Sport Supply Group, Inc. Business Information, Profile, and History

History of Sport Supply Group, Inc.

The largest direct mail distributor of sports-related equipment in the United States, Sport Supply Group, Inc. manufactures and markets approximately 8,000 products to public and private schools, state and local governments, and youth sports leagues, among other institutional markets. During the late 1990s, Sport Supply maintained a mailing list comprising more than 200,000 names and marketed its products to more than 100,000 institutional, retail, mass merchant, and team dealer customers. The company manufactured 3,000 of the 8,000 products it sold at four manufacturing facilities. At Sport Supply's two plants in Anniston, Alabama, the company manufactured game tables, gymnastics, netting, and tennis and baseball equipment. At its plant in Cerritos, California, the company manufactured gymnastic equipment. Soccer field equipment and weight room equipment were manufactured at the company's manufacturing plant in Farmers Branch, Texas.

Origins in BSN Corp.

When Sport Supply emerged in 1991, its presence signaled the return of Michael Blumenfeld, a one-time professional athlete who twice tried to establish a successful sporting goods distributorship. His first attempt was a company named BSN Corp., which was originally named Blumenfeld Sports Net Co. BSN rose to powerful heights during the 1980s, then quickly floundered, prompting Blumenfeld to regroup and try again. His second effort was Sport Supply, a company whose historical roots were intertwined with its predecessor, BSN. Explored together, the history of Blumenfeld's two companies charts a prodigious rise in the sporting goods industry, beginning with a business born in the back of a pickup truck and its evolution into the largest direct mail marketer of sporting goods equipment in the United States. During this nearly three-decade-long period, Blumenfeld took a roller coaster ride in the business world, experiencing the pitfalls and the rewards of operating in a hotly contested industry. His journey began in the early 1970s, shortly after he took off his baseball cleats for the last time.

As a high school student, Blumenfeld showed considerable athletic promise. He was signed by the St. Louis Cardinals out of high school and entered the club's farm system, spending two years playing outfield in the minor leagues. In 1966, Blumenfeld's baseball career was cut short by nagging knee problems, forcing him to look for a job outside of baseball. Blumenfeld did not exit the realm of sports entirely, however. By the early 1970s, he was struggling to make a living selling tennis nets. He drove around Memphis, Tennessee, selling tennis nets to the region's tennis and country clubs from the back of his truck. It was a modest start, to be sure, but the absence of conventional business trappings did not discourage Blumenfeld and his wife from taking great care of their fledgling entrepreneurial creation. After each sale, Blumenfeld and his wife mailed the customer a hand-drawn brochure describing the merchandise they had for sale. Over time, customers began asking for items not included within the brochure, so Blumenfeld searched for a supplier and added the new merchandise to his brochure.

Before long, the hand-drawn brochures developed into genuine catalogs, filled with page after page of sporting goods merchandise. As the size of the catalogs increased, so did the size of BSN, maturing from a start-up business venture into a legitimate, money-making company. By the end of the 1970s, Blumenfeld found himself running a robustly growing mail order operation that was generating millions of dollars in sales each year. For those in the sporting goods industry who had not noticed BSN, they soon would. In 1980, when annual sales reached $3 million, Blumenfeld sold shares in BSN to the public.

The money raised from BSN's initial public offering would be needed as Blumenfeld led his company into the 1980s. He was facing a deleterious problem, and its cause was the enviable success of his sporting goods distributorship. BSN had achieved remarkable strides in its relatively short existence, emerging from nowhere to compete as a recognizable and fast-growing concern in an industry populated by companies with considerably more experience. As Blumenfeld perceived the situation, the more established retail operators in the country were becoming increasingly concerned about BSN's resolute growth and the threat it represented. They were losing business to an upstart company. BSN had to be stopped. Blumenfeld claimed the reaction against his company was conspiratorial. He claimed merchants had threatened him with baseball bats at trade shows. When threats failed to stop burgeoning BSN, merchants voiced their complaints to their suppliers, the same businesses that supplied Blumenfeld with merchandise. The suppliers, reportedly, sided with their more established retail customers and cut Blumenfeld off from some of the merchandise he depended on. Blumenfeld, who felt he was being shouldered aside by the industry's heavyweights, answered with a new strategy, one that would dramatically change the face of BSN.

