Collegiate Pacific (AMEX:BOO)
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The Company will host a conference call today at 3:30 p.m. CT/4:30 p.m.
ET to discuss these results. The call may be accessed by dialing
866-510-0711. Use passcode 93378535. A replay will be available for 30
days and can be accessed by dialing 888-286-8010 using passcode 57188844.
Collegiate Pacific Inc. (AMEX:BOO) today reported results for its third
fiscal quarter ending March 31, 2007.
Commenting on results for the Quarter and Year-to-date periods, Adam
Blumenfeld, CEO stated, “We are pleased to
report solid results for the third quarter and to have reached $.40 in
fully diluted earnings per share for the first nine months of the fiscal
year, despite notable distractions such as mid-year completion of the
Sport Supply Group acquisition, our pending transition to Sport Supply
Group’s SAP operating platform, and our first
audit of internal controls which we are required to complete to comply
with Sarbanes-Oxley as of June 30, 2007.
“For the Quarter ended March 31, 2007,
consolidated net sales grew 6.4% to $63.2 million, primarily
attributable to a 17% organic growth rate from our road sales force from
end of season basketball uniform deliveries and solid uniform demand
from spring sports. Consolidated gross margin percentages improved by 80
basis points to 36.1% versus 35.3% in the year ago period. This was
driven primarily from our catalog division, which experienced a 150
basis point improvement in gross margin percentages to 37.5% from 36% in
the year ago period. Consolidated net income and EPS improved 41% and
42%, respectively, for the quarter versus the year ago period, due in
part to the elimination of minority interest in Sport Supply Group as
well as synergies gained as we continue to integrate the companies. This
bottom line leverage is reflective of our continuing efforts to
streamline operating expenses and allow for sales growth and gross
margin expansion to have a more demonstrative impact on earnings in
future periods.
“For the nine month period ending March 31,
2007, consolidated net sales grew 5.7% to $181 million versus $171
million in the year ago period. Our catalog, Internet and road sales
force were all contributors to this top line growth. Consolidated gross
margin percentages improved by 200 basis points to 35.6% versus 33.6% in
the year ago period. This significant improvement in gross margin was
driven primarily from our catalog and Internet sales efforts, which
experienced a 370 basis point improvement to 37.2% versus 33.5% in the
year ago period, largely due to pricing and product mix improvements.
The margin strength in our catalog and Internet businesses has no doubt
acted as somewhat of a counterbalance to slower top line growth in these
entities; however, the trade-off has been a profitable one. Road sales
gross margins have remained relatively stable year over year in the
33-34% range. Year to date consolidated net income and earnings per
share grew 47% and 48%, respectively.”
Commenting on plans for the future, Mr. Blumenfeld stated, “As
we prepare to enter year two of the Company’s
three year plan, we remain committed to our previously stated vision:
integrate, optimize and grow. We intend to complete the migration to one
Catalog IT platform by June 30, 2007 and one Road Sales Group IT
Platform in the next 12-18 months. We intend to continue consolidating
our Dallas, TX distribution and assembly facilities in the coming months
and to complete this effort in large part by the end of the calendar
year.
“We will focus on reducing operating
expenses, enhancing gross margins and growing profitable sales for the
benefit of generating greater cash flows and accelerating our repayment
of bank debt. As we consolidate warehouses, we will reduce the number of
SKUs we carry. This should improve inventory turns and enhance cash
flows. As we move to liquidate excess SKUs, we intend to free up
warehouse space, convert inventory to cash and speed the repayment of
debt. As we combine certain catalog brands and divisions, we intend to
reduce the number of paper catalogs we distribute by as much as 25% and
rely heavily on our CRM-driven telesales professionals and road sales
pros to reach deeper vertically into our customer and prospect
databases. Each of these initiatives is, in our view, the proper path to
take to achieve our three year plan, but each can produce fluctuations
in short term operating metrics – such as a
slowing of the catalog sales growth rate or a masking of organic gross
margin progress – even while producing
greater cash flow for the Company. Generally speaking, we see FY08 as a
year with organic sales growth similar to FY07, continued gross margin
improvements, and a meaningful reduction in the growth of operating
expenses – the result of which should be
improved operating leverage and strong double digit growth in operating
profits and net income.
“With the acquisition of Sport Supply Group
now complete, the Company is transitioning from a phase of hyper
top-line growth to, we believe, one of more robust bottom line
performance. While our enthusiasm to expand market share and evaluate
partnership opportunities will always remain a cornerstone of the Company’s
strategy, investors should be mindful of our immediate focus, which is
the proper consolidation and optimization of our business units and
intention to substantially improve our bottom line results in the coming
years.”
