##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 For the quarterly period ended December 31, 2008
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from
 _____ 

to
 _____
 Commission File No. 1-15289
 Sport Supply Group, Inc.
  Delaware
    
    22-2795073(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1901 Diplomat Drive, Farmers Branch, Texas
    
    75234(Address of Principal Executive Offices)
    
    (Zip code)
 (972) 484-9484  (Registrants Telephone Number, Including Area Code)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 PageNumberPART I: FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
at December 31, 2008
and June 30, 2008
    
    
    1Condensed Consolidated Statements of Income for the
three and six months ended December 31, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows  for
the six months ended December 31, 2008 and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    33Exhibit 10.6Exhibit 31.1Exhibit 31.2Exhibit 32




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements.
 SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
  December 31,
    
    
    June 30,2008
    
    
    2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,082
    
    
    $
    20,531Accounts receivable, net of allowance for doubtful accounts of
$1,588 and $1,320 respectively
    
    
    34,638
    
    
    
    34,060Inventories
    
    
    37,984
    
    
    
    36,318Current portion of deferred income taxes
    
    
    3,934
    
    
    
    3,866Prepaid income taxes
    
    
    712
    
    
    
    Prepaid expenses and other current assets
    
    
    1,908
    
    
    
    1,203Total current assets
    
    
    82,258
    
    
    
    95,978PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$8,536 and $7,576, respectively
    
    
    8,993
    
    
    
    9,715DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of
$2,249 and $2,978, respectively
    
    
    703
    
    
    
    1,389INTANGIBLE ASSETS, net of accumulated amortization of
$4,817 and $4,431, respectively
    
    
    6,604
    
    
    
    6,972GOODWILL
    
    
    53,082
    
    
    
    53,543OTHER ASSETS, net
    
    
    76
    
    
    
    98Total assets
    
    $
    151,716
    
    
    $
    167,695LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    16,959
    
    
    $
    21,183Accrued liabilities
    
    
    10,389
    
    
    
    11,842Dividends payable
    
    
    
    
    
    
    309Accrued interest
    
    
    149
    
    
    
    240Current portion of notes payable and other long-term debt
    
    
    28,923
    
    
    
    108Income taxes payable
    
    
    
    
    
    
    677Total current liabilities
    
    
    56,420
    
    
    
    34,359DEFERRED INCOME TAX LIABILITY
    
    
    3,699
    
    
    
    4,014NOTES PAYABLE AND OTHER LONG-TERM DEBT
    
    
    5,461
    
    
    
    50,036Total liabilities
    
    
    65,580
    
    
    
    88,409COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS 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;
12,490,756 and 12,465,986 shares issued and
12,386,830 and 12,362,060 shares outstanding, respectively
    
    
    125
    
    
    
    125Additional paid-in capital
    
    
    65,696
    
    
    
    64,648Retained earnings
    
    
    21,118
    
    
    
    15,316Treasury stock at cost, 103,926 shares
    
    
    (803
    )
    
    
    (803
    )Total stockholders equity
    
    
    86,136
    
    
    
    79,286Total liabilities and stockholders equity
    
    $
    151,716
    
    
    $
    167,695
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SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    53,175
    
    
    $
    54,089
    
    
    $
    126,752
    
    
    $
    124,463Cost of sales
    
    
    34,443
    
    
    
    34,816
    
    
    
    81,101
    
    
    
    79,562Gross profit
    
    
    18,732
    
    
    
    19,273
    
    
    
    45,651
    
    
    
    44,901Selling, general and administrative expenses
    
    
    17,273
    
    
    
    17,635
    
    
    
    35,527
    
    
    
    35,578Operating profit
    
    
    1,459
    
    
    
    1,638
    
    
    
    10,124
    
    
    
    9,323Other income (expense):Interest income
    
    
    40
    
    
    
    70
    
    
    
    117
    
    
    
    157Interest expense
    
    
    (926
    )
    
    
    (964
    )
    
    
    (1,914
    )
    
    
    (2,180
    )Gain on early retirement of Notes
    
    
    1,192
    
    
    
    
    
    
    
    1,443
    
    
    
    Other income (expense)
    
    
    (21
    )
    
    
    (15
    )
    
    
    
    
    
    
    35Total other income (expense)
    
    
    285
    
    
    
    (909
    )
    
    
    (354
    )
    
    
    (1,988
    )Income before income taxes
    
    
    1,744
    
    
    
    729
    
    
    
    9,770
    
    
    
    7,335Income tax provision
    
    
    692
    
    
    
    277
    
    
    
    3,657
    
    
    
    2,787Net income
    
    $
    1,052
    
    
    $
    452
    
    
    $
    6,113
    
    
    $
    4,548Weighted average number of shares outstanding:Basic
    
    
    12,386,830
    
    
    
