Fitness financials: Everlast shows higher 4Q revenues and new licensees, plus The Sports Authority, Hibbett, Amer, Everlast, adidas-Salomon, Sears/Kmart, Health Fitness Corp.

Everlast reports yearly earnings, including higher 4Q revenues, and new licensees
In near simultaneous announcements Everlast Worldwide (Nasdaq: EVST) reported fourth-quarter net revenues advanced 20.3 percent to $14.8 million compared to $12.3 million in 2003 and announced new licensees for a new strength and cardiovascular equipment division plus production and marketing of hand-held equipment. The revenue increase was driven by strong men’s apparel sales of $4.5 million, which had a whopping 200 percent increase over the 2003 period, along with a 14 percent increase in net licensing revenues. Net sales were $12.7 million from $10.4 million in 2003. Reported net loss available to common stockholders’ under GAAP was ($1.2) million, or ($0.37) per basic share for the 2004 period as compared to a reported net loss of ($1.2) million, or ($0.38) per basic share in 2003.

For FY 2004, net revenues increased 13 percent to $45.0 million as compared to $39.8 million in 2003. Growth came from a 36 percent increase in net licensing revenue to $9.1 million up from 2003’s $6.7 million, along with increases in men’s apparel and sporting goods revenues of $2.8 million, a 9 percent increase over 2003. Net sales were $35.9 million from 2003’s $33.1 million. Pro-forma earnings were $0.2 million, or $0.07 per basic share as compared to $34,000, or $0.01 per basic share in 2003. Pro-forma EBITDA was $4.0 million in 2004 as compared to $2.9 million in 2003. Reported net loss available to common stockholders under GAAP, was ($1.0) million, or ($0.33) per basic share in 2004, as compared to a ($1.0) million loss, or ($0.31) per basic share loss in 2003.

Always up for a licensing agreement, Everlast signed three new agreements with FCSI Ltd., Rhinox and Explorer Headgear, expanded its relationship with Sports and Leisure Technology Corp., and launched a new relationship with M&M Fitness. Located in London, FCSI Ltd. will produce retail boxing equipment for distribution in the U.K. and Republic of Ireland, shipping on April 1. Based in Los Angeles, Rhinox is Everlast’s U.S. headwear licensee and will introduce a new line in the second quarter. Headquartered in Toronto, Explorer Headgear is now the Canadian licensee for men’s and boys’ active wear, sportswear, outerwear, and swimwear. Products are expected to be available by mid-year 2005. The expanded licensing relationship with Sports and Leisure Technology Corp., a division of E&B Giftware, includes the production and marketing of a line of Everlast “Hand-X” products in the U.K. and the Republic of Ireland. The licensed products, which constitute a subcategory of the overall fitness products area, include jump ropes, hand weights, weight lifting gloves and belts, and handgrips and will be marketed starting April 1. With M&M Fitness, based in New York City, the company will develop a line of aerobic equipment (including treadmills, steppers, elliptical trainers and stationary bikes) and weightlifting equipment (free weights, home gyms, weight lifting benches, weight bars, etc.). Products produced by M&M Fitness are expected to be available by the third quarter of this year.  

The Sports Authority’s same-store sales drop 2 percent for year
The Sports Authority (NYSE: TSA) reported that its fourth quarter same-store sales were down and sales were flat, with its guidance for the 2005 first quarter well below analyst expectations.

Net income for the fourth quarter was $25.6 million, or $0.97 per diluted share, compared with last year’s net income of $28.3 million, or $1.08 per diluted share, excluding after-tax merger integration costs of $13.7 million, or $0.52 per diluted share. With merger integration costs, net income for last year’s fourth quarter was $14.6 million, or $0.55 per diluted share. Total sales were $713.8 million compared with $712.0 million last year. Comparable store sales decreased 2.2 percent from last year’s results, in line with previous guidance, the company said. Analysts had estimated the company would earn 93 cents per share on sales of $712 million.

