UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
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For the quarterly period ended March 31, 2008
OR
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o
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from
to
Commission File No. 1-15289
Sport Supply Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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22-2795073
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(State or Other Jurisdiction of
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(I.R.S. Employer Identification No.)
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Incorporation or Organization)
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1901 Diplomat Drive, Farmers Branch, Texas
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75234
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(Address of Principal Executive Offices)
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(Zip code)
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(972) 484-9484
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o
No
þ
As of April 28, 2008, there were 12,361,460 shares of the issuers common stock outstanding.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
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March 31,
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June 30,
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2008
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2007
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(Unaudited)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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13,045
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$
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5,670
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Accounts receivable, net of allowance for doubtful accounts of
$1,501 and $1,296, respectively
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40,131
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31,154
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Inventories
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32,303
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32,241
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Current portion of deferred income taxes
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3,605
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3,790
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Prepaid income taxes
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96
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3,208
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Prepaid expenses and other current assets
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2,381
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1,380
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Total current assets
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91,561
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77,443
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PROPERTY AND EQUIPMENT, net of accumulated depreciation of $6,910
and $4,986, respectively
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10,049
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10,678
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DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of
$2,754 and $2,035, respectively
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1,613
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2,309
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INTANGIBLE ASSETS, net of accumulated amortization of $4,177 and
$3,379, respectively
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7,226
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8,024
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GOODWILL
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54,949
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54,949
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DEFERRED INCOME TAXES
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3,045
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OTHER ASSETS, net
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113
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144
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Total assets
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$
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165,511
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$
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156,592
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LIABILITIES AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$
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20,861
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$
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16,167
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Accrued liabilities
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11,255
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10,318
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Dividends payable
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309
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259
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Accrued interest
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958
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291
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Current portion of long-term debt
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108
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3,608
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Deferred income tax liability
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129
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Total current liabilities
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33,491
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30,772
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DEFERRED INCOME TAX LIABILITY
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4,698
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3,898
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NOTES PAYABLE AND OTHER LONG-TERM DEBT
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50,092
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71,386
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS EQUITY:
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Preferred stock, $0.01 par value, 1,000,000 shares authorized;
no shares issued
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Common stock, $0.01 par value, 50,000,000 shares authorized;
12,465,386 and 10,440,586 shares issued and 12,361,460 and
10,354,560 shares outstanding, respectively
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125
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104
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Additional paid-in capital
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64,092
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44,276
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Retained earnings
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13,816
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6,813
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Treasury stock at cost, 103,926 and 86,026 shares, respectively
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(803
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(657
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Total stockholders equity
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77,230
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50,536
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Total liabilities and stockholders equity
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$
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165,511
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$
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156,592
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 1 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except share and per share amounts)
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Three Months Ended
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Nine Months Ended
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March 31,
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March 31,
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2008
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2007
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2008
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2007
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Net sales
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$
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65,821
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$
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63,235
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$
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190,284
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$
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180,782
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Cost of sales
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41,739
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40,404
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121,301
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116,513
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Gross profit
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24,082
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22,831
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68,983
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64,269
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Selling, general and administrative expenses
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17,750
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18,421
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53,328
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52,474
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Operating profit
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6,332
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4,410
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15,655
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11,795
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Other income (expense):
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Interest income
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45
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28
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202
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142
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Interest expense
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(974
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)
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(1,707
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)
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(3,154
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)
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(4,424
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)
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Other income
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42
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17
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77
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109
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Total other expense
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(887
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)
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(1,662
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)
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(2,875
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)
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(4,173
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Income before minority interest
in income of consolidated
subsidiary and income taxes
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5,445
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2,748
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12,780
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7,622
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Income tax provision
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2,069
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1,010
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4,856
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2,929
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Minority interest in income of consolidated
subsidiary, net of tax
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531
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Net income
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$
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3,376
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$
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1,738
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$
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7,924
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$
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4,162
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Weighted average number of shares outstanding:
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Basic
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12,296,813
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10,233,560
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12,043,082
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10,231,051
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Diluted
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15,842,816
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13,774,358
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15,578,514
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10,375,469
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Net income per common share basic
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$
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0.27
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$
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0.17
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$
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0.66
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$
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0.41
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Net income per common share diluted
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$
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0.25
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$
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0.17
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$
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0.61
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$
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0.40
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Dividends declared per common share
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$
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0.025
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$
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0.025
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$
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0.075
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$
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0.075
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The accompanying notes are an integral part of these condensed consolidated financial statements.
- 2 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended
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March 31,
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2008
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2007
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income
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$
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7,924
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$
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4,162
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Adjustments to reconcile net income to cash provided by operating activities:
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Provision for uncollectible accounts receivable
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714
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1,307
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Depreciation and amortization
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2,798
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2,553
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Amortization of deferred debt issuance costs
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719
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705
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Deferred taxes
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3,901
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1,952
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Stock-based compensation expense
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355
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Minority interest in consolidated subsidiary
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531
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Changes in operating assets and liabilities:
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Accounts receivable
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(9,691
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)
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(7,332
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)
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Inventories
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(62
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)
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1,594
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Prepaid income taxes
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3,112
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(20
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Prepaid expenses and other current assets
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(1,001
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)
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(339
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)
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Other assets, net
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31
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(321
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)
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Accounts payable
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4,694
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(333
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Accrued liabilities and accrued interest
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1,604
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1,105
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Net cash provided by operating activities:
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15,098
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5,564
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases of property and equipment
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(1,371
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)
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(1,429
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Cash used in business acquisitions
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(24,907
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)
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Net cash used in investing activities:
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(1,371
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)
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(26,336
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Deferred debt issuance cost
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(23
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)
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Proceeds from bank line of credit
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1,015
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34,024
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Payments on notes payable and line of credit
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(25,809
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)
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(13,415
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)
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Cash paid for treasury shares
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(145
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)
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Payment of dividends
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(871
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)
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|
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(768
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)
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Proceeds from issuance of common stock
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19,481
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|
37
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Net cash provided by (used in) financing activities:
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(6,352
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)
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19,878
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Net change in cash and cash equivalents
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|
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7,375
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|
|
|
(894
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)
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Cash and cash equivalents, beginning of year
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5,670
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|
|
|
4,079
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|
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Cash and cash equivalents, end of period
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$
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13,045
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$
|
3,185
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid for interest
|
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$
|
1,976
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$
|
2,963
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Cash paid (refunded) for income taxes
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$
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(1,532
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)
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$
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1,042
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
- 3 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements of Sport Supply Group,
Inc. and its subsidiaries (collectively, the
Company
) have been prepared in accordance
with accounting principles generally accepted in the United States of America (
US GAAP
)
for interim financial reporting. Accordingly, they do not include all of the information and
footnotes required by US GAAP for complete financial statements and should be read in conjunction
with the Companys annual report on Form 10-K for the fiscal year ended June 30, 2007. All
intercompany transactions and balances have been eliminated in consolidation. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments) considered necessary
for a fair presentation of the interim financial information have been included.
Operating results for interim periods are not necessarily indicative of results that may be
expected for the fiscal year ending June 30, 2008.
2. Recent Accounting Pronouncements:
In July 2006, the Financial Accounting Standards Board (
FASB
) issued Interpretation
No. 48,
Accounting for Uncertainty in Income Taxes
(
FIN 48
)
.
FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with the FASBs Statement of Financial Accounting Standards (
SFAS
) No. 109,
Accounting for Income Taxes
. FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return and also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. FIN 48 applies to all tax
positions for which the statute of limitations remains open and provides that only tax provisions
that meet the more-likely-than-not recognition threshold are recognized. The Company adopted the
provisions of FIN 48 on July 1, 2007. The Companys federal income tax returns for the year ended
June 30, 2004 and subsequent years remain subject to examination. The Companys income tax returns
in certain state income tax jurisdictions remain subject to examination for various periods for the
year ended June 30, 2003 and subsequent years. The Company has no reserves for uncertain tax
positions and no adjustments were required upon adoption of FIN 48. Interest and penalties
resulting from audits by tax authorities have been immaterial and are included in the provision for
income taxes in the consolidated statements of income.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(
SFAS 157
).
