Sport Supply Group Q2 Net Sales Slip 1.7%

Sport Supply Group, Inc. said net sales for earnings per share for its fiscal second quarter ending Dec. 31, 2008 were 4 cents per fully diluted share. Net sales for the quarter declined 1.7%.

Commenting on the quarter and year-to-date Results, Adam Blumenfeld, Chairman and CEO stated, “We are extremely pleased with our Q209 results, especially given the tough economic climate. Net sales for the quarter declined only 1.7%, and remain positive for the first six months of our fiscal year improving nearly 2% versus prior year results. While we always strive for more aggressive sales targets, to produce such results in this weak spending environment demonstrates the relative resilience of our institutional (non-consumer / non–retail) industry and, more specifically, the strength of Sport Supply’s direct-selling operating platform. We believe the company continues to gain significant market share in our industry. Gross margin percentages remained fairly consistent with the prior year quarter, and selling, general and administrative expenses actually declined in terms of actual dollars by about $350,000 versus the same quarter last year. We continue our efforts to streamline the company’s administrative cost structure even as we look for internal and external paths to accelerate top line growth.

“The company produced more than $1.4 million in operating income during our slowest seasonal period of the year, and the most difficult macro economic environment in recent history,” he continued. “Our trailing twelve month EBITDA, adjusted for FAS123-R stock based compensation, grew 33% to $24.7 million from $18.5 million in the comparative period, and our trailing twelve month net income grew 89% to $11.3 million from $6.0 million in the comparative period…”

Early Retirement of Convertible Debentures

The company repurchased $15.7 million in RBI convertible notes over the last 90 days (or about 31% of the original $50 million of convertible notes), at accretive levels, and has reduced the total amount of outstanding convertible notes to approximately $28.9 million as of Dec. 31, 2008. It used cash on-hand and proceeds from revolving credit facility during the Quarter to retire convertible debt at a $1.2 Million aggregate discount. In total, the early retirement plan for this debt has saved the company approximately $1.4 Million in future principal payments and approximately $1.2 Million in future interest payments, said Blumenfeld.

New $40 Million Banking Facility with Bank of America

“We are pleased to announce today a new three year $40 Million credit facility with Bank of America which can be expanded to a total of $60 Million subject to certain conditions set forth in the credit agreement,” he continued. “This facility, which replaces the previous $25 Million facility from Merrill Lynch Commercial Finance Corp., 'MLCFC', permits the company to utilize available funds under the line to repurchase the remaining convertible notes outstanding prior to or upon their maturity, subject to certain conditions set forth in the credit agreement. Essentially, this new facility should provide the Company the necessary means to retire the convertible notes on or before their due date of December 1, 2009, and to do so at attractive rates. We are excited about this expanded relationship with Bank of America and the flexibility it affords the Company not only with respect to the convertible notes, but further expansion via organic growth and acquisition, as well as the ability to execute common stock repurchases. The company will incur a third quarter non-cash, non-recurring charge of approximately $340,000 for loan origination fees associated with the MLCFC facility.”

NIKE Team Uniform Launch

“We are proud to have introduced NIKE Team Sports Uniforms through our catalog, telesales and internet platforms during the month of December,” Blumenfeld said. “While we have long promoted Nike and a number of other well established brands through our Road Sales Platform, this is the first time we have offered premium branded NIKE team uniforms, shoes, and coaches’ wear to the more than 100,000 customers that comprise our Catalog Platform. We have high hopes for this new initiative and think it has meaningful growth potential in years to come.”