Collegiate Pacific Inc. (AMEX:BOO): -- Solid Organic Sales Growth
of 15% for the Quarter -- Company sees balance of FY06 Fully
Diluted GAAP EPS of $0.20 - $0.26, which is generally in line with
the range of analyst consensus estimates -- Company Sees FY07
Fully-Diluted GAAP EPS of $0.62-$0.78 Collegiate Pacific Inc.
(AMEX:BOO) today announced its results of operations for the second
fiscal quarter ended December 31, 2005, and that it will host a
conference call today at 3:30 PM, Central Standard Time, to discuss
the second fiscal quarter and future plans. The call may be
accessed by dialing 866-510-0708 and using participant code
27597908. A replay of the call will be available for 30 days by
calling 888-286-8010 and entering passcode 54869893. Certain points
of Interest for the Quarter Include: -- Q206 Net Loss of $971
thousand, or ($0.10) fully-diluted GAAP EPS, which includes an
approximately $555 thousand, or ($0.05) fully-diluted GAAP EPS net
of taxes, seasonal loss at SSPY, and also includes $1.57M in
non-cash and cash charges, or ($0.10) fully-diluted GAAP EPS net of
taxes, for the items described below; and -- Company completes
Financial Restatements for Q1 of FY06 and FY04 and FY05, which
results in a pre-tax increase of approximately $90 thousand in Q1
of FY06 and a pre-tax decrease of approximately $357 thousand and
$291 thousand for FY04 and FY05, respectively, as indicated in the
table below. -0- *T Restatement Adjustment Summary ( Increase) /
Decrease ------------------------------------------------ Three
month period Twelve month period ended ended
--------------------------- -------------------- June 30, 2004 June
30, 2005 September 30, 2005 ------------- -------------
-------------------- Cost of sales adjustments $(233,400)
$(384,250) $284,140 Intangible amortization adjustments (123,334)
93,313 (194,134) ------------- ------------- --------------------
Gross adjustments $(356,734) $(290,937) $90,006 Effect of taxes
146,260 113,405 (35,538) ------------- -------------
-------------------- Net adjustments $(210,474) $(177,532) $54,468
------------- ------------- -------------------- Weighted average
shares outstanding --------------------- Basic 6,324,950 10,031,314
10,124,387 ============= ============= ==================== Fully
diluted 7,571,910 10,279,185 14,068,662 ============= =============
==================== Earnings per share as previously reported
--------------------- Basic $0.30 $0.38 $0.25 =============
============= ==================== Fully diluted $0.25 $0.37 $0.22
============= ============= ==================== Earnings per share
as adjusted --------------------- Basic $0.26 $0.36 $0.25
============= ============= ==================== Fully diluted
$0.22 $0.35 $0.22 ============= ============= ====================
*T Commenting on the quarter and the first six-months of fiscal
2006, which ended December 31, 2005, Michael J. Blumenfeld,
Chairman and CEO stated: "While the second fiscal quarter is the
seasonal low-point for our business, we are pleased to report
robust sales growth and gross margin performance consistent with
our expectations. Moreover, we are particularly pleased to have
completed a restatement of our financial statements for the fiscal
years ended June 30, 2004 and 2005, as well as our first quarter of
fiscal 2006, for changes related to our purchase accounting for the
valuation and amortization expenses associated with acquired
intangibles and inventories from Collegiate Pacific's acquisition
activities since January 2004. As discussed below, these
adjustments increased our reported net income for the fiscal
quarter ended September 30, 2005, by approximately $54 thousand,
which did not impact EPS, and decreased our reported net income by
approximately $210 thousand, or ($0.03) per share, and
approximately $178 thousand, or ($0.02) per share, respectively,
for our fiscal years ended June 30, 2004 and June 30, 2005." "The
Company produced a net loss of $971 thousand for the quarter ended
December 31, 2005, or ($0.10) per fully diluted share, including a
seasonal net loss of approximately $555 thousand for our 73% owned
affiliate Sport Supply Group, Inc. Additionally, results for the
quarter included the following cash and non-cash charges in the
total amount of approximately $1.57 million, or $0.10 per diluted
earnings per share, net of taxes: -- non-cash amortization charges
in the amount of approximately $420 thousand for acquired
intangibles, including our acquisition of a majority interest in
Sport Supply Group, Inc.; -- a one-time cash charge in the amount
of approximately $430 thousand related to the termination of the
Merger Agreement with Sport Supply Group Inc.; -- a cash charge in
the amount of approximately $544 thousand for Sarbanes-Oxley
related compliance costs; and -- a cash charge in the amount of
approximately $176 thousand for professional fees incurred in
connection with the preparation and filing of a Registration
Statement on Form S-3, which was filed by the company pursuant to
the terms of a registration rights agreement the company entered
into with the purchasers of its convertible senior subordinated
notes due 2009. We are pleased to put these charges behind us."