The provisions of SFAS 157 define fair value, establish a framework for measuring fair value in
generally accepted accounting principles, and expand disclosures about fair value measurements.
The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. The
Company does not believe the adoption of SFAS 157 will have a significant effect on its
consolidated financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities including an Amendment of FASB Statement No. 115
(
SFAS 159
). SFAS
159 permits entities to choose to measure many financial instruments and certain other items at
fair value. The provisions of SFAS 159 are effective for fiscal years beginning after November 15,
2007. The Company has not determined the effect, if any, the adoption of SFAS 159 will have on the
Companys consolidated financial position or results of operations.
- 4 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations
(
SFAS
141R
). SFAS 141R replaces SFAS No. 141,
Business Combinations
(
SFAS 141
). SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which
SFAS 141
called the purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R also establishes principles and requirements
for how the acquirer: a) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination or a gain from a bargain
purchase and c) determines what information to disclose to enable users of the financial statements
to evaluate the nature and financial effects of the business combination. SFAS 141R will apply
prospectively to business combinations for which the acquisition date is on or after the Companys
fiscal year beginning July 1, 2009. While the Company has not yet evaluated this statement for the
impact, if any, that SFAS 141R will have on its consolidated financial statements, the Company will
be required to expense costs related to any acquisitions after June 30, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated
Financial Statements
(
SFAS 160
). SFAS 160 amends Accounting Research Bulletin 51 to
establish accounting and reporting standards for the noncontrolling (minority) interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. SFAS 160 is effective for the Companys fiscal
year beginning July 1, 2009. The Company does not believe the adoption of SFAS 161 will have a
significant effect on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and
Hedging Activities
(
SFAS 161
). This standard is intended to improve financial reporting
by requiring transparency about the location and amounts of derivative instruments in an entitys
financial statements; how derivative instruments and related hedged items are accounted for under
SFAS No 133; and how derivative instruments and related hedged items affect its financial position,
financial performance and cash flows. The provisions of SFAS 161 are effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. The
Company does not believe the adoption of SFAS 161 will have a significant effect on its
consolidated financial position, results of operations or cash flows.
3. Business Combinations:
On November 13, 2006, the Company announced it had completed an acquisition of the remaining
26.8% of the capital stock of Sport Supply Group, Inc. (
Old SSG
) that it did not already
own for approximately $24.9 million (the
Merger Transaction
). Under the terms of the
Merger Transaction, a wholly-owned subsidiary of the Company was merged with and into Old SSG, with
Old SSG as the surviving corporation. Each issued and outstanding share of Old SSGs common stock
was converted into the right to receive $8.80 in cash.
The Company acquired Old SSG after considering the historic levels of earnings achieved by the
acquired company. The consideration paid was agreed upon after the Company determined the
potential impact on future earnings of the integrated companies.
The goodwill acquired by the Company in connection with the acquisition of Old SSG, which was
an acquisition of stock, is not deductible for income tax purposes. The pro forma operating results
of the Company as if the acquisition of 100% of Old SSG had occurred on July 1, 2006 are not
materially different for the periods presented than the actual results and, therefore, pro forma
results have been omitted.
- 5 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Net Sales:
The Companys net sales to external customers are attributable to sales of sporting goods
equipment and soft goods through the Companys catalog and team dealer divisions. The following
table details the Companys consolidated net sales by these divisions for the three and nine months
ended March 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Catalog
|
|
$
|
44,333
|
|
|
$
|
41,555
|
|
|
$
|
108,925
|
|
|
$
|
103,231
|
|
Team Dealer
|
|
|
21,488
|
|
|
|
21,680
|
|
|
|
81,359
|
|
|
|
77,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
65,821
|
|
|
$
|
63,235
|
|
|
$
|
190,284
|
|
|
$
|
180,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Inventories:
Inventories are carried at the lower of cost or market using the weighted-average cost method
for items purchased for resale and the average cost method for manufactured items.
Inventories at March 31, 2008 and June 30, 2007 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Raw materials
|
|
$
|
2,225
|
|
|
$
|
1,784
|
|
Work in progress
|
|
|
115
|
|
|
|
114
|
|
Finished goods
|
|
|
29,963
|
|
|
|
30,343
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
32,303
|
|
|
$
|
32,241
|
|
|
|
|
|
|
|
|
6. Allowance for Doubtful Accounts:
Changes in the Companys allowance for doubtful accounts for the nine months ended March 31,
2008 and the fiscal year ended June 30, 2007, are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
1,296
|
|
|
$
|
1,496
|
|
Provision for uncollectible accounts receivable
|
|
|
714
|
|
|
|
1,099
|
|
Accounts written off, net of recoveries
|
|
|
(509
|
)
|
|
|
(1,299
|
)
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,501
|
|
|
$
|
1,296
|
|
|
|
|
|
|
|
|
- 6 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Income Per Share:
The table below outlines the determination of the number of diluted shares of common stock
used in the calculation of diluted earnings per share as well as the calculation of diluted
earnings per share for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Determination of diluted number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
12,296,813
|
|
|
|
10,233,560
|
|
|
|
12,043,082
|
|
|
|
10,231,051
|
|
Assumed exercise of dilutive stock options
|
|
|
133,034
|
|
|
|
127,829
|
|
|
|
122,463
|
|
|
|
144,418
|
|
Assumed conversion of subordinated
Debentures
|
|
|
3,412,969
|
|
|
|
3,412,969
|
|
|
|
3,412,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding
|
|
|
15,842,816
|
|
|
|
13,774,358
|
|
|
|
15,578,514
|
|
|
|
10,375,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,376
|
|
|
$
|
1,738
|
|
|
$
|
7,924
|
|
|
$
|
4,162
|
|
Add: interest component on assumed
conversion of subordinated debentures,
net of taxes
|
|
|
552
|
|
|
|
552
|
|
|
|
1,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, adjusted
|
|
$
|
3,928
|
|
|
$
|
2,290
|
|
|
$
|
9,579
|
|
|
$
|
4,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.61
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2008 and 2007, stock options to purchase 688,300 and
653,100 shares, respectively, and for the nine months ended March 31, 2008 and 2007, stock options
to purchase 535,333 and 448,700 shares, respectively, were excluded in the computations of diluted
income per share because their effect was anti-dilutive. $50 million in convertible senior
subordinated notes were issued in November 2004. During the nine months ended March 31, 2007, the
assumed conversion of 3,412,969 shares from the convertible senior subordinated notes was
anti-dilutive. During the three months ended March 31, 2008 and 2007 and the nine months ended
March 31, 2008 the assumed conversion of 3,412,969 shares from the convertible senior subordinated
notes was dilutive and is included in the calculation above. On July 30, 2007, the Company
privately sold 1,830,000 shares of its common stock for $18.3 million to CBT Holdings, LLC. These
shares are included in the total average common shares outstanding since July 30, 2007.