    12,242,845
    
    
    
    12,379,427
    
    
    
    11,916,216Diluted
    
    
    12,855,239
    
    
    
    12,347,175
    
    
    
    15,263,587
    
    
    
    15,446,363Net income per common share  basic
    
    $
    0.08
    
    
    $
    0.04
    
    
    $
    0.49
    
    
    $
    0.38Net income per common share  diluted
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.41
    
    
    $
    0.37Dividends declared per common share
    
    $
    0.00
    
    
    $
    0.025
    
    
    $
    0.025
    
    
    $
    0.05
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SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
  Six Months EndedDecember 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    6,113
    
    
    $
    4,548Adjustments to reconcile net income to cash provided by (used in)
operating activities:Provision for uncollectible accounts receivable
    
    
    498
    
    
    
    486Depreciation and amortization
    
    
    1,420
    
    
    
    1,850Amortization of deferred debt issuance costs
    
    
    686
    
    
    
    496Discount on early retirement of long term debt
    
    
    (1,443
    )
    
    
    Deferred income taxes
    
    
    78
    
    
    
    2,040Stock-based compensation expense
    
    
    569
    
    
    
    218Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,076
    )
    
    
    (5,148
    )Inventories
    
    
    (1,666
    )
    
    
    465Prepaid expenses and other current assets
    
    
    (705
    )
    
    
    149Other assets, net
    
    
    22
    
    
    
    17Accounts payable
    
    
    (4,224
    )
    
    
    2,794Income taxes payable / prepaid income taxes
    
    
    (1,389
    )
    
    
    2,843Accrued liabilities and accrued interest
    
    
    (1,544
    )
    
    
    1,548Net cash provided by (used in) operating activities:
    
    
    (2,661
    )
    
    
    12,306CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (330
    )
    
    
    (1,358
    )Net cash used in investing activities:
    
    
    (330
    )
    
    
    (1,358
    )CASH FLOWS FROM FINANCING ACTIVITIES:Early retirement of long term debt
    
    
    (19,701
    )
    
    
    Deferred debt issuance cost
    
    
    
    
    
    
    (18
    )Proceeds from bank line of credit
    
    
    15,213
    
    
    
    1,015Payments on notes payable and line of credit
    
    
    (9,829
    )
    
    
    (25,780
    )Payment of dividends
    
    
    (620
    )
    
    
    (564
    )Tax benefit related to the exercise of stock options
    
    
    249
    
    
    
    Proceeds from issuance of common stock
    
    
    230
    
    
    
    18,764Net cash used in financing activities:
    
    
    (14,458
    )
    
    
    (6,583
    )Net change in cash and cash equivalents
    
    
    (17,449
    )
    
    
    4,365Cash and cash equivalents, beginning of period
    
    
    20,531
    
    
    
    5,670Cash and cash equivalents, end of period
    
    $
    3,082
    
    
    $
    10,035SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    1,345
    
    
    $
    1,971Cash paid (refunded) for income taxes
    
    $
    4,807
    
    
    $
    (1,595
    )
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SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 1. Basis of Presentation:
 Company US GAAP
  2. Recent Accounting Pronouncements:
 FASB SFAS Fair Value Measurements SFAS 157 FSP Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities including an Amendment of FASB Statement No. 115 SFAS 159
 Business Combinations .
 
    
    Acquisition costs will generally be expensed as incurred;
    
    Non-controlling interests (currently referred to as minority interests) will be valued
at fair value at the acquisition date;
    
    Acquired contingent liabilities will be recorded at fair value at the acquisition date
and subsequently measured at either the higher of such amount or the amount determined
under existing guidance for non-acquired contingencies;
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
    
    In-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
    
    Restructuring costs associated with a business combination will generally be expensed
subsequent to the acquisition date; and
    
    Changes in deferred tax asset valuation allowances and income tax uncertainties after
the acquisition date generally will affect income tax expense.
  Noncontrolling Interests in Consolidated
Financial Statements SFAS 160
 Disclosures about Derivative Instruments and
Hedging Activities SFAS 161 Accounting for Derivative Instruments and Hedging Activities
 Determination of the Useful Life of Intangible
Assets FSP 142-3 Goodwill and Other Intangible Assets
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (including Partial Cash Settlement) APB 14-1
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Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities FSP EITF 03-6-1 Earnings Per Share.
 3. Net Sales:
  For the Three Months Ended
    
    
    For the Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Catalog
    
    $
    26,291
    
    
    $
    27,291
    
    
    $
    65,242
    
    
    $
    64,592Team Dealer
    
    
    26,884
    
    
    
    26,798
    
    
    