With some of his suppliers refusing to do business with him, Blumenfeld decided that he could either fade away or fight back. He opted for the latter alternative and devised a solution. He decided he would integrate backwards and acquire sporting goods manufacturers, thereby greatly reducing his dependence on suppliers for merchandise. In the future, BSN would be both a manufacturer and a distributor. Blumenfeld acquired his first manufacturer in 1981, a tennis and golf equipment manufacturer named Rol-Dri, Inc. Rol-Dri was the first of many acquisitions to follow, as Blumenfeld pursued his objective of acquiring enough sporting goods manufacturers to produce 75 percent of all the products BSN sold through its catalogs. By 1985, Blumenfeld had acquired 13 manufacturers, each typically small, but together the acquired manufacturers encompassed a broad range of athletic and leisure equipment, apparel, and accessories. Blumenfeld acquired companies such as Hammatt & Sons, a producer of table games, Champion Barbell, which produced weightlifting equipment, and Nelson Knitting Co., a manufacturer of athletic hosiery. With the addition of these companies and others, roughly half of BSN's $30 million in sales during the mid-1980s were derived from products it manufactured itself. At this juncture in the company's history, it was offering more than 3,000 products at discounts of up to 30 percent over retail, selling everything from tennis balls to baseball backstops through more than three million catalogs mailed each year. In the space of four years, Blumenfeld had made another meaningful leap. A mighty distributor had also become a rising manufacturer. As was the case with BSN's admirable growth as a distributor, the company's evolution into a manufacturer also spawned its own problems. For Blumenfeld, success was never easy.

Poised as a rising contender in the manufacturing segment of the sporting goods industry, Blumenfeld now found himself butting heads with much larger manufacturers such as Wilson, MacGregor, Rawlings, and Spalding. BSN was much smaller than these rivals, however, and needed a large acquisition to narrow the chasm separating it from its rivals. Blumenfeld tried on several occasions during the mid-1980s to acquire a company that would make BSN a major player overnight, but each time his bids were rebuffed. He tried to buy Riddell Sports, the largest maker of football helmets in the country, but his offer of $7 million in cash and stock was spurned. He tried to buy Wilson Sporting Goods, offering $151 million in BSN stock, and again his offer was brushed aside. Next, he attempted to buy Bike Athletics, the country's second-largest football helmet manufacturer, but no one would listen to his proposal. The cloud of conspiracy that had settled into Blumenfeld's mind when suppliers cut him off years earlier came back. "We're considered the renegade of the world," Blumenfeld remarked to a Forbes reporter. "People fear that BSN is doing so well by itself, for God's sake don't give them something they can sink their teeth into."

While concern over the threat posed by a new competitor may have played its part in Blumenfeld's failed deals, the en masse refusal of larger companies to accept Blumenfeld's tender offers was chiefly because most of the bids included BSN stock as part of the purchase price. At the time of Blumenfeld's various acquisition attempts, BSN's stock was not performing well, its vitality drained discernibly by the sundry acquisitions completed during the first half of the 1980s. Despite slipping earnings, Blumenfeld moved forward, his conviction to expand BSN through acquisitions made stronger by the cold shoulder he received from the sporting goods community. By 1987, Blumenfeld had achieved his goal of manufacturing 75 percent of the merchandise sold in his catalogs. The company by this point, with sales eclipsing $70 million, ranked as the nation's leading reconditioner of football equipment, the largest manufacturer of cheerleader's uniforms and supplies, and the largest direct distributor of sports equipment to the institutional marketplace. Again, however, success had its price.

