GAAP Basic earnings per share of $.25 and GAAP diluted earnings per
share of $.22 Pro Forma Basic earnings per share of $.31 and Pro
Forma diluted earnings per share of $.26 Collegiate Pacific Inc.
(AMEX:BOO) today reported its results for the first fiscal quarter
of 2006 ended September 30, 2005. Commenting on the quarter,
Michael J. Blumenfeld, Chairman and CEO of Collegiate Pacific
stated: "We are pleased to report these results for the quarter. On
an operating basis, all of our internal expectations were achieved.
Our operating profit reached $5.5 million generating record net
income of $2.5 million. The quarter included substantial non-cash
and cash acquisition charges that are discussed below. We completed
several operating platform-building projects to support a revenue
base that has gone from $39 million for fiscal 2004 to a projected
$230 million for fiscal 2006. The investments we have made in our
infrastructure, new product designs and introduction, expansion of
manufacturing and distribution facilities and the hiring and
training of new salesmen lay the foundation to achieve the type of
operating leverage commensurate with our revenue increases."
Operating Highlights for the Quarter -- Revenues increase 136% to
$65.3 Million -- Operating Profits rises 60% to $5.5 Million --
Organic Sales Growth Up 13% "The increase in our weighted average
share count for the first fiscal quarter of 2006 to 14.1 million
shares from 10.4 million shares in the same period last fiscal year
is a byproduct of imposing the 'if converted method' required by
Financial Accounting Standard 128 ("FAS 128") as it relates to our
outstanding convertible senior subordinated notes due 2009. On an
annual basis, this method of accounting would be recognized only
when our annual net income exceeds $6 million. However, we are
required by FAS128 to recognize the higher weighted average share
count for this current fiscal quarter regardless of our projected
annual net income for all of fiscal 2006. Based on our quarterly
projections, the fiscal quarter ended September 30, 2005, is the
only quarter in fiscal 2006 that triggers this required increase in
the weighted average share count we must use to report our
quarterly earnings per share for the three months ended September
30, 2005. Looking ahead, if our net income in any future quarterly
period of fiscal 2006 were to exceed $1.7 million, the company
would be required by FAS 128 to utilize the 'if converted method'
to calculate its reported diluted earnings per share for the
quarter. Giving the effect of the calculation of the weighted
average shares outstanding in this first quarter of fiscal 2006,
the company believes it will be required by FAS 128 to calculate
its diluted earnings per share for the fiscal year ending June 30,
2006, using approximately 11.5 million shares outstanding, which
assumes the company does not issue any additional shares in
connection with any future acquisition activities." Sport Supply
Group Results Commenting on the quarterly results of Sport Supply
Group, Michael J. Blumenfeld stated, "With some initial input from
Collegiate Pacific and a lot of hard work, Sport Supply Group
reported a strong quarter for the three months ended September 30.
Before approximately $1.2 million in acquisition related charges
for an increase in the fair market value of acquired inventories
and intangibles, Sport Supply generated a solid 7% revenue growth
to $25 million and 100% increase in operating income - $2.1 million
verses $1.1 million compared to last year same period. We look
forward to a continuing positive performance from Sport Supply."
Pro-Forma Adjusted Presentation Collegiate Pacific is providing
actual results and forecast guidance on a financial basis in
accordance with U.S. generally accepted accounting principles
("GAAP"), and on a pro forma adjusted basis ("Pro Forma Adjusted")
that excludes the impact of certain non-cash expenses and specific
acquisition or financing related expenses in the amount of
approximately $852 thousand for the amortization of purchased
intangibles resulting from Collegiate Pacific's acquisition
activities and amortization expense associated with the increase in
fair market values of the inventories of acquired companies. The
impact of these charges primarily reduces reported gross margins
and increases expenses in a specific reporting period. Pro Forma
diluted earnings per share, before these charges, was $0.26 per
share. See Table B below for a further explanation of the "Pro
Forma Adjusted" presentation. Commenting on the Quarter and future
periods, Adam Blumenfeld, President, stated: "We are very pleased
with the strength of the quarter and particular progress in certain
metrics we track. Consolidated operating margins for the company
are on target and are the result of new pricing and cost of goods
improvements in our Dixie, OTS, Kessler and Salkeld (DOKS) team
dealers and at Sport Supply Group, Inc. ("SSG"). We believe that
our gross margins will show improvement in the coming periods as
the results of these efforts are realized. Our acquired team
dealers continue to successfully promote Collegiate Pacific's
proprietary equipment to their customer base, generating
incremental sales and gross profit dollars for the company. We will
continue to focus on this cross-selling synergy as we integrate the
catalog and team dealer efforts in the DOKS territories. The DOKS
sales force is now composed of approximately 175 sales
professionals in 22 states across the USA. We continue to review
opportunities to add to the geographic reach of this sales force
and to provide new, innovative products up through the base of this
vertical sales platform." "We are in our infancy of realizing
synergistic opportunities with SSG. However, as we have previously
indicated, we see substantial potential benefits for Collegiate
Pacific and SSG alike as we implement this long-term, operating
program. A number of joint initiatives have been put in place since
July 1, 2005, and we look forward to fully realizing their economic
benefits, which we expect to occur later in fiscal 2006 and more
dramatically in fiscal 2007." "Looking ahead, we remind investors
of the shift in seasonality that accompanies our 53% ownership of
SSG and a general shift in the seasonality of our business. The
second fiscal quarter ending December 31, 2005, is projected to be
the seasonal low-point for the company. We see Q2 as a near
break-even quarter on a GAAP basis given this seasonality change.