- 7 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Intangible Assets:
Intangible assets at March 31, 2008 and June 30, 2007, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
June 30, 2007
|
|
|
|
Asset
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
|
Net
|
|
|
|
Life
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
(Years)
|
|
|
Value
|
|
|
Amortization
|
|
|
Value
|
|
|
Value
|
|
|
Amortization
|
|
|
Value
|
|
|
|
(In thousands)
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
10-15
|
|
|
$
|
343
|
|
|
$
|
216
|
|
|
$
|
127
|
|
|
$
|
343
|
|
|
$
|
199
|
|
|
$
|
144
|
|
Non-compete agreements
|
|
|
10
|
|
|
|
3,200
|
|
|
|
880
|
|
|
|
2,320
|
|
|
|
3,200
|
|
|
|
640
|
|
|
|
2,560
|
|
Customer relationships
|
|
|
10
|
|
|
|
3,343
|
|
|
|
1,478
|
|
|
|
1,865
|
|
|
|
3,343
|
|
|
|
1,200
|
|
|
|
2,143
|
|
Contractual backlog
|
|
|
.25-.50
|
|
|
|
427
|
|
|
|
427
|
|
|
|
|
|
|
|
427
|
|
|
|
427
|
|
|
|
|
|
Customer database
|
|
|
3
|
|
|
|
660
|
|
|
|
605
|
|
|
|
55
|
|
|
|
660
|
|
|
|
440
|
|
|
|
220
|
|
Significant contracts
|
|
|
5
|
|
|
|
327
|
|
|
|
180
|
|
|
|
147
|
|
|
|
327
|
|
|
|
130
|
|
|
|
197
|
|
License agreements and other
|
|
|
3-10
|
|
|
|
493
|
|
|
|
391
|
|
|
|
102
|
|
|
|
493
|
|
|
|
343
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizable intangible
assets
|
|
|
|
|
$
|
8,793
|
|
|
$
|
4,177
|
|
|
$
|
4,616
|
|
|
$
|
8,793
|
|
|
$
|
3,379
|
|
|
$
|
5,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-amortizable intangible
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
$
|
2,610
|
|
|
|
|
|
|
$
|
2,610
|
|
|
$
|
2,610
|
|
|
|
|
|
|
$
|
2,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-amortizable
intangible assets
|
|
|
|
|
$
|
2,610
|
|
|
|
|
|
|
$
|
2,610
|
|
|
$
|
2,610
|
|
|
|
|
|
|
$
|
2,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
|
|
|
$
|
11,403
|
|
|
$
|
4,177
|
|
|
$
|
7,226
|
|
|
$
|
11,403
|
|
|
$
|
3,379
|
|
|
$
|
8,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill June 30, 2007
|
|
|
|
|
|
$
|
54,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill March 31, 2008
|
|
|
|
|
|
$
|
54,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 8 -
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Stockholders Equity:
Changes in stockholders equity during the nine months ended March 31, 2008, were as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Stockholders equity at June 30, 2007
|
|
$
|
50,536
|
|
Issuance of stock for cash
|
|
|
19,482
|
|
Treasury stock purchases
|
|
|
(145
|
)
|
Stock-based compensation
|
|
|
355
|
|
Net income
|
|
|
7,924
|
|
Dividends declared
|
|
|
(922
|
)
|
|
|
|
|
|
Stockholders equity at March 31, 2008
|
|
$
|
77,230
|
|
|
|
|
|
10. Legal proceedings:
On December 19, 2007, Jeffrey S. Abraham, as Trustee of the Law Offices of Jeffrey S. Abraham
Money Purchase Plan, dated December 31, 1999, f/b/o Jeffrey S. Abraham, voluntarily dismissed with
prejudice, the complaint filed on September 21, 2006, in the Court of Chancery of the State of
Delaware in and for New Castle County, C.A. No. 2435-VCS against Sport Supply Group, Inc. fka
Collegiate Pacific, Old SSG and certain of their respective officers and directors.
The Company is a party to various other litigation matters, in most cases involving ordinary
and routine claims incidental to the Companys business. The Company cannot estimate with
certainty its ultimate legal and financial liability with respect to such pending litigation
matters. However, the Company believes, based on its examination of such matters, that its
ultimate liability will not have a material adverse effect on its financial position, results of
operations or cash flows.
11. Sales tax:
During fiscal 2007, the Company undertook a nexus study to determine if the Companys
acquisition activity over the last several years had an effect on the Companys nexus regarding the
collection and remittance of sales taxes in various states. The result of the study revealed the
Company may have nexus for states in which certain entities had not previously collected or
remitted sales tax. As a result, the Company recorded an increase in accrued liabilities of $1.9
million during fiscal 2007. The Company continues to analyze possible sales tax exposure and
records adjustments as needed. No material adjustments have been recorded in fiscal 2008. The
Company has addressed the issue by implementing new sales tax software which will allow the Company
to charge sales taxes to all applicable customers, taking steps to ensure customers have applicable
sales tax exemption certificates on file with the Company, and by consulting with outside firms to
identify potential exposure and comply with respective state laws related to sales taxes.
- 9 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Certain statements in Managements Discussion and Analysis of Financial Condition and Results
of Operations are forward-looking as defined in the Private Securities Litigation Reform Act of
1995. These statements are based on current expectations that are subject to risks and
uncertainties, including those discussed under the heading Risk Factors in our annual report on
Form 10-K for the fiscal year ended June 30, 2007 and elsewhere in this quarterly report. As such,
actual results may differ materially from expectations as of the date of this filing.
Sport Supply Group, Inc. (
Sport Supply Group
,
we
,
us
,
our
, or the
Company)
is a marketer, manufacturer and distributor of sporting
goods equipment, physical education, recreational and leisure products and a marketer and
distributor of soft goods, primarily to the institutional market in the United States. The
institutional market generally consists of youth sports programs, YMCAs, YWCAs, park and
recreational organizations, schools, colleges, churches, government agencies, athletic teams,
athletic clubs and dealers. We sell our products directly to our customers primarily through the
distribution of our unique, informative catalogs and fliers, our strategically located road sales
professionals, our telemarketers, various sales events and the Internet. We offer a broad line of
sporting goods and equipment, soft goods and other recreational products, as well as provide
after-sale customer service. We currently market approximately 22 thousand sports related
equipment products, soft goods and recreational related equipment and products to institutional,
retail, Internet, sports teams and other team dealer customers. We market our products through the
support of a customer database of over 400 thousand potential customers, our approximately 190
person direct sales force strategically located throughout the Mid-Western and Mid-Atlantic United
States, and our call centers located at our headquarters in Farmers Branch, Texas, Corona,
California in the Los Angeles basin, and Richmond, Virginia. Our fiscal year ends on June 30 of
each year. Accordingly, references in this report to fiscal 2006, fiscal 2007, and fiscal
2008 refer to our fiscal years ended or ending, as the case may be, June 30, 2006, 2007 and 2008,
respectively.
Critical Accounting Policies
Sport Supply Groups discussion and analysis of its financial condition and results of
operations is based upon the Companys consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of
contingent assets and liabilities.
Discussed below are several significant accounting policies that require the use of judgment
and estimates that may materially affect the consolidated financial statements. The estimates
described below are reviewed from time to time and are subject to change if the circumstances so
indicate. The effect of any such change is reflected in results of operations for the period in
which the change is made.
Inventories.
Inventories are valued at the lower of cost or market. Cost is determined using
the average cost method for items manufactured by us and the weighted-average cost method for items
purchased for resale. We record adjustments to our inventories for estimated obsolescence or
diminution in market value equal to the difference between the cost of inventory and the estimated
market value, based on market conditions from time to time. These adjustments are estimates, which
could vary significantly, either favorably or unfavorably, from actual experience if future
economic conditions, levels of customer demand or competitive conditions differ from expectations.
Because valuing our inventories at the lower of cost or market requires significant management
judgment, we believe the
accounting estimate related to our inventories is a critical accounting estimate.
Management of the Company has discussed this critical accounting estimate with the audit committee
of our Board of Directors, and the audit committee has reviewed the Companys disclosure relating
to this estimate in this quarterly report on Form 10-Q.
- 10 -
Allowance for Doubtful Accounts.
We evaluate the collectibility of accounts receivable based
on a combination of factors. In circumstances where there is knowledge of a specific customers
inability to meet its financial obligations, a specific allowance is provided to reduce the net
receivable to the amount that is reasonably believed to be collectable. For all other customers,
allowances are established based on historical bad debts, customer payment patterns and current
economic conditions. The establishment of these allowances requires the use of judgment and
assumptions regarding the potential for losses on receivable balances. If the financial condition
of our customers deteriorates, resulting in an impairment of their ability to make payments,
additional allowances may be required resulting in an additional charge to expenses when made.
Because estimating our uncollectible accounts requires significant management judgment, we believe
the accounting estimate related to our allowance for doubtful accounts is a critical accounting
estimate. Management of the Company has discussed this critical accounting estimate with the
audit committee of our Board of Directors, and the audit committee has reviewed the Companys
disclosure relating to this estimate in this quarterly report on Form 10-Q.
At March 31, 2008, our total allowance for doubtful accounts increased to approximately $1.5
million, compared to $1.3 million as of June 30, 2007. The increase is mainly due to the Companys
increase in sales volume. Accounts receivable days sales outstanding calculated on a twelve month
average is 56 days at March 31, 2008 and was 54 days at June 30, 2007. On an ongoing basis,
management continues to assess the quality of accounts receivable. See Note 6 in Notes to
Condensed Consolidated Financial Statements.
