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School Specialty Reports Fiscal 2012 First Quarter Results
  --  First quarter revenues increase 9 percent; organic revenue grows 2
      percent
  --  Diluted earnings per share of $0.72; includes $0.05 refinancing charge
  --  Full year guidance confirmed


GREENVILLE, Wisc., Aug. 25, 2011 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS) today reported fiscal 2012 first quarter financial results. Revenue for the first quarter was $276.1 million compared with $253.0 million in the first quarter of the prior fiscal year, an increase of 9 percent. On a comparable shipment week basis, first quarter revenue increased approximately $5 million, or 2 percent. Approximately $18 million of the revenue increase was attributable to timing of shipments.

Net income was $13.6 million, including refinancing charges net of tax of $1.1 million, compared with a net loss of $331.6 million in last year's first quarter, which included an impairment charge of $344.9 million. Diluted earnings per share, including refinancing charges, was $0.72 in this year's first quarter compared with a loss per share of $17.58 last year, including the impairment charge. Excluding impairment and refinancing charges, diluted earnings per share increased 10 percent to $0.77 per share in the first quarter of fiscal 2012 from $0.70 per share in last year's first quarter. Earnings before interest, tax, depreciation and amortization ("EBITDA") increased 4 percent to $40.3 million in this year's first quarter.

"Growth in revenues in the first quarter marked the second consecutive quarter of improvement in a challenging school budget environment," said Chief Executive Officer David J. Vander Zanden. "Both the Educational Resources and Accelerated Learning segments contributed to the revenue increase in the quarter. State budget and tax collection trends currently suggest that for most states, the worst may be over, and that stabilization and potential improvement in fiscal 2012 actual state performance against budgets should help stem education budget pressure."

"Our business and shipment cycle makes it important to review the combined results of the first two quarters to accurately evaluate performance of the business," cautioned Vander Zanden. "Due to the extra shipping week last fiscal year, our busiest week over the summer has moved from its traditional place in quarter two to the last week of quarter one."

Vander Zanden concluded, "We remain firmly committed to improving gross margins and controlling costs for the balance of the year in order to improve operating performance, and believe that in the long term, shareholders will benefit from this improved operating leverage as education spending increases to meet growing student populations and new curriculum adoptions."

First Quarter Financial Results

  --  Revenue for fiscal 2012's first quarter was $276.1 million, compared
      with $253.0 million in fiscal 2011's first quarter, an increase of $23.1
      million, or 9 percent. Approximately $18 million of this increase was
      related to the shift in the high volume shipping weeks between the first
      and second quarter as described above. Organic revenue growth, after
      adjusting for shift in weeks between the first and second quarter, was 2
      percent. The Educational Resource segment had organic revenue growth of
      1 percent and the Accelerated Learning segment had organic revenue
      growth of 3 percent.

  --  Gross profit was $111.3 million compared with $108.1 million in last
      year's first quarter. Consolidated gross margin declined 240 basis
      points to 40.3 percent, compared with the prior year's 42.7 percent. The
      decline in gross margin was related primarily to pricing discounts and
      product and freight cost increases within the Educational Resources
      segment, partially offset by a favorable product mix.

  --  Selling, general and administrative (SG&A) expenses increased $2.0
      million to $79.8 million compared with the prior year's $77.8 million.
      The increase is primarily related to incremental variable costs
      associated with the higher volume and the expense associated with the
      company's incremental investment in catalogs for this back-to-school
      season. Full-time headcount was down 5 percent at the end of the first
      quarter, on a year-over-year comparison.

  --  Interest expense in the first quarter was $7.9 million compared with
      last year's $8.1 million. Interest expense in the first quarter of
      fiscal 2012 included $0.7 million of accelerated debt issuance cost
      amortization related to debt refinancings. First quarter fiscal 2012
      interest expense includes $2.5 million of non-cash interest expense
      related to the company's convertible debt, compared to $3.4 million of
      non-cash interest expense in last year's first quarter.

