Sport Supply Group, Inc. had a pretty rough go of things in the second quarter as a decline in sales brought on by a calendar shift and the inability to anniversary a government order cut net income in half. Revenues for Q2 declined 7.5% to $23.2 million from $25.1 million for the same quarter last year. Net income was $621,000 for the quarter against net income of $1.3 million for last year's quarter, a 52.1% decline.

Accounting for the revenue declines, Terry Babilla, SSG’s president and COO, noted that “Approximately $1 million of the decline in revenues was because SSG had 3 more shipping days in the quarter ended June 30, 2004 as compared to the quarter ended June 30, 2005. These additional shipping days resulted from SSG changing its fiscal year-end last year from a 52/53 week fiscal year ending on the last Friday in March of each year to March 31.”

Mr. Babilla also pointed to an order from the U.S. government worth approximately $825,000 that occurred during last year’s quarter and that was not repeated this time around.

Gross margins were down 120 basis points to 28.6% of sales versus 29.8% in Q2 last year. SSG management attributed the decline to the lower revenues and to increased freight costs, noting that base product margins were consistent with the same quarter last year.

Although selling, general, and administrative expenses were down approximately $75,000 during the quarter, as a percent of sales, they were up 150 basis points. SSG incurred approximately $200,000 in incremental legal fees related to a failed transaction with an unaffiliated third party during this quarter. The company does not expect to incur these legal fees in future quarters.