Adam Blumenfeld, President of Collegiate Pacific stated:
"Operationally, we were pleased with consolidated sales growth for
the quarter and with gross margin performance in the quarter and
year-to-date six month period ended December 31, 2005. Organic
sales growth for businesses owned at least twelve months was
approximately 15% for the quarter and approximately 20% for the six
month period ended December 31, 2005, well within our expectations.
Regarding gross margins, investors should be mindful that Sport
Supply Group carries a historically lower gross margin than that of
Collegiate Pacific. Notwithstanding, the consolidated gross margins
were 32.6% for the quarter, and 32.6% year-to-date. Certain
adjustments outlined above were in connection with inventory market
adjustments at Sport Supply Group, which negatively affect reported
gross margins. Without these adjustments, the gross margins would
have been approximately 33.3% and 33.7% for the three and six month
periods, respectively, ended December 31, 2005, which exceeds our
internal expectations. This is reflective of progress being made in
our catalog selling efforts; Dixie, OTS, Kesslers and Salkeld's
("DOKS") road sales platform and by our Sport Supply Group
affiliate in enhancing gross margins and reducing the cost of goods
sold. Our attempts to improve gross margins are a long-term, multi
business cycle process, but we are pleased with initial results,
particularly in light of the significant increase in the cost of
certain raw materials." "Regarding our 73% investment in Sport
Supply Group, Inc., we are pleased with the progress Sport Supply
Group has made to date and remain well focused on optimizing this
investment for the benefit of all shareholders." Adam Blumenfeld
continued; "We are excited to have added talented personnel in the
Finance, Sales and Marketing divisions of the Company. We are
pleased to welcome Sue Myers as our new corporate controller and
Kurt Hagen as our new executive vice president of sales and
marketing. With 12 years experience in the fast-growing Fossil
Corporation (Nasdaq:FOSL), we look forward to Kurt being
instrumental in the acceleration of our catalog and on-line sales
efforts. The addition of Mr. Hagen rounds out the Executive
Management Team for our major operating platforms and solidifies,
we believe, the necessary foundation for future profitable growth."
Regarding our outlook and guidance for future periods, Michael
Blumenfeld stated: "At this time, we are currently projecting GAAP
diluted earnings per share between $0.20 and $0.26 for the balance
of fiscal 2006, which assumes no excess expenses to budget with
respect to our Sarbanes-Oxley compliance costs in Q3 and Q4, and is
generally in line with the range of current analyst consensus
projections. We continue to see EBITDA for fiscal 2006 of $15
million or more. The Company is also introducing preliminary
guidance for FY07 (which begins July 1, 2006) of $0.62 - $0.78 per
fully diluted GAAP share. This guidance assumes no material
acquisitions or dispositions during FY07 and will likely be refined
as the year unfolds. We see FY07 EBITDA of approximately $20
Million." Restatement of Financial Statements As previously
disclosed by the company in its most recent annual report on form
10-KSB and previous quarterly reports on Form 10-Q, since February
2005, the company has received and responded to several comment
letters from the Staff of the Securities and Exchange Commission's
Division of Corporation Finance. The SEC comments were initiated in
conjunction with the SEC's review of the company's Registration
Statement on Form S-3, which was filed by the company on January
24, 2005, as required by the terms of a registration rights
agreement the company entered into with the purchasers of its
convertible senior subordinated notes due 2009. Based on the SEC
comments, management and the audit committee of our board of
directors reassessed the company's purchase accounting for the
intangible assets and inventories the company acquired in
connection with acquisitions since January 2004. As a result,
Collegiate Pacific will restate its financial statements for the
fiscal year ended June 30, 2004 and June 30, 2005, by filing an
amendment to its Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2005. In addition, the company will restate its
financial results for the fiscal quarter ended September 30, 2005,
by filing an amendment to its Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2005. The amendments will
reflect the following purchase accounting adjustments to amounts
previously allocated to the following acquired intangible assets