For FY 2004, net income was $47.3 million, or $1.79 per diluted share, excluding after-tax merger integration costs of $13.3 million, or $0.50 per diluted share. In 2003, net income was $2.11 per diluted share, excluding the effect of after-tax merger integration costs of $26.7 million, or $1.37 per diluted share, and income related to non-recurring events and a related tax benefit of $1.9 million, or $0.10 per diluted share. Pro-forma combined earnings for the prior year was $1.58 per diluted share. Total sales for 2004 were $2.44 billion compared with $1.76 billion in 2003. Comparable store sales for the combined company decreased 2.0 percent from last year’s combined company results.

“Our bottom-line results in the fourth quarter were primarily driven by improved operating efficiencies and better cost controls across the board. During the quarter, our winter and outdoor product categories were impacted by unseasonable weather; however, we were very pleased with the strong sales gains we registered in apparel and the continued positive performance of our re-modeled stores,” said Chairman and CEO Doug Morton in a statement.

Like other companies, TSA is reviewing its method for lease accounting in light of the recent SEC clarification, and has decided to restate certain financial results. The company expects the accounting adjustments to lower earnings in the latest fourth quarter by $0.01 and to cut fiscal 2004 profit by $0.08 per share. The company will also record a $3.9 million charge to restate periods prior to fiscal 2004.

Looking ahead, TSA said that it expects to earn $0.25 to $0.27 per share in the first quarter of 2005 on same-store sales growth of 1 percent to 2 percent. Analysts were anticipating $0.37.

TSA opened six stores and closed four stores during the fourth quarter. As Jan. 29, 2005, it had 392 stores in 45 states.

Hibbett sets quarterly sales record
Hibbett Sporting Goods (NasdaqNM: HIBB) beat analysts’ expectations and posted fourth-quarter net income of $8.2 million, or earnings per diluted share of $0.35, on sales of $107.1 million — the first time it has exceeded the $100 million mark for quarterly sales. Analysts had expected $0.32 earnings per share on sales of $106.6 million. Same-store sales increased 5.2 percent in the fourth quarter. Preliminary net income for the fourth quarter increased 26.8 percent to $8.2 million compared with $6.5 million last year.

Net sales for the 52-week period ended Jan. 29, 2005, increased 17.6 percent to $377.5 million compared with $321.0 million last year. Same-store sales increased 5.7 percent. Preliminary net income was up 25.6 percent to $25.6 million compared with $20.3 million last year. Earnings per diluted share also increased 24.4 percent to $1.07 from $0.86 in the prior year.

After receiving a letter from the SEC regarding certain accounting issues for operating leases and leasehold improvements, Hibbett said it will change the way it accounts for build-out periods, construction allowances and the depreciation of leasehold improvements. The results presented in its earnings exclude these changes, and Hibbett said that the necessary adjustments will reduce net income per diluted share for fiscal year 2005 by $0.01 to $0.03 and $0.02 to $0.04 for fiscal year 2004.

For the quarter, the company opened 14 new stores. For the year, it opened 54 new stores, bringing the store base to 482 in 22 states. Hibbett plans to open a net of approximately 70 new stores in fiscal 2006, including approximately 14 in the first quarter.

Amer served with writ in tobacco product liability case
Amer Group Plc, parent of Precor, and its subsidiary Amerintie 1 Oy (formerly Amer Tobacco Ltd.) have been served a writ concerning product liability from its tobacco business days. The plaintiff is seeking Euro 130,000 (USD $173,472) in compensation. British American Tobacco Nordic Oy has also been served a writ. The plaintiff is a private individual and has requested that the suit be heard at the same trial as three other suits, because the grounds for the cases are similar. According to the plaintiff’s attorney, the compensation sought in the three other suits is equal in amount to the Amer claim. In the case of the other suits, the defendants will be served in the next few days. The plaintiff is suing for sickness and the marketing and sale of tobacco products during the period 1975-2002. Amer Group divested its tobacco business in March 2004. Amer said the claims for compensation will not affect its financial position.