Goodwill, Intangibles and Long-lived Assets.
We assess the recoverability of the carrying
value of goodwill, intangibles and long-lived assets periodically. If circumstances suggest that
long-lived assets may be impaired, and a review indicates the carrying value will not be
recoverable, the carrying value is reduced to its estimated fair value. As of March 31, 2008, the
balance sheet includes approximately $62.2 million of goodwill and intangible assets, net, $10.0
million of fixed assets, net, and $1.6 million of deferred debt issuance costs, net. The Company
has concluded that no impairment exists. Because estimating the recoverability of the carrying
value of long-lived assets requires significant management judgment and our use of different
estimates that we reasonably could have used would have an impact on our reported net long-lived
assets, we believe the accounting estimates related to our impairment testing are critical
accounting estimates. Management of the Company has discussed this critical accounting estimate
with the audit committee of our Board of Directors, and the audit committee has reviewed the
Companys disclosure relating to this estimate in this quarterly report on Form 10-Q.
- 11 -
Consolidated Results of Operations
The following table compares selected financial data from the Condensed Consolidated
Statements of Income for the three and nine months ended March 31, 2008 and 2007 (dollars in
thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
For the Nine Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
Dollars
|
|
|
Percent
|
|
|
Net sales
|
|
$
|
65,821
|
|
|
|
100.0
|
%
|
|
$
|
63,235
|
|
|
|
100.0
|
%
|
|
$
|
190,284
|
|
|
|
100.0
|
%
|
|
$
|
180,782
|
|
|
|
100.0
|
%
|
Gross profit
|
|
|
24,082
|
|
|
|
36.6
|
%
|
|
|
22,831
|
|
|
|
36.1
|
%
|
|
|
68,983
|
|
|
|
36.3
|
%
|
|
|
64,269
|
|
|
|
35.6
|
%
|
Selling, general
and administrative
expenses
|
|
|
17,750
|
|
|
|
27.0
|
%
|
|
|
18,421
|
|
|
|
29.1
|
%
|
|
|
53,328
|
|
|
|
28.0
|
%
|
|
|
52,474
|
|
|
|
29.0
|
%
|
Operating profit
|
|
|
6,332
|
|
|
|
9.6
|
%
|
|
|
4,410
|
|
|
|
7.0
|
%
|
|
|
15,655
|
|
|
|
8.2
|
%
|
|
|
11,795
|
|
|
|
6.5
|
%
|
Net income
|
|
|
3,376
|
|
|
|
5.1
|
%
|
|
|
1,738
|
|
|
|
2.7
|
%
|
|
|
7,924
|
|
|
|
4.2
|
%
|
|
|
4,162
|
|
|
|
2.3
|
%
|
Net income per
share basic
|
|
$
|
0.27
|
|
|
|
|
|
|
$
|
0.17
|
|
|
|
|
|
|
$
|
0.66
|
|
|
|
|
|
|
$
|
0.41
|
|
|
|
|
|
Net income per
share diluted
|
|
$
|
0.25
|
|
|
|
|
|
|
$
|
0.17
|
|
|
|
|
|
|
$
|
0.61
|
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|
|
Acquisitions Since July 1, 2006 and Related Developments
On November 13, 2006, the Company announced it had completed an acquisition of the remaining
26.8% of the capital stock of Sport Supply Group, Inc. (
Old SSG
) that it did not already
own for approximately $24.9 million (the
Merger Transaction
). Under the terms of the
Merger Transaction, a wholly-owned subsidiary of the Company was merged with and into Old SSG, with
Old SSG as the surviving corporation. Each issued and outstanding share of Old SSGs common stock
was converted into the right to receive $8.80 in cash.
The Company acquired Old SSG after considering the historic levels of earnings achieved by the
acquired company. The consideration paid was agreed upon after the Company determined the
potential impact on future earnings of the integrated companies.
The goodwill acquired by the Company in connection with the acquisition of Old SSG, which was
an acquisition of stock, is not deductible for income tax purposes. The pro forma operating results
of the Company as if the acquisition of 100% of Old SSG had occurred on July 1, 2006 are not
materially different for the periods presented than the actual results and, therefore, pro forma
results have been omitted.
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Net Sales.
Net sales for the fiscal quarter ended March 31, 2008 totaled $65.8 million
compared to $63.2 million for the fiscal quarter ended March 31, 2007, an increase of $2.6 million,
or 4.1%. The increase in net sales was primarily attributable to a $2.8 million increase in
catalog group sales.
- 12 -
Historically, sales of our sporting goods have experienced seasonal fluctuations. This
seasonality causes our financial results to vary from quarter to quarter, which usually results in
lower net sales and
operating profit in the second quarter of our fiscal year (October through December) and
higher net sales and operating profit in the remaining quarters of our fiscal year. We attribute
this seasonality primarily to the budgeting procedures of our customers and the seasonal demand for
our products, which have historically been driven by spring and summer sports. Generally, between
the months of October and December of each fiscal year, there is a lower level of sports activities
at our non-retail institutional customer base, a higher degree of adverse weather conditions and a
greater number of school recesses and major holidays. We believe the operations of our team
dealers, which have a greater focus on fall and winter sports, have reduced the seasonality of our
financial results. We have also somewhat mitigated this sales reduction during the December
quarter by marketing our products through the websites of large retailers. Retail customers order
the products from the retailers websites and we ship the products to the retailers customers.
Gross Profit.
Gross profit for the fiscal quarter ended March 31, 2008 increased $1.3 million
to $24.1 million, or 36.6% of net sales, compared with $22.8 million, or 36.1% of net sales for the
fiscal quarter ended March 31, 2007. The $1.3 million increase in gross profit is primarily due to
a combination of a $2.8 million increase in sales volume by our catalog group, a shift toward a
more profitable product mix by our road sales professionals toward the Companys proprietary
product, a 110 basis point improvement in our team dealer gross profit percentage, improvements in
manufacturing efficiencies and a $324 thousand increase in freight collected.
The acquisition and manufacturing costs of inventory, the cost of shipping and handling
(freight costs) and any decrease in the value of inventory due to obsolescence or lower of cost or
market adjustments are included in the determination of cost of sales. Cost of sales for the
fiscal quarter ended March 31, 2008 was $41.7 million, or 63.4% of net sales, compared to $40.4
million, or 63.9% of net sales for the fiscal quarter ended March 31, 2007. Cost of sales for the
fiscal quarter ended March 31, 2008 consisted of $35.7 million for the purchase price of our
inventory sold, $4.9 million in outbound freight costs, $242 thousand for the write-off of obsolete
or damaged inventory and $892 thousand for labor and overhead costs associated with the products we
manufacture.
Selling, General and Administrative Expense.
Selling, general and administrative
(
SG&A
) expenses for the fiscal quarter ended March 31, 2008 were $17.8 million, or 27.0%
of net sales, compared with $18.4 million, or 29.1% of net sales for the fiscal quarter ended March
31, 2007. During the fiscal quarter ended March 31, 2008, SG&A expenses primarily consisted of the
following:
|
|
|
personnel related expenses (including group insurance) of approximately $10.4
million;
|
|
|
|
|
advertising and catalog production expenses of approximately $1.6 million;
|
|
|
|
|
depreciation and amortization of approximately $907 thousand;
|
|
|
|
|
computer services and supplies of approximately $698 thousand;
|
|
|
|
|
rent expense of approximately $588 thousand;
|
|
|
|
|
travel expenses of approximately $509 thousand;
|
|
|
|
|
outside professional services expenses of approximately $347 thousand; and
|
|
|
|
|
bank charges and credit card fees of approximately $305 thousand.
|
The $671 thousand decrease in SG&A expenses we experienced during the fiscal quarter ended
March 31, 2008 compared to the fiscal quarter ended March 31, 2007 was primarily attributable to a
decrease in advertising and catalog production expenses of $602 thousand, a decrease in
business and other miscellaneous taxes of $315 thousand, a decrease in rent expense of $118
thousand, and a decrease in legal expenses of $104 thousand. These and other reductions were
partially offset by an increase of $782 thousand in personnel related expenses, including variable
commission costs.
- 13 -
Operating Profit.
