Sport Supply Group, formerly Collegiate Pacific, reported revenues grew 3.2% in its first quarter ended Sept. 30, to $70.4 million from $68.2 million. Net income improved by 24.2%, to $4.1 million, or 31 cents a share, from $3.3 million, or 28 cents, a year ago as gross margins lifted to 36.4% from 35.3%.
“We are pleased to report a strong first quarter which sets the stage for what we intend to be a year of significant earnings growth,” said chairman and CEO Adam Blumenfeld . “These results are even more impressive given that we incurred year-one SOX compliance costs of approximately $300,000 during the quarter and had approximately $222,000 of one time benefits in the prior years quarter. We believe a combination of positive sales growth, expanding gross margin, and a leveling of operating and administrative expenses will make for impressive quarterly earnings performance and comparisons going forward. We reiterate our earnings guidance of $0.60 – $0.70 fully diluted earnings per share for FY08, an estimated improvement of approximately 75% over FY07.”
Blumenfeld continued: “We are also proud of the outstanding progress we continue to make on the balance sheet a by-product of improved inventory and cash management, and faster collection of outstanding receivables. As of September 30, 2007, the company repaid all of its senior bank debt, $24.7 million of which was outstanding as of June 30, 2007, and had $3.7 million of cash on hand. This debt repayment and corresponding increase in stockholders equity is due, in part, to the previously announced $18.3 million equity infusion from an affiliate of Andell Holdings. The remaining $6.4 million in debt repayment is from internally generated cash flow during the first quarter. Inventory levels also decreased sequentially from June 30, 2007 by another $4.1 million, though they will expand seasonally as we prepare for the Spring selling cycle. We expect continued gains in efficiency from our SKU, catalog and warehouse consolidation. Right sizing the infrastructure is a key component to current and future earnings leverage. It readies the platform, in our view, to maximize earnings potential from organic and potentially acquired sales growth.
“We have long stated our intention to Optimize then Grow the business as part of our multi-year plan. We are pleased with the ongoing earnings optimization process and look forward to moving into the growth phase.”
Sports Supply also said it amended and restated its credit facility with Merrill Lynch Business Financial Services, Inc. (“MLBFS”) to bring borrowing capacity more in line with the operating needs of the company, and extend the term of the Agreement beyond the due date of the Companys outstanding convertible debentures.
Commenting on the amended facility, John Pitts, CFO, stated: “The amended facility, consisting of a $25.0 million revolving credit facility with an accordion feature that could potentially expand total availability to $55.0 million, should provide ample borrowing capacity beyond the maturity of the convertible debentures while substantially reducing costs associated with the facility. With continued strong cash generation, the Company believes that it will have significant flexibility in planning for the maturity of the convertible debentures in December 2009.”
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
|Three Months Ended|
|Cost of sales||44,746||44,100|
|Selling, general and administrative expenses||17,943||16,803|
|Other income (expense):|
|Total other expense||(1,079||)||(1,150||)|
Income before minority interest in income of consolidated subsidiary and income taxes
|Income tax provision||2,510||2,312|
|Minority interest in income of consolidated subsidiary, net of tax||0||503|
|Weighted average number of shares outstanding:|
|Net income per share common stock basic||$||0.35||$||0.32|
|Net income per share common stock diluted||$||0.31||$||0.28|
Dividends declared per share common stock