Collegiate Pacific Inc. reported its results for the first fiscal quarter of 2006 ended September 30, 2005 with sales increasing 124.7% to $65.3 million from $27.7 million during the same period last year. This huge gain comes largely on the heels of the acquisition of Sport Supply Group. Organic sales increased 13% for the quarter.

Commenting on the quarter, Michael J. Blumenfeld, chairman and CEO of Collegiate Pacific stated: “We are pleased to report these results for the quarter. On an operating basis, all of our internal expectations were achieved. Our operating profit reached $5.5 million generating record net income of $2.5 million. The quarter included substantial non-cash and cash acquisition charges that are discussed below. We completed several operating platform-building projects to support a revenue base that has gone from $39 million for fiscal 2004 to a projected $230 million for fiscal 2006. The investments we have made in our infrastructure, new product designs and introduction, expansion of manufacturing and distribution facilities and the hiring and training of new salesmen lay the foundation to achieve the type of operating leverage commensurate with our revenue increases.”

“The increase in our weighted average share count for the first fiscal quarter of 2006 to 14.1 million shares from 10.4 million shares in the same period last fiscal year is a byproduct of imposing the “if converted method” required by Financial Accounting Standard 128 (“FAS 128”) as it relates to our outstanding convertible senior subordinated notes due 2009. On an annual basis, this method of accounting would be recognized only when our annual net income exceeds $6 million. However, we are required by FAS128 to recognize the higher weighted average share count for this current fiscal quarter regardless of our projected annual net income for all of fiscal 2006. Based on our quarterly projections, the fiscal quarter ended September 30, 2005, is the only quarter in fiscal 2006 that triggers this required increase in the weighted average share count we must use to report our quarterly earnings per share for the three months ended September 30, 2005. Looking ahead, if our net income in any future quarterly period of fiscal 2006 were to exceed $1.7 million, the company would be required by FAS 128 to utilize the “if converted method” to calculate its reported diluted earnings per share for the quarter. Giving the effect of the calculation of the weighted average shares outstanding in this first quarter of fiscal 2006, the company believes it will be required by FAS 128 to calculate its diluted earnings per share for the fiscal year ending June 30, 2006, using approximately 11.5 million shares outstanding, which assumes the company does not issue any additional shares in connection with any future acquisition activities.”

Sport Supply Group Results

Commenting on the quarterly results of Sport Supply Group, Michael J. Blumenfeld stated, ” With some initial input from Collegiate Pacific and a lot of hard work, Sport Supply Group reported a strong quarter for the three months ended September 30. Before approximately $1.2 million in acquisition related charges for an increase in the fair market value of acquired inventories and intangibles, Sport Supply generated a solid 7% revenue growth to $25 million and 100% increase in operating income – $2.1million verses $1.1 million compared to last year same period. We look forward to a continuing positive performance from Sport Supply.”

Pro-Forma Adjusted Presentation

Collegiate Pacific is providing actual results and forecast guidance on a financial basis in accordance with U.S. generally accepted accounting principles (“GAAP”), and on a pro forma adjusted basis (“Pro Forma Adjusted”) that excludes the impact of certain non-cash expenses and specific acquisition or financing related expenses in the amount of approximately $852 thousand for the amortization of purchased intangibles resulting from Collegiate Pacific’s acquisition activities and amortization expense associated with the increase in fair market values of the inventories of acquired companies. The impact of these charges primarily reduces reported gross margins and increases expenses in a specific reporting period. Pro Forma diluted earnings per share, before these charges, was $0.26 per share.” See Table B below for a further explanation of the “Pro Forma Adjusted” presentation.

Commenting on the Quarter and future periods, Adam Blumenfeld, president, stated: “We are very pleased with the strength of the quarter and particular progress in certain metrics we track. Consolidated operating margins for the company are on target and are the result of new pricing and cost of goods improvements in our Dixie, OTS, Kessler and Salkeld (DOKS) team dealers and at Sport Supply Group, Inc. We believe that our gross margins will show improvement in the coming periods as the results of these efforts are realized. Our acquired team dealers continue to successfully promote Collegiate Pacific’s proprietary equipment to their customer base, generating incremental sales and gross profit dollars for the company. We will continue to focus on this cross-selling synergy as we integrate the catalog and team dealer efforts in the DOKS territories. The DOKS sales force is now composed of approximately 175 sales professionals in 22 states across the USA. We continue to review opportunities to add to the geographic reach of this sales force and to provide new, innovative products up through the base of this vertical sales platform.”

“We are in our infancy of realizing synergistic opportunities with SSG. However, as we have previously indicated, we see substantial potential benefits for Collegiate Pacific and SSG alike as we implement this long-term, operating program. A number of joint initiatives have been put in place since July 1, 2005, and we look forward to fully realizing their economic benefits, which we expect to occur later in fiscal 2006 and more dramatically in fiscal 2007.”

“Looking ahead, we remind investors of the shift in seasonality that accompanies our 53% ownership of SSG and a general shift in the seasonality of our business. The second fiscal quarter ending December 31, 2005, is projected to be the seasonal low-point for the company. We see Q2 as a near break-even quarter on a GAAP basis given this seasonality change. The Q3 and Q4 periods, which are historically slower for the DOKS road salesmen, are the seasonal strong points for our CP, Tomark and SSG catalogs.”

“For FY06, and giving the impact to the 10% increase in the annual weighted average share calculations and the increase in non cash charges mentioned above, we see GAAP diluted earnings per share of approximately $0.40 – $0.50 on consolidated revenues of approximately $230 million. During this evolutionary process where annual revenues are expected to grow from $107 million to $230 million, quarterly comparisons to previous periods may not offer meaningful comparisons as revenues, expenses and order backlogs could shift between reporting periods.”


                                                 Three Months Ended
                                                    September 30
                                                    2005        2004
                                              ------------ -----------

Net sales                                     $65,274,896 $27,710,288
Cost of sales                                  44,244,541  18,317,237
                                              ------------ -----------

             Gross profit                      21,030,355   9,393,051

Selling, general and administrative expenses    5,541,592    ,958,814
                                              ------------ -----------

             Operating profit                   5,488,763   3,434,237
                                              ------------ -----------

Other income (expense):
     Interest income                               46,222      15,445
     Interest expense                            (998,861)     (6,856)
     Other income                                  24,649      49,379
                                              ------------ -----------

             Total other income (expense)        (927,990)     57,968
                                              ------------ -----------

             Income before minority interest
              in net income of consolidated 
              subsidiary and income taxes       4,560,773   3,492,205

Minority interest in net income of
 consolidated subsidiary                          425,642          --
                                              ------------ -----------

    Income before incomes taxes                 4,135,131   3,492,205

Income tax provision                            1,614,711   1,420,330
                                              ------------ -----------

             Net income                        $2,520,420  $2,071,875
                                              ============ ===========

Weighted average number of shares outstanding:
             Basic                             10,124,387   9,908,227
                                              ============ ===========
             Diluted                           14,068,662  10,102,793
                                              ============ ===========

Net income per share common stock - basic           $0.25       $0.21
                                              ============ ===========
Net income per share common stock - diluted         $0.22       $0.21
                                              ============ ===========