· Q109
Net Income Rises 23.6%
· Company
Retires 25% of Outstanding Convertible Debt at Prices Below Par
· Cash
On-hand of $19.0 Million Subsequent to $5.5 Million Bond Repurchase
The
Company will host a conference call today to discuss these results and future
plans, at 3:30PM CT / 4:40 ET. The call may be accessed by dialing 866 202 3109
and using pass code 28583700.
Dallas, TX. Sport Supply Group,
Inc. (NASDAQ: RBI) today reported record sales of $73.6 Million and diluted EPS
of $0.35 for its first quarter ended September 30, 2008.
For
the quarter ended September 30, 2008, key metrics include:
-
- Net Sales Grew 4.6% from $70.4 Million to $73.6 Million
-
- Gross Margin Percentages Expanded 17 basis points from 36.42% to 36.59%
- - SG&A Expenses Grew a marginal 1.7%, from
$17.9 Million to $18.3 Million
- - SG&A Decreased as a percentage of sales
from 25.5% to 24.8%
-
- Operating Margins Improved from 10.92% to 11.78%
-
- Net Income Grew 23.6% from $4.1 Million to $5.1 Million
-
- Diluted EPS Grew 13% from $0.31 to $0.35 per diluted share
-
- Net Income, on a Trailing Twelve Month Basis, Grew 130% to $10.7 Million
-
- EBITDA, on a Trailing Twelve Month Basis, Grew 44.6% to $24.3 Million
Commenting
on the Quarter, Adam Blumenfeld, Chairman and Chief Executive Officer stated:
"We
are pleased to report a strong first quarter of the fiscal year, driven by
top line growth faster than the first quarter of the previous comparative
year, continued gross margin expansion and well controlled expenses. In
particular, our elementary school business, varsity athletics sales and
internet division all showed impressive strength during the period. To produce
these results in the highest sales quarter of our year, given the current
macro-economic backdrop, is a testament to the relative resiliency of our
direct selling business model, and our non-consumer / non-retail oriented
institutional customer base.
Our
goal moving forward is to produce increased earnings and cash flow despite these
tough economic times. We continue to right-size our infrastructure; re-align
internal assets to target the most receptive markets, and tightly manage our
product, selling, general and administrative costs. Additionally, we continue
to focus on mid to long term initiatives to increase market share,
profitability and franchise value. Within the last 90 days we have enhanced
certain key vendor relationships and added important new distribution partners.
Balancing near term tactical decisions with longer term strategic initiatives
is the challenge this economy presents for most companies. We are executing
well in this regard and I think it speaks to the relative variability of our
cost structure and forward-looking nature of our Management Team.”
Continued
Strengthening of Balance Sheet
"The
current financial crisis is creating opportunities for companies like ours,
whose balance sheets are strong and who can deploy cash at critical times. Stress
in the fixed income markets has created opportunities for us to redeem our
outstanding convertible bonds at prices accretive to our shareholders. We are
pleased to announce that we repurchased $5.5 Million of our convertible bonds
during the quarter at prices well below par, and an additional $7.0 Million of
bonds since quarter end at similarly attractive prices. Together, these
purchases have retired 25% of the convertible notes outstanding. We believe our
balance sheet strength will continue to be rewarded in the coming months and
years, and we will continue to consider similar bond repurchases for the
benefit of shareholders as conditions merit.
Outlook
“Similar
to other companies, this is a tough environment in which to predict trends and
measure demand. The events which have transpired in the global markets over the
last 90 days, and the uncertainties they foster for everyone, suggest we be
mindful of the unpredictable nature of this economy near term, even as we move
forward to implement plans to accelerate activity over the longer term.
Accordingly, we now estimate annualized net revenue growth in FY09 will be in
the low to mid single digits, and we are slightly modifying our FY09 diluted
EPS range from $0.85 - $0.95 to $0.82 - $0.92. The midpoint of this range
implies a mid-teens growth rate when compared to FY08 EPS of $0.76.”
