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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________.
Commission File Number 1-10704
Sport Supply Group, Inc.
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2241783
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Diplomat Drive, Farmers Branch, Texas 75234 - 8914
------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 484-9484
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 preceeding 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 X No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act) Yes No X
Indicated below is the number of shares outstanding of each class of
the registrant's common stock as of October 30, 2003.
Title of Each Class of Common Stock Number Outstanding
----------------------------------- ------------------
Common Stock, $0.01 par value 8,917,244 shares
PART I. FINANCIAL INFORMATION
1. Financial Statements.
---------------------
Index to Consolidated Financial Statements Page
------------------------------------------ ----
Consolidated Balance Sheets as of September 26, 2003
(Unaudited) and March 28, 2003 3
Consolidated Statements of Operations for the three and six months
ended September 26, 2003 and September 27, 2002 (Unaudited) 4
Consolidated Statements of Cash Flows for the six months ended
September 26, 2003 and September 27, 2002 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 26, March 28,
2003 2003
----------- -----------
(unaudited)
CURRENT ASSETS :
Cash and equivalents $ 787,352 $ 2,142,302
Accounts receivable:
Trade, less allowance for doubtful
accounts of $458,000 at September 26,
2003 and $500,000 at March 28, 2003 15,147,330 19,756,947
Other 349,333 488,728
Inventories, net 18,325,469 19,564,314
Other current assets 522,982 576,653
Deferred tax assets 1,525,472 1,525,472
Net assets of discontinued operations 253,525 -
----------- -----------
Total current assets 36,911,463 44,054,416
----------- -----------
DEFERRED CATALOG EXPENSES 1,589,379 1,912,346
PROPERTY, PLANT AND EQUIPMENT :
Land 8,663 8,663
Buildings 1,605,102 1,605,102
Computer equipment & software 11,535,420 11,461,375
Machinery and equipment 6,567,516 6,558,502
Furniture and fixtures 1,509,688 1,508,393
Leasehold improvements 2,514,062 2,497,209
----------- -----------
23,740,451 23,639,244
Less -- Accumulated depreciation
and amortization (15,976,319) (15,119,308)
----------- -----------
7,764,132 8,519,936
----------- -----------
DEFERRED TAX ASSETS 3,974,753 3,974,753
TRADEMARKS, less accumulated amortization
of $1.0 million at Sept. 26, 2003 and
$995,000 at March 28, 2003 2,872,536 2,926,288
OTHER ASSETS, less accumulated amortization
of $610,000 at Sept. 26, 2003 and
$798,000 at March 28, 2003 512,480 607,900
----------- -----------
$ 53,624,743 $ 61,995,639
=========== ===========
CURRENT LIABILITIES :
Accounts payable 7,760,037 11,823,287
Other accrued liabilities 4,393,145 4,443,990
Notes payable and capital lease
obligations, current portion 72,287 71,082
----------- -----------
Total current liabilities 12,225,469 16,338,359
----------- -----------
NOTES PAYABLE AND CAPITAL LEASE
OBLIGATIONS, net of current portion 13,528,961 17,611,753
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY :
Preferred stock, par value $0.01, 100,000
shares authorized, no shares outstanding - -
Common stock, par value $0.01, 20,000,000
shares authorized, 9,362,397 shares issued
at September 26, 2003 and March 28, 2003,
8,917,244 shares outstanding at September
26, 2003 and March 28, 2003 93,624 93,624
Additional paid-in capital 48,101,331 48,101,331
Accumulated deficit (16,523,360) (16,348,146)
Treasury stock, at cost, 445,153 shares at
September 26, 2002 and March 28, 2003 (3,801,282) (3,801,282)
----------- -----------
27,870,313 28,045,527
----------- -----------
$ 53,624,743 $ 61,995,639
=========== ===========
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- For The Three Months Ended - - For The Six Months Ended -
September 26, September 27, September 26, September 27,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net revenues $ 25,896,678 $ 25,544,214 $ 51,687,793 $ 51,951,454
Cost of sales 18,585,257 17,696,357 37,044,925 36,088,743
----------- ----------- ----------- -----------
Gross profit 7,311,421 7,847,857 14,642,868 15,862,711
Selling, general &
administrative expenses 7,213,591 7,693,840 14,171,971 15,187,774
----------- ----------- ----------- -----------
Operating income 97,830 154,017 470,897 674,937
Interest expense (150,080) (147,095) (299,518) (315,224)
Other income (expense), net (1,447) 3,953 11,741 (3,994)
----------- ----------- ----------- -----------
Income before income taxes
and cumulative effect of
accounting change (53,697) 10,875 183,120 355,719
(Provision for) benefit of income
taxes for continuing operations 19,868 (4,024) (68,909) (133,931)
----------- ----------- ----------- -----------
Income from continuing operations (33,829) 6,851 114,211 221,788
Discontinued operations, net of tax (256,428) 15,374 (289,425) 10,158
Cumulative effect of
accounting change - - - (7,442,432)
----------- ----------- ----------- -----------
Net income (loss) $ (290,257) $ 22,225 $ (175,214) $ (7,210,486)
=========== =========== =========== ===========
Basic earnings (loss) per share:
Income from continuing operations $ 0.00 $ 0.00 $ 0.01 $ 0.02
Discontinued operations (0.03) 0.00 (0.03) 0.00
Cumulative effect of
accounting change 0.00 0.00 0.00 (0.83)
----------- ----------- ----------- -----------
Basic loss per share $ (0.03) $ 0.00 $ (0.02) $ (0.81)
=========== =========== =========== ===========
Diluted earnings (loss) per share:
Income from continuing operations $ 0.00 $ 0.00 $ 0.01 $ 0.02
Discontinued operations (0.03) 0.00 (0.03) 0.00
Cumulative effect of
accounting change 0.00 0.00 0.00 (0.83)
----------- ----------- ----------- -----------
Diluted loss per share $ (0.03) $ 0.00 $ (0.02) $ (0.81)
=========== =========== =========== ===========
Weighted average common shares
outstanding
Basic 8,917,244 8,917,244 8,917,244 8,917,244
Diluted 8,917,244 8,917,244 8,917,244 8,917,244
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- For The Six Months Ended -
September 26, September 27,
