SEC Company Response from EVERLAST WORLDWIDE INC (CIK 0000934795) — Oct 20, 2005
EVERLAST WORLDWIDE INC (CIK 0000934795)
Date: Oct. 20, 2005 · CIK: 0000934795 · Accession: 0000921895-05-001713
AI Filing Summary & Sentiment
Referenced dates: October 3, 2005
Letter
Re: RESPONSE OF EVERLAST WORLDWIDE, INC. (THE "COMPANY") TO COMMENT LETTER TO FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2004 FILED MARCH 28, 2005 (SEC FILE NO. 0-25918) AND FORM 10-Q FOR FISCAL QUARTER ENDED JUNE 30, 2005 FILED ON AUGUST 10, 2005 (SEC FILE NO. 0-25918) ----------------------------------------------------
sec document
OLSHAN OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
PARK AVENUE TOWER 65 EAST 55TH STREET NEW YORK, NEW YORK 10022 TELEPHONE: 212.451.2300 October 20, 2005 FACSIMILE: 212.451.2222
WWW.OLSHANLAW.COM
DIRECT DIAL: 212-451-2220 EMAIL: RFRIEDMAN@OLSHANLAW.COM
Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549-0404 Attention: Brian V. McAllister
Ladies and Gentlemen:
We acknowledge receipt of the comment letter dated October 3, 2005 from the Securities and Exchange Commission (the "COMMISSION LETTER") with regards to our response dated August 18, 2005. We have reviewed the letter with the Company and the Company's auditors and the following reflect the Company's responses to the Commission Letter. The section and page number references below refer to the Company's annual report on Form 10-K (the "Annual Report") filed with the Securities and Exchange Commission (the "SEC") on March 28, 2005 and the Company's report for the fiscal quarter ended June 30, 2005 on Form 10-Q (the "Quarterly Report") filed with the SEC on August 10, 2005. The responses are numbered to coincide with the numbering of the comments in the Commission Letter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGE 7-F
1. After some follow up discussions between the Staff and the Company's Chief Financial Officer, the Company has decided to provide certain relevant segment disclosure information as defined in SFAS No. 131. The Annual Report shall be amended to add the following footnote:
23. OPERATING SEGMENTS:
OUR OPERATING SEGMENTS ARE EVIDENCED BY THE STRUCTURE OF OUR INTERNAL ORGANIZATION. THE SEGMENTS OF APPAREL, SPORTING GOODS EQUIPMENT AND LICENSING ARE DEFINED FOR OPERATIONS PARTICIPATING IN
NEW JERSEY OFFICE 2001 ROUTE 46 / SUITE 202 PARSIPPANY, NEW JERSEY 07054 TELEPHONE: 973.335.7400 FACSIMILE: 973.335.8018
October 20, 2005 Page 2
EVERLAST BRAND SALES ACTIVITY. OUR APPAREL AND SPORTING GOODS BUSINESSES PREDOMINATELY OPERATE IN ONE GEOGRAPHIC SEGMENT, THE UNITED STATES AND CANADA, WHERE WE DESIGN, MANUFACTURE (SPORTING GOODS), MARKET AND SELL SPORTS AND FITNESS FOOTWEAR, APPAREL AND SPORTING GOODS EQUIPMENT. OUR LICENSING SEGMENT RECEIVES APPROXIMATELY 75% OF ITS REVENUES FROM DOMESTIC LICENSEES, WITH THE REMAINING LICENSING REVENUES RECEIVED FROM LICENSEES IN COUNTRIES SPREAD OVER THE GLOBE.