Operating profit for the fiscal quarter ended March 31, 2008 increased to
$6.3 million, or 9.6% of net sales, compared to operating profit of $4.4 million, or 7.0% of net
sales for the fiscal quarter ended March 31, 2007. The increase in operating profit was primarily
attributable to the increase in net sales and gross profit along with the reduction in SG&A
expenses during the period.
Interest Expense.
Interest expense for the fiscal quarter ended March 31, 2008 decreased to
$974 thousand, compared to $1.7 million for the fiscal quarter ended March 31, 2007. The $733
thousand decrease in interest expense is attributable to a reduction in borrowings under the
Companys revolving credit facility. The Company had no borrowings outstanding under the Companys
revolving credit facility during the quarter ended March 31, 2008.
Income Taxes.
Income tax expense for the fiscal quarter ended March 31, 2008 was $2.1
million, which is approximately 38.0% of our income before income taxes, compared to income tax
expense of $1.0 million, which was approximately 36.8% of our income before income taxes for the
fiscal quarter ended March 31, 2007. The increase in income tax expense was primarily attributable
to the increase in operating profits before tax during the quarter ended March 31, 2008 compared to
the operating profits before tax for the prior comparable period. The lower tax rate for the
fiscal quarter ended March 31, 2007 was attributable to an adjustment in the state income tax rate
realized during the period.
Net Income.
Net income for the fiscal quarter ended March 31, 2008 increased to $3.4 million,
or 5.1% of net sales, compared to net income of $1.7 million, or 2.7% of net sales for the fiscal
quarter ended March 31, 2007.
Nine Months Ended March 31, 2008 Compared to Nine Months Ended March 31, 2007
Net Sales.
Net sales for the nine months ended March 31, 2008 totaled $190.3 million compared
to $180.8 million for the nine months ended March 31, 2007, an increase of $9.5 million, or 5.3%.
The increase in net sales was primarily attributable to a $5.7 million increase in catalog group
sales and a $3.8 million increase in sales from the Companys team dealer group through its road
sales force.
Gross Profit.
Gross profit for the nine months ended March 31, 2008 increased $4.7 million to
$69.0 million, or 36.3% of net sales, compared with $64.3 million, or 35.6% of net sales for the
nine months ended March 31, 2007. The $4.7 million increase in gross profit is primarily due to a
combination of an increase in sales volume from our both our catalog and team dealer groups, a
shift toward a more profitable product mix by our road sales professionals toward the Companys
proprietary product, improvements in manufacturing efficiencies and a 70 basis point improvement in
overall gross profit percentage.
The acquisition and manufacturing costs of inventory, the cost of shipping and handling
(freight costs) and any decrease in the value of inventory due to obsolescence or lower of cost or
market adjustments are included in the determination of cost of sales. Cost of sales for the nine
months ended March 31, 2008 was $121.3 million, or 63.7% of net sales, compared to $116.5 million,
or 64.4% of net sales for the nine months ended March 31, 2007. Cost of sales for the nine months
ended March 31, 2008 consisted of $104.4 million for the purchase price of our inventory sold,
$13.5 million in outbound freight costs, $861 thousand for the write-off of obsolete or damaged
inventory and $2.5 million for labor and overhead costs associated with the products we
manufacture.
- 14 -
Selling, General and Administrative Expense.
SG&A expenses for the nine months ended March
31, 2008 were $53.3 million, or 28.0% of net sales, compared with $52.5 million, or 29.0% of net
sales for the nine months ended March 31, 2007. During the nine months ended March 31, 2008, SG&A
expenses primarily consisted of the following:
|
|
|
personnel related expenses (including group insurance) of approximately $30.9
million;
|
|
|
|
|
advertising and catalog production expenses of approximately $4.7 million;
|
|
|
|
|
depreciation and amortization of approximately $2.7 million;
|
|
|
|
|
rent expense of approximately $2.0 million;
|
|
|
|
|
computer services and supplies of approximately $1.8 million;
|
|
|
|
|
travel expenses of approximately $1.5 million;
|
|
|
|
|
legal and accounting fees of approximately $1.2 million;
|
|
|
|
|
outside professional services expenses of approximately $963 thousand;
|
|
|
|
|
bank charges of approximately $871 thousand;
|
|
|
|
|
general insurance related expenses of approximately $813 thousand; and
|
|
|
|
|
bad debt expenses of approximately $714 thousand.
|
The $854 thousand increase in SG&A expenses we experienced during the nine months ended March
31, 2008 compared to the nine months ended March 31, 2007 was primarily attributable to an increase
in personnel related expenses, including variable commission costs, of $2.4 million to support
sales growth, partially offset by a decrease of $592 thousand in bad debt expense and a decrease of
$592 thousand in advertising and catalog production expenses.
Operating Profit.
Operating profit for the nine months ended March 31, 2008 increased to
$15.7 million, or 8.2% of net sales, compared to operating profit of $11.8 million, or 6.5% of net
sales for the nine months ended March 31, 2007. The increase in operating profit was primarily
attributable to the increase in net sales and gross profit, which was partially offset by the
increase in SG&A expenses during the period.
Interest Expense.
Interest expense for the nine months ended March 31, 2008 decreased to $3.2
million, compared to $4.4 million for the nine months ended March 31, 2007. The $1.2 million
decrease in interest expense is attributable to a reduction in borrowings under the Companys
revolving credit facility. The Company had no borrowings outstanding under the Companys revolving
credit facility at March 31, 2008.
Minority Interest
. Minority interest of $531 thousand for the nine months ended March 31,
2007 reflects income attributable to the prior minority ownership in Old SSG.
Income Taxes.
Income tax expense for the nine months ended March 31, 2008 was $4.9 million,
which is approximately 38.0% of our income before income taxes, compared to income tax expense of
$2.9 million, which was approximately 38.4% of our income before income taxes for the nine months
ended March 31, 2007. The increase in income tax expense is primarily attributable to the increase
in operating profits before
tax during the period.
Net Income.
Net income for the nine months ended March 31, 2008 increased to $7.9 million, or
4.2% of net sales, compared to net income of $4.2 million, or 2.3% of net sales for the nine months
ended March 31, 2007.
- 15 -
Liquidity and Capital Resources
Liquidity
The increase in cash and cash equivalents for the nine months ended March 31, 2008, compared
to June 30, 2007, was primarily attributable to improved operating results and net income over the
prior comparable period and to the Company entering into a purchase agreement (the
Purchase
Agreement
) with CBT Holdings, LLC (the
Purchaser
) on July 26, 2007 whereby the
Company privately sold 1,830,000 shares (the
Shares
) of its common stock for $18.3
million. The transaction was consummated on July 30, 2007. The Company used the proceeds from the
private placement for the prepayment of outstanding indebtedness under the Senior Credit Facility,
which is discussed below, and the payment of out-of-pocket costs and expenses of approximately $247
thousand incurred in connection with the private placement.
Operating Activities.
Net cash flows from operating activities during the nine months ended
March 31, 2008 provided approximately $15.1 million in cash compared to approximately $5.6 million
of cash during the nine months ended March 31, 2007. The cash flows from operating activities
during the nine months ended March 31, 2008 resulted primarily from net income, which represents
our principal source of cash flows.
Increases in operating cash flows during the nine months ended March 31, 2008 compared to
operating cash flows during the nine months ended March 31, 2007, were attributable to:
|
|
|
an increase in accounts payable of $4.7 million during the nine months ended March
31, 2008, compared to a $333 thousand decrease in accounts payable during the nine
months ended March 31, 2007, which is attributable to improved management of the
Companys financial resources;
|
|
|
|
|
a decrease in prepaid income taxes of $3.1 million during the nine months ended
March 31, 2008, compared to a $20 thousand increase in prepaid income taxes during
the nine months ended March 31, 2007, which is primarily attributable to $1.5 million
in taxes refunded; and
|
|
|
|
|
a decrease in deferred taxes of $3.9 million during the nine months ended March
31, 2008, compared to a $2.0 million decrease in deferred taxes during the nine
months ended March 31, 2007, which is due primarily to the utilization of net
operating loss carryforwards.
|
Increases in operating cash flows were partially offset by an increase in accounts receivable
of $9.7 million during the nine months ended March 31, 2008, compared to a $7.3 million increase in
accounts receivable during the nine months ended March 31, 2007, and an increase in inventories of
$62 thousand during the nine months ended March 31, 2008, compared to a $1.6 million decrease in
inventories during the nine months ended March 31, 2007.