    61,510
    
    
    
    59,871Net sales
    
    $
    53,175
    
    
    $
    54,089
    
    
    $
    126,752
    
    
    $
    124,463
 4. Inventories:
   December 31,
    
    
    June 30,2008
    
    
    2008(in thousands)Raw materials
    
    $
    1,909
    
    
    $
    2,297Work in progress
    
    
    160
    
    
    
    159Finished goods
    
    
    35,915
    
    
    
    33,862Total inventories
    
    $
    37,984
    
    
    $
    36,318
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5. Allowance for Doubtful Accounts:
  December 31,
    
    
    June 30,2008
    
    
    2008(in thousands)Balance at beginning of period
    
    $
    1,320
    
    
    $
    1,296Provision
for uncollectible accounts receivable
    
    
    498
    
    
    
    1,028Accounts written off, net of recoveries
    
    
    (230
    )
    
    
    (1,004
    )Balance at end of period
    
    $
    1,588
    
    
    $
    1,320
 6. Notes Payable and Other Long-Term Debt:
 Notes
 Indenture
 SEC
  Revolving Facility Senior Credit Facility
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##### Table of Contents



Amendment No. 1 MLCFC
 Amendment No. 2
 Amendment No. 3
    December 31,
    
    
    June 30,2008
    
    
    2008(in thousands)Notes
    
    $
    28,856
    
    
    $
    50,000Revolving Facility
    
    
    5,437
    
    
    
    Other notes payable
    
    
    91
    
    
    
    144Total notes payable
    
    
    34,384
    
    
    
    50,144Less current portion
    
    
    (28,923
    )
    
    
    (108
    )Notes payable and other long-term debt
    
    $
    5,461
    
    
    $
    50,036
  (in thousands)2009
    
    $
    542010
    
    
    34,3302011
    
    
    Thereafter
    
    
    Total future payments
    
    $
    34,384
 New Credit
Agreement
  - 8 -




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7. Income Per Share:
  For the Three Months Ended
    
    
    For the Six Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands except share and per share data)Numerator:Net income
    
    $
    1,052
    
    
    $
    452
    
    
    $
    6,113
    
    
    $
    4,548Effect of Notes
    
    
    (528
    )
    
    
    
    
    
    
    209
    
    
    
    1,103Diluted income
    
    $
    524
    
    
    $
    452
    
    
    $
    6,322
    
    
    $
    5,651Denominator:Basic weighted average shares outstanding
    
    
    12,386,830
    
    
    
    12,242,845
    
    
    
    12,379,427
    
    
    
    11,916,216Add effect of:Stock options and restricted stock
    
    
    41,999
    
    
    
    104,330
    
    
    
    99,680
    
    
    
    117,178Notes
    
    
    426,410
    
    
    
    
    
    
    
    2,784,480
    
    
    
    3,412,969Diluted weighted average shares outstanding
    
    
    12,855,239
    
    
    
    12,347,175
    
    
    
    15,263,587
    
    
    
    15,446,363Basic income per share
    
    $
    0.08
    
    
    $
    0.04
    
    
    $
    0.49
    
    
    $
    0.38Diluted income per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.41
    
    
    $
    0.37
 Earnings Per Share
      - 10 -




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8. Stockholders Equity:
  (in thousands)Stockholders equity at June 30, 2008
    
    $
    79,286Issuance of stock for cash
    
    
    230Stock-based compensation
    
    
    569Tax benefit related to the exercise of stock options
    
    
    249Net income
    
    
    6,113Dividends declared
    
    
    (311
    )Stockholders equity at December 31, 2008
    
    $
    86,136
 9. Legal Proceedings:
  10. Subsequent Events:
  New Credit
Agreement
  - 11 -




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
  Sport Supply Group we us our Company
     - 12 -




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Critical Accounting Policies
   Inventories.
 Allowance for Doubtful Accounts.
  - 13 -




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Goodwill, Intangibles and Long-lived Assets.
 Consolidated Results of Operations
  For the Three Months Ended December 31,
    
    
    For the Six Months Ended December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent
    
    
    Dollars
    
    
    Percent
    
    
    Dollars
    
    
    PercentNet sales
    
    $
    53,175
    
    
    
    100.0
    %
    
    $
    54,089
    
    
    
    100.0
    %
    
    $
    126,752
    
    
    
    100.0
    %
    
    $
    124,463
    
    
    
    100.0
    %Gross profit
    
    
    18,732
    
    
    
    35.2
    %
    
    
    19,273
    
    
    
    35.6
    %
    
    
    45,651
    
    
    
    36.0
    %
    
    
    44,901
    
    
    
    36.1
    %Selling, general and
administrative
expenses
    
    
    17,273
    
    
    