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES :
Income (loss) from continuing operations $ 114,211 $ (7,220,644)
Adjustments to reconcile income from
continuing operations to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,023,377 1,123,697
Provision for accounts receivable 254,997 193,158
Cumulative effect of accounting change - 7,442,432
Changes in assets and liabilities:
Decrease in accounts receivable 4,494,015 2,632,373
Decrease in inventories 1,238,845 2,112,912
Decrease in deferred catalog expenses
and other current assets 376,638 433,884
Decrease in accounts payable (4,063,250) (1,588,901)
(Increase) decrease in deferred
tax assets - 136,222
Increase (decrease) in accrued
liabilities (50,845) 247,130
(Increase) in other assets 2,974 (7,594)
----------- -----------
Operating cash flow provided
by continuing operations 3,390,962 5,504,669
Operating cash flow (used by) provided
by discontinued operations (542,950) 10,158
----------- -----------
Net cash provided by operating activites 2,848,012 5,514,827
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES :
Acquisitions of property, plant & equipment (121,375) (230,881)
CASH FLOWS FROM FINANCING ACTIVITIES :
Proceeds from issuance of notes payable 54,724,958 56,618,377
Payments of notes payable and capital
lease obligations (58,806,545) (61,919,074)
----------- -----------
Net cash used in financing activities (4,081,587) (5,300,697)
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (1,354,950) (16,751)
Cash and equivalents, beginning of period 2,142,302 586,911
----------- -----------
Cash and equivalents, end of period $ 787,352 $ 570,160
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION :
Cash paid during the period for interest $ 279,632 $ 353,967
=========== ===========
Cash paid during the period for income taxes $ 68,601 $ 68,774
=========== ===========
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 26, 2003
(Unaudited)
Basis of Presentation
---------------------
These consolidated financial statements reflect all normal and
recurring adjustments that are, in the opinion of management, necessary to
present a fair statement of Sport Supply Group, Inc.'s ("SSG") consolidated
financial position as of September 26, 2003 and the results of its
operations for the three and six month periods ended September 26, 2003 and
September 27, 2002.
The consolidated financial statements include the accounts of SSG and
its wholly-owned subsidiaries, Athletic Training Equipment Company, Inc., a
Delaware corporation and Sport Supply Group Asia Limited, a Hong Kong
corporation. All significant intercompany accounts and transactions have
been eliminated in consolidation. Effective March 2001, Sport Supply Group,
Inc. became a majority-owned subsidiary of Emerson Radio Corp. The
consolidated financial statements also include estimates and assumptions
made by management that affect the reported amounts of assets and
liabilities, the reported amounts of revenues and expenses, provisions for
and the disclosure of contingent assets and liabilities. Actual results
could materially differ from those estimates.
Certain financial information for previous fiscal years has been
reclassified to conform to the fiscal 2004 presentation.
Note 1 - Inventories
--------------------
Inventories are stated at the lower of cost or market. Cost is
determined using the standard cost method for items manufactured by us and
weighted-average cost for items purchased for resale. As of September 26,
2003 and March 28, 2003, inventories consisted of the following:
September 26, March 28,
2003 2003
----------- -----------
Raw materials $ 1,967,566 $ 2,095,242
Work-in-progress 390,350 318,165
Finished and purchased goods 17,239,214 18,223,657
----------- -----------
19,597,130 20,637,064
Less inventory allowance for
obsolete or slow moving items (1,271,661) (1,072,750)
----------- -----------
Inventories, net $ 18,325,469 $ 19,564,314
=========== ===========
Note 2 - Notes Payable and Capital Lease Obligations
----------------------------------------------------
As of September 26, 2003 and March 28, 2003, notes payable and capital
lease obligations consisted of the following:
September 26, March 28,
2003 2003
----------- -----------
Note payable under revolving line of credit,
Interest based on prime (4.00% at
September 26, 2003 and 4.25% at March 28,
2003) and LIBOR, as adjusted (3.76% at
March 28, 2003), due October 31, 2007,
collateralized by substantially all assets. $ 13,494,597 $ 17,521,601
Capital lease obligation, interest at
9.0%, payable in annual installments
of principal and interest totaling
$55,000 through August 2005. 73,579 117,963
Other 33,072 43,271
----------- -----------
Total 13,601,248 17,682,835
Less - current portion (72,287) (71,082)
----------- -----------
Long-term notes payable and capital
lease obligations, net $ 13,528,961 $ 17,611,753
=========== ===========
We have an amended Loan and Security Agreement with Congress Financial
Corporation to finance our working capital requirements through October 31,
2007. Under this amendment our line of credit is reduced from $25 million
to $20 million, our LIBOR borrowing rates are reduced from 2.50% to 2.25%,
our inventory and accounts receivable borrowing rates are increased and the
fees are reduced. The amended Loan and Security Agreement better meets our
working capital borrowing needs and reduces our interest and loan fee costs.
This agreement provides for revolving loans and letters of credit which, in
the aggregate, cannot exceed the lesser of $20 million or a "Borrowing Base"
amount based on specified percentages of eligible accounts receivable and
inventories. As of September 26, 2003, we had total available borrowings
under our senior credit facility of approximately $19.1 million, of which
approximately $13.5 million were outstanding. Amounts outstanding under the
senior credit facility are secured by substantially all the assets of Sport
Supply Group, Inc. and its subsidiaries. Pursuant to the Loan and Security
Agreement, we are restricted from, among other things, paying cash dividends
and entering into certain transactions without the lender's prior consent
and we are required to maintain certain net worth levels.