WHERE APPLICABLE, "OTHER" REPRESENTS ITEMS NECESSARY TO RECONCILE THE CONSOLIDATED FINANCIAL STATEMENTS, WHICH GENERALLY INCLUDE CORPORATE ACTIVITY AND COSTS, TO THE SEGMENT FINANCIAL INFORMATION PROVIDED AS FOLLOWS:
FOR THE YEAR ENDED DECEMBER 31, 2004 Sporting Apparel Goods Licensing Other Total
Net revenues $ 13,039,000 $22,901,000 $9,059,0 $ -- $44,999,000 -------------------------------------------------------------------------------
Depreciation and amortization 1,926,000 1,926,000 -------------------------------------------------------------------------------
Interest and financing costs, net 1,353,000 1,353,000 -------------------------------------------------------------------------------
Income (loss) before income taxes from continuing operations $ 1,122,000 $ 437,000 $ 8,767,000 ($11,654,000) ($ 1,328,000) ================================================================================
Identifiable Component Assets $ 4,784,000 $ 20,362,000 $ 1,176,000 $38,434,000 $64,756,000 ================================================================================
FOR THE YEAR ENDED DECEMBER 31, 2003
Sporting Apparel Goods Licensing Other Total
Net revenues $ 10,729,000 $22,390,000 $6,669,000 $ -- $ 39,788,000
Depreciation and amortization 1,596,000 1,596,000 ---------------------------------------------------------------------------------
Interest and financing costs, net 635,000 635,000 ---------------------------------------------------------------------------------
Income (loss) before income taxes from continuing operations $ 2,484,000 ($ 919,000) $ 6,465,000 ($10,998,000) ($ 2,968,000) ==================================================================================
Identifiable Component Assets $ 1,951,000 $19,142,000 $ 1,081,000 $ 42,083,000 $ 64,257,000 ==================================================================================
FOR THE YEAR ENDED DECEMBER 31, 2002
Sporting Apparel Goods Licensing Other Total
Net revenues $ 11,705,000 $24,965,000 $5,501,000 $ -- $ 42,171,000
Depreciation and amortization 1,472,000 1,472,000 ----------------------------------------------------------------------------------
Interest and financing costs, net 339,000 339,000 ----------------------------------------------------------------------------------
Income (loss) before income taxes from continuing operations $ 3,172,000 $ 682,000 $5,351,000 ($ 8,386,000) $ 819,000 ==================================================================================
October 20, 2005 Page 3
FORM 10-Q FOR QUARTER ENDED JUNE 30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 12 -----------------------------------------------------------
2. The disclosure in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended June 30, 2005" on the Company's Quarterly Report shall be amended to read as follows (Please note that the changes are in bold and italicized):
Gross profit decreased to $4.2 million for the three months ended June 30, 2005 from $4.8 million for the three months ended June 30, 2004. Gross profit decreased as a percentage of net revenues to 34% from 52%. The decrease in gross profit dollars and gross profit percentage was due to: HIGHER COMMODITY COSTS PRIMARILY DUE TO FUEL SURCHARGES WHICH ARE EXPECTED TO CONTINUE IN THE NEAR TERM, AN UNFAVORABLE CHANGE IN SALES MIX, WHICH MAY OR MAY NOT CONTINUE IN THE FORESEEABLE FUTURE AND SPECIFICALLY, $100,000 of higher freight costs associated with the United States imposing tariff and import quota restrictions on products manufactured in China causing us to ship the product by air before quota restrictions went into affect; $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.
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8-K, PAGE 19 ---------------------------------------------------------
3. Based on a follow up discussion between the Staff and the Company's Chief Financial Officer, it was concluded that the list of Current Reports on Form 8-K are not required to be disclosed on Quarterly Reports under the new rules. The Company will not list the Current Report on Form 8-K in future Form 10-Q filings.
Please direct any questions or comments concerning this response to Gary J. Dailey at (212) 239-0990 or to the undersigned at (212) 451-2220.
Very truly yours,
/s/ Robert H. Friedman
----------------------
Robert H. Friedman
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OLSHAN
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
PARK AVENUE TOWER
65 EAST 55TH STREET
NEW YORK, NEW YORK 10022
TELEPHONE: 212.451.2300
October 20, 2005 FACSIMILE: 212.451.2222
WWW.OLSHANLAW.COM
DIRECT DIAL: 212-451-2220
EMAIL: RFRIEDMAN@OLSHANLAW.COM
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549-0404
Attention: Brian V. McAllister
Re: RESPONSE OF EVERLAST WORLDWIDE, INC. (THE "COMPANY") TO
COMMENT LETTER TO FORM 10-K FOR FISCAL YEAR ENDED
DECEMBER 31, 2004 FILED MARCH 28, 2005 (SEC FILE NO.
0-25918) AND FORM 10-Q FOR FISCAL QUARTER ENDED JUNE 30,
2005 FILED ON AUGUST 10, 2005 (SEC FILE NO. 0-25918)
----------------------------------------------------
Ladies and Gentlemen:
We acknowledge receipt of the comment letter dated October 3, 2005
from the Securities and Exchange Commission (the "COMMISSION LETTER") with
regards to our response dated August 18, 2005. We have reviewed the letter with
the Company and the Company's auditors and the following reflect the Company's
responses to the Commission Letter. The section and page number references below
refer to the Company's annual report on Form 10-K (the "Annual Report") filed
with the Securities and Exchange Commission (the "SEC") on March 28, 2005 and
the Company's report for the fiscal quarter ended June 30, 2005 on Form 10-Q
(the "Quarterly Report") filed with the SEC on August 10, 2005. The responses
are numbered to coincide with the numbering of the comments in the Commission
Letter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGE 7-F
1. After some follow up discussions between the Staff and the
Company's Chief Financial Officer, the Company has decided to provide certain
relevant segment disclosure information as defined in SFAS No. 131. The Annual
Report shall be amended to add the following footnote:
23. OPERATING SEGMENTS:
OUR OPERATING SEGMENTS ARE EVIDENCED BY THE STRUCTURE OF
OUR INTERNAL ORGANIZATION. THE SEGMENTS OF APPAREL, SPORTING GOODS
EQUIPMENT AND LICENSING ARE DEFINED FOR OPERATIONS PARTICIPATING IN
NEW JERSEY OFFICE
2001 ROUTE 46 / SUITE 202
PARSIPPANY, NEW JERSEY 07054
TELEPHONE: 973.335.7400
FACSIMILE: 973.335.8018
October 20, 2005
Page 2
EVERLAST BRAND SALES ACTIVITY. OUR APPAREL AND SPORTING GOODS
BUSINESSES PREDOMINATELY OPERATE IN ONE GEOGRAPHIC SEGMENT, THE
UNITED STATES AND CANADA, WHERE WE DESIGN, MANUFACTURE (SPORTING
GOODS), MARKET AND SELL SPORTS AND FITNESS FOOTWEAR, APPAREL AND
SPORTING GOODS EQUIPMENT. OUR LICENSING SEGMENT RECEIVES
APPROXIMATELY 75% OF ITS REVENUES FROM DOMESTIC LICENSEES, WITH THE
REMAINING LICENSING REVENUES RECEIVED FROM LICENSEES IN COUNTRIES
SPREAD OVER THE GLOBE.
