Collegiate Pacific Inc. reported consolidated net sales grew 6.4% to $63.2 million primarily attributable to a 17% organic growth rate from its road sales force from end of season basketball uniform deliveries and solid uniform demand from spring sports. Net income rose to $1.74 million, or 17 cents a share, from $1.2 million, or 12 cents, a year ago.
Commenting on results for the Quarter and Year-to-date periods, Adam Blumenfeld, CEO stated, “We are pleased to report solid results for the third quarter and to have reached $.40 in fully diluted earnings per share for the first nine months of the fiscal year, despite notable distractions such as mid-year completion of the Sport Supply Group acquisition, our pending transition to Sport Supply Group's SAP operating platform, and our first audit of internal controls which we are required to complete to comply with Sarbanes-Oxley as of June 30, 2007.
“For the Quarter ended March 31, 2007, consolidated net sales grew 6.4% to $63.2 million, primarily attributable to a 17% organic growth rate from our road sales force from end of season basketball uniform deliveries and solid uniform demand from spring sports. Consolidated gross margin percentages improved by 80 basis points to 36.1% versus 35.3% in the year ago period. This was driven primarily from our catalog division, which experienced a 150 basis point improvement in gross margin percentages to 37.5% from 36% in the year ago period. Consolidated net income and EPS improved 41% and 42%, respectively, for the quarter versus the year ago period, due in part to the elimination of minority interest in Sport Supply Group as well as synergies gained as we continue to integrate the companies. This bottom line leverage is reflective of our continuing efforts to streamline operating expenses and allow for sales growth and gross margin expansion to have a more demonstrative impact on earnings in future periods.
“For the nine month period ending March 31, 2007, consolidated net sales grew 5.7% to $181 million versus $171 million in the year ago period. Our catalog, Internet and road sales force were all contributors to this top line growth. Consolidated gross margin percentages improved by 200 basis points to 35.6% versus 33.6% in the year ago period. This significant improvement in gross margin was driven primarily from our catalog and Internet sales efforts, which experienced a 370 basis point improvement to 37.2% versus 33.5% in the year ago period, largely due to pricing and product mix improvements. The margin strength in our catalog and Internet businesses has no doubt acted as somewhat of a counterbalance to slower top line growth in these entities; however, the trade-off has been a profitable one. Road sales gross margins have remained relatively stable year over year in the 33-34% range. Year to date consolidated net income and earnings per share grew 47% and 48%, respectively.”
Commenting on plans for the future, Mr. Blumenfeld stated, “As we prepare to enter year two of the Company's three year plan, we remain committed to our previously stated vision: integrate, optimize and grow. We intend to complete the migration to one Catalog IT platform by June 30, 2007 and one Road Sales Group IT Platform in the next 12-18 months. We intend to continue consolidating our Dallas, TX distribution and assembly facilities in the coming months and to complete this effort in large part by the end of the calendar year.
“We will focus on reducing operating expenses, enhancing gross margins and growing profitable sales for the benefit of generating greater cash flows and accelerating our repayment of bank debt. As we consolidate warehouses, we will reduce the number of SKUs we carry. This should improve inventory turns and enhance cash flows. As we move to liquidate excess SKUs, we intend to free up warehouse space, convert inventory to cash and speed the repayment of debt. As we combine certain catalog brands and divisions, we intend to reduce the number of paper catalogs we distribute by as much as 25% and rely heavily on our CRM-driven telesales professionals and road sales pros to reach deeper vertically into our customer and prospect databases. Each of these initiatives is, in our view, the proper path to take to achieve our three year plan, but each can produce fluctuations in short term operating metrics – such as a slowing of the catalog sales growth rate or a masking of organic gross margin progress – even while producing greater cash flow for the Company. Generally speaking, we see FY08 as a year with organic sales growth similar to FY07, continued gross margin improvements, and a meaningful reduction in the growth of operating expenses – the result of which should be improved operating leverage and strong double digit growth in operating profits and net income.
“With the acquisition of Sport Supply Group now complete, the Company is transitioning from a phase of hyper top-line growth to, we believe, one of more robust bottom line performance. While our enthusiasm to expand market share and evaluate partnership opportunities will always remain a cornerstone of the Company's strategy, investors should be mindful of our immediate focus, which is the proper consolidation and optimization of our business units and intention to substantially improve our bottom line results in the coming years.”
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales $63,235 $59,418 $180,782 $171,094
Cost of sales 40,404 38,421 116,513 113,640
----------- ----------- ----------- -----------
Gross profit 22,831 20,997 64,269 57,454
Selling, general and
administrative
expenses 18,421 17,253 52,474 49,181
----------- ----------- ----------- -----------
Operating profit 4,410 3,744 11,795 8,273
----------- ----------- ----------- -----------
Other income
(expense):
Interest income 28 25 142 99
Interest expense (1,707) (1,261) (4,424) (3,379)
Other income 17 155 109 244
----------- ----------- ----------- -----------
Total other
expense (1,662) (1,081) (4,173) (3,036)
----------- ----------- ----------- -----------
Income before
minority
interest in
income of
consolidated
subsidiary and
income taxes 2,748 2,663 7,622 5,237
Income tax provision 1,010 787 2,929 1,813
----------- ----------- ----------- -----------
Minority interest in
income of
consolidated
subsidiary, net of
tax 0 644 531 588
----------- ----------- ----------- -----------
Net income $1,738 $1,232 $4,162 $2,836
=========== =========== =========== ===========
Weighted average
number of shares
outstanding:
Basic 10,233,560 10,183,973 10,231,051 10,174,843
=========== =========== =========== ===========
Diluted 13,774,358 10,359,528 10,375,469 10,389,740
=========== =========== =========== ===========
Net income per share
common stock - basic $0.17 $0.12 $0.41 $0.28
=========== =========== =========== ===========
Net income per share
common stock -
diluted $0.17 $0.12 $0.40 $0.27
=========== =========== =========== ===========
Dividends declared per
share common stock $0.025 $0.025 $0.075 $0.075
=========== =========== =========== ===========
