Sport Supply Group, Inc. reported sales increased 2.8% in the third quarter ended March 31, to $65.5 million from $63.7 million a year ago. Net Income decreases 8.5% to $3.2 million, or 25 cents a share, from $3.5 million, or 26 cents, in prior year period, principally due to $1.1 million of legal, professional and other expenses related to the its merger agreement.
As reported, the company has agreed to be acquired by affiliates of ONCAP Investment Partners II L.P.. The lower earnings also reflect a $0.9 million decrease in tax reserves for sales and use taxes related to the settlement of a tax assessment in Fiscal 2009.
Among the Q3 highlights:
- Gross Margins increase 70 basis points to 36.1% vs. 35.4% in prior year period.
- Adjusted Net Income per Diluted share increases 25.0% to $0.30 vs. $0.24 in the prior period
- Adjusted EBITDA increases 6.8% to $7.2 million for the three months ended March 31, 2010 vs. $6.7 million for the comparable period in 2009.
- Net Sales increase 4.2% to $198.5 million vs. $190.5 million in prior year period
- Gross Margins increase 30 basis points to 36.1% vs. 35.8% in prior year period
- Net Income decreases 4.5% to $9.2 million vs. $9.6 million in prior year period, principally due to $1.1 million of legal, professional and other expenses related to the pending merger agreement with affiliates of ONCAP Investment Partners II L.P. and $0.1 million of expenses related to other acquisition activity in Fiscal 2010 as well as the $1.4 million one-time gain from the early retirement of 5.75% notes that occurred in Fiscal 2009 and the settlement of a tax assessment in February 2009 reducing our sales and use tax reserves.
- Fully Diluted EPS increases 2.9% to $0.70 vs. $0.68 in prior year period
- Adjusted Net Income per Diluted share increases 24.6% to $0.76 vs. $0.61 in prior year period
- Adjusted EBITDA increases 7.7% to $25.8 million for the trailing twelve months ended March 31, 2010 vs. $24.0 million for the comparable period in 2009
- Net Cash Provided by Operating Activities of $18.9 million versus $3.2 million in the prior year period
- Free Cash Flow from Operations of $18.5 million versus $2.6 million in the prior year period.
* Debt reduced to $3.0 million
* Cash on hand of $2.2 million
“We are pleased to report increased sales and gross margins for the third fiscal quarter despite the continuing challenges of a difficult macroeconomic environment for spending, and, to a lesser extent, very unusual weather in the eastern half of the United States during the month of February,” stated Adam Blumenfeld, Chairman and Chief Executive Officer. “We are equally as pleased with the success of our continued debt reduction efforts, with the Company approaching debt-free levels as of March 31, 2010. This is a credit to continued vigilance in our management of inventory and receivable levels.”
Blumenfeld continued: “Since the close of the third quarter, the Company announced the completion of two transactions: the purchase of substantially all the assets of Coach's Sports Corner of Sandusky, Ohio, and the purchase of certain assets of Greg Larson Sports of Brainerd, Minnesota. We welcome these purchased operations into the Sport Supply Group family and expect them to be fine additions to the Company. The Company intends to continue to seek out strategic partnerships, joint ventures and acquisitions where situations merit, and continue to expand its footprint in the team and institutional marketplace.”
Blumenfeld concluded: “With respect to the pending transaction with ONCAP, a division of the Onex Corporation, we remain on schedule, as previously released, for a closing during the second or third calendar quarter of 2010, subject to the holding of a special stockholders' meeting and the satisfactory completion of closing conditions as outlined in the merger agreement.”