Collegiate Pacific Inc. fiscal 2006 sales increased 108% to $75.1 million compared to 36.0 million last year. Net income for the year was nearly cut in half to $1.9 million compared to $3.6 million last year. Diluted EPS was 18 cents compared to 35 cents reported last year.
Michael J. Blumenfeld, Chairman and CEO of Collegiate Pacific, stated, “The fourth quarter and year end periods finished in line with the guidance we provided on August 9, 2006. Fiscal 2006 net sales and gross profit came in generally at or near original plan, with selling, general and administrative expenses finishing higher due to a number of both one-time expenses and platform building related expenses throughout the fiscal year. Despite a delay in the seasonal shipment of football uniforms and installation orders during the fourth quarter of fiscal 2006 and the expenses referred to above, fiscal 2006 still produced increased operating profits over the year ago period — to $8.3 million — on net sales growth of 111% to $224 million and gross profit margins of 33.5%, which met the high-end of internal projections.
“We have forecasted fiscal 2007 to produce 10%+ top line organic growth with gross profit margins increasing to approximately 35% producing an operating profit of approximately $17 million. The Company has forecasted fiscal 2007 earnings per share of $0.52 — $0.64 based upon the current ownership of 73.2% of SSPY. The hard work and internal processes put in place during fiscal 2006 should serve as a sound platform for earnings leverage and delivery in the coming years.”
Commenting on the pending SSPY transaction, Mr. Blumenfeld stated: “I am very pleased to announce the execution of a definitive merger agreement to acquire the remaining shares of SSPY we do not currently own for $8.80 per share or approximately $24 million. This is an all cash transaction. Using cash versus stock to complete this acquisition is a benefit we believe to all parties involved as it speeds the time to closure — allowing for potential synergy work once the companies are fully under common ownership to begin during the slower winter months — while also removing potential overhang and dilution from newly issued shares had they been issued at these levels. Subject to the satisfaction of all conditions, we anticipate closure of the transaction within the next 60 to 90 days. Completion of this transaction allows, we believe, for the full potential between Collegiate Pacific and Sport Supply Group to be realized. We anticipate — with the hard work and dedication of both Sport Supply Group and Collegiate Pacific employees — the transaction will offer significant accretion over the next 12-36 months as we work to accelerate top line growth, combine our manufacturing and distribution assets, and aggressively attack unnecessary costs throughout the system.
“Once the transaction is complete, and in keeping with my comments during the past year, I do intend to retire sometime toward the end of the calendar year. I will likely remain involved with the Company in a consulting capacity subject to the requests of the board of directors. Managerially, it is likely that current Collegiate Pacific President, Adam Blumenfeld, will occupy the position of Chief Executive Officer and current Sport Supply Group President Terry Babilla will occupy the position of President and COO. This too is subject to approval by Collegiate Pacific's board of directors and we will formally announce our succession plans as soon as those have become definitive. With the consummation of this transaction, I believe we have assembled the strongest managerial team and family of operating assets in team sports history to take this business forward.”
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the fiscal years ended June 30,
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2006 2005 2004
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(In thousands, except per share data)
Net sales $224,238 $106,339 $39,562
Cost of sales 149,159 70,385 25,606
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Gross profit 75,079 35,954 13,956
Selling, general and
administrative expenses 66,767 28,651 11,109
Operating profit 8,312 7,303 2,847
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Other income (expense):
Interest income 117 581 22
Interest expense (4,545) (2,160) (52)
Other income 223 174 18
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Total other expense (4,205) (1,405) (12)
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Income before
minority interest
in income of
consolidated
subsidiary and
income taxes 4,107 5,898 2,835
Income tax provision 1,603 2,297 1,162
Minority interest in income of
consolidated subsidiary, net of
tax 608 -- --
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Net income $1,896 $3,601 $1,673
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Weighted average number of
shares outstanding:
Basic 10,182,428 10,031,314 6,324,950
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Diluted 10,399,130 10,279,185 7,571,910
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Net income per share of common
stock - basic $0.19 $0.36 $0.26
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Net income per share of common
stock - diluted $0.18 $0.35 $0.22
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Dividends declared per share of
common stock $0.10 $0.10 $0.10
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