This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include statements relating to Collegiate
Pacific's anticipated financial performance, business prospects, new
developments and similar matters, and/or statements preceded by,
followed by or that include the words "believes," "could," "expects,"
"anticipates," "estimates," "intends," "plans," or similar expressions.
These forward-looking statements are based on management's current
expectations and assumptions, which are inherently subject to
uncertainties, risks and changes in circumstances that are difficult to
predict. Actual results may differ materially from those suggested by
the forward-looking statements due to a variety of factors, including
changes in business, political, and economic conditions due to the
threat of future terrorist activity or otherwise, the ability to
successfully complete integration related activities, actions and
initiatives by current and potential competitors, and certain other
additional factors described in Collegiate Pacific's filings with the
Securities and Exchange Commission. Other unknown or unpredictable
factors also could have material adverse effects on Collegiate Pacific's
future results, performance or achievements. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events
discussed in this press release may not occur. You are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date stated, or if no date is stated, as of the date of
this press release. Collegiate Pacific is not under any obligation and
does not intend to make publicly available any update or other revisions
to any of the forward-looking statements contained in this press release
to reflect circumstances existing after the date of this press release
or to reflect the occurrence of future events even if experience or
future events make it clear that any expected results expressed or
implied by those forward-looking statements will not be realized.
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
March 31, 2007
June 30,
2006
ASSETS
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents
$ 3,185
$ 4,079
Accounts receivable, net of allowance for doubtful accounts of
$2,035 and $1,496 respectively
37,029
31,004
Inventories
35,591
37,185
Current portion of deferred taxes
2,957
2,625
Prepaid income taxes
1,627
1,607
Prepaid expenses and other current assets
2,538
2,199
Total current assets
82,927
78,699
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $4,357
and $2,755, respectively
9,784
10,087
DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of
$1,781 and $1,076, respectively
2,563
2,782
INTANGIBLE ASSETS, net of accumulated amortization of $3,110 and
$2,188, respectively
8,293
9,014
GOODWILL
54,567
40,280
DEFERRED INCOME TAXES
2,655
3,156
OTHER ASSETS, net
152
417
Total assets
$ 160,941
$ 144,435
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$ 14,469
$ 14,802
Accrued liabilities
6,275
5,896
Dividends payable
256
256
Accrued interest
1,055
329
Current portion of long-term debt
3,368
2,210
Deferred tax liability
41
15
Total current liabilities
25,464
23,508
DEFERRED TAX LIABILITY
3,077
3,259
NOTES PAYABLE AND OTHER LONG-TERM DEBT
81,735
62,284
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARY
--
8,150
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;
10,319,586 and 10,315,191 shares issued and 10,233,560 and
10,229,165 shares outstanding, respectively
103
103
Additional paid-in capital
43,199
43,162
Retained earnings
8,020
4,626
Treasury stock at cost, 86,026 shares
(657)
(657)
Total stockholders' equity
50,665
47,234
Total liabilities and stockholders' equity
$ 160,941
$ 144,435
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended
Nine Months Ended
March 31,
March 31,
2007
2006
2007
2006
Net sales
$ 63,235
$ 59,418
$ 180,782
$ 171,094
Cost of sales
40,404
38,421
116,513
113,640
Gross profit
22,831
20,997
64,269
57,454
Selling, general and administrative expenses
18,421
17,253
52,474
49,181
Operating profit
4,410
3,744
11,795
8,273
Other income (expense):
Interest income
28
25
142
99
Interest expense
(1,707)
(1,261)
(4,424)
(3,379)
Other income
17
155
109
244
Total other expense
(1,662)
(1,081)
(4,173)
(3,036)
Income before minority interest in income of consolidated
subsidiary and income taxes
2,748
2,663
7,622
5,237
Income tax provision
1,010
787
2,929
1,813
Minority interest in income of consolidated subsidiary, net of tax
0
644
531
588
Net income
$ 1,738
$ 1,232
$ 4,162
$ 2,836
Weighted average number of shares outstanding:
Basic
10,233,560
10,183,973
10,231,051
10,174,843
Diluted
13,774,358
10,359,528
10,375,469
10,389,740
Net income per share common stock – basic
$ 0.17
$ 0.12
$ 0.41
$ 0.28
Net income per share common stock –
diluted
$ 0.17
$ 0.12
$ 0.40
$ 0.27
Dividends declared per share common stock
$ 0.025
$ 0.025
$0.075
$0.075