Collegiate Pacific Inc. announced a fiscal second quarter net loss of $971 thousand, or a loss of 10 cents fully-diluted EPS, compared to a net income of $581,000 last year. Sales increased 95.0% to $46.4 million compared to $23.8 million last year.
The net loss includes an approximately $555 thousand, or 5 cents fully-diluted GAAP EPS net of taxes, seasonal loss at Sport Supply Group, and also includes $1.57 million in non-cash and cash charges, or ($0.10) fully-diluted GAAP EPS net of taxes, for the items described below; The company also completed Financial Restatements for Q1 of FY06 and FY04 and FY05, which results in a pre-tax increase of approximately $90 thousand in Q1 of FY06 and a pre-tax decrease of approximately $357 thousand and $291 thousand for FY04 and FY05, respectively, as indicated in the table below.
Restatement Adjustment Summary ( Increase) /
Decrease
------------------------------------------------
Three month period
Twelve month period ended ended
--------------------------- --------------------
June 30, 2004 June 30, 2005 September 30, 2005
------------- ------------- --------------------
Cost of sales
adjustments $(233,400) $(384,250) $284,140
Intangible
amortization
adjustments (123,334) 93,313 (194,134)
------------- ------------- --------------------
Gross adjustments $(356,734) $(290,937) $90,006
Effect of taxes 146,260 113,405 (35,538)
------------- ------------- --------------------
Net adjustments $(210,474) $(177,532) $54,468
------------- ------------- --------------------
Weighted average
shares outstanding
---------------------
Basic 6,324,950 10,031,314 10,124,387
============= ============= ====================
Fully diluted 7,571,910 10,279,185 14,068,662
============= ============= ====================
Earnings per share as
previously reported
---------------------
Basic $0.30 $0.38 $0.25
============= ============= ====================
Fully diluted $0.25 $0.37 $0.22
============= ============= ====================
Earnings per share as
adjusted
---------------------
Basic $0.26 $0.36 $0.25
============= ============= ====================
Fully diluted $0.22 $0.35 $0.22
============= ============= ====================
Commenting on the quarter and the first six-months of fiscal 2006, which ended December 31, 2005, Michael J. Blumenfeld, Chairman and CEO stated: “While the second fiscal quarter is the seasonal low-point for our business, we are pleased to report robust sales growth and gross margin performance consistent with our expectations. Moreover, we are particularly pleased to have completed a restatement of our financial statements for the fiscal years ended June 30, 2004 and 2005, as well as our first quarter of fiscal 2006, for changes related to our purchase accounting for the valuation and amortization expenses associated with acquired intangibles and inventories from Collegiate Pacific's acquisition activities since January 2004. As discussed below, these adjustments increased our reported net income for the fiscal quarter ended September 30, 2005, by approximately $54 thousand, which did not impact EPS, and decreased our reported net income by approximately $210 thousand, or ($0.03) per share, and approximately $178 thousand, or ($0.02) per share, respectively, for our fiscal years ended June 30, 2004 and June 30, 2005.”
“The Company produced a net loss of $971 thousand for the quarter ended December 31, 2005, or ($0.10) per fully diluted share, including a seasonal net loss of approximately $555 thousand for our 73% owned affiliate Sport Supply Group, Inc. Additionally, results for the quarter included the following cash and non-cash charges in the total amount of approximately $1.57 million, or $0.10 per diluted earnings per share, net of taxes:
- non-cash amortization charges in the amount of approximately $420 thousand for acquired intangibles, including our acquisition of a majority interest in Sport Supply Group, Inc.;
- a one-time cash charge in the amount of approximately $430 thousand related to the termination of the Merger Agreement with Sport Supply Group Inc.;
- a cash charge in the amount of approximately $544 thousand for Sarbanes-Oxley related compliance costs; and
- a cash charge in the amount of approximately $176 thousand for professional fees incurred in connection with the preparation and filing of a Registration Statement on Form S-3, which was filed by the company pursuant to the terms of a registration rights agreement the company entered into with the purchasers of its convertible senior subordinated notes due 2009.
“We are pleased to put these charges behind us.”