“Sport
Supply’s basic operating thesis remains well intact. Over the course of time, we
continue to envision a "strong get stronger, weak get weaker"
scenario unfolding. To that end, we are the largest direct marketer and
distributor of product to the institutional sporting goods space. Customers,
in our opinion, will likely continue to gravitate towards best of breed makers
and distributors and away from less reliable sources for product. With over $30
million in on-hand inventory, and a value-oriented direct distribution model,
Sport Supply is well positioned to help customers make the most of their budget
dollars and provide the comfort and stability needed in any business cycle, but
particularly during these volatile times. Unlike discretionary purchases, we
view unspent dollars in the Institutional sporting goods market as deferred –
not lost. We are well situated to target these sales dollars as future spending
trends improve. "
Mr.
Blumenfeld concluded: "This operating environment presents a host of
challenges for Companies across the country. Sport Supply is best positioned,
we believe, to compete in these uncertain times and take advantage of situations
as they arise”.
This
press release contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements
include statements relating to Sport Supply Group’s anticipated financial
performance, business prospects, new developments and similar matters, and/or
statements preceded by, followed by or that include the words “believes,”
“could,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” or similar
expressions. These forward-looking statements are based on management’s current
expectations and assumptions, which are inherently subject to uncertainties,
risks and changes in circumstances that are difficult to predict. Actual
results may differ materially from those suggested by the forward-looking
statements due to a variety of factors, including changes in business,
political, and economic conditions due to the threat of future terrorist activity
or otherwise, actions and initiatives by current and potential competitors, and
certain other additional factors described in Sport Supply Group’s filings with
the Securities and Exchange Commission. Other unknown or unpredictable factors
also could have material adverse effects on Sport Supply Group’s future
results, performance or achievements. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in this press
release may not occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date stated, or if no
date is stated, as of the date of this press release. Sport Supply Group is not
under any obligation and does not intend to make publicly available any update
or other revisions to any of the forward-looking statements contained
in
this press release to reflect circumstances existing after the date of this
press release or to reflect the occurrence of future events even if experience
or future events make it clear that any expected results expressed or implied
by those forward-looking statements will not be realized.
CONTACT:
Sport Supply Group, Inc., Dallas
Adam Blumenfeld
972-243-0879
SOURCE:
Sport Supply Group, Inc.
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Sport
Supply Group, Inc. and Subsidiaries
UNAUDITED Consolidated
Statements of Income
(in thousands, except share and per
share amounts)
|
Three Months Ended |
|
|
September 30, |
|
|
2008 |
2007 |
|
|
Net sales
Cost of sales |
$ 73,577
46,658 |
$ 70,374
44,746 |
|
|
Gross
profit |
26,919 |
25,628 |
|
|
Selling,
general and administrative expenses |
18,254 |
17,943 |
|
|
Operating
profit |
8,665 |
7,685 |
|
|
Other
income (expense): |
|
|
|
|
Interest income |
77 |
87 |
|
|
Interest
expense |
(737) |
(1,216) |
|
|
Other
income |
20 |
50 |
|
|
Total
other expense |
(640) |
(1,079) |
|
|
Income
before income taxes |
8,025 |
6,606 |
|
|
Income tax
provision |
2,964 |
2,510 |
|
|
Net income |
$ 5,061 |
$ 4,096 |
|
|
Weighted
average number of shares outstanding: |
|
|
|
|
Basic |
12,372,024 |
11,589,587 |
|
|
Diluted |
15,702,177 |
15,132,581 |
|
|
Net income
per share – basic |
$ 0.41 |
$ 0.35 |
|
|
Net income
per share – diluted |
$ 0.35 |
$ 0.31 |
|
|
Dividends
declared per share common stock |
$ 0.025 |
$ 0.025 |
|
|
SPORT SUPPLY GROUP, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
(in thousands)
|
For the three
months ended