    32.5
    %
    
    
    17,635
    
    
    
    32.6
    %
    
    
    35,527
    
    
    
    28.0
    %
    
    
    35,578
    
    
    
    28.6
    %Operating profit
    
    
    1,459
    
    
    
    2.7
    %
    
    
    1,638
    
    
    
    3.0
    %
    
    
    10,124
    
    
    
    8.0
    %
    
    
    9,323
    
    
    
    7.5
    %Other income (expense)
    
    
    285
    
    
    
    0.5
    %
    
    
    (909
    )
    
    
    -1.7
    %
    
    
    (354
    )
    
    
    -0.3
    %
    
    
    (1,988
    )
    
    
    -1.6
    %Net income
    
    $
    1,052
    
    
    
    2.0
    %
    
    $
    452
    
    
    
    0.8
    %
    
    $
    6,113
    
    
    
    4.8
    %
    
    $
    4,548
    
    
    
    3.7
    %Net income per share
- basic
    
    $
    0.08
    
    
    
    
    
    
    $
    0.04
    
    
    
    
    
    
    $
    0.49
    
    
    
    
    
    
    $
    0.38Net income per share
- diluted
    
    $
    0.04
    
    
    
    
    
    
    $
    0.04
    
    
    
    
    
    
    $
    0.41
    
    
    
    
    
    
    $
    0.37
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Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007
 Net Sales.
 Gross Profit.
  Selling, General and Administrative Expenses. SG&A
 
    
    personnel related expenses (including group insurance) of approximately $9.8
million;
    
    advertising and catalog production expenses of approximately $2.0 million;
    
    IT operating costs of approximately $719 thousand;
    
    depreciation and amortization of approximately $700 thousand;
    
    rent expense of approximately $639 thousand;
    
    facilities operating expenses of $616 thousand;
    
    travel expenses of approximately $583 thousand; and
    
    outside professional and legal services of approximately $528 thousand.
  
    
    a decrease in personnel-related costs of $391 thousand primarily due to a $417
thousand reduction in performance incentives;
    
    a decrease in depreciation and amortization of $198 thousand primarily due to a
$126 thousand reduction in amortization from acquisition-related intangible assets
becoming fully amortized and a $72 thousand reduction in depreciation from fully
depreciating property and equipment assets exceeding depreciation from property and
equipment additions;
  - 15 -




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##### Table of Contents




    
    a decrease in outside professional and legal services of $172 thousand primarily
due to the reduction of Sarbanes-Oxley related services due to the Company qualifying
as a smaller reporting company;
    
    a decrease in facility rent and facility operating costs of $106 thousand due to
lower operating expenses;
    
    an increase in advertising and catalog production expenses of $358 thousand due to
increased catalog creation and distribution costs of $181 thousand and a $171 thousand
increase in other direct marketing and promotion costs; and
    
    an increase in stock-based compensation expense of $151 thousand due to stock
options issued in July 2008.
 Operating Profit.
 Other Income (Expense).
 For the Three Months EndedDecember 31,(in thousands)2008
    
    
    2007
    
    
    ChangeInterest income
    
    $
    40
    
    
    $
    70
    
    
    $
    (30
    )Interest expense
    
    
    (524
    )
    
    
    (729
    )
    
    
    205Amortization of debt issuance costs
    
    
    (169
    )
    
    
    (235
    )
    
    
    66Accelerated amortization of debt issuance
costs due to early retirement of Notes
    
    
    (233
    )
    
    
    
    
    
    
    (233
    )Gain on early retirement of Notes
    
    
    1,192
    
    
    
    
    
    
    
    1,192Other expense
    
    
    (21
    )
    
    
    (15
    )
    
    
    (6
    )Total other income/(expense)
    
    $
    285
    
    
    $
    (909
    )
    
    $
    1,194
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Income Taxes.
 Net Income.
 Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007
 Net Sales.
 Gross Profit.
  Selling, General and Administrative Expenses. SG&A
 
    
    personnel related expenses (including group insurance) of approximately $20.5
million;
 
    
    advertising and catalog production expenses of approximately $3.7 million;
 
    
    IT operating costs of approximately $1.4 million;
 
    
    depreciation and amortization of approximately $1.4 million;
  - 17 -




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##### Table of Contents




    
    rent expense of approximately $1.3 million;
 
    
    facilities operating expenses of $1.3 million;
 
    
    travel expenses of approximately $1.1 million; and
 
    
    outside professional and legal services of approximately $1.1 million.
  