The Q3 and Q4 periods, which are historically slower for the DOKS
road salesmen, are the seasonal strong points for our CP, Tomark
and SSG catalogs." "For FY06, and giving the impact to the 10%
increase in the annual weighted average share calculations and the
increase in non cash charges mentioned above, we see GAAP diluted
earnings per share of approximately $0.40 - $0.50 on consolidated
revenues of approximately $230 million. During this evolutionary
process where annual revenues are expected to grow from $107
million to $230 million, quarterly comparisons to previous periods
may not offer meaningful comparisons as revenues, expenses and
order backlogs could shift between reporting periods." Securities
and Exchange Commission (SEC) Comments As previously disclosed by
the company in its most recent annual report on form 10-KSB and
previous quarterly reports on Form 10-QSB, since February 2005, the
company has received and responded to several comment letters from
the Staff of the Securities and Exchange Commission's Division of
Corporation Finance. The SEC comments were initiated in conjunction
with the SEC's review of the company's Registration Statement on
Form S-3, which was filed by the company on January 24, 2005, as
required by the terms of a registration rights agreement the
company entered into with the purchasers of its convertible senior
subordinated notes due 2009. At this time, we remain in discussions
with the SEC regarding several comments that remain unresolved. The
unresolved comments primarily relate to the valuation and
amortization expense associated with acquired intangibles and
inventories resulting from Collegiate Pacific's acquisition
activities since January 2004. These matters are subject to
interpretation and the SEC review process is not complete. As a
result, the ultimate resolution of these comments is uncertain.
Resolution of any of these comments may involve the restatement of
previously filed financial statements. Based on current estimates,
the Company believes any such required restatement could decrease
its previously reported earnings per share for both fiscal 2004
(ended June 30, 2004) and fiscal 2005 (ended June 30, 2005) by
approximately $0.02 - $0.03 per share. The Company is working
toward a final resolution of these matters and will provide an
update when these matters are resolved. Quarterly Report on Form
10-Q Due to, among other things, the additional filing and other
related requirements of applicable regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") now that
Collegiate Pacific is for the first quarterly period in its
existence no longer a Small Business Issuer, as such term is
defined in the Exchange Act, Collegiate Pacific will be delaying
the filing of its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2005, as permitted by the rules of the
Exchange Act. Collegiate Pacific's Quarterly Report on Form 10-Q
will be filed within five calendar days of this press release.
Investor Conference Call Collegiate Pacific will host a conference
call today, at 8:00 AM Central Time, to discuss the Quarter and
future plans. The call may be accessed by dialing 866-270-6057 and
using participant code 78634004. A replay of the call will be
available for 30 days by calling 888-286-8010 and entering passcode
42335762. About Collegiate Pacific Collegiate Pacific is the
nation's fastest growing manufacturer and supplier of sports
equipment primarily to the institutional and team dealer markets.
The Company offers more than 4,500 products to 300,000 prospective
and existing customers. The Company distributes approximately 1.5
million catalogs annually and employs approximately 170
professional road salesmen. Safe Harbor Statement This news release
includes forward-looking statements. Collegiate Pacific cautions
that these statements are qualified by important factors that could
cause actual results to differ materially from those in the
forward-looking statements, including but not limited to Collegiate
Pacific's ability to successfully execute its acquisition plans and
growth strategy, integration of acquired businesses, weather
conditions, global economic conditions, product demand, financial
market performance, and other risks described in Collegiate
Pacific's most recent annual report on form 10-KSB, previous
quarterly reports on Form 10-QSB, and current reports on Form 8-K,
each as filed with the Securities and Exchange Commission.
