Sport Supply Group, Inc. fiscal third quarter sales increased 2% to $27.8 million compared $27.3 million. Gross margins improved 340 basis points to 33.3% vs. 29.9%
Operating Income increased 75% to $2.7 million vs. $1.5 million and Net Income increased 59% to $2.5 million vs. $1.5 million. Basic earnings per share increased 58% to 27 cents per share compared to 17 cents last year.
Highlights for the nine months ended March 31, 2006
- Revenue growth of 5.1% ($68.2 million vs. $64.9 million)
- Improvement in Gross Margins of 330 basis points (33.2% vs. 29.9%)
- Improvement in Gross Profit Dollars of $3.2 million or 16% ($22.6
million vs. $19.4 million) - Increased Operating Income by 267% ($3.2 million vs. $870,000)
- Increased Net Income by 268% ($2.8 million vs. $763,000)
- Increased basic earnings per share by 267% ($.31 per share vs.
$.09 per share)
Terry Babilla, the Company’s President and Chief Operating Officer, commented, “We achieved significant improvement from the prior year in virtually all measures of financial performance for the three and nine month periods ended March 31, 2006. Our results reflect organic revenue growth and significant improvements in margins, operating income, net income and earnings per share. Our number one priority continues to be focused on increasing profitability.
“While our revenue growth for the three and nine months ended March 31, 2006 reflects a 2% and 5.1% increase, respectively, we believe it is important to note that we voluntarily eliminated two sales initiatives that contributed approximately $650,000 and $1 million in revenues, respectively, in the three and nine months ended March 2005 and less than $10,000 in the three and nine months ended March 2006.
“These sales initiatives were eliminated because they did not meet the Company’s profitability criteria. In addition, we are in the process of closing our Team Dealer sporting goods store, located in Dallas, Texas, because this store does not meet the Company’s profitability criteria. We anticipate the store will be closed by June 30, 2006. The store generated revenues of approximately $570,000 for the nine months ended March 31, 2006 versus $860,000 for the nine months ended March 31, 2005.”
Mr. Babilla then stated that, “In addition to significantly improved operating results, the Company’s balance sheet is in excellent condition, with stockholders equity increasing from $28.4 on March 31, 2005 to $31.9 million on March 31, 2006.” In addition, Mr. Babilla noted that, “The Company has tax benefit carry-forwards that can be used to offset future taxable income. As of March 31, 2006 the Company has gross deferred tax assets of approximately $8.9 million, consisting of: 1) current deferred tax assets of approximately $1.4 million, 2) net long-term deferred tax assets of approximately $2.0 million, and 3) a valuation allowance of approximately $5.5 million.
“The amount of the deferred tax assets considered realizable will be increased by reversing the valuation allowance if the Company continues to generate profitable results in the future. Reversing the valuation allowance would increase deferred tax assets and stockholders equity on the balance sheet and would also be reflected as a tax benefit on our income statement resulting in an increase in net income. The deferred tax assets also represent significant future cash savings since the deferred tax assets will be used to offset future income taxes. Although management believes the Company will realize the full benefit of the gross deferred tax assets of $8.9 million before they expire, we have decided not to reverse the $5.5 million valuation allowance until there is a longer period of consistent profitability.”
Mr. Babilla concluded by stating that, “Approximately 2 1/2 years ago, we implemented a turnaround program at SSG with the objective of reversing several consecutive years of operating losses. The entire focus of the SSG management team and employee base has been to return SSG to profitability on a consistent basis. SSG has realized two consecutive years of increasing profitability. We will continue to focus our attention on increasing our profitable revenues by improving our selling and marketing efforts, entering into strategic relationships, expanding our gross margins and eliminating unnecessary expenses through the use of technology.”
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED SUMMARY STATEMENTS OF OPERATIONS
(Unaudited -- amounts in 000's except earnings per share)
Three Months Ended March Nine Months Ended March
2006 2005 2006 2005
------------- ---------- ----------- -----------
Net revenues $27,809 $27,252 $68,171 $64,883
Cost of sales 18,550 19,109 45,558 45,464
------------- ---------- ----------- -----------
Gross profit 9,259 8,143 22,613 19,419
Selling, general &
administrative
expenses 6,557 6,598 19,421 18,550
------------- ---------- ----------- -----------
Operating profit 2,702 1,545 3,192 869
Interest & other
expense 122 46 264 156
------------- ---------- ----------- -----------
Income before taxes 2,580 1,499 2,928 713
Provision for income
taxes 120 -- 120 --
Income from
discontinued
operations -- 50 -- 50
------------- ---------- ----------- -----------
Net income $2,460 $1,549 $2,808 $763
============= ========== =========== ===========
Basic EPS $0.27 $0.17 $0.31 $0.09
Diluted EPS $0.27 $0.17 $0.30 $0.08
Weighted Shares OS
Basic 8,961 8,917 8,949 8,917
Diluted 9,245 8,918 9,235 9,088