BSN Falters in Late 1980s; Sport Supply Emerges

Before Blumenfeld's decade-long acquisition binge was over, he purchased 48 companies, consisting of dozens of small distributors, manufacturers, and retailers. Some of these acquisitions did not readily fit into BSN's corporate structure, while others were losing money prior to their acquisition. Several of the companies were mired in bankruptcy proceedings. The result was an externally strong company, leading the field in several lucrative markets, with profound internal problems. BSN was a money-loser. Between 1989 and 1991, the company lost more than $15 million, too much for Blumenfeld to contend with. He decided to start anew from the ashes of BSN and sold much of what he had purchased to gain the financial resources to muster another attempt in the sporting goods industry. In his mid-40s at this turning point, Blumenfeld made plans for the future, a future in which Sport Supply would be the corporate vehicle to lift him out of the valley where BSN had been abandoned.

A complex series of refinancing transactions gave birth to Sport Supply Group, Inc. and gave Blumenfeld another chance at creating a successful sporting goods distributor. He took the company public in April 1991, and began the rebuilding process. On the heels of the initial public offering, Sport Supply's customer base was broadened to include retailers such as J.C. Penney, Sears, and Wal-Mart, while Blumenfeld scoured the country in search of acquisition targets. To those who winced at the thought of Blumenfeld embarking on another acquisition campaign, there was some mollification to be found in Blumenfeld's promise that he had learned his lesson during the 1980s. In the future, he declared, Sport Supply would buy only profitable distributors and perhaps a few small manufacturers that fit the company's distribution channels.

Sport Supply in the 1990s

Between 1991 and 1994, Sport Supply acquired 12 sporting goods distributors and signed several important licensing agreements, including the rights to manufacture, market, and distribute merchandise under the MacGregor trade name (obtained in 1992) and an exclusive license agreement with AMF Bowling, Inc. to use the AMF name (acquired in 1993) in connection with the promotion and sale of gymnastics equipment in the United States and Canada. During this three-year period, annual sales increased from $47 million to $67 million. More importantly, the company's stock price rose strongly, more than doubling between 1991 and 1994.

The mid-1990s were years of expansion and divestment for Sport Supply, as the company strengthened its position as a distributor of sporting goods and leisure merchandise to the institutional market. In June 1995, the company acquired the Nitro Golf division from Prince Golf International, Ltd., a manufacturer and distributor of new golf balls. A strategic decision implemented a short time later made Nitro Golf only a short-term component of Sport Supply's business, but a deal concluded later in the year had a more lasting effect on the company's business. In December 1995, Sport Supply signed a three-year agreement with Little League Baseball, Incorporated that designated the company as the "Official Factory Direct Equipment Supplier of Little League Baseball." The deal opened the doors to the estimated three million participants of Little League Baseball, adding measurably to Sport Supply's revenues. In August 1997, the agreement with Little League Baseball was extended through 2001.

While the two agreements with Little League Baseball were being negotiated between the end of 1995 and 1997, the company made the strategic decision to dispose of its golf operations to focus on its core institutional business. In May 1996, Sport Supply sold virtually all the assets of its Gold Eagle Professional Products Division, which sold golf accessory products to the retail market. In March 1997, another golf divestiture was made when Nitro Leisure Products, Inc., acquired two years earlier, was sold.

Sport Supply entered the late 1990s having completed the rebuilding process that began when the company was spun off from BSN. Sales for the 11-month period ended September 1997 flirted with the $80 million mark, while the company's net earnings stood at a respectable $2.6 million. Sport Supply ranked as the largest direct mail marketer of sports-related equipment to the institutional market in the United States, making the majority of its sales to schools, universities, athletic clubs, youth sport leagues, government agencies, recreational organizations, and military facilities. To these customers, who typically purchased large quantities of merchandise, Sport Supply offered roughly 8,000 products, 3,000 of which the company manufactured at its four manufacturing plants in Alabama, California, and Texas. Whether or not the company would fall victim to the same profitability problems that hounded its predecessor remained to be seen in the new century ahead, but as Sport Supply competed during the late 1990s, its position was strong, underpinned by the diversity and breadth of the products it offered.

Principal Subsidiaries: Sport Supply Group International Holdings, Inc.