EXHIBIT 5(a)
FOR FURTHER INFORMATION:
At the Company:
John P. Walker, President - 972/406-7108
Robert K. Mitchell, Chief Financial Officer - 972/406-3484
FOR IMMEDIATE RELEASE
Monday, May 15, 2000
SPORT SUPPLY GROUP, INC. RECEIVES APPROVAL FOR
CONTINUED LISTING ON NEW YORK STOCK EXCHANGE
Company Announces Second Quarter Results and
Business to Business e Commerce Strategic Direction
May 15, 2000 Dallas, Texas - Sport Supply Group, Inc. (NYSE: "GYM
or SSG") today announced it has received formal notification from
the New York Stock Exchange (the "Exchange") to continue listing
its shares on the Big Board. As previously reported, the Company
was notified by the Exchange that it did not meet certain newly
enacted listing requirements. Subsequent to the notice, the
Company submitted its 18-month business plan and held several
conferences with the Exchange to review the Company's short and
long term objectives and business strategies. Pursuant to these
conferences and discussion of the Company's business plan, the
Exchange agreed to continue to list the Company's shares. The
Company's continued listing is contingent on meeting the
Exchange's listing requirements and the Exchange may review the
Company's performance and stock price on a periodic basis to
determine this compliance.
Sport Supply Group also reported financial results for the
three and six-months ended March 31, 2000. Net revenues, operating
income and earnings per share before nonrecurring litigation
charges for the quarter ended March 31, 2000 were approximately
$34.8 million, $2.1 million and $.19 per share, respectively, as
compared to $35.5 million, $5.2 million and $.41 per share,
respectively, for the same period last year. Net revenues,
operating income and earnings per share before nonrecurring
litigation charges for the six-months ended March 31, 2000 were
approximately $53.8 million, $781 thousand, and $.04 per share,
respectively, as compared to approximately $50.3 million, $4.4
million and $.33 per share, respectively, for the six month
period ended April 2, 1999.
<PAGE>
Net revenues for the three-month period ended March 31, 2000
were impacted by a higher than expected backlog of orders due to the
timing of receipt of the orders from the Company's customers.
Order backlog on March 31, 2000 was $4.1 million as compared to
$1.7 million on April 2, 1999. Gross margin for the three and
six-month periods ended March 31, 2000 was 33.1% and 33.2% as
compared to gross margins of 34.2% and 34.2% for the three and
six-month period ended April 2, 1999. The gross margin percentage
was impacted during the current fiscal year by a shift in the
Company's product mix and lower margins associated with its bid
related sales and sales generated from its fund raising program,
SSG's youth division sales, and revenues of the team dealer division.
Selling, general and administrative expenses were $8.8 million
and $16.5 million for the three and six month period as compared to
$7.0 million and $12.8 million for the same period last year. The
increase in SG&A for the three and six-month period is attributable
to the Company's investment in its information technology systems,
additional sales personnel and general overhead expenses associated
with companies acquired in the past year. The Company also recorded
a $605,000 non-recurring charge related to the settlement of certain
litigation.
Subsequent to March 31, 2000, the Company successfully negotiated
the settlement of one lawsuit and engaged in settlement discussions
related to a second lawsuit whereby the Company believes there is a
reasonable likelihood of settlement. Consequently, as of March 31, 2000,
the Company recorded a non-recurring charge related to these claims in the
amount of $605,000. This non-recurring charge reduced the Company's Fixed
Charge Coverage Ratio to 1:9 to 1. The Credit Agreement governing the
Company's credit facility requires a minimum Fixed Charge Coverage Ratio
of 2 to 1. Therefore, as of March 31, 2000 the Company was not in
compliance with the Fixed Charge Coverage Ratio under its Credit Agreement
with its senior lender. Consequently, all amounts owed under the Credit
Agreement are classified as current liabilities on the Balance Sheet.
The Company believes this classification as a current liability is a
temporary situation. The Company received a 30-day waiver of this default
from its senior lender and anticipates entering into an amendment to the
Credit Agreement in the near term.
The Company announced that its investment advisor is exploring
and evaluating various strategic alternatives, which might include a sale
or merger of the Company and possible capital financing opportunities.
<PAGE>
The Company's advisor has received interest from several parties. However,
the interest expressed to date has not set forth a value the Company's
Board believes is indicative of the Company's inherent and potential
long-term value.