During the nine months ended March 31, 2008, we continued integrating the operations of Old
SSG with those of the Company. In that regard, the Company materially completed its efforts to
consolidate its Farmers Branch, Texas distribution, warehouse and assembly facilities. As a
by-product of
consolidating our Farmers Branch, Texas facilities, the Company was able to reduce the (i)
amount of square footage leased and (ii) the number of like SKUs we carry as well as outsource
several SKUs, which, as anticipated, reduced our inventory levels and corresponding carrying costs,
as well as improved inventory turns. Inventories at March 31, 2008 decreased to $32.3 million,
compared to inventories of $35.6 million, a 9.3% reduction, for the nine months ended March 31,
2007.
- 16 -
In addition, as we combine some of our catalog brands and divisions, we have reduced the
number of paper catalogs we distribute by as much as twenty-five percent and rely more heavily on
our telesales and road sales professionals to grow our net sales. We believe these integration
efforts will enhance our cash flows in future periods.
Investing Activities.
Net cash used in investing activities during the nine months ended
March 31, 2008, was $1.4 million, compared to $26.3 million of cash used in investing activities
during the nine months ended March 31, 2007. Purchases of property and equipment during the nine
months ended March 31, 2008 were $1.4 million. Property and equipment purchased during the nine
months ended March 31, 2008 consisted primarily of computer equipment and software. Although the
Company continued to incur expenditures related to the integration of the catalog operations to a
single IT platform during the nine months ended March 31, 2008, the Company substantially completed
the integration project on June 30, 2007. During the nine months ended March 31, 2007, the Company
used approximately $24.9 million to complete its acquisition of the 26.8% of the capital stock of
Old SSG that it did not already own
Financing Activities.
Net cash used in financing activities during the nine months ended
March 31, 2008, was $6.4 million, compared to net cash provided by financing activities of $19.9
million during the nine months ended March 31, 2007. The net decrease in cash used in financing
activities during the nine months ended March 31, 2008 was primarily due to payments on notes
payable and the Companys revolving line of credit and term loan of $25.8 million.
Decreases in cash used in financing activities were partially offset by proceeds from the
issuance of common stock of approximately $19.5 million.
Current assets as of March 31, 2008 were approximately $91.6 million and current liabilities
were approximately $33.5 million, thereby providing the Company with working capital of
approximately $58.1 million.
Capital Resources
During the fiscal quarter ended December 31, 2004, we sold $50.0 million principal amount of
5.75% Convertible Senior Subordinated Notes due 2009 (the
Notes
). The Notes were sold to
qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
The issuance of the Notes resulted in aggregate proceeds of $46.6 million to the Company, net of
issuance costs.
The Notes are governed by the Indenture dated as of November 26, 2004 between the Company and
The Bank of New York Trust Company N.A., as trustee (the
Indenture
). The Indenture
provides, among other things, that the Notes will bear interest of 5.75% per year, payable
semi-annually, and will be convertible at the option of the holder of the Notes into the Companys
common stock at a conversion rate of 68.2594 shares per $1 thousand principal amount of Notes,
subject to certain adjustments. This is equivalent to a conversion price of approximately $14.65
per share. The Company may redeem the Notes, in whole or in part, at the redemption price, which is
100% of the principal amount, plus accrued and unpaid interest and additional interest, if any, to,
but excluding, the redemption date only if the closing price of the Companys common stock exceeds
150% of the conversion price for at least 20 trading days
in any consecutive 30-day trading period. Upon the occurrence of a change in control of the
Company, holders may require the Company to purchase all or a portion of the Notes in cash at a
price equal to 100% of the principal amount of Notes to be repurchased, plus accrued and unpaid
interest and additional interest, if any, to, but excluding, the repurchase date, plus the make
whole premium, if applicable.
- 17 -
Under the terms of a Registration Rights Agreement the Company entered into with the holders
of the Notes, the Company was required to file a registration statement on Form S-3 with the
Securities and Exchange Commission (
SEC
) for the registration of the Notes and the shares
issuable upon conversion of the Notes (the
Registration Statement
). On February 28,
2006, the SEC declared the Registration Statement effective.
The Companys principal external source of liquidity is its amended and restated senior
secured credit facility (the
Amended Credit Agreement
) with Merrill Lynch Commercial
Finance Corp., formerly known as Merrill Lynch Business Financial Services, Inc. (
MLCFC
),
individually as a lender, as administrative agent, sole book runner and sole lead manager, which is
collateralized by all of the assets of the Company and its wholly-owned subsidiaries.
On October 30, 2007, the Company entered into the Amended Credit Agreement with MLCFC,
individually and as a lender, as administrative agent, sole book runner and sole lead manager, and
Bank of America, N.A., as a lender. The Amended Credit Agreement replaces the Companys prior
Amended and Restated Credit Agreement (the
Senior Credit Facility
), dated as of November
13, 2006, by and among the Company, MLCFC and the additional lenders from time to time parties
thereto. The Senior Credit Facility replaced the Companys June 29, 2006 Credit Agreement with
Merrill Lynch Capital, a division of MLCFC. The Amended Credit Agreement establishes a commitment
to provide the Company with a $25.0 million secured revolving credit facility through June 1, 2010
(the
Revolving Facility
) with an accordion feature that could potentially expand total
availability to $55.0 million.
On January 7, 2008, the Company entered into Amendment No. 1 To Amended and Restated Credit
Agreement (
Amendment No. 1
). Amendment No. 1 amended the Amended Credit Agreement to (i)
increase from $5 million to $10 million the allowed purchase, redemption, retirement, defeasance,
surrender, cancellation, termination or acquisition of any shares of the Companys common stock and
(ii) change the name of the lender from Merrill Lynch Business Financial Services, Inc. to Merrill
Lynch Commercial Finance Corp.
As of March 31, 2008, the Company had $0 outstanding under the Revolving Facility, thereby
leaving the Company with approximately $25 million of availability under the terms of the
Amended
Credit Agreement.
All borrowings under the Revolving Facility will bear interest at either (a) LIBOR (London
Interbank Offered Rate) plus a spread ranging from 0.75% to 1.75%, with the amount of the spread at
any time based on the Companys ratio of total debt, excluding subordinated debt, to the Companys
earnings before interest, taxes, depreciation and amortization (
EBITDA
) (the
Senior
Leverage Ratio
) on a trailing 12-month basis, or (b) an alternative base rate equal to the
MLCFC prime rate plus an additional spread ranging from -0.75% to 0.25%, with the amount of the
spread at any time based on the Companys Senior Leverage Ratio on a trailing 12-month basis.
The Revolving Facility includes covenants that require the Company to maintain certain
financial ratios. The Companys Senior Leverage Ratio on a trailing 12-month basis may not exceed
2.50 to 1.00 at any time and the Companys ratio of EBITDA to the sum of the Companys fixed
charges (interest expense, taxes, cash dividends and scheduled principal payments) on a trailing
12-month basis (the
Fixed Charge Coverage Ratio
) must be at least 1.15 to 1.00 at all times. The
Revolving Facility also limits the amount the Company can disburse for capital expenditures. At
March 31, 2008, the Company was in compliance with all of its financial covenants under the
Revolving Facility.
The Revolving Facility is guaranteed by each of the Companys subsidiaries and is secured by,
among other things, a pledge of all of the issued and outstanding shares of stock of each of the
Companys subsidiaries and a first priority perfected security interest on all of the assets of the
Company and each of its subsidiaries.
- 18 -
The Revolving Facility contains customary representations, warranties and covenants
(affirmative and negative) and the Revolving Facility is subject to customary rights of the lenders
and the administrative agent upon the occurrence and during the continuance of an event of default,
including, under certain circumstances, the right to accelerate payment of the loans made under the
Revolving Facility and the right to charge a default rate of interest on amounts outstanding under
the Revolving Facility.