Collegiate Pacific cautions that the foregoing list of important
factors is not exclusive, any forward-looking statements included
in this news release is made as of the date of this news release,
and Collegiate Pacific does not undertake to update any
forward-looking statement. -0- *T COLLEGIATE PACIFIC INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Sept. 30, June
30, 2005 2005 ------------- ------------ ASSETS (Unaudited) CURRENT
ASSETS: Cash and cash equivalents $8,021,097 $40,325,716 Accounts
receivable, net of allowance for doubtful accounts of $1,541,074
and $1,042,496, respectively 41,157,951 18,131,753 Inventories
31,778,630 17,446,556 Current portion of deferred taxes 750,078
741,209 Prepaid income taxes -- 498,336 Prepaid expenses and other
current assets 2,819,398 601,439 ------------- ------------ Total
current assets 84,527,154 77,745,009 PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $1,570,932 and $1,294,135, respectively
10,359,848 1,501,096 DEFERRED DEBT ISSUANCE COSTS, net of
accumulated amortization of $563,730 and $392,932, respectively
2,846,629 3,017,427 INTANGIBLE ASSETS, net of accumulated
amortization of $1,011,153 and $815,498, respectively 10,298,111
2,198,417 GOODWILL 37,202,035 24,192,455 OTHER ASSETS, net 642,235
409,068 ------------- ------------ Total assets $145,876,012
$109,063,472 ============= ============ LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable
$20,360,805 $9,782,479 Accrued liabilities 5,770,911 1,724,783
Dividends payable 255,744 255,144 Accrued interest 1,012,847
250,000 Current portion of long-term debt 273,667 329,867 Income
taxes payable 1,135,115 -- ------------- ------------ Total current
liabilities 28,809,089 12,342,273 DEFERRED TAX LIABILITY 621,548
779,529 LONG-TERM DEBT 53,888,001 50,448,153 MINORITY INTEREST IN
SUBSIDIARY 14,032,999 -- STOCKHOLDERS' EQUITY: Preferred stock,
$0.01 par value, 1,000,000 shares authorized; no shares issued --
-- Common stock, $0.01 par value, 50,000,000 shares authorized;
10,268,228 and 10,196,780 shares issued and 10,128,954 and
10,110,754 shares outstanding, respectively 102,682 102,058
Additional paid-in capital 42,676,567 41,911,008 Retained earnings
6,402,577 4,137,902 Treasury stock at cost, 86,026 shares (657,451)
(657,451) ------------- ------------ Total stockholders' equity
48,524,375 45,493,517 ------------- ------------ Total liabilities
and stockholders' equity $145,876,012 $109,063,472 =============
============ The accompanying notes are an integral part of these
financial statements. COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three
Months Ended September 30 ------------------------ 2005 2004
------------ ----------- Net sales $65,274,896 $27,710,288 Cost of
sales 44,244,541 18,317,237 ------------ ----------- Gross profit
21,030,355 9,393,051 Selling, general and administrative expenses
5,541,592 ,958,814 ------------ ----------- Operating profit
5,488,763 3,434,237 ------------ ----------- Other income
(expense): Interest income 46,222 15,445 Interest expense (998,861)
(6,856) Other income 24,649 49,379 ------------ ----------- Total
other income (expense) (927,990) 57,968 ------------ -----------
Income before minority interest in net income of consolidated
subsidiary and income taxes 4,560,773 3,492,205 Minority interest
in net income of consolidated subsidiary 425,642 -- ------------
----------- Income before incomes taxes 4,135,131 3,492,205 Income
tax provision 1,614,711 1,420,330 ------------ ----------- Net
income $2,520,420 $2,071,875 ============ =========== Weighted
average number of shares outstanding: Basic 10,124,387 9,908,227
============ =========== Diluted 14,068,662 10,102,793 ============
=========== Net income per share common stock - basic $0.25 $0.21
============ =========== Net income per share common stock -
diluted $0.22 $0.21 ============ =========== The accompanying notes
are an integral part of these financial statements. Table A
Collegiate Pacific Inc. Reconciliation of Diluted Shares and
Earnings Per Share (unaudited) Quarter ended September 30
---------------------- 2005 2004 ---------- ----------- Weighted
average shares outstanding - basic (a) 10,124,387 9,908,227 Assumed
conversion of subordinated convertible debentures 3,412,969 -
Dilutive impact of stock options 531,306 194,566 ----------
----------- Weighted average shares outstanding - fully diluted (b)
14,068,662 10,102,793 ========== =========== Net income for the
period ended September 30, (c) $2,520,420 $2,071,875 Add: Interest
component on assumed conversion of subordinated debentures, net of
taxes 562,054 -- ---------- ----------- Net income, adjusted for
the period ended September 30, (d) $3,082,474 $2,071,875 ==========
=========== Basic earnings per share (c)/(a) $0.25 $0.21 ==========
=========== Fully diluted earnings per share (d)/(b) $0.22 $0.21
========== =========== Table B Collegiate Pacific Inc.