Note 3 - Capital Structure
--------------------------
As of September 26, 2003, our issued and outstanding capital stock
consisted solely of common stock. We have 271,817 options outstanding under
the stock option plan with exercise prices ranging from $0.95 to $9.44 per
share. If the options were exercised, all holders would have rights similar
to common shareholders.
Note 4 - Income (Loss) Per Common Share
----------------------------------------
Basic income (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted income (loss) per share
reflects the potential dilution that could occur if securities convertible
or exercisable into shares of common stock were converted or exercised into
common stock.
The following table sets forth the computation of basic and diluted
income (loss) per share:
For the Three Months Ended For the Six Months Ended
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2003 2002 2003 2002
--------- --------- --------- ---------
Numerator:
----------
Net income (loss) ($290,257) $22,225 ($175,214) ($7,210,486)
========== ======= ========== ============
Denominator:
------------
Weighted average
common shares - basic 8,917,244 8,917,244 8,917,244 8,917,244
========= ========= ========= =========
Effect of dilutive
securities:
Employee stock options 0 2,649 0 0
--------- --------- --------- ---------
Weighted average
common shares - diluted 8,917,244 8,919,893 8,917,244 8,917,244
========= ========= ========= =========
Per Share Calculations:
-----------------------
Net income (loss) - basic ($0.03) $0.00 ($0.02) ($0.81)
==== ===== ==== =====
Net income (loss) - diluted ($0.03) $0.00 ($0.02) ($0.81)
==== ===== ==== =====
Securites excluded from
weighted average common
shares diluted because their
effect would be antidilutive 271,817 361,054 271,817 361,054
------- ------- ------- -------
Note 5 - Income Taxes
---------------------
We have a net operating loss carryforward included in net deferred tax
assets that can be used to offset future taxable income and can be carried
forward for 15 to 20 years. As of September 26, 2003 we have net deferred
tax assets of approximately $5.5 million. We believe the net deferred tax
assets will be realized through tax planning strategies available in future
periods and future profitable operating results. Although realization is
not assured, we believe it is more likely than not that all of the net
deferred tax assets will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced or eliminated in the near
term if certain tax planning strategies are not successfully executed or
estimates of future taxable income during the carryforward period are
reduced. If we determine that we would not be able to realize all or part
of the net deferred tax asset in the future, an adjustment to the deferred
tax asset would be charged to income in the period such determination was
made.
In addition to the foregoing, as of September 26, 2003, we have a $5.6
million valuation allowance relating to deferred tax assets. We record a
valuation allowance to reduce the amount of our deferred tax assets to the
amount that is more likely than not to be realized. While we have
considered future taxable income and ongoing tax planning strategies in
assessing the need for the valuation allowance, in the event that we
determine that we would be able to realize our deferred tax assets in the
future in excess of the net recorded amount, an adjustment to the deferred
tax asset would increase income in the period such determination was made.
Note 6 - Stock Based Compensation
----------------------------------
We have a stock option plan under which certain officers, directors and
employees have been granted options. All the options have been granted at
prices equal to the market value of the shares at the time of the grant and
expire on the tenth anniversary of the grant date. Our stock-based
compensation is measured in accordance with the provisions of Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, no compensation expense
is recognized for fixed option plans because the exercise prices of employee
stock options equal or exceed the market prices of the underlying stock on
the dates of grant.
The following table represents the effect on net income (loss) and
income (loss) per share if we had applied the fair value based method and
recognition provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," to stock based employee
compensation.
For the For the For the For the
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
September September September September
26, 2003 27, 2002 26, 2003 27, 2002
-------- -------- -------- --------
Net income (loss), as reported ($290,257) $22,225 ($175,214) ($7,210,486)
========== ======= ========== ============
Deduct: Total stock-based
employee compensation expense
determined under the fair
value method for all awards,
net of related tax effects -- -- (356) --
Pro forma income (loss) ($290,257) $22,225 ($175,570) ($7,210,486)
========== ======= ========== ============
Income (loss) per share -
basic and diluted:
As reported ($0.03) $0.00 ($0.02) ($0.81)
========== ======= ========== ============
Pro forma ($0.03) $0.00 ($0.02) ($0.81)
========== ======= ========== ============
Note 7 - New Accounting Pronouncements
--------------------------------------
In January 2003, the FASB issued FASB Interpretation (FIN) 46,
"Consolidation of Variable Interest Entities". FIN 146 requires a company
to consolidate a variable interest entity if it is designated as the primary
beneficiary of that entity even if the company does not have a majority of
voting interests. A variable interest entity is generally defined as an
entity where its equity is unable to finance its own activities or where the
owners of the entity lack the risk and reward of ownership. In October
2003, the FASB agreed to defer the effective date of FIN 46 for variable
interests held by public companies in all entities that were acquired
prior to February 1, 2003. This deferral is to allow time for certain
implementation issues to be addressed through the issuance of a potential
modification to the interpretation. The deferral revised the effective date
for consolidation of these entities until the end of the first interim or
annual period ending after December 15, 2003. We do not believe that FIN 46
will have any material impact on our financial statements.
In April 2003, the FASB issued FAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." FAS 149 amends and clarifies
financial accounting and reporting for derivative instruments. This
statement is effective for contracts entered into or modified after June 30,
2003. We adopted this statement as of June 28, 2003 and it did not have any
material impact on our financial statements.
In May 2003, the FASB issued FAS 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," which
addresses how an issuer classifies and measures financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or
an asset in some circumstances) because that financial instrument embodies
an obligation of the issuers. This Statement shall be effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise shall be effective at the beginning of the first interim period
beginning after June 15, 2003. For financial instruments created before the
issuance date of this Statement and still existing at the beginning of the
interim period of adoption, transition shall be achieved by reporting the
cumulative effect of a change in an accounting principle by initially
measuring the financial instruments at fair value or other measurement
attribute required by this Statement. We adopted this statement as of June
28, 2003 and it did not have any material impact on our financial
statements.