  --  During the first quarter of fiscal 2012, $57.5 million of outstanding
      3.75% convertible subordinated debentures were exchanged and refinanced
      with new debentures. Expenses of $1.1 million associated with this
      convertible debt exchange were recognized in the current year's first
      quarter.

  --  Net income was $13.6 million in the first quarter of fiscal 2012
      compared with a net loss of $331.6 million last year's first quarter.
      Diluted earnings per share in this year's first quarter were $0.72
      compared with a loss per share of $17.58 last year. Current year net
      income included $1.1 million of debt refinancing charges, or $0.05 per
      diluted share. Last year's net loss included a non-cash goodwill and
      other intangible asset impairment charge of $344.9 million, or $18.28
      per share.

  --  Free cash flow declined in the first quarter of fiscal 2012 by $44.8
      million compared to fiscal 2011's first quarter. This expected decline
      was a result of the planned early inventory purchases made during the
      company's fourth quarter of fiscal 2011 and the subsequent payments of
      the related accounts payable.


Outlook

School Specialty is confirming its fiscal 2012 guidance of the following:

  --  Revenue of $755 million to $780 million, representing flat to positive
      3.5 percent growth, on a normalized 52-week comparison.
  --  EBITDA of $53 million to $59 million, representing margins of 7.0
      percent to 7.5 percent.
  --  Loss per share of $0.35 to $0.10.
  --  Free cash flow of $5 million to $15 million, which includes one-time
      deferred tax payments of approximately $30 million.


Conference Call

School Specialty will host a conference call to discuss its fiscal 2012 first quarter financial results. The conference call begins today, August 25, at 10:00 a.m. Central (11:00 a.m. Eastern). The call will be simultaneously broadcast in the Investors section of the School Specialty web site at www.schoolspecialty.com, and a replay of the call will be available.

About School Specialty, Inc.

School Specialty is a leading education company that provides innovative and proprietary products, programs and services to help educators engage and inspire students of all ages and abilities to learn. The company designs, develops, and provides preK-12 educators with the latest and very best curriculum, supplemental learning resources, and school supplies. Working in collaboration with educators, School Specialty reaches beyond the scope of textbooks to help teachers, guidance counselors and school administrators ensure that every student reaches his or her full potential.

For more information about School Specialty, visit www.schoolspecialty.com.

Cautionary Statement Concerning Forward-Looking Information

Any statements made in this press release about future results of operations, expectations, plans, prospects, or asset values, including but not limited to statements included under the heading "Outlook," constitute forward-looking statements. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "should," "plans," "targets" and/or similar expressions. These forward-looking statements are based on School Specialty's current estimates and assumptions and, as such, involve uncertainty and risk. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by the forward-looking statements because of a number of factors, including the factors described in Item 1A of School Specialty's Annual Report on Form 10-K for the fiscal year ended April 30, 2011, which factors are incorporated herein by reference. Except to the extent required under the federal securities laws, School Specialty does not intend to update or revise the forward-looking statements.

                        -Financial Tables Follow-


                       SCHOOL SPECIALTY, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
               (In Thousands, Except Per Share Amounts)
                              Unaudited


                                              Three Months Ended
                                           ------------------------

                                            July 30,     July 24,
                                              2011         2010
                                           ----------  ------------

  Revenues                                  $ 276,084     $ 252,984

  Cost of revenues                            164,808       144,912
                                           ----------  ------------
    Gross profit                              111,276       108,072
  Selling, general and administrative
   expenses                                    79,776        77,848

  Impairment charge                                --       411,390
                                           ----------  ------------
    Operating income/(loss)                    31,500     (381,166)

  Other expense:
    Interest expense                            7,912         8,130
    Expense associated with convertible
     debt exchange                              1,090            --
                                           ----------  ------------
  Income/(loss) before provision for
   income taxes                                22,498     (389,296)
  Provision for (benefit from) income
   taxes                                        8,928      (57,669)
    Income/(loss) before investment in
     unconsolidated affiliate                $ 13,570   $ (331,627)
                                           ----------  ------------
  Equity in losses of unconsolidated
   affiliate                                     (20)            --
                                           ----------  ------------

    Net income/(loss)                        $ 13,550   $ (331,627)
                                           ==========  ============