Adam Blumenfeld, President of Collegiate Pacific stated: “Operationally, we were pleased with consolidated sales growth for the quarter and with gross margin performance in the quarter and year-to-date six month period ended December 31, 2005. Organic sales growth for businesses owned at least twelve months was approximately 15% for the quarter and approximately 20% for the six month period ended December 31, 2005, well within our expectations. Regarding gross margins, investors should be mindful that Sport Supply Group carries a historically lower gross margin than that of Collegiate Pacific. Notwithstanding, the consolidated gross margins were 32.6% for the quarter, and 32.6% year-to-date. Certain adjustments outlined above were in connection with inventory market adjustments at Sport Supply Group, which negatively affect reported gross margins. Without these adjustments, the gross margins would have been approximately 33.3% and 33.7% for the three and six month periods, respectively, ended December 31, 2005, which exceeds our internal expectations. This is reflective of progress being made in our catalog selling efforts; Dixie, OTS, Kesslers and Salkeld's (“DOKS”) road sales platform and by our Sport Supply Group affiliate in enhancing gross margins and reducing the cost of goods sold. Our attempts to improve gross margins are a long-term, multi business cycle process, but we are pleased with initial results, particularly in light of the significant increase in the cost of certain raw materials.”
“Regarding our 73% investment in Sport Supply Group, Inc., we are pleased with the progress Sport Supply Group has made to date and remain well focused on optimizing this investment for the benefit of all shareholders.”
Adam Blumenfeld continued; “We are excited to have added talented personnel in the Finance, Sales and Marketing divisions of the Company. We are pleased to welcome Sue Myers as our new corporate controller and Kurt Hagen as our new executive vice president of sales and marketing. With 12 years experience in the fast-growing Fossil Corporation (Nasdaq:FOSL – News), we look forward to Kurt being instrumental in the acceleration of our catalog and on-line sales efforts. The addition of Mr. Hagen rounds out the Executive Management Team for our major operating platforms and solidifies, we believe, the necessary foundation for future profitable growth.”
Regarding our outlook and guidance for future periods, Michael Blumenfeld stated: “At this time, we are currently projecting GAAP diluted earnings per share between $0.20 and $0.26 for the balance of fiscal 2006, which assumes no excess expenses to budget with respect to our Sarbanes-Oxley compliance costs in Q3 and Q4, and is generally in line with the range of current analyst consensus projections. We continue to see EBITDA for fiscal 2006 of $15 million or more. The Company is also introducing preliminary guidance for FY07 (which begins July 1, 2006) of $0.62 – $0.78 per fully diluted GAAP share. This guidance assumes no material acquisitions or dispositions during FY07 and will likely be refined as the year unfolds. We see FY07 EBITDA of approximately $20 Million.”
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- --------------------------
2005 2004 2005 2004
------------ ------------ ------------- ------------
Net sales $46,401,280 $23,794,598 $111,676,176 $51,504,886
Cost of sales 31,258,686 15,884,544 75,219,087 34,468,131
------------ ------------ ------------- ------------
Gross profit 15,142,594 7,910,054 36,457,089 17,036,755
Selling, general
and
administrative
expenses 16,192,395 6,710,482 31,928,121 12,664,887
------------ ------------ ------------- ------------
Operating
profit (loss) (1,049,801) 1,199,572 4,528,968 4,371,868
------------ ------------ ------------- ------------
Other income
(expense):
Interest
income 28,116 42,999 74,338 58,444
Interest
expense (1,119,045) (334,663) (2,117,906) (341,519)
Other income 63,824 71,184 88,473 120,563
------------ ------------ ------------- ------------
Total other
income
(expense) (1,027,105) (220,480) (1,955,095) (162,512)
------------ ------------ ------------- ------------
Income (loss)
before
minority
interest in
net income of
consolidated
subsidiary and
income taxes (2,076,906) 979,092 2,573,873 4,209,356
Minority interest
in net income
(loss) of
consolidated
subsidiary (481,833) -- (56,191) --
------------ ------------ ------------- ------------
Income (loss)
before income
taxes (1,595,073) 979,092 2,630,064 4,209,356
Income tax
provision (624,198) 397,945 1,026,052 1,751,654
------------ ------------ ------------- ------------
Net income
(loss) $(970,875) $581,147 $1,604,012 $2,457,702
============ ============ ============= ============
Weighted average
number of shares
outstanding:
Basic 10,129,351 10,004,947 10,126,869 9,956,587
============ ============ ============= ============
Diluted 10,129,351 10,320,184 10,599,918 10,211,489
============ ============ ============= ============
Net income (loss)
per share common
stock -- basic $(0.10) $0.06 $0.16 $0.25
============ ============ ============= ============
Net income (loss)
per share common
stock -- diluted $(0.10) $0.06 $0.15 $0.24
============ ============ ============= ============