Note 8 - Goodwill and Other Intangible Assets
---------------------------------------------
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). SFAS 142 requires that goodwill not be
amortized but instead be tested for impairment at least annually by
reporting unit. We adopted SFAS 142 effective March 30, 2002 and ceased
recording goodwill amortization on March 30, 2002 and recorded a non-cash
"cumulative effect of change in accounting principle" of approximately
$7.4 million ($0.83 per basic and diluted share) for the three months
ended June 28, 2002.
As of September 26, 2003, estimated amortization expense of other
intangible assets for each of the next five years is as follows (in
thousands):
2004 $ 267
2005 143
2006 115
2007 110
2008 104
Thereafter 2,407
-------
$ 3,146
=======
Note 9 - Discontinued Operations
--------------------------------
During October 1999, we acquired substantially all of the assets of
Spaulding Athletic, which was a team dealer located in Little Rock,
Arkansas. A team dealer is a local sporting goods store that sells its
products primarily to teams in its local market. Spaulding Athletic
serviced the local institutional customers and teams with a full line of
athletic products.
On July 15, 2003, we discontinued operations at Spaulding Athletic, our
team dealer located in Little Rock, Arkansas. In October 2003, we sold
substantially all of the assets at that location (other than cash and
accounts receivable). This closure and discontinued operation resulted in a
pretax loss of approximately $358,000 for the six months ended September and
is included in the discontinued operations in the accompanying consolidated
statement of operations for the three and six month periods ended September
26, 2003.
The following table represents net current assets and liabilities of
discontinued operations as of September 26, 2003 and the results of
operations for the three and six month periods ended September 26, 2003 and
the three and six month periods ended September 27, 2002.
September 26, 2003
------------------
Current assets $363,874
Current liabilities ($110,349)
-------
Net current assets $253,525
For the For the For the For the
Three Three Six Six
Months Months Months Months
ended ended ended ended
September September September September
26, 2003 27, 2002 26, 2003 27, 2002
-------- -------- -------- --------
Net revenues $170,346 $543,232 $218,840 $909,149
Earnings(loss) from operations (305,539) 20,727 (358,334) 12,448
Income tax (provision) benefit 49,111 (5,353) 68,909 (2,290)
-------- -------- -------- --------
Total discontinued
operations, net ($256,428) $ 15,374 ($289,425) $10,158
======== ======== ======== ========
Note 10 - Subsequent Events
During February 1999, we acquired substantially all of the assets of
Larry Black Sporting Goods, Inc., a team dealer with locations in Enid,
Oklahoma and Wichita, Kansas. Larry Black Sporting Goods, Inc. serviced the
local institutional customers and teams with a full line of athletics
products.
In October 2003, we discontinued operations at our team dealer located
in Enid, Oklahoma. In addition, in November 2003, we sold substantially all
the assets (other than cash and accounts receivable) of our team dealer
located in Wichita, Kansas.
The following represents proforma net current assets and liabilities of
the Enid, Oklahoma and Wichita, Kansas Larry Black team dealer operations as
of September 26, 2003 and the results of operations before income taxes for
the three and six month periods ended September 26, 2003 and the three and
six month periods ended September 27, 2002. The results of discontinuing
the Enid, Oklahoma and Wichita, Kansas Team Dealer locations will be
reflected in the December 2003 quarterly financial statements.
September 26, 2003
------------------
Current assets $2,214,301
Current liabilities ($993,654)
---------
Net current assets $1,220,647
For the For the For the For the
Three Three Six Six
Months Months Months Months
ended ended ended ended
September September September September
26, 2003 27, 2002 26, 2003 27, 2002
-------- -------- -------- --------
Net revenues $1,232,916 $1,833,072 $2,455,478 $3,363,413
Earnings(loss) from operations $55,120 $14,286 $22,854 ($42,364)
Note 11 Contingencies
---------------------
During the past several years, we used the services of Strategic
Technologies, Inc. ("STI") to process our outbound truck freight bills. STI
audited freight bills submitted by our carriers and provided us a detailed
listing of invoices that were scheduled for payment at which time we
transferred funds to STI. STI was required to issue checks to the carriers
within forty-eight (48) hours of receipt of our funds. STI filed for
reorganization under Chapter 11 of the U. S. Bankruptcy Code on July 19,
2002 in the United States Bankruptcy Court in the District of New Jersey,
Case No. 02-37935 (NLW). The case was converted to Chapter 7 of the U. S.
Bankruptcy Code on July 31, 2002. In certain circumstances, we have had to
pay our freight carriers for invoices that we previously paid to STI and
attempt to recover such monies from STI. We have filed a proof of claim of
approximately $593,000 for unpaid shipping charges and service fees paid to
STI. No assurance can be made that we will be able to recover such money.
During the past several years, we used the services of Consolidated
Freightways to ship products to our customers. Consolidated Freightways
Corporation filed for reorganization under Chapter 11 of the U. S.
Bankruptcy Code on September 2, 2002 in the United States Bankruptcy Court
in the District of California, Case No. RS 02-24284-MG. On August 25, 2003,
the Bankruptcy Trustee for Consolidated Freightways Corporation of Delaware
filed a lawsuit in the United States Bankruptcy Court, Central District
of California, to collect fees for the transportantion of goods that are
alleged to be owed to the bankruptcy estate. The Trustee's initial claim is
$866,683.72, which includes approximately $265,000 in collection fees and
late payment charges. SSG disputes the amount claimed by the Trustee and
claims an offset of approximately $308,000 for goods lost or damaged by
Consolidated Freightways in transit.
It is not possible at this time to determine the ultimate liabilities
that we may incur resulting from these lawsuits, claims, and proceedings.
If these matters were to be ultimately resolved unfavorably at amounts
exceeding our reserves, an outcome not currently anticipated, it is possible
that such outcome could have a material adverse effect on our consolidated
financial position or results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
Results of Operations
---------------------
Net Revenues. Net revenues increased approximately $352,000 (1.4%) and
decreased $264,000 (0.5%) for the three and six months periods ended
September 26, 2003, respectively, as compared to same periods last year.