and inventories: -- increase the value of the customer
relationships acquired in connection with its acquisitions of
Kesslers Team Sports, Dixie Sporting Goods, Orlando Team Sports and
Salkeld & Sons by approximately $1.9 million, which was
originally allocated to goodwill; -- increase the value the
inventories acquired in connection with its acquisitions of
Kesslers Team Sports, Dixie Sporting Goods, Orlando Team Sports and
Salkeld & Sons by approximately $650 thousand, which was
originally allocated to goodwill; and -- increase the value of
contractual backlog the company acquired in connection with its
acquisitions of Kesslers Team Sports, Dixie Sporting Goods, Orlando
Team Sports and Salkeld & Sons by approximately $200 thousand,
which was originally allocated to goodwill. As a result of these
restatements, amortization expense and cost of goods sold for the
fiscal years ended June 30, 2004 and 2005 were increased by
approximately $210 thousand, or ($0.03) per share, and by
approximately $178 thousand, or ($0.02) per share, respectively. In
addition, the restatement increased the company's reported net
income for the fiscal quarter ended September 30, 2005, by
approximately $54 thousand, which did not impact EPS. These are
non-cash adjustments that do not affect Collegiate Pacific's cash
flow or debt balances for these periods. "Given the cumulative
effect of this change in reported non-cash amortization expense, we
have determined that the most appropriate action is to restate the
affected periods. We have discussed this issue with our auditors,"
said Michael J. Blumenfeld. Quarterly Report on Form 10-Q Due to,
among other things, delays caused by the company's decision to
restate its consolidated financial statements set forth in its
Annual Report on Form 10-KSB for the fiscal years ended June 30,
2004 and 2005, as well as its Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2005, to correct all purchase
accounting issues related to the company's acquisition activity
since January 2004, all in connection with the company's recent
resolution of all outstanding comments the company received from
the Securities and Exchange Commission's Division of Corporation
Finance regarding the company's purchase accounting for those
acquisitions, Collegiate Pacific will be delaying the filing of its
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 2005, as permitted by the rules of the Exchange Act. Collegiate
Pacific's Quarterly Report on Form 10-Q will be filed within five
calendar days of this press release. The amendment to the Company's
10-KSB for fiscal 2005 and its 10-Q for the quarter ended September
30, 2005, must be filed prior to the company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 2005. About
Collegiate Pacific Collegiate Pacific is the nation's fastest
growing manufacturer and supplier of sports equipment primarily to
the institutional and team dealer markets. The Company offers more
than 4,500 products to 300,000 prospective and existing customers.
The Company distributes approximately 1.5 million catalogs annually
and employs approximately 175 professional road salesmen. -0- *T
COLLEGIATE PACIFIC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS December 31, June 30, 2005 2005 -------------
------------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash
equivalents $9,038,788 $40,325,716 Accounts receivable, net of
allowance for doubtful accounts of $ 1,539,634 and $1,042,496,
respectively 32,232,306 18,131,753 Inventories 38,379,939
17,478,805 Current portion of deferred taxes 803,278 775,231
Prepaid income taxes 366,265 644,596 Prepaid expenses and other
current assets 3,310,791 601,439 ------------- ------------- Total
current assets 84,131,367 77,957,540 PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $ 1,845,597 and $1,294,135,
respectively 10,154,315 1,501,096 DEFERRED DEBT ISSUANCE COSTS, net
of accumulated amortization of $734,527 and $392,932, respectively
2,675,831 3,017,427 INTANGIBLE ASSETS, net of accumulated
amortization of $ 1,689,213 and $ 853,333, respectively 9,512,310
1,862,606 GOODWILL 47,455,472 23,848,345 DEFERRED INCOME TAXES
124,143 OTHER ASSETS, net 604,129 409,068 -------------
------------- Total assets $154,657,567 $108,596,082 =============
============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $19,442,010 $9,782,479 Accrued
liabilities 5,035,848 1,724,783 Dividends payable 254,777 255,144
Accrued interest 267,708 250,000 Current portion of long-term debt
12,463,043 329,867 ------------- -------------- Total current
liabilities 37,463,386 12,342,273 DEFERRED TAX LIABILITY 621,548