    
    a decrease in outside professional and legal services of $794 thousand primarily
due to the reduction of Sarbanes-Oxley related services due to the Company qualifying
as a smaller reporting company;
 
    
    a decrease in depreciation and amortization of $373 thousand primarily due to a
$148 thousand reduction in amortization from acquisition-related intangible assets
becoming fully amortized and a $225 thousand reduction in depreciation from fully
depreciating property and equipment assets exceeding depreciation from property and
equipment additions;
 
    
    a decrease in facility rent and facility operating costs of $141 thousand primarily
due to lower operating expenses;
 
    
    an increase in stock-based compensation expense of $345 thousand due to stock
options issued in July 2008;
 
    
    an increase in advertising and catalog expenses of $328 thousand due to increased
catalog creation and distribution costs of $299 thousand and a $29 thousand increase
in other direct marketing and promotion costs;
 
    
    an increase in IT operating expenses of $315 thousand primarily due to the
capitalized cost related to a system migration project that was completed in the prior
year. IT operating expenses for the six months ended December 31, 2008 are
representative of ongoing IT operating expenses; and
 
    
    an increase in personnel-related expenses of $290 thousand primarily due to a $179
thousand increase in performance incentives and a $97 thousand increase in
payroll-related taxes and benefits.
 Operating Profit.
  - 18 -




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Other Income (Expenses).
 For the Six Months EndedDecember 31,(in thousands)2008
    
    
    2007
    
    
    ChangeInterest income
    
    $
    117
    
    
    $
    157
    
    
    $
    (40
    )Interest expense
    
    
    (1,201
    )
    
    
    (1,684
    )
    
    
    483Amortization of debt issuance costs
    
    
    (378
    )
    
    
    (496
    )
    
    
    118Accelerated amortization of debt
issuance costs due to early
retirement of Notes
    
    
    (335
    )
    
    
    
    
    
    
    (335
    )Gain on early retirement of Notes
    
    
    1,443
    
    
    
    
    
    
    
    1,443Other income
    
    
    
    
    
    
    35
    
    
    
    (35
    )Total other expense
    
    $
    (354
    )
    
    $
    (1,988
    )
    
    $
    1,634
  Income Taxes.
 Net Income.
 Liquidity and Capital Resources
  Liquidity
 CBT Holdings
  - 19 -




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##### Table of Contents



Cash Flows
  Six Months EndedDecember 31,2008
    
    
    2007(in thousands)Operating activities
    
    $
    (2,661
    )
    
    $
    12,306Investing activities
    
    $
    (330
    )
    
    $
    (1,358
    )Financing activities
    
    $
    (14,458
    )
    
    $
    (6,583
    )
 Operating Activities.
  
    
    net income of $6.1 million, as compared to $4.5 million for the six months ended
December 31, 2007;
 
    
    additional sources of cash from non-cash expenses included in net income of $1.8
million as compared to $5.1 million for the six months ended December 31, 2007;
 
    
    use of cash from a $3.4 million increase in accounts receivable, inventory and
prepaid expenses as compared to $4.5 million for the six months ended December 31,
2007;
 
    
    use of cash from a $5.8 million decrease in accounts payable and accrued
liabilities as compared to a source of cash from an increase of $4.3 million for the
six months ended December 31, 2007; and
 
    
    use of cash from a $1.4 million decrease in prepaid income taxes as compared to a
source of cash from an increase of $2.8 million in income taxes payable for the six
months ended December 31, 2007.
    - 20 -




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Investing Activities.
  Financing Activities.
   Capital Resources
  Indenture
 SEC
   - 21 -




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##### Table of Contents



Revolving Facility Senior Credit Facility
 Amendment No. 1 MLCFC
 Amendment No. 2
 Amendment No. 3
  Senior Leverage Ratio
 Fixed Charge Coverage Ratio
  - 22 -




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New Credit
Agreement
       - 23 -




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##### Table of Contents



Long-Term Financial Obligations and Other Commercial Commitments
  Contractual Obligations
 Payments due by 12 month Period(dollars in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1 - 3 years
    
    
    3 - 5 years
    
    
    5 yearsLong-term debt, including current portion
    
    $
    34,384
    
    
    $
    28,923
    
    
    $
    5,461
    
    
    $
    
    
    
    $
    Operating leases
    
    
    5,346
    
    
    
    2,878
    
    
    
    2,344
    
    
    
    124
    
    
    
    Interest expense on long-term debt
    
    
    1,690
    
    
    
    1,610
    
    
    
    80
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    41,420
    
    
    $
    33,411
    
    
    $
    7,885
    
    
    $
    124
    
    
    $
    
 Purchase Commitments.
  - 24 -




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##### Table of Contents



Long-Term Debt and Advances Under Credit Facilities.
    Operating Leases.
 Off-Balance Sheet Arrangements.
 Subsequent Events
  New Credit
Agreement
  - 25 -




