Fitness financials: Nike revenues up 11 percent; Russell acquires running-specialist Brooks; plus IHRSA clubs, Everlast, Big 5

Nike revenues and earnings up in second quarter
Nike Inc. (NYSE:NKE) has reported revenues and earnings for the company’s second quarter ended Nov. 30, 2004, with revenues up 11 percent to $3.1 billion, versus $2.8 billion for the same period last year, and net income of $261.9 million, or $0.97 per diluted share, compared to $179.1 million, or $0.66 per diluted share in the prior year.

“Nike’s second quarter revenues and earnings per share reached all-time high levels as a result of solid performance across our global portfolio,” said Philip H. Knight, Chairman and CEO. “Our businesses in the United States and emerging markets such as China, Russia and Turkey, combined with favorable European exchange rates, helped drive much of this growth.”

In addition, the company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from December 2004 through April 2005, totaling $4.9 billion, 9.1 percent higher than such orders reported for the same period last year. Currency exchange rates had no net impact to this growth. By region, futures orders for the United States were up 10 percent; Europe increased six percent; Asia Pacific grew 14 percent; and the Americas increased 15 percent. In Europe, one point of the increase was due to currency exchange rates.

Russell Athletics acquires running-specialist Brooks Sports
Russell Corporation (NYSE:RML) has signed an agreement to acquire Brooks Sports Inc. for approximately $115 million. Brooks’ sales for 2004 are expected to be approximately $95 million, and the acquisition is expected to be accretive to Russell’s 2005 earnings. The all-cash transaction will be funded with proceeds from Russell’s existing credit facility.

Products are sold predominately through specialty running stores and other retail outlets specializing in high-quality, performance running products. Approximately 25 percent of Brooks’ revenues are generated internationally from 26 countries. The transaction, which is subject to regulatory review and other customary conditions, is expected to be completed by early January 2005.

“This is a continuation of our strategy to expand our position as a leading, authentic sporting goods company,” said Jack Ward, chairman and CEO. “The addition of athletic performance footwear strengthens Russell’s position in the sporting goods business. We believe that this acquisition, just as our other recent acquisitions, is an investment in our future growth.

Headquartered near Seattle, Brooks employs 165 worldwide and was founded in 1914. Russell Corporation (www.russellcorp.com) has a long history in the athletic market. It expanded its presence in the sporting goods market with the 2002 acquisition of Moving Comfort (one of the first women’s performance running apparel brands), the 2003 acquisitions of Bike Athletic and Spalding, and its acquisitions this year of American Athletic and Huffy Sports. Wachovia Capital Markets LLC acted as the sole financial advisor to Brooks Sports Inc. on the transaction.

IHRSA: Clubs’ financial performance up over a year ago
A recently conducted survey of 14 leading U.S. health and sports club companies has found that commercial health club financial performance has improved for the quarter ending Sept. 30, 2004, relative to the same period last year. The survey was conducted for the International Health, Racquet & Sportsclub Association (IHRSA) by Industry Insights Inc. It found companies grew their total revenue an average of 7.9 percent to an average of $12.8 million in revenue for the quarter. The participating companies also reported improved same-store revenue for clubs that have been in operation for at least two years, by an average of 2.4 percent to $10.8 million. John McCarthy said that the normally slow summertime third quarter actually remained stable and even grew.

The survey found that the average earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) improved by 8.1 percent to nearly $3.5 million. As a percentage of total revenue, EBITDAR remained steady at approximately 27 percent of revenue for both the third quarter of 2003 and 2004. Total revenues were a mean of $12.88 million; total membership dues revenue was $9 million; total non-dues revenue was $3.73 million; and same-store total revenue was $10.88 million. The largest growth area was in non-dues revenue, which was up 9.8 percent and approximately 12.5 percent as the median reported by the 14 companies in the survey.

Everlast partners with Jacques Moret
Everlast Worldwide Inc. (NASDAQ:EVST) has announced the signing of its largest license agreement to date with Jacques Moret Inc. of New York City. As of Jan. 1, 2005, this new agreement grants Moret, a major supplier to the U.S. women’s apparel market, a license for Everlast women’s apparel in the United States. Under the terms of the five-year agreement, Jacques Moret Inc. will pay approximately $12.5 million in minimum guarantees to Everlast, noting that strong potential royalty earnings in excess of this amount are possible. At the end of this initial five-year term, Moret has the option to sign a 99-year license for women’s apparel rights for approximately $30 million. Additionally, Moret will assume and pay for all women’s apparel inventory purchased by Everlast, future advertisements previously placed by the company and other transitional costs associated with the women’s business.

In order to facilitate a smooth transition and continued Everlast growth, Jacques Moret Inc. has agreed to hire key sales, merchandising and operating personnel previously employed by Everlast’s women’s apparel division. Orders already placed with Everlast for spring and summer women’s apparel will be fully shipped in joint efforts between Everlast and Jacques Moret during the transition period.

Big 5 will redeem senior notes
Big 5 Sporting Goods Corporation (NASDAQ:BGFV) has announced that its wholly owned subsidiary, Big 5 Corp., will redeem on December 22 the remaining $23.1 million of principal amount of its 10.875 percent senior notes due 2007 by using funds available under an amended credit facility which was finalized on December 15. The amended credit facility provides for a new $20 million term loan facility and a $140 million revolving credit facility. In addition to the $23.1 million redemption, the company previously reported that it had issued a notice to redeem $10.0 million aggregate principal amount of its 10.875 percent senior notes on Nov. 30, 2004, and this redemption was completed as planned. The completion of these two transactions will result in the redemption of all of the company’s remaining senior notes, consistent with the company’s previously announced plans. The notes had an original face amount of $131 million when issued in November 1997.

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