700,146 LONG-TERM DEBT 56,007,842 50,448,153 MINORITY INTEREST IN
SUBSIDIARY 13,594,147 STOCKHOLDERS' EQUITY: Preferred stock, $0.01
par value, 1,000,000 shares authorized; no shares issued -- --
Common stock, $0.01 par value, 50,000,000 shares authorized;
10,215,480 and 10,205,780 shares issued and 10,129,454 and
10,119,754 shares outstanding, respectively 102,687 102,058
Additional paid-in capital 42,681,022 41,911,008 Retained earnings
4,844,386 3,749,895 Treasury stock at cost, 86,026 shares (657,451)
(657,451) ------------- -------------- Total stockholders' equity
46,970,644 45,105,510 ------------- -------------- Total
liabilities and stockholders' equity $154,657,567 $108,596,082
============= ============== COLLEGIATE PACIFIC INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three Months Ended Six Months Ended December 31,
December 31, ------------------------- --------------------------
2005 2004 2005 2004 ------------ ------------ -------------
------------ Net sales $46,401,280 $23,794,598 $111,676,176
$51,504,886 Cost of sales 31,258,686 15,884,544 75,219,087
34,468,131 ------------ ------------ ------------- ------------
Gross profit 15,142,594 7,910,054 36,457,089 17,036,755 Selling,
general and administrative expenses 16,192,395 6,710,482 31,928,121
12,664,887 ------------ ------------ ------------- ------------
Operating profit (loss) (1,049,801) 1,199,572 4,528,968 4,371,868
------------ ------------ ------------- ------------ Other income
(expense): Interest income 28,116 42,999 74,338 58,444 Interest
expense (1,119,045) (334,663) (2,117,906) (341,519) Other income
63,824 71,184 88,473 120,563 ------------ ------------
------------- ------------ Total other income (expense) (1,027,105)
(220,480) (1,955,095) (162,512) ------------ ------------
------------- ------------ Income (loss) before minority interest
in net income of consolidated subsidiary and income taxes
(2,076,906) 979,092 2,573,873 4,209,356 Minority interest in net
income (loss) of consolidated subsidiary (481,833) -- (56,191) --
------------ ------------ ------------- ------------ Income (loss)
before income taxes (1,595,073) 979,092 2,630,064 4,209,356 Income
tax provision (624,198) 397,945 1,026,052 1,751,654 ------------
------------ ------------- ------------ Net income (loss)
$(970,875) $581,147 $1,604,012 $2,457,702 ============ ============
============= ============ Weighted average number of shares
outstanding: Basic 10,129,351 10,004,947 10,126,869 9,956,587
============ ============ ============= ============ Diluted
10,129,351 10,320,184 10,599,918 10,211,489 ============
============ ============= ============ Net income (loss) per share
common stock -- basic $(0.10) $0.06 $0.16 $0.25 ============
============ ============= ============ Net income (loss) per share
common stock -- diluted $(0.10) $0.06 $0.15 $0.24 ============
============ ============= ============ *T EBITDA means earnings
before interest, taxes, depreciation and amortization, and
calculated as net income plus (i) interest expense net of interest
income, (ii) income tax provision, and (iii) depreciation,
depletion and amortization. EBITDA should not be considered as an
alternative to net income or operating income as an indication of
our operating performance. EBITDA is not necessarily comparable to
similarly titled measures of other companies. EBITDA is presented
here in our discussion of guidance for future periods because it is
a widely used financial indicator used by investors and analysts to
measure performance. Safe Harbor Statement This news release
includes forward-looking statements. Collegiate Pacific cautions
that these statements are qualified by important factors that could
cause actual results to differ materially from those in the
forward-looking statements, including but not limited to Collegiate
Pacific's ability to successfully execute its acquisition plans and
growth strategy, integration of acquired businesses, weather
conditions, global economic conditions, product demand, financial
market performance, and other risks described in Collegiate
Pacific's most recent annual report on form 10-KSB, previous
quarterly reports on Form 10-Q, and current reports on Form 8-K,
each as filed with the Securities and Exchange Commission.
Collegiate Pacific cautions that the foregoing list of important
factors is not exclusive, any forward-looking statements included
in this news release is made as of the date of this news release,
and Collegiate Pacific does not undertake to update any
forward-looking statement.
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