On July 26, 2007, the Company entered into a purchase agreement (the
Purchase
Agreement
) with CBT Holdings, LLC (the
Purchaser
) whereby the Company privately sold
1,830,000 shares (the
Shares
) of its common stock for $18.3 million. The transaction was
consummated on July 30, 2007. The Company used the proceeds from the private placement for the
prepayment of outstanding indebtedness under the Senior Credit Facility and the payment of
out-of-pocket costs and expenses incurred in connection with the private placement.
Pursuant to the Purchase Agreement, the Company agreed to file a registration statement
on Form S-3, registering the Shares for resale, and would have been subject to certain penalties if
the registration statement was not declared effective within 270 days of July 30, 2007. The
registration statement was declared effective on October 18, 2007. Also pursuant to the Purchase
Agreement, the Company will be subject to certain penalties if the registration statement is
unavailable under certain conditions.
In addition, for so long as the Purchaser owns not less than 600,000 of the Shares, it
will have certain rights with respect to access to Company management, the ability to designate a
representative who is reasonably acceptable to the Company to attend in a non-voting, observer
capacity, the meetings of the Companys Board of Directors and its committees, and the ability to
require that the Companys Board of Directors nominate a designee chosen by the Purchaser and who
is otherwise reasonably acceptable to the Company and further recommend to the Companys
stockholders the election of such nominee to the Companys Board of Directors.
On July 26, 2004, the Company issued promissory notes to the former stockholders of Dixie
Sporting Goods Co., Inc. (
Dixie
) in the aggregate amount of $500 thousand. Payments of
principal are paid monthly and interest accrues at the rate of 4% per annum on any past due
principal amount of the notes. The notes mature on July 31, 2009. Principal payments made in the
fiscal quarter ended March 31, 2008 were $24.6 thousand and the remaining principal payments of
$164 thousand are due through the fiscal year ending June 30, 2010.
- 19 -
Long-Term Financial Obligations and Other Commercial Commitments
The following table summarizes the outstanding borrowings and long-term contractual
obligations of the Company at March 31, 2008, and the effects such obligations are expected to have
on liquidity and cash flows in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
|
|
After
|
|
Contractual Obligations
|
|
Total
|
|
|
1 year
|
|
|
1 - 3 years
|
|
|
3 - 5 years
|
|
|
5 years
|
|
|
|
(In thousands)
|
|
|
Long-term debt, including current portion
|
|
$
|
50,200
|
|
|
$
|
108
|
|
|
$
|
50,092
|
|
|
$
|
|
|
|
$
|
|
|
Operating leases
|
|
|
6,622
|
|
|
|
2,892
|
|
|
|
3,577
|
|
|
|
148
|
|
|
|
5
|
|
Interest expense on long-term debt
|
|
|
5,823
|
|
|
|
2,909
|
|
|
|
2,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
62,645
|
|
|
$
|
5,909
|
|
|
$
|
56,583
|
|
|
$
|
148
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt and Advances Under Credit Facilities.
As of March 31, 2008, we had outstanding
$50 million in Notes. We maintain the Amended Credit Agreement with MLCFC. Outstanding advances
under the Amended Credit Agreement totaled $0 as of March 31, 2008. Promissory notes to former
stockholders of Dixie and other long-term obligations were approximately $164 thousand.
We believe the Companys borrowings under the Revolving Facility, cash on hand and cash flows
from operations will satisfy its respective short-term and long-term liquidity requirements. The
maturity date on our Notes is November 2009. In the absence of these notes converting into shares
of the Companys common stock, it is our intent to pay off as much of the debt as possible with
cash flows from operations and refinance the remaining balance with additional bank debt or the
sale of debt or equity securities. There can be no assurance that a refinancing will be available
or that, if available, such refinancing will be available on acceptable terms.
The Company may experience periods of higher borrowings under the Amended Credit Agreement due
to the seasonal nature of its business cycle. If the Company was to actively seek expansion
through future acquisitions and/or joint ventures, then the success of such efforts may require
additional bank debt, or public or private sales of debt or equity securities.
Operating Leases.
We lease property and equipment, manufacturing and warehouse facilities,
and office space under non-cancellable leases. Certain of these leases obligate us to pay taxes,
maintenance and repair costs.
Off-Balance Sheet Arrangements.
We do not utilize off-balance sheet financing arrangements.
We do, however, finance the use of certain facilities, office and computer equipment, and
automobiles under various non-cancellable operating lease agreements. At March 31, 2008, the total
future minimum lease payments under various operating leases we are a party to totaled
approximately $6.6 million and, as indicated in the table above, are payable through fiscal 2013.
- 20 -
Statement Regarding Forward-Looking Disclosure
This quarterly report on
Form 10-Q
, including Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 2, contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if never materialized or are proven
incorrect, could cause the results of Sport Supply Group and its consolidated subsidiaries to
differ materially from those expressed or implied by such forward-looking statements. All
statements other than statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any projections of net sales, gross
profit margin, expenses, earnings or losses from operations, synergies or other financial items,
including statements regarding ability and manner of satisfying short-term and long-term liquidity
requirements; any statements of the plans, strategies and objectives of management for future
operations; any statements regarding future economic conditions or performance; any statements of
expectation or belief; and any statements of assumptions underlying any of the foregoing. The
risks, uncertainties and assumptions referred to above include Sport Supply Groups ability to
integrate acquired businesses, global economic conditions, product demand, financial market
performance and other risks that are described herein, as well as those items described from time
to time in Sport Supply Groups SEC reports, including Sport Supply Groups annual report on Form
10-K for the fiscal year ended June 30, 2007. Sport Supply Group cautions that the foregoing list
of important factors is not all encompassing. Any forward-looking statements included in this
report are made as of the date of filing of this report with the SEC, and we assume no obligation
and do not intend to update these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rates.
Sport Supply Group is exposed to interest rate risk in connection with its
borrowings under the Amended Credit Agreement, which bear interest at floating rates based on LIBOR
or the prime rate plus an applicable borrowing margin. For our $50 million of Notes, interest rate
changes affect the fair market value but do not impact earnings or cash flows. Conversely, for
variable rate debt, interest rate changes generally do not affect the fair market value but do
impact future earnings and cash flows, assuming other factors are held constant.
As of March 31, 2008, Sport Supply Group had $50 million in principal amount of fixed rate
debt represented by the Notes and $0 of variable rate debt represented by borrowings under the
Amended Credit Agreement. Based on the balance outstanding under the variable rate facilities as
of March 31, 2008, an immediate change of one percentage point in the applicable interest rate
would have caused an increase or decrease in interest expense of $0 on an annual basis. At March
31, 2008, up to $25 million of variable rate borrowings were available under the Revolving
Facility. We may use derivative financial instruments, where appropriate, to manage our interest
rate risks or risks of a declining U.S. dollar. However, as a matter of policy, Sport Supply Group
does not enter into derivative or other financial investments for trading or speculative purposes.
At March 31, 2008, Sport Supply Group had no such derivative financial instruments outstanding.
Foreign Currency and Derivatives.
We have not used derivative financial instruments to manage
foreign currency risk related to the procurement of merchandise inventories from foreign sources
and we did not earn income denominated in foreign currencies. We recognized all of our revenue and
pay all of our obligations in U.S. dollars. We may in the future invest in foreign currencies to
reduce the foreign currency risk related to procuring merchandise inventories from foreign sources.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
An evaluation was carried out under the
supervision and with the participation of the Companys management, including the Chief Executive
Officer (
CEO
) and Chief Financial Officer (
CFO
), of the effectiveness of the
Companys disclosure controls and procedures (as defined in §240.13a-15(e) or §240.15d-15(e) of the
General Rules and Regulations of the Securities Exchange Act of 1934, as amended (the
1934
Act
)) as of the end of the period covered by this quarterly report. Based on that evaluation,
management, including the CEO and CFO, has concluded that, as of March 31, 2008, the Companys
disclosure controls and procedures were
effective.
- 21 -
Changes in Internal Control Over Financial Reporting.
Sport Supply Groups management, with
the participation of Sport Supply Groups CEO and CFO, has evaluated whether any change in Sport
Supply Groups internal control over financial reporting occurred during the third quarter of
fiscal 2008. Based on its evaluation, management, including the CEO and CFO, has concluded that
there has been no change in Sport Supply Groups internal control over financial reporting during
the third quarter of fiscal 2008 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
- 22 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to various litigation matters, in most cases involving ordinary and
routine claims incidental to the Companys business. The Company cannot estimate with certainty
its ultimate legal and financial liability with respect to such pending litigation matters.