John P. Walker, President stated, "As a result of timing of receipt
of orders the Company finished the quarter with a particularly large backlog
for this time of year. We expect much of this backlog to ship in the June
quarter as part of our normal business cycle.
As the Company migrates toward e commerce cataloging we continue
to have duplicate expenses associated with marketing our product.
The Company incurs both printed catalog expense and e commerce
developmental expense. We expect our expenditures on marketing
traditional paper catalogs to slowly be reduced while the Company
migrates its customers to transact business with SSG over the
Internet.
During the past two years the Company has invested in the
development of an information technology platform that will allow
SSG to distinguish itself from other competitors in the
institutional sporting goods marketplace. We expect the use of
the Company's e commerce websites to continue to increase each
month while more customers migrate to business to business
applications of the internet. In fiscal 2001, SSG has targeted
10-15% of its sales to be transacted using e commerce. Continued
migration of our existing customer base will allow the Company to
significantly reduce its order processing costs and more
importantly, we believe this successful migration will create
barriers to entry within the institutional sporting goods market
thereby excluding competition that cannot offer this solution.
As a result of many meetings with key accounts, school districts
and school administrators as well as with other critical segments
of the institutional sporting goods industry, we believe it is
imperative that we continue to move ahead with the development of
our e commerce model. As part of this plan, SSG plans to have a
complete electronic catalog available to its customers by the
start of the new school year. We anticipate these electronic
catalogs will offer more than 8,000 products in an easy to use
web front end.
<PAGE>
The Company is currently in discussions with several well-known
business to business solution providers and we expect to conclude
those discussions shortly, the result of which will be one or
more exclusive, strategic partnerships that will further these
initiatives.
The decision to make additional investments in e commerce while
at the same time continue traditional catalog marketing programs
is a long-term decision. While it may impact profitability in the
short term, it is a decision that we believe is in the best
interests of the shareholders and is expected to add value by
concentrating on the strengths of the Company and positioning SSG
for long term value rather than immediate financial results.
Concurrent with the continued migration to e commerce and as part
of its overall strategic direction, Sport Supply Group will also
look for additional synergies and efficiencies with regard to its
operations and product lines. The Company expects this technological
restructuring of its operations to provide for a more streamlined and
effective infrastructure and ultimately enhance the Company's financial
position."
This news release, other than the historical information,
consists of forward looking statements that involve risks and
uncertainties detailed from time to time in the Company's filings
with the Securities and Exchange Commission, including the Company's
Reports on Form 10-K and Form 10-Q. Actual results may vary materially.
<PAGE>
FINANCIAL TABLES TO FOLLOW
<TABLE>
Sport Supply Group, Inc., and Subsidiaries
Summary Financial Information
(Amounts in Thousands, except for per share data)
(unaudited)
<CAPTION>
Statements of Operations
Quarter Ended Six Months Ended
March 31, April 2, March 31, April 2,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Revenues $34,794 $35,476 $53,829 $50,346
Gross Margins 11,514 12,139 17,854 17,218
Operating Expenses 8,799 6,967 16,468 12,798
Nonrecurring Litigation
Charges 605 0 605 0
Operating Income 2,110 5,172 781 4,420
Net Income (Loss) $ 1,027 $3,020 $ ( 81) $2,460
Earnings Per Share $ 0.14 $ 0.41 $ 0.01) $ 0.33
Earnings Per Share -
assuming dilution $ 0.14 $ 0.39 $ 0.01) $ 0.32
Weighted Shares
Outstanding 7,270,179 7,387,852 7,274,702 7,486,263
Weighted Shares
Outstanding -
assuming dilution 7,272,706 7,748,331 7,274,702 7,637,795
</TABLE>
<TABLE>
<CAPTION>
Condensed Balance Sheets
March 31, 2000 October 1, 1999
<S> <C> <C>
Current Assets $ 50,488 $ 44,587
Non Current Assets 30,158 28,662
Total Assets $ 80,646 $ 73,249
Current Liabilities $ 38,449 $ 12,715
<PAGE>
Long Term Debt 252 18,426
Stockholder's Equity 41,945 42,108
Total Liabilities
and Equity $ 80,646 $ 73,249
</TABLE>