September 30, |
|
2008 |
2007 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
Net income |
$
5,061 |
$
4,096 |
Adjustments to reconcile net income to cash provided by |
|
|
operating activities: |
|
|
Provision for uncollectible accounts receivable |
282 |
271 |
Depreciation and amortization |
703 |
913 |
Amortization of deferred debt issuance costs |
311 |
260 |
Discount on early retirement of long term debt |
(250) |
-- |
Deferred taxes |
327 |
1,924 |
Stock-based compensation expense |
284 |
83 |
Changes in operating assets and liabilities: |
|
|
Accounts receivable |
(9,174) |
(14,032) |
Inventories |
722 |
4,075 |
Prepaid expenses and other current assets |
(1,110) |
(641) |
Other assets, net |
10 |
9 |
Accounts payable |
5,631 |
6,939 |
Income taxes payable / prepaid income taxes |
1,604 |
1,047 |
Accrued liabilities and accrued interest |
(351) |
664 |
|
|
|
Net cash provided by operating activities: |
4,050 |
5,608 |
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
Purchases of property and equipment |
(193) |
(722) |
Net cash used in investing activities: |
(193) |
(722) |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
Early retirement of long term debt |
(5,234) |
-- |
Proceeds from bank line of credit |
-- |
262 |
Payments on notes payable and line of credit |
(26) |
(24,997) |
Payment of dividends |
(309) |
(259) |
Proceeds from issuance of common stock |
230 |
18,147 |
Net cash used in financing activities: |
(5,339) |
(6,847) |
|
|
|
Net change in cash and cash equivalents |
(1,482) |
(1,961) |
Cash and cash equivalents, beginning of period |
20,531 |
5,670 |
Cash and cash equivalents, end of period |
$ 19,049 |
$
3,709 |
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
Cash paid for interest |
$
55 |
$
514 |
Cash paid (refunded) for income taxes |
$ 1,049 |
$
(423) |
|
|
|
RECONCILIATION OF INCOME FROM
CONTINUING OPERATIONS TO EBITDA AND
ADJUSTED EBITDA
(Unaudited, in thousands)
|
|
Three Months Ended September 30, |
|
Trailing Twelve Months Ended
September 30, |
|
|
2008 |
2007 |
|
2008 |
2007 |
|
|
|
|
|
|
|
Net Income |
|
$ 5,061 |
$ 4,096 |
|
$ 10,699 |
$ 4,660 |
Provision for income taxes |
|
2,964 |
2,510 |
|
6,730 |
2,832 |
Minority interest in consolidated subsidiary |
|
-- |
-- |
|
-- |
28 |
Interest expense, net of interest income |
|
660 |
1,129 |
|
3,346 |
5,754 |
Depreciation and amortization |
|
703 |
913 |
|
3,527 |
3,536 |
EBITDA (a) |
|
9,388 |
8,648 |
|
24,302 |
16,810 |
Other
expenses: |
|
|
|
|
|
|
Stock-based compensation expense |
|
284 |
83 |
|
693 |
83 |
Adjusted
EBITDA (a) |
|
$ 9,672 |
$ 8,731 |
|
$ 24,995 |
$ 16,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) EBITDA
and Adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net
income before interest expense (net of interest income), income taxes,
depreciation and amortization. Adjusted EBITDA is defined as net income before
interest expense (net of interest income), income taxes, depreciation,
amortization, and other items included in the caption above labeled "Other
expenses" which do not directly relate to the ongoing operations. SSG
management relies on EBITDA and adjusted EBITDA as the primary measures to
review and assess operating performance. SSG believes it is useful to
investors to provide disclosures of its operating results on the same basis
that is used by management. Management and investors also review EBITDA and
adjusted EBITDA to evaluate SSG's overall performance and to compare SSG's
current operating results with corresponding periods and with other
companies. You should not consider EBITDA and adjusted EBITDA in isolation or
as a substitute for net income, operating cash flows or other cash flow
statement data determined in accordance with accounting principles generally
accepted in the United States of America. Because EBITDA and Adjusted EBITDA
are not measures of financial performance under accounting principles generally
accepted in the United States of America and are susceptible to varying
calculations, they may not be comparable to similarly titled measures of other
companies.
SPORT SUPPLY GROUP, INC. AND
SUBSIDIARIES
RECONCILIATION OF CASH FLOW PROVIDED
BY OPERATING ACTIVITIES
TO FREE CASH FLOW FROM OPERATIONS
AND
FREE CASH FLOW FROM OPERATIONS PER
SHARE
(Unaudited, in thousands except share and per share amounts)
|
|
Three Months Ended September 30, |