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Interest Rates
   Foreign Currency and Derivatives
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures. CEO CFO §240.15d15(e) 1934
Act
 Changes in Internal Control Over Financial Reporting.
  - 26 -




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##### Table of Contents



Statement Regarding Forward-Looking Disclosure
 This Quarterly Report on Form 10-Q , including Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 2, contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if never materialized or are proven
incorrect, could cause the
results of Sport Supply Group and its consolidated subsidiaries to differ materially from those
expressed or implied by such forward-looking statements. All statements other than statements of
historical fact are statements that could be deemed forward-looking statements, including but not
limited to any projections of net sales, gross profit margin, expenses, earnings or losses from
operations, synergies or other financial items, including statements regarding ability and manner
of satisfying short-term and long-term liquidity requirements; any statements of the plans,
strategies and objectives of management for future operations; any statements regarding future
economic conditions or performance; any statements of expectation or belief; and any statements of
assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to
above include Sport Supply Groups ability to integrate acquired businesses, global economic
conditions, reduced product demand, increased product costs, reductions in municipal, state and
national government budgets, financial market performance, the ability to acquire future financing
given the current state of the credit and capital markets and other risks that are described
herein, as well as those items described from time to time in Sport Supply Groups SEC filings,
including Sport Supply Groups Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
Sport Supply Group cautions that the foregoing list of important factors is not all encompassing.
Any forward-looking statements included in this report are made as of the date of filing of this
report with the SEC, and we assume no obligation and do not intend to update these forward-looking
statements.
  - 27 -




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
 Total Numberof Notes
    
    
    ApproximatePurchased as
    
    
    Dollar Value ofTotal
    
    
    
    
    
    
    Part of Publicly
    
    
    Notes that MayNumber of
    
    
    Average
    
    
    Announced
    
    
    yet be PurchasedNotes
    
    
    Price Paid
    
    
    Plans or
    
    
    Under the PlansPurchased
    
    
    per Note
    
    
    Programs (1)
    
    
    or ProgramsJuly 1 - 31, 2008 (2)
    
    
    101,296
    
    
    $
    13.95
    
    
    
    101,296
    
    
    $
    18,586,000August 1 - 31, 2008 (3)
    
    
    273,038
    
    
    $
    13.99
    
    
    
    273,038
    
    
    $
    14,766,000October 1 - 31, 2008 (4)
    
    
    477,816
    
    
    $
    13.62
    
    
    
    477,816
    
    
    $
    8,256,000November 1  30, 2008 (5)
    
    
    238,908
    
    
    $
    13.19
    
    
    
    238,908
    
    
    $
    5,106,000December 1 - 31, 2008 (6)
    
    
    352,218
    
    
    $
    13.65
    
    
    
    352,218
    
    
    $
    299,000
 (1)
    
    As previously disclosed in the Companys Current Report on Form 8-K filed with the SEC on
November 26, 2008, under Amendment No. 3 to the Revolving Facility, the Company was authorized to
repurchase up to $20.0 million of the Notes. The New Credit Agreement allows the Company to
refinance the Notes with borrowings under the facility at or prior to maturity.(2)
    
    On July 7, 2008, the Company purchased approximately $1.5 million of its Notes through an open
market purchase. The Notes were purchased at a discounted price of $95.25 per $100 value. The
Company paid approximately $1.4 million in principal and accrued interest.(3)
    
    On August 13, 2008, the Company purchased approximately $4.0 million of its Notes through an
open market purchase. The Notes were purchased at a discounted price of $95.50 per $100 value.
The Company paid approximately $3.9 million in principal and accrued interest.(4)
    
    On October 7, 2008, the Company purchased approximately $7.0 million of its Notes through an
open market purchase. The Notes were purchased at a discounted price of $93.00 per $100 value.
The Company paid approximately $6.7 million in principal and accrued interest.(5)
    
    On November 28, 2008, the Company purchased approximately $3.5 million of its Notes through an
open market purchase. The Notes were purchased at a discounted price of $90.00 per $100 value.
The Company paid approximately $3.2 million in principal and accrued interest.(6)
    
    During the month ended December 31, 2008, the Company purchased approximately $5.2 million of
its Notes through open market purchases. The Notes were purchased at a discounted price of $93.17
per $100 value. The Company paid approximately $4.8 million in principal and accrued interest.  - 28 -




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##### Table of Contents



Item 4.
Submission of Matter to a Vote of Security Holders.
   No. of Votes Cast
    
    
    No. of Votes CastNominee for
    
    
    Against orElection
    
    
    WithheldAdam Blumenfeld
    
    
    8,623,244
    
    
    
    298,059Jeff Davidowitz
    
    
    8,408,163
    
    
    
    507,140Richard Ellman
    
    
    8,591,305
    
    
    
    323,998William M. Lockhart
    
    
    8,599,933
    
    
    
    315,370Scott H. Richland
    
    
    8,599,982
    
    
    
    315,321William H. Watkins, Jr.
    