The increase in net revenues for the three month period is the result of a
$1.2 million increase in core institutional revenues as a result of more
aggressive pricing and other revenue generating programs. This increase in
revenues for the three month period was partially offset by a $383,000
decrease in revenues generated from our wholly-owned subsidiary, Athletic
Training Equipment Company, Inc. ("ATEC"), and a $422,000 decrease in
revenues generated from our Team Dealer operations.
The decrease in revenues for the six month period is the result of an
$811,000 decrease in ATEC revenues and a $635,000 decrease in Team Dealer
revenues. This decrease was partially offset by a $1.2 million increase in
core institutional revenues.
Orders placed over the Internet for the quarter increased to $1.2 million as
compared to $1.1 million for the same three month period last year, and
increased to $2.9 million for the six month period as compared to $2.2
million for the same period last year.
All of our team dealer operations, other than our team dealer located in
Dallas, Texas, have either been sold or otherwise discontinued. See Item 1.
Financial Statements-Note 9 - Discontinued Operations and Note 10-Subsequent
Events.
We expect continued revenue challenges in fiscal year 2004, due to increased
competition, a decreased salesforce, continued restrictions in state,
federal and school budgets, an overall soft economy, and declining
participation and funding of youth sports organizations. We are in the
process of implementing a number of sales and marketing programs in order to
address these obstacles.
Gross Profit. Gross profit decreased by approximately $536,000 (6.8%) and
$1.2 million (7.7%) for the three and six month periods ended September 26,
2003, respectively, as compared to same periods last year. As a percentage
of net revenues, gross profit decreased 2.5% to 28.2 % from 30.7% for the
three month period and decreased 2.2% to 28.3% from 30.5% for the six month
period ended September 26, 2003 as compared to the same periods last year.
We believe the decrease in gross profit for the three and six month periods
is primarily the result of more aggressive pricing resulting in lower gross
profits and increased import freight and import operations costs. Increased
importing costs represented 1.1% of the 2.5% gross profit decline in the
three month period and 0.9% of the 2.2% gross profit decline in the six
month period ended September 26, 2003.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased approximately $480,000 (6.2%) and $1.0
million (6.7%) for the three and six month periods ended September 26, 2003,
respectively, as compared to the same periods last year. As a percentage of
net revenues, selling, general and administrative expenses decreased to
27.9% from 30.1% for the three month period and decreased to 27.4% from
29.2% for the six month period ended September 26, 2003 as compared to the
same period last year. The decreases for the three and six month periods
were primarily a result of the following:
(i.) A decrease in payroll related expense of approximately $211,000 for the
three month period and approximately $524,000 for the six month period,
attributable to reduced headcount.
(ii.) A decrease in selling and promotional expense of approximately
$145,000, for the three month period and $377,000 for the six month
period, primarily as a result of reduced marketing spending.
We expect continued selling, general and administrative expense decreases
this fiscal year as compared to the prior year due to our ongoing cost
reduction program. In addition, we have completed cost benefit analyses of
our Huffy and AMF license agreements and have decided not to renew such
license agreements. We expect that this decision will reduce our royalty
expense in future fiscal years by approximately $185,000, annually, without
an offsetting reduction to revenues.
Interest Expense. Interest expense increased approximately $3,000 (2.0%)
and decreased $16,000 (5.0%) for the three and six month periods ended
September 26, 2003, respectively, as compared to the same periods last year.
Income Tax Expense. We recorded income tax benefit of approximately $20,000
and expense of approximately $69,000 for the three and six month periods
ended September 26, 2003, respectively, as compared to income tax expense of
approximately $4,000 and approximately $134,000 for the three and six month
periods last year, respectively. We have a net operating loss carryforward
included in net deferred tax assets that can be used to offset future
taxable income and can be carried forward for 15 to 20 years. We believe the
net deferred tax assets will be realized through tax planning strategies
available in future periods and future profitable operating results.
Although realization is not assured, we believe it is more likely than not
that all of the net deferred tax assets will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced or
eliminated in the near term if certain tax planning strategies are not
successfully executed or estimates of future taxable income during the
carryforward period are reduced. If we determine that we would not be able
to realize all or part of the net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the
period such determination was made.
In addition to the foregoing, as of September 26, 2003, we have a $5.6
million valuation allowance relating to deferred tax assets. We record a
valuation allowance to reduce the amount of our deferred tax assets to the
amount that is more likely than not to be realized. While we have considered
future taxable income and ongoing tax planning strategies in assessing the
need for the valuation allowance, in the event that we determine that we
would be able to realize our deferred tax assets in the future in excess of
the net recorded amount, an adjustment to the deferred tax asset would
increase income in the period such determination was made.
Income from Continuing Operations. Income from continuing operations for
the three and six month periods ended September 26, 2003 decreased by
approximately $41,000 and approximately $108,000, respectively as compared
to the same periods last year. The decrease in income from continuing
operations was primarily due to lower gross profits, as discussed above.
Discontinued Operations. In July 2003, we discontinued operations at
Spaulding Athletic, our team dealer located in Little Rock, Arkansas. As a
result, we have recorded losses from discontinued operations, net of income
tax, of approximately $256,000 and $289,000 for the three and six month
periods ended September 26, 2003, respectively. These expenses include
estimated reserves for accounts receivable and inventory. See Item 1.
Financial Statements - Note 9 - Discontinued Operations.
Cumulative Effect of Accounting Change. On March 30, 2002 we adopted
Financial Accounting Standards Board Statement No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). SFAS 142 requires that goodwill not be
amortized but instead be tested for impairment at least annually by
reporting unit. Goodwill is required to be tested for impairment in a
transitional test upon adoption and then at least annually by reporting
unit. As a result of our impairment testing, we recorded a non-cash
"cumulative effect of accounting change" impairment write down of
approximately $7.4 million for the six month period ended September 27,
2002.
