Collegiate Pacific (AMEX:BOO)
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Collegiate Pacific Inc. (AMEX:BOO):
-- Solid Organic Sales Growth of 15% for the Quarter
-- Company sees balance of FY06 Fully Diluted GAAP
EPS of $0.20 - $0.26, which is generally in line with the
range of analyst consensus estimates
-- Company Sees FY07 Fully-Diluted GAAP EPS of $0.62-$0.78
Collegiate Pacific Inc. (AMEX:BOO) today announced its results
of operations for the second fiscal quarter ended December 31, 2005,
and that it will host a conference call today at 3:30 PM, Central
Standard Time, to discuss the second fiscal quarter and future plans.
The call may be accessed by dialing 866-510-0708 and using participant
code 27597908. A replay of the call will be available for 30 days by
calling 888-286-8010 and entering passcode 54869893.
Certain points of Interest for the Quarter Include:
-- Q206 Net Loss of $971 thousand, or ($0.10)
fully-diluted GAAP EPS, which includes an
approximately $555 thousand, or ($0.05) fully-diluted
GAAP EPS net of taxes, seasonal loss at SSPY, and also
includes $1.57M in non-cash and cash charges, or
($0.10) fully-diluted GAAP EPS net of taxes, for the
items described below; and
-- Company completes 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.
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*T
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
============= ============= ====================
*T
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), 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."
Restatement of Financial Statements
As previously disclosed by the company in its most recent annual
report on form 10-KSB and previous quarterly reports on Form 10-Q,
since February 2005, the company has received and responded to several
comment letters from the Staff of the Securities and Exchange
Commission's Division of Corporation Finance. The SEC comments were
initiated in conjunction with the SEC's review of the company's
Registration Statement on Form S-3, which was filed by the company on
January 24, 2005, as required by the terms of a registration rights
agreement the company entered into with the purchasers of its
convertible senior subordinated notes due 2009. Based on the SEC
comments, management and the audit committee of our board of directors
reassessed the company's purchase accounting for the intangible assets
and inventories the company acquired in connection with acquisitions
since January 2004. As a result, Collegiate Pacific will restate its
financial statements for the fiscal year ended June 30, 2004 and June
30, 2005, by filing an amendment to its Annual Report on Form 10-KSB
for the fiscal year ended June 30, 2005. In addition, the company will
restate its financial results for the fiscal quarter ended September
30, 2005, by filing an amendment to its Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 2005. The amendments will
reflect the following purchase accounting adjustments to amounts
previously allocated to the following acquired intangible assets and
inventories:
-- increase the value of the customer relationships
acquired in connection with its acquisitions of
Kesslers Team Sports, Dixie Sporting Goods, Orlando
Team Sports and Salkeld & Sons by approximately $1.9
million, which was originally allocated to goodwill;
-- increase the value the inventories acquired in
connection with its acquisitions of Kesslers Team
Sports, Dixie Sporting Goods, Orlando Team Sports and
Salkeld & Sons by approximately $650 thousand, which
was originally allocated to goodwill; and
-- increase the value of contractual backlog the company
acquired in connection with its acquisitions of
Kesslers Team Sports, Dixie Sporting Goods, Orlando
Team Sports and Salkeld & Sons by approximately $200
thousand, which was originally allocated to goodwill.
As a result of these restatements, amortization expense and cost
of goods sold for the fiscal years ended June 30, 2004 and 2005 were
increased by approximately $210 thousand, or ($0.03) per share, and by
approximately $178 thousand, or ($0.02) per share, respectively. In
addition, the restatement increased the company's reported net income
for the fiscal quarter ended September 30, 2005, by approximately $54
thousand, which did not impact EPS. These are non-cash adjustments
that do not affect Collegiate Pacific's cash flow or debt balances for
these periods.
"Given the cumulative effect of this change in reported non-cash
amortization expense, we have determined that the most appropriate
action is to restate the affected periods. We have discussed this
issue with our auditors," said Michael J. Blumenfeld.