However, the Company believes, based on its examination of such matters, that its ultimate
liability will not have a material adverse effect on its financial position, results of operations
or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
Dollar Value of
|
|
|
|
Total
|
|
|
|
|
|
|
Part of Publicly
|
|
|
Shares that May
|
|
|
|
Number of
|
|
|
Average
|
|
|
Announced
|
|
|
yet be Purchased
|
|
|
|
Shares
|
|
|
Price Paid
|
|
|
Plans or
|
|
|
Under the Plans
|
|
|
|
Purchased
|
|
|
per Share
|
|
|
Programs (1)
|
|
|
or Programs (1)
|
|
|
January 1 through
January 31, 2008
|
|
|
17,900
|
|
|
$
|
8.12
|
|
|
|
17,900
|
|
|
$
|
9,854,676
|
|
(1)
|
|
As previously disclosed in the Companys report on Form 8-K filed with the SEC on January 7,
2008, on January 4, 2008, the Companys Board of Directors authorized the repurchase of up to
$10.0 million worth of the Companys common stock.
|
- 23 -
Item 6. Exhibits.
A.
|
|
Exhibits. The following exhibits are filed as part of this report:
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
|
3.1
|
|
Certificate of Incorporation of
the Registrant.
|
|
Exhibit 1 to the
Registrants Registration
Statement on Form 8-A
filed on September 9,
1999.
|
|
|
|
|
|
3.1.1
|
|
Certificate of Amendment to
Certificate of Incorporation of
Collegiate Pacific Inc.
|
|
Exhibit 3.10 to the
Registrants Registration
Statement on Form SB-2
(No. 333-34294) originally
filed on April 7, 2000.
|
|
|
|
|
|
3.1.2
|
|
Amendment to Certificate of
Incorporation of Collegiate
Pacific Inc.
|
|
Exhibit 3.1 to the
Registrants Current
Report on Form 8-K filed
on July 2, 2007.
|
|
|
|
|
|
3.2
|
|
By-Laws of the Registrant.
|
|
Exhibit 2 to the
Registrants Registration
Statement on Form 8-A
filed on September 9,
1999.
|
|
|
|
|
|
3.2.1
|
|
Amendment to the Bylaws of
Collegiate Pacific Inc.
|
|
Exhibit 3.1 to the
Registrants Current
Report on Form 8-K filed
on June 14, 2007.
|
|
|
|
|
|
3.2.2
|
|
Amendment to the Bylaws of
Collegiate Pacific Inc.
|
|
Exhibit 3.2 to the
Registrants Current
Report on Form 8-K filed
on July 2, 2007.
|
|
|
|
|
|
4.1
|
|
Specimen Certificate of Common
Stock, $0.01 par value, of Sport
Supply Group, Inc.
|
|
Exhibit 4.1 to the
Registrants Annual Report
on Form 10-K filed on
September 13, 2007.
|
|
|
|
|
|
4.2
|
|
Indenture, dated as of
November 26, 2004, by and
between Collegiate Pacific Inc.
and The Bank of New York Trust
Company N.A., as Trustee.
|
|
Exhibit 99.1 to the
Registrants Current
Report on Form 8-K filed
on November 29, 2004.
|
|
|
|
|
|
4.3
|
|
Form of 5.75% Convertible Senior
Subordinated Note Due 2009
(included in Section 2.2 of
Exhibit 4.2 to this report).
|
|
Exhibit 99.2 to the
Registrants Current
Report on Form 8-K filed
on November 29, 2004.
|
|
|
|
|
|
10.1
|
|
Amendment No. 1 to Amended and
Restated Credit Agreement, dated
January 7, 2008, by and between
Sport Supply Group, Inc. and
Merrill Lynch Commercial
Financing Corp.
|
|
Exhibit 10.1 to the
Registrants Current
Report on Form 8-K filed
on January 9, 2008.
|
- 24 -
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
|
31.1
|
|
Certification of Adam Blumenfeld
pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities
Exchange Act of 1934, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
|
|
31.2
|
|
Certification of John Pitts
pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities
Exchange Act of 1934, as adopted
pursuant to Section 302 of the
|
|
|
|
|
Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
|
|
32
|
|
Certification of Adam Blumenfeld
and John Pitts pursuant to 18
U.S.C. Section 1350 as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
*
|
|
Filed herewith
|
|
**
|
|
Furnished herewith
|
- 25 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereto duly authorized.
|
|
|
|
|
|
SPORT SUPPLY GROUP, INC.
|
|
Dated: April 30, 2008
|
/s/ Adam Blumenfeld
|
|
|
Adam Blumenfeld, Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
/s/ John Pitts
|
|
|
John Pitts, Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
|
|
- 26 -
EXHIBIT INDEX
The following exhibits are filed as part of this report:
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
|
3.1
|
|
Certificate of Incorporation
of the Registrant.
|
|
Exhibit 1 to the
Registrants
Registration Statement
on Form 8-A filed on
September 9, 1999.
|
|
|
|
|
|
3.1.1
|
|
Certificate of Amendment to
Certificate of Incorporation
of Collegiate Pacific Inc.
|
|
Exhibit 3.10 to the
Registrants
Registration Statement
on Form SB-2
(No. 333-34294)
originally filed on
April 7, 2000.
|
|
|
|
|
|
3.1.2
|
|
Amendment to Certificate of
Incorporation of Collegiate
Pacific Inc.
|
|
Exhibit 3.1 to the
Registrants Current
Report on Form 8-K
filed on July 2, 2007.
|
|
|
|
|
|
3.2
|
|
By-Laws of the Registrant.
|
|
Exhibit 2 to the
Registrants
Registration Statement
on Form 8-A filed on
September 9, 1999.
|
|
|
|
|
|
3.2.1
|
|
Amendment to the Bylaws of
Collegiate Pacific Inc.
|
|
Exhibit 3.1 to the
Registrants Current
Report on Form 8-K
filed on June 14, 2007.
|
|
|
|
|
|
3.2.2
|
|
Amendment to the Bylaws of
Collegiate Pacific Inc.
|
|
Exhibit 3.2 to the
Registrants Current
Report on Form 8-K
filed on July 2, 2007.
|
|
|
|
|
|
4.1
|
|
Specimen Certificate of
Common Stock, $0.01 par
value, of Sport Supply Group,
Inc.
|
|
Exhibit 4.1 to the
Registrants Annual
Report on Form 10-K
filed on September 13,
2007.
|
|
|
|
|
|
4.2
|
|
Indenture, dated as of
November 26, 2004, by and
between Collegiate Pacific
Inc. and The Bank of New York
Trust Company N.A., as Trustee.
|
|
Exhibit 99.1 to the
Registrants Current
Report on Form 8-K
filed on November 29,
2004.
|
|
|
|
|
|
4.3
|
|
Form of 5.75% Convertible
Senior Subordinated Note Due
2009 (included in Section 2.2
of Exhibit 4.2 to this
report).
|
|
Exhibit 99.2 to the
Registrants Current
Report on Form 8-K
filed on November 29,
2004.
|
|
|
|
|
|
10.1
|
|
Amendment No. 1 to Amended
and Restated Credit
Agreement, dated January 7,
2008, by and between Sport
Supply Group, Inc. and Merrill Lynch Commercial
Financing Corp.
|
|
Exhibit 10.1 to the
Registrants Current
Report on Form 8-K
filed on January 9,
2008.
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
|
31.1
|
|
Certification of Adam
Blumenfeld pursuant to Rule
13a-14(a) or 15(d)-14(a) of
the Securities Exchange Act
of 1934, as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002.*
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31.2
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Certification of John Pitts
pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities
Exchange Act of 1934, as
adopted pursuant to Section
302 of the Sarbanes-Oxley Act
of 2002.*
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32
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Certification of Adam
Blumenfeld and John Pitts
pursuant to 18 U.S.C. Section
1350 as adopted pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002.**
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*
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Filed herewith
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**
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Furnished herewith
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