Collegiate Pacific Q2 net sales were up 6.4% to $49.4 million for the quarter from $46.4 million for the same period in fiscal 2006. Net income for the quarter was a loss of $871,000 compared to a loss of $971,000 last year. Fully diluted earnings per share was a loss of nine cents for the quarter compared to a loss of 10 cents last year.
Gross profit margins were up 255 basis points to 35.2% for the quarter from 32.6% for the same period in fiscal 2006. Selling, general and administrative expenses were up 6.5% to $17.3 million for the quarter from $16.2 million for the same period in fiscal 2006. SG&A for the three months ended December 31, 2006 included a $525 thousand increase in the company's allowance for doubtful accounts, which the company recorded in the second quarter, based on management's assessment of the quality of outstanding accounts receivable.
Operating profit for the quarter ended December 31, 2006 improved by approximately $1.2 million to $125 thousand from a loss of more than $1.1 million in the same period in fiscal 2006.
Commenting on the quarter and year to date results, Adam Blumenfeld, CEO stated: “The second quarter, which is seasonally Collegiate Pacific's weakest operating period, illustrated the company's continued progress toward its long-term objectives while simultaneously attacking several major initiatives. With the Sport Supply Group, Inc. acquisition completed as of November 13, 2006, we have turned our attention to a number of integration and optimization activities. Over the next six months we intend to complete our Sarbanes-Oxley compliance process, transition our catalog businesses to a single IT platform, combine many of our operating, manufacturing and warehousing activities, and develop a consolidated FY08 business plan. While these projects take time, we continue to display notable progress in the areas of gross margins, SG&A and operating profits. We are encouraged by the significant increase in our gross margin percentages -up 255 basis points for the second quarter and 260 basis points year to date. Gross margins improved as a result of sales volume increase, customer and product mix, product pricing, and inventory adjustments. The inventory adjustments, required as a result of the SSG acquisition, were $300 thousand and $1.2 million for the three months and six months ended December 31, 2005, respectively. We are also encouraged with expense control.”
“As previously discussed, subsequent to the completion of the Sport Supply Group transaction we announced a new three year operating plan targeting an increase in gross margins, a capping of the growth rate in operating expenses, expanding operating profits and dramatically increasing our earnings per share. Implementing this plan will, from time to time, involve such activities as the reorganization of specific operating units, the consolidation of facilities and the constant evaluation of where to best apply our financial resources. Since the start of FY07 we have reorganized our operations in Florida; reduced headcount by approximately 5% across the company, and in this second quarter increased our accounts receivable reserves after management completed its review and analysis of the quality of accounts receivable at our team dealers. Nonetheless, even with these activities we have been able to produce revenue growth, gross margin expansion and stronger earnings per share.”
“Regarding sales growth, while our catalog related businesses produced low double digit top line growth for the quarter, top line growth from our team dealer group was weaker than expected. Sales growth in the team dealer group was effected by the delayed deliveries of basketball uniforms from a major cloth vendor during the quarter. We have embarked on a number of initiatives to strengthen both the top and bottom line performance of our team dealer group and expect this ongoing process to yield future improvements in operating results.”
“Despite considerable distractions introduced through the many merger-related and SOX-related activities to date, the company has produced more than $7.0 Million in operating profits during the first half of Fiscal 2007, representing a 63.1% increase over Fiscal 2006. While we acknowledge there will be unforeseen challenges related to accomplishing our three year plan, we remain committed to achieving it. The net effect of this process is intended to produce a substantial reduction in commercial debt through expanded cash flow and the creation of meaningful operating leverage, earnings and cash flow for our shareholders and employees in the coming years.”
On the current run rate, the Company sees FY07 net sales of approximately $235 – 240 Million and fully diluted EPS of approximately $0.45 – $0.55 per share compared to $0.16 for fiscal 2006.