    
    8,591,354
    
    
    
    323,949
  Votes For
    
    
    8,879,831Votes Against
    
    
    36,181Abstentions
    
    
    291Broker Non-Votes
    
    
    
 
 Item 5.
Other Information.
 New Credit
Agreement
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- 30 -




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##### Table of Contents



Item 6. Exhibits.
  Exhibit 
Number
    
    Description
    
    Incorporated by Reference From3.1
    
    
    Certificate of
Incorporation of the
Registrant.
    
    Exhibit 1 to the Registrants
Registration Statement on
Form 8-A filed on
September 9, 1999.3.1.1
    
    
    Certificate of Amendment
to Certificate of
Incorporation of
Collegiate Pacific Inc.
    
    Exhibit 3.10 to the
Registrants Registration
Statement on Form SB-2
(No. 333-34294) originally
filed on April 7, 2000.3.1.2
    
    
    Amendment to Certificate
of Incorporation of
Collegiate Pacific Inc.
    
    Exhibit 3.1 to the
Registrants Current Report
on Form 8-K filed on July 2,
2007.3.2
    
    
    By-Laws of the Registrant.
    
    Exhibit 2 to the Registrants
Registration Statement on
Form 8-A filed on
September 9, 1999.3.2.1
    
    
    Amendment to the Bylaws
of Collegiate Pacific
Inc.
    
    Exhibit 3.1 to the
Registrants Current Report
on Form 8-K filed on June 14,
2007.3.2.2
    
    
    Amendment to the Bylaws
of Collegiate Pacific
Inc.
    
    Exhibit 3.2 to the
Registrants Current Report
on Form 8-K filed on July 2,
2007.4.1
    
    
    Specimen Certificate of
Common Stock, $0.01 par
value, of Sport Supply
Group, Inc.
    
    Exhibit 4.1 to the
Registrants Annual Report on
Form 10-K filed on September
13, 2007.4.2
    
    
    Indenture, dated as of
November 26, 2004, by and
between Collegiate
Pacific Inc. and The Bank
of New York Trust Company
N.A., as Trustee.
    
    Exhibit 99.1 to the
Registrants Current Report
on Form 8-K filed on
November 29, 2004.4.3
    
    
    Form of 5.75% Convertible
Senior Subordinated Note
Due 2009 (included in
Section 2.2 of
Exhibit 4.2 to this
report).
    
    Exhibit 99.2 to the
Registrants Current Report
on Form 8-K filed on
November 29, 2004.10.1
    
    
    Executive Officer Change
In Control Agreement
between Sport Supply
Group, Inc. and John
Pitts.
    
    Exhibit 10.1 to the
Registrants Current Report
on Form 8-K filed on October
1, 2008.10.2
    
    
    Amended and Restated
Executive Officer Change
in Control Agreement
between Sport Supply
Group, Inc. and Adam
Blumenfeld.
    
    Exhibit 10.3 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.10.3
    
    
    Amended and Restated
Executive Officer Change
in Control Agreement
between Sport Supply
Group, Inc. and Terrence
Babilla.
    
    Exhibit 10.4 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.
  - 31 -




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Exhibit 
Number
    
    Description
    
    Incorporated by Reference From10.4
    
    
    Amended and Restated Form
of Executive Officer
Change In Control
Agreement.
    
    Exhibit 10.5 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.10.5
    
    
    Amendment No. 3 to
Amended and Restated
Credit Agreement, dated
November 26, 2008, by and
between Sport Supply
Group, Inc. and Merrill
Lynch Commercial Finance
Corp.
    
    Exhibit 10.1 to the
Registrants Current Report
on Form 8-K filed on November
26, 2008.10.6
    
    
    Credit Agreement, dated
February 9, 2009, by and
between Sport Supply
Group, Inc. and Bank of
America, N.A*31.1
    
    
    Certification of Adam
Blumenfeld pursuant to
Rule 13a-14(a) or
15(d)-14(a) of the
Securities Exchange Act
of 1934, as adopted
pursuant to Section 302
of the Sarbanes-Oxley Act
of 2002.*31.2
    
    
    Certification of John
Pitts pursuant to Rule
13a-14(a) or 15(d)-14(a)
of the Securities
Exchange Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act of
2002.*32
    
    
    Certification of Adam
Blumenfeld and John Pitts
pursuant to 18 U.S.C.
Section 1350 as adopted
pursuant to Section 906
of the Sarbanes-Oxley Act
of 2002.**
 
 *
    
    Filed herewith**
    
    Furnished herewith  - 32 -




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##### Table of Contents



SIGNATURES
  SPORT SUPPLY GROUP, INC.Dated: February 11, 2009
    /s/ Adam BlumenfeldAdam Blumenfeld, Chief Executive Officer/s/ John PittsJohn Pitts, Chief Financial Officer(Principal Financial and Accounting Officer)  - 33 -




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##### Table of Contents



EXHIBIT INDEX
  Exhibit 
Number
    
    Description
    
    Incorporated by Reference From3.1
    
    
    Certificate of
Incorporation of the
Registrant.
    