WHERE APPLICABLE, "OTHER" REPRESENTS ITEMS NECESSARY TO
RECONCILE THE CONSOLIDATED FINANCIAL STATEMENTS, WHICH GENERALLY
INCLUDE CORPORATE ACTIVITY AND COSTS, TO THE SEGMENT FINANCIAL
INFORMATION PROVIDED AS FOLLOWS:
FOR THE YEAR ENDED DECEMBER 31, 2004
Sporting
Apparel Goods Licensing Other Total
Net revenues $ 13,039,000 $22,901,000 $9,059,0 $ -- $44,999,000
-------------------------------------------------------------------------------
Depreciation and amortization 1,926,000 1,926,000
-------------------------------------------------------------------------------
Interest and financing costs, net 1,353,000 1,353,000
-------------------------------------------------------------------------------
Income (loss) before income taxes from
continuing operations $ 1,122,000 $ 437,000 $ 8,767,000 ($11,654,000) ($ 1,328,000)
================================================================================
Identifiable Component Assets $ 4,784,000 $ 20,362,000 $ 1,176,000 $38,434,000 $64,756,000
================================================================================
FOR THE YEAR ENDED DECEMBER 31, 2003
Sporting
Apparel Goods Licensing Other Total
Net revenues $ 10,729,000 $22,390,000 $6,669,000 $ -- $ 39,788,000
Depreciation and amortization 1,596,000 1,596,000
---------------------------------------------------------------------------------
Interest and financing costs, net 635,000 635,000
---------------------------------------------------------------------------------
Income (loss) before income taxes from
continuing operations $ 2,484,000 ($ 919,000) $ 6,465,000 ($10,998,000) ($ 2,968,000)
==================================================================================
Identifiable Component Assets $ 1,951,000 $19,142,000 $ 1,081,000 $ 42,083,000 $ 64,257,000
==================================================================================
FOR THE YEAR ENDED DECEMBER 31, 2002
Sporting
Apparel Goods Licensing Other Total
Net revenues $ 11,705,000 $24,965,000 $5,501,000 $ -- $ 42,171,000
Depreciation and amortization 1,472,000 1,472,000
----------------------------------------------------------------------------------
Interest and financing costs, net 339,000 339,000
----------------------------------------------------------------------------------
Income (loss) before income taxes from
continuing operations $ 3,172,000 $ 682,000 $5,351,000 ($ 8,386,000) $ 819,000
==================================================================================
October 20, 2005
Page 3
FORM 10-Q FOR QUARTER ENDED JUNE 30
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, page 12
-----------------------------------------------------------
2. The disclosure in "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations for the Three Months Ended June
30, 2005" on the Company's Quarterly Report shall be amended to read as follows
(Please note that the changes are in bold and italicized):
Gross profit decreased to $4.2 million for the three
months ended June 30, 2005 from $4.8 million for the three months
ended June 30, 2004. Gross profit decreased as a percentage of net
revenues to 34% from 52%. The decrease in gross profit dollars and
gross profit percentage was due to: HIGHER COMMODITY COSTS PRIMARILY
DUE TO FUEL SURCHARGES WHICH ARE EXPECTED TO CONTINUE IN THE NEAR
TERM, AN UNFAVORABLE CHANGE IN SALES MIX, WHICH MAY OR MAY NOT
CONTINUE IN THE FORESEEABLE FUTURE AND SPECIFICALLY, $100,000 of
higher freight costs associated with the United States imposing
tariff and import quota restrictions on products manufactured in
China causing us to ship the product by air before quota
restrictions went into affect; $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.
ITEM 6. EXHIBITS AND CURRENT REPORTS ON FORM 8-K, PAGE 19
---------------------------------------------------------
3. Based on a follow up discussion between the Staff and the
Company's Chief Financial Officer, it was concluded that the list of Current
Reports on Form 8-K are not required to be disclosed on Quarterly Reports under
the new rules. The Company will not list the Current Report on Form 8-K in
future Form 10-Q filings.
Please direct any questions or comments concerning this response to
Gary J. Dailey at (212) 239-0990 or to the undersigned at (212) 451-2220.
Very truly yours,
/s/ Robert H. Friedman
----------------------
Robert H. Friedman
cc: George Horowitz
Gary J. Dailey