Net Income (Loss). Net loss increased to approximately $290,000 and
decreased to a loss of approximately $175,000 for the three and six month
periods ended September 26, 2003, respectively, as compared to a net income
of approximately $22,000 and a net loss of approximately $7.2 million for
the three and six month periods ended September 27, 2002, respectively. Net
loss per share increased to ($0.03) and ($0.02) for the three and six month
periods ended September 27, 2002, respectively, from earnings per share of
$0.00 and $(0.81) for the three and six month periods ended September 27,
2002, respectively. The improvement for the six month period is due largely
to the cumulative effect of accounting change recorded last year.
Liquidity and Capital Resources
-------------------------------
We have an amended Loan and Security Agreement with Congress Financial
Corporation to finance our working capital requirements through October 31,
2007. Under this amendment our line of credit is reduced from $25 million
to $20 million, our LIBOR borrowing rates are reduced from 2.50% to 2.25%,
our inventory and accounts receivable borrowing rates are increased and the
fees are reduced. The amended Loan and Security Agreement better meets our
working capital borrowing needs and reduces our interest and loan fee costs.
This agreement provides for revolving loans and letters of credit which, in
the aggregate, cannot exceed the lesser of $20 million or a "Borrowing Base"
amount based on specified percentages of eligible accounts receivable and
inventories. As of September 26, 2003, we had total available borrowings
under our senior credit facility of approximately $19.1 million, of which
approximately $13.5 million were outstanding. Amounts outstanding under the
senior credit facility are secured by substantially all the assets of Sport
Supply Group, Inc. and its subsidiaries. Pursuant to the Loan and Security
Agreement, we are restricted from, among other things, paying cash dividends
and entering into certain transactions without the lender's prior consent
and we are required to maintain certain net worth levels.
Our working capital decreased approximately $3.0 million during the six
month period ended September 26, 2003, from $27.7 million at March 28, 2003
to $24.7 million at September 26, 2003. This decrease in working capital is
primarily a result of seasonal decreases in trade receivables of
approximately $4.6 million, seasonal decreases in inventories of $1.2
million, and a decrease in cash of approximately $1.4 million. These
decreases were partially offset by a decrease in trade accounts payable of
approximately $4.1 million.
We believe we can satisfy our working capital requirements necessary to
support our current operations from borrowings under our credit facility and
cash flows from operations. However, future losses would negatively impact
our results of operations and impact our ability to support our working
capital needs.
We do not currently have any significant commitments for capital
expenditures.
The following table sets forth our contractual obligations at September 26,
2003 for the periods shown:
Due in Due in
Due within Two to Four to
one year three years five years Thereafter Total
------------------------------------------------------------
Notes payable $ 57,557 $ 25,202 $13,494,597 $ -- $13,577,356
Capital lease 14,730 9,162 -- -- 23,892
obligations
Leases 2,128,468 2,578,321 653,414 -- 5,360,203
------------------------------------------------------------
Total $2,200,755 $2,612,685 $14,148,011 $ -- $18,961,451
============================================================
Contingencies
-------------
During the past several years, we used the services of Strategic
Technologies, Inc. ("STI") to process our outbound truck freight bills. STI
audited freight bills submitted by our carriers and provided us a detailed
listing of invoices that were scheduled for payment at which time we
transferred funds to STI. STI was required to issue checks to the carriers
within forty-eight (48) hours of receipt of our funds. STI filed for
reorganization under Chapter 11 of the U. S. Bankruptcy Code on July 19,
2002 in the United States Bankruptcy Court in the District of New Jersey,
Case No. 02-37935 (NLW). The case was converted to Chapter 7 of the U. S.
Bankruptcy Code on July 31, 2002. In certain circumstances, we have had to
pay our freight carriers for invoices that we previously paid to STI and
attempt to recover such monies from STI. We have filed a proof of claim of
approximately $593,000 for unpaid shipping charges and service fees paid to
STI. No assurance can be made that we will be able to recover such money.
During the past several years, we used the services of Consolidated
Freightways to ship products to our customers. Consolidated Freightways
Corporation filed for reorganization under Chapter 11 of the U. S.
Bankruptcy Code on September 2, 2002 in the United States Bankruptcy Court
in the District of California, Case No. RS 02-24284-MG. On August 25, 2003,
the Bankruptcy Trustee for Consolidated Freightways Corporation of Delaware
filed a lawsuit in the United States Bankruptcy Court, Central District
of California, to collect fees for the transportantion of goods that are
alleged to be owed to the bankruptcy estate. The Trustee's initial claim is
$866,683.72, which includes approximately $265,000 in collection fees and
late payment charges. SSG disputes the amount claimed by the Trustee and
claims an offset of approximately $308,000 for goods lost or damaged by
Consolidated Freightways in transit.
It is not possible at this time to determine the ultimate liabilities
that we may incur resulting from these lawsuits, claims, and proceedings.
If these matters were to be ultimately resolved unfavorably at amounts
exceeding our reserves, an outcome not currently anticipated, it is possible
that such outcome could have a material adverse effect on our consolidated
financial position or results of operations.
Certain Factors that May Affect Our Business or Future Operating Results
------------------------------------------------------------------------
This report contains various forward looking statements and information
that are based on our beliefs as well as assumptions made by and information
currently available to us. When used in this report, the words
"anticipate," "believe," "estimate," "expect," "predict," "intend,"
"project" and similar expressions are intended to identify forward looking
statements. Such statements are made as of the date of this Report and are
subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, expected or projected. Several key factors that may have a
direct bearing on our results are set forth below.
Future trends for revenues and profitability remain difficult to
predict. We continue to face many risks and uncertainties, including:
1. general and specific market and economic conditions;
2. budgetary restrictions of schools and government agencies;
3. unanticipated disruptions or slowdowns in operations;
4. high fixed costs;
5. competitive factors;
6. continuation of existing license agreement;
7. foreign supplier related issues;
8. use of deferred tax asset;
9. product liability and insurance; and
10. increased internet migration.