    Exhibit 1 to the Registrants
Registration Statement on
Form 8-A filed on
September 9, 1999.3.1.1
    
    
    Certificate of Amendment
to Certificate of
Incorporation of
Collegiate Pacific Inc.
    
    Exhibit 3.10 to the
Registrants Registration
Statement on Form SB-2
(No. 333-34294) originally
filed on April 7, 2000.3.1.2
    
    
    Amendment to Certificate
of Incorporation of
Collegiate Pacific Inc.
    
    Exhibit 3.1 to the
Registrants Current Report
on Form 8-K filed on July 2,
2007.3.2
    
    
    By-Laws of the Registrant.
    
    Exhibit 2 to the Registrants
Registration Statement on
Form 8-A filed on
September 9, 1999.3.2.1
    
    
    Amendment to the Bylaws
of Collegiate Pacific
Inc.
    
    Exhibit 3.1 to the
Registrants Current Report
on Form 8-K filed on June 14,
2007.3.2.2
    
    
    Amendment to the Bylaws
of Collegiate Pacific
Inc.
    
    Exhibit 3.2 to the
Registrants Current Report
on Form 8-K filed on July 2,
2007.4.1
    
    
    Specimen Certificate of
Common Stock, $0.01 par
value, of Sport Supply
Group, Inc.
    
    Exhibit 4.1 to the
Registrants Annual Report on
Form 10-K filed on September
13, 2007.4.2
    
    
    Indenture, dated as of
November 26, 2004, by and
between Collegiate
Pacific Inc. and The Bank
of New York Trust Company
N.A., as Trustee.
    
    Exhibit 99.1 to the
Registrants Current Report
on Form 8-K filed on
November 29, 2004.4.3
    
    
    Form of 5.75% Convertible
Senior Subordinated Note
Due 2009 (included in
Section 2.2 of
Exhibit 4.2 to this
report).
    
    Exhibit 99.2 to the
Registrants Current Report
on Form 8-K filed on
November 29, 2004.10.1
    
    
    Executive Officer Change
In Control Agreement
between Sport Supply
Group, Inc. and John
Pitts.
    
    Exhibit 10.1 to the
Registrants Current Report
on Form 8-K filed on August
1, 2008.10.2
    
    
    Amended and Restated
Executive Officer Change
in Control Agreement
between Sport Supply
Group, Inc. and Adam
Blumenfeld.
    
    Exhibit 10.3 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.10.3
    
    
    Amended and Restated
Executive Officer Change
in Control Agreement
between Sport Supply
Group, Inc. and Terrence
Babilla.
    
    Exhibit 10.4 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.




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##### Table of Contents



Exhibit
 Number
    
    Description
    
    Incorporated by Reference From10.4
    
    
    Amended and Restated Form
of Executive Officer
Change In Control
Agreement.
    
    Exhibit 10.5 to the
Registrants Quarterly Report
on Form 10-Q filed on
November 5, 2008.10.5
    
    
    Amendment No. 3 to
Amended and Restated
Credit Agreement, dated
November 26, 2008, by and
between Sport Supply
Group, Inc. and Merrill
Lynch Commercial Finance
Corp.
    
    Exhibit 10.1 to the
Registrants Current Report
on Form 8-K filed on November
26, 2008.10.6
    
    
    Credit Agreement, dated
February 9, 2009, by and
between Sport Supply
Group, Inc. and Bank of
America, N.A*31.1
    
    
    Certification of Adam
Blumenfeld pursuant to
Rule 13a-14(a) or
15(d)-14(a) of the
Securities Exchange Act
of 1934, as adopted
pursuant to Section 302
of the Sarbanes-Oxley Act
of 2002.*31.2
    
    
    Certification of John
Pitts pursuant to Rule
13a-14(a) or 15(d)-14(a)
of the Securities
Exchange Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act of
2002.*32
    
    
    Certification of Adam
Blumenfeld and John Pitts
pursuant to 18 U.S.C.
Section 1350 as adopted
pursuant to Section 906
of the Sarbanes-Oxley Act
of 2002.**
 
 *
    
    Filed herewith**
    
    Furnished herewith