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EVST Everlast Worldwide (MM)