General and Specific Market and Economic Conditions
---------------------------------------------------
The general economic condition in the United States could affect
pricing and availability of raw materials such as metals, petroleum and
other commodities used in manufacturing certain products and certain
purchased finished goods as well as transportation costs. Any material price
increases to our customers could have an adverse effect on revenues and any
price increases from vendors could have an adverse effect on our costs.
Professional sports have a significant impact on the market conditions for
each individual sport. Collective bargaining, labor disputes, lockouts or
strikes by a professional sport could have a negative impact on our
revenues. There is significant competition in the retail and institutional
sporting goods market. Difficult economic conditions and significant
competition in our market could have a negative impact on both revenues and
gross margins.
Budgetary Restrictions of Schools and Government Agencies
---------------------------------------------------------
Much of our business is dependent on the budgetary funding of schools,
as well as local, state and federal government agencies. Many U.S. states
are currently reporting budget deficits and cost cutting measures. Decreases
in school athletic budgets will continue to increase the pricing and profit
margin competitive pressures in the institutional sporting goods market.
Restrictions or reductions to the funding or budgeted spending of these
entities could adversely affect our results of operations.
Unanticipated Disruptions or Slowdowns in Operations
----------------------------------------------------
Our ability to provide high quality customer service, process and
fulfill orders and manage inventory depends on: (i.) the efficient and
uninterrupted operation of our call center, distribution center,
manufacturing facilities, and management information systems and (ii.) the
timely performance of vendors, catalog printers and shipping companies. Any
material disruption or slowdown in the operation of our call center,
distribution center, manufacturing facilities or management information
systems, or comparable disruptions or slowdowns suffered by our principal
service and product suppliers, could cause delays in our ability to receive,
process and fulfill customer orders and may cause orders to be canceled,
lost or delivered late, goods to be returned or receipt of goods to be
refused.
We ship approximately 70% of our products using United Parcel Service
("UPS"). As experienced in 1997, a strike by UPS or any of our other major
carriers could adversely affect our results of operations due to not being
able to deliver our products in a timely manner and using other more
expensive freight carriers. Although we have analyzed the cost-benefit
effect of using other carriers, we continue to utilize UPS for the majority
of our small package shipments and believe this is most advantageous to our
company.
In addition to the foregoing, the International Longshore and Warehouse
Union ("ILWU"), which is the union of dock workers that move the cargo (such
as import containers) along the West Coast, reached a contract agreement on
November 23, 2002 with the Pacific Maritime Association ("PMA"), a group of
global ship owners and terminal operators. A strike by the ILWU, or lockout
by the PMA, as experienced in September 2002, would significantly slow the
receipt of our import products and could cause delays in our ability to
process and fulfill customer orders. Any strike or lockout could also cause
an increase in backlog and freight charges such as port congestion
surcharges, extended peak season surcharges, charges as a result of force
majeure clauses, etc.
High Fixed Costs
----------------
Operations and maintenance of our call center, distribution center,
manufacturing facilities and management information systems involve
substantial fixed costs. Paper, packaging, shipping and postage are
significant components of our costs. Catalog marketing entails substantial
paper, postage, and costs associated with catalog development. Each of
these is subject to price fluctuations.
Competitive Factors
-------------------
The institutional market for sporting goods and leisure products is
highly competitive and there are no significant barriers to enter this
market. The size of this market has encouraged the entry of new competitors
as well as increased competition from established companies. Competitors
include large retail operations that also sell to the institutional market,
other catalog and direct marketing companies, team dealers, and Internet
sellers. Increased competition could result in pricing pressures, erosion
in gross profit margins, increased marketing expenditures and loss of market
share and could have a material adverse effect on our results of operations.
Continuation of Existing License Agreement
------------------------------------------
In February 1992, we acquired two separate licenses to use several
trade names, styles, and trademarks (including, but not limited to,
MacGregor[R]). On December 21, 2000, the license relating to the use of the
MacGregor[R] trademark was amended and restated in its entirety. The license
agreement permits us to manufacture, promote, sell, and distribute to
designated customers throughout the world, specified sports related
equipment and products relating to baseball, softball, basketball, soccer,
football, volleyball, and general exercise. The license agreement requires
us to pay royalties based upon sales of MacGregor[R] branded products, with
the minimum annual royalty set at $100,000. Futhermore, the license
agreement is exclusive with respect to certain customers and non-exclusive
with respect to others. The license agreement has an original term of
forty (40) years, but will automatically renew for successive forty (40)
year periods unless terminated in accordance with the terms of the license.
We have converted a substantial portion of our products to the MacGregor[R]
brand, which is believed to be a widely recognized trade name in the
sporting goods industry. Termination of this license agreement could have a
material adverse effect on our results of operations.
Foreign Supplier Related Issues
-------------------------------
Approximately 30% of our total product costs are from products
purchased directly from foreign suppliers located primarily in the Far East.
In addition, we believe foreign manufacturers produce many of the products
we purchase from domestic suppliers. We are subject to risks of doing
business abroad, including delays in shipments, adverse fluctuations in
foreign currency exchange rates, increases in import duties, decreases in
quotas, changes in custom regulations, acts of God (such as earthquakes),
war and political turmoil. The occurrence of any one or more of the
foregoing could adversely affect our operations.
Use of Deferred Tax Asset
-------------------------
We believe our net deferred tax assets will be realized through tax
planning strategies available in future periods and future profitable
operating results. Although realization is not assured, we believe it is
more likely than not that our remaining net deferred tax assets will be
realized. The amount of the deferred tax asset considered realizable,
however, could be reduced or eliminated in the near term if certain tax
planning strategies are not successfully executed or estimates of future
taxable income during the carryforward period are reduced. If we determine
that we would not be able to realize all or part of the net deferred tax
asset in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.
Product Liability and Insurance
-------------------------------
Because of the nature of our products, we are periodically subject to
product liability claims resulting from personal injuries. We may become
involved in various lawsuits incidental to our business, some of which
relate to claims allegedly resulting in substantial permanent paralysis.