Reconciliation of GAAP actual results to Pro Forma Adjusted Results
(unaudited) Quarter ended September 30, ---------------------- 2005
2004 ---------- ----------- Operating Profit Reconciliation
------------------------------- GAAP Operating Profit (a)
$5,488,763 $3,434,237 Add: Amortization of acquired intangibles and
amortization of increase in fair value of inventories of acquired
companies (b) 851,875 82,000 ---------- ----------- Pro Forma
Adjusted Operating Profit $6,340,638 $3,516,237 ==========
=========== Net Income Reconciliation -------------------------
GAAP Net Income (a) $2,520,420 $2,071,875 Add: Amortization of
acquired intangibles and amortization of increase in fair value of
inventories of acquired companies, net of taxes (b) 519,644 48,708
Amortization of capitalized debt cost, net of taxes (c) 104,186 -
---------- ----------- Pro Forma Adjusted Net Income $3,144,250
$2,120,583 ========== =========== GAAP Weighted average shares
outstanding - basic 10,124,387 9,908,227 Pro Forma Weighted average
shares outstanding - basic 10,124,387 9,908,227 GAAP Weighted
average shares outstanding - Fully Diluted 14,068,662 10,102,793
Pro Forma Weighted average shares outstanding - Fully Diluted
14,068,662 10,102,793 GAAP Basic earnings per share $0.25 $0.21 Pro
Forma Basic earnings per share $0.31 $0.21 GAAP Fully diluted
earnings per share $0.22 $0.21 Pro Forma Fully diluted earnings per
share $0.26 $0.21 Footnotes for Tables A and B (a) Amounts
represent Collegiate Pacific's results of operations for the
periods presented in accordance with U.S. generally accepted
accounted principles. (b) Adjustment represents the non-cash
amortization expense associated with acquired intangible assets and
the non-cash amortization expense associated with the increase to
fair market value of acquired inventories, resulting from
Collegiate Pacific's acquisition activities (c) Adjustment
represents non-cash amortization expense of capitalized debt costs
associated with Collegiate Pacific's convertible subordinated
debentures due 2009. These capitalized costs are amortized over the
life of the related debt. *T Use of Pro Forma Adjusted Financial
Information To supplement the results presented in accordance with
U.S. generally accepted accounting principles (GAAP), for the three
months ended September 30, 2005 and 2004, Collegiate Pacific also
used Pro Forma Adjusted measures of operating profit, net income
and earnings per share, which are adjusted from the GAAP-based
results to exclude certain non-cash costs and expenses. These
adjustments are not in accordance with, or an alternative for,
GAAP. These adjustments are provided to enhance an overall
understanding of Collegiate Pacific's financial performance for the
three months ended September 30, 2005 and are indicators management
uses for planning and forecasting future periods. In fiscal 2005
and 2004, the excluded items include certain non-cash costs and
expenses associated with Collegiate Pacific's acquisition
activities because Collegiate Pacific's management does not believe
these non-cash expenses are indicative of Collegiate Pacific's core
business. Even though such items have recurred in the past and may
recur in future periods, they are driven by events such as
acquisitions that are not directly related to Collegiate Pacific's
ongoing core business operations. Collegiate Pacific will continue
to exclude such items in its Pro Forma Adjusted results. These
financial measures are not to be considered in isolation from, or
as a substitute for, financial results prepared in accordance with
GAAP. Collegiate Pacific's management believes the Pro forma
Adjusted financial measures for fiscal 2005 and 2004, although not
indicative of future performance, are useful for comparison against
Collegiate Pacific's historical and future operations.
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