(Conversion of Euros or other foreign currency into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of March 10.)
 
adidas-Salomon raises dividend, plans buyback
adidas-Salomon (ADSG.DE) has raised its annual dividend by 30 percent and plans to buy back up to 10 percent of its stock. The company said it would pay 1.30 euros per share for 2004, up from 1 euro in 2003, and aimed to increase its long-term payout to 15 percent to 25 percent of net income from 15 percent to 20 percent at present. Orders in Europe, where adidas generates half of its sales, stood flat at the end of 2004 after a 4 percent drop in the third quarter amid a subdued consumer climate. Despite a difficult European market, it said orders should pick up in the second half from sales from the 2006 World Soccer Cup in Germany. Global orders at adidas were up 7 percent at the end of 2004. European orders are still much weaker than at the end of 2003, when the backlog was up 6 percent. In North America, orders were up 7 percent on a currency-neutral basis at the end of 2004, while orders in the booming Asian region were up 44 percent. adidas said operating margin will reach a record level in 2005. Its gross margin grew 2.3 percent percentage points to 47.2 percent in 2004. adidas said it still expects 2005 net income to grow by 10 percent to 15 percent. adidas shares rose 6.1 percent to Euro 119.26 (USD $159.68) on March 9, making it the top gainer in Germany’s DAX.

(Conversion of Euros or other foreign currency into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of March 10.)

ISS advisors back Sears, Kmart merger
Institutional Shareholder Services (ISS), an independent proxy advisory firm, has recommended that Sears, Roebuck and Co. shareholders vote for Sears’ (NYSE: S) proposed merger with Kmart Holding Corp. (Nasdaq: KMRT) at the company’s special shareholder meeting on March 24. In its analysis of the merger, ISS said in its report: “Based on our review of the terms of the transaction … in particular the reasonable premium received, the reasonable synergy assumptions, the positive market reaction and the improved governance profile, we believe that the merger agreement warrants shareholder support.” Sears Holdings Corp., currently a wholly owned subsidiary of Kmart Holding Corp. created to facilitate the merger between Kmart Holding Corp. and Sears, Roebuck and Co., will become the new holding company of Sears and Kmart following the merger.

Despite the fact that the merger vote hasn’t occurred, Kmart filed with the SEC that it plans to convert about 400 Kmart stores to Sears stores over the next three years. It said that some stores would be modeled on the Sears Essentials concept, a mid-size, stand-alone store, and at least three Kmart stores would be re-worked into Sears Grand stores, a super-sized rendition of its department stores.

Based on the ISS recommendation, Sears’ shares went up 57 cents to finish at $53.29. It had been trading around $52.80. Kmart’s stock closed up $1.26 to $111.66. It was trading at about $110 prior to the announcement.

In other news, Alan Lacy is replacing Glenn Richter as chairman of the board of directors of Sears Canada Inc. Lacy, chairman and CEO of Sears, has been on the Sears Canada board since 2000.

Health Fitness revenues boosted by acquisition
Health Fitness Corp.’s (HFIT.OB) fourth-quarter revenue increased nearly 54 percent predominantly due to the acquisition of the Health and Fitness Services Business of Johnson & Johnson Healthcare Systems Inc., as well as growth in management services revenue from new 2004 contracts.

Fourth-quarter revenue was $13.5 million from 2003’s $8.8 million. Revenue from its health improvement program services also grew to $725,444 from $287,919 for the same period in 2003. Net earnings applicable to common shareholders were $314,995, compared to a net loss applicable to common shareholders of $600,353 in 2003. This positive change of $915,348 is primarily due to a $643,635 increase in operating income, a $104,541 decrease in income tax expense and the difference in one-time charges between 2004 and 2003. Net earnings per diluted share were $0.02 for the fourth quarter of 2004, compared with a net loss per diluted share of $0.05 for the same period in 2003.

For FY 2004, revenue increased 66.6 percent to $52.4 million, from $31.5 million for 2003. Net earnings applicable to common shareholders were $1.6 million, compared to a net loss applicable to common shareholders of $27,254 for 2003 — attributable to an increase in operating income between 2004 and 2003. Net earnings per diluted share were $0.10 for 2004, compared with a net loss per diluted share of $0.00 for 2003.

Health Fitness Corp. is the leading provider of results-oriented health improvement management services to corporations, hospitals, universities and communities.

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