Significantly increased product liability claims continue to be asserted
successfully against manufacturers and distributors of sports equipment
throughout the United States resulting in general uncertainty as to the
nature and extent of manufacturers' and distributors' liability for personal
injuries. See Part II. Item 1. -- "Legal Proceedings".
In recent years, product liability insurance has become much more
expensive, more restrictive and more difficult to obtain. There can be no
assurance that our general product liability insurance will be sufficient to
cover any successful product liability claims made against us. In our
opinion, any ultimate liability arising out of currently pending product
liability claims will not have a material adverse effect on our financial
condition or results of operations. However, any claims substantially in
excess of our insurance coverage, or any substantial claim not covered by
insurance, could have a material adverse effect on our financial condition
and results of operations.
Increased Internet Migration
----------------------------
We have significant investments in our Internet websites and IT
platform based on our belief that, in the future, an increasing portion of
our customer base will use the Internet as the predominant method for
quoting, ordering, procuring their products and performing customer service
inquires. We have cost structured our business anticipating customer
migration to the Internet to continue. If the increase in migration to the
Internet does not continue, we could experience reductions in revenue or
additional costs to market to and service these customers through direct
mail expense and increased call center personnel.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There have been no significant changes from items disclosed in Form
10-K for the fiscal year ended March 28, 2003.
Item 4. Controls and Procedures
-----------------------
(a) Disclosure controls and procedures. As of the end of the period
covered by this Quarterly Report on Form 10-Q, we have carried out an
evaluation, with the participation of our management, including the
Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures pursuant to
Securities Exchange Act Rule 13a-15. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in ensuring that
information required to be disclosed by us in the reports that we file
or submit under the Securities Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's
rules and forms.
(b) Changes in internal controls over financial reporting. There have been
no changes in our internal control over financial reporting that
occurred during our second fiscal quarter to which this Quarterly
Report on Form 10-Q relates that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Periodically, we become involved in various claims and lawsuits
incidental to our business. In management's opinion, any ultimate liability
arising out of currently pending claims will not have a material adverse
effect on our financial condition or results of operations. However, any
claims substantially in excess of our insurance coverage, or any substantial
claim that may not be covered by insurance or any significant monetary
settlement, could have a material adverse effect on our financial condition
or results of operations.
Item 2. Changes in Securities and Proceeds
----------------------------------
None.
Item 3. Defaults Upon Senior Securities
(a) None.
(b) None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Our Annual Meeting of Stockholder's was held on August 28, 2003, at
which time the shareholders elected the following nominees to the Board of
Directors: Geoffrey P. Jurick, John P. Walker, Peter G. Bunger, Carl D.
Harnick, and Thomas P. Treichler. Election of the Board of Directors was
the only matter submitted for shareholder vote. There were 8,917,211 shares
of our outstanding capital stock entitled to vote at the record date for
this meeting and there were present at such meeting, in person or by proxy,
stockholders holding 8,439,746 shares of our Common Stock, which represented
approximately 94.6% of the total capital stock outstanding and entitled to
vote. There were 8,439,746 shares voted on the matter of the election of
directors. The result of the votes cast regarding each nominee for office
was:
ELECTION OF DIRECTORS
---------------------
Directors Votes For Votes Withheld
--------- --------- --------------
(1) Geoffrey P. Jurick 7,617,127 822,619
(2) John P. Walker 7,617,127 822,619
(3) Peter G. Bunger 7,617,127 822,619
(4) Carl D. Harnick 7,908,227 531,519
(5) Thomas P. Treichler 7,908,227 531,519
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit
Nbr. Description of Exhibit
Exhibit 3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference from Exhibit 4.1 to
the Company's Registration Statement on Form S-8
(Registration No. 33-80028)).
Exhibit 3.1.1 Certificate of Amendment of Amended and Restated
Certificate of Incorporation to the Company
(incorporated by reference from Exhibit 4.1 to the
Company's Registration Statement on Form S-8
(Registration No. 33-80028)).
Exhibit 3.2 Amended and Restated Bylaws of the Company (incorporated
by reference from Exhibit 3.2 to the Company's Report on
Form 10-K for the year ended November 1, 1996).
Exhibit 4.1 Specimen of Common Stock Certificate (incorporated by
reference from Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-39218))
Exhibit 10.1 (*) Separation Agreement dated September 15, 2003 between
the Company and John P. Walker.
Exhibit 10.2 (*) Amendment No. 1 to Voit Licensing Agreement dated August
1, 2003 between the Company and Voit Corporation.
Exhibit 10.3 (*) Amendment No. 1 to Amended and Restated Stock Option
Plan dated August 28, 2003.
Exhibit 10.4 (*) Third Amendment to Loan and Security Agreement dated
November 6, 2003 by and between the Company and Congress
Financial Corporation.
Exhibit 31.1 (*) Certification of the Company's Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 (*) Certification of the Company's Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 (*) Certification of the Company's Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
-----------------------------
( * ) = Filed Herewith
(b) Reports on Form 8-K
Current Report on Form 8-K dated and filed July 14, 2003, furnishing
the press release announcing our financial results for the year ended
March 30, 2003.
Current Report on Form 8-K dated and filed August 12, 2003, furnishing
the press release announcing our financial results for the quarter
ended June 27, 2003.
Current Report on Form 8-K dated and filed October 6, 2003, furnishing
the press release announcing the appointment of Geoffrey P. Jurick as
President.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
We hereby certify that this Report on Form 10-Q fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in this report fairly presents, in
all material respects, the financial condition and results of operations of
the Company.
Dated: November 10, 2003
SPORT SUPPLY GROUP, INC.
By: /s/ Geoffrey P. Jurick
--------------------------
Geoffrey P. Jurick
Chief Executive Officer
By: /s/ Robert K. Mitchell
--------------------------
Robert K. Mitchell
Chief Financial Officer