Quarterly Report on Form 10-Q
Due to, among other things, delays caused by the company's
decision to restate its consolidated financial statements set forth in
its Annual Report on Form 10-KSB for the fiscal years ended June 30,
2004 and 2005, as well as its Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2005, to correct all purchase
accounting issues related to the company's acquisition activity since
January 2004, all in connection with the company's recent resolution
of all outstanding comments the company received from the Securities
and Exchange Commission's Division of Corporation Finance regarding
the company's purchase accounting for those acquisitions, Collegiate
Pacific will be delaying the filing of its Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 2005, as permitted by
the rules of the Exchange Act. Collegiate Pacific's Quarterly Report
on Form 10-Q will be filed within five calendar days of this press
release. The amendment to the Company's 10-KSB for fiscal 2005 and its
10-Q for the quarter ended September 30, 2005, must be filed prior to
the company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2005.
About Collegiate Pacific
Collegiate Pacific is the nation's fastest growing manufacturer
and supplier of sports equipment primarily to the institutional and
team dealer markets. The Company offers more than 4,500 products to
300,000 prospective and existing customers. The Company distributes
approximately 1.5 million catalogs annually and employs approximately
175 professional road salesmen.
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*T
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2005 2005
------------- -------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $9,038,788 $40,325,716
Accounts receivable, net of allowance
for doubtful accounts of
$ 1,539,634 and $1,042,496,
respectively 32,232,306 18,131,753
Inventories 38,379,939 17,478,805
Current portion of deferred taxes 803,278 775,231
Prepaid income taxes 366,265 644,596
Prepaid expenses and other current
assets 3,310,791 601,439
------------- -------------
Total current assets 84,131,367 77,957,540
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $ 1,845,597 and
$1,294,135, respectively 10,154,315 1,501,096
DEFERRED DEBT ISSUANCE COSTS, net of
accumulated amortization of $734,527 and
$392,932, respectively 2,675,831 3,017,427
INTANGIBLE ASSETS, net of accumulated
amortization of $ 1,689,213 and $
853,333, respectively 9,512,310 1,862,606
GOODWILL 47,455,472 23,848,345
DEFERRED INCOME TAXES 124,143
OTHER ASSETS, net 604,129 409,068
------------- -------------
Total assets $154,657,567 $108,596,082
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $19,442,010 $9,782,479
Accrued liabilities 5,035,848 1,724,783
Dividends payable 254,777 255,144
Accrued interest 267,708 250,000
Current portion of long-term debt 12,463,043 329,867
------------- --------------
Total current liabilities 37,463,386 12,342,273
DEFERRED TAX LIABILITY 621,548 700,146
LONG-TERM DEBT 56,007,842 50,448,153
MINORITY INTEREST IN SUBSIDIARY 13,594,147
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
1,000,000 shares authorized; no
shares issued -- --
Common stock, $0.01 par value,
50,000,000 shares authorized;
10,215,480 and 10,205,780 shares
issued and 10,129,454 and
10,119,754 shares outstanding,
respectively 102,687 102,058
Additional paid-in capital 42,681,022 41,911,008
Retained earnings 4,844,386 3,749,895
Treasury stock at cost, 86,026
shares (657,451) (657,451)
------------- --------------
Total stockholders' equity 46,970,644 45,105,510
------------- --------------
Total liabilities and
stockholders' equity $154,657,567 $108,596,082
============= ==============
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
============ ============ ============= ============
*T
EBITDA means earnings before interest, taxes, depreciation and
amortization, and calculated as net income plus (i) interest expense
net of interest income, (ii) income tax provision, and (iii)
depreciation, depletion and amortization. EBITDA should not be
considered as an alternative to net income or operating income as an
indication of our operating performance. EBITDA is not necessarily
comparable to similarly titled measures of other companies. EBITDA is
presented here in our discussion of guidance for future periods
because it is a widely used financial indicator used by investors and
analysts to measure performance.
Safe Harbor Statement
This news release includes forward-looking statements. Collegiate
Pacific cautions that these statements are qualified by important
factors that could cause actual results to differ materially from
those in the forward-looking statements, including but not limited to
Collegiate Pacific's ability to successfully execute its acquisition
plans and growth strategy, integration of acquired businesses, weather
conditions, global economic conditions, product demand, financial
market performance, and other risks described in Collegiate Pacific's
most recent annual report on form 10-KSB, previous quarterly reports
on Form 10-Q, and current reports on Form 8-K, each as filed with the
Securities and Exchange Commission. Collegiate Pacific cautions that
the foregoing list of important factors is not exclusive, any
forward-looking statements included in this news release is made as of
the date of this news release, and Collegiate Pacific does not
undertake to update any forward-looking statement.