  Weighted average shares outstanding:
    Basic                                      18,873        18,864
    Diluted                                    18,925        18,864

  Net Income/(Loss) per Share:
    Basic                                      $ 0.72     $ (17.58)
    Diluted                                    $ 0.72     $ (17.58)

  Earnings before interest, taxes,
   depreciation,
    amortization and impairment
    charges (EBITDA) reconciliation:
    Net income (loss)                        $ 13,550   $ (331,627)
    Equity in losses of unconsolidated
     affiliate                                     20            --
    Provision for / benefit from income
     taxes                                      8,928      (57,669)
    Loss on convertible debt exchange           1,090            --
    Impairment of goodwill and intangible
     assets                                        --       411,390
    Depreciation and amortization expense       7,218         6,988
    Amortization of development costs           1,602         1,537

    Net interest expense                        7,912         8,130
                                           ----------  ------------

    EBITDA                                   $ 40,320      $ 38,749
                                           ==========  ============


       See accompanying notes to condensed consolidated financial
        statements.

                       SCHOOL SPECIALTY, INC
               CONSOLIDATED CONDENSED BALANCE SHEETS
                          (In Thousands)
                             Unaudited

                              July 30,    April 30,   July 24,
                              2011        2011        2010
                              ----------  ----------  ----------
  ASSETS
  Current assets:
    Cash and cash
     equivalents                 $ 3,927     $ 9,821     $ 8,586
    Accounts receivable          194,507      67,442     177,888
    Inventories                  121,526     111,266     126,828
    Deferred catalog costs        11,206      16,639      10,268
    Prepaid expenses and
     other current assets         15,584      14,516      16,115

    Deferred taxes                    --          --       9,866
                              ----------  ----------  ----------
       Total current assets      346,750     219,684     349,551
  Property, plant and
   equipment, net                 62,268      65,571      64,672
  Goodwill                       129,091     129,390     126,786
  Intangible assets, net         153,218     155,889     163,541
  Other                           36,063      36,383      33,134
  Deferred taxes long-term         8,887      10,227          --
  Investment in
   unconsolidated affiliate       20,380      20,400      28,299
                              ----------  ----------  ----------

       Total assets            $ 756,657   $ 637,544   $ 765,983
                              ==========  ==========  ==========

  LIABILITIES AND
   SHAREHOLDERS' EQUITY
  Current liabilities:
    Current maturities -
     long-term debt             $ 42,765    $ 98,243   $ 133,809
    Accounts payable             125,554      85,639     126,169
    Accrued compensation           8,903       7,972      10,764
    Deferred revenue               4,348       3,600       5,466
    Deferred taxes                    --       4,454          --
    Accrued income taxes          13,856      11,855       4,264
    Other accrued
     liabilities                  37,583      25,428      37,458
                              ----------  ----------  ----------
       Total current
        liabilities              233,009     237,191     317,930
  Long-term debt - less
   current maturities            306,926     198,036     201,587
  Deferred taxes                      --          --      27,867

  Other liabilities                  688         688       1,423
                              ----------  ----------  ----------

       Total liabilities         540,623     435,915     548,807
                              ----------  ----------  ----------

  Commitments and
   contingencies
  Shareholders' equity:
    Preferred stock, $0001
     par value per share,
     1,000,000 shares
     authorized;
        none outstanding              --          --          --
    Common stock, $0001 par
     value per share,
     150,000,000 authorized
     and
         24,300,545;
     24,290,345 and
     24,290,345 shares
     issued, respectively             24          24          24
    Capital paid-in excess
     of par value                442,764     441,335     437,513
    Treasury stock, at cost
     - 5,420,210; 5,420,210
     and 5,420,210 shares,
     respectively              (186,637)   (186,637)   (186,637)
    Accumulated other
     comprehensive income         25,818      26,390      21,113

    (Accumulated deficit)       (65,935)    (79,483)    (54,837)
                              ----------  ----------  ----------
       Total shareholders'
        equity                   216,034     201,629     217,176
                              ----------  ----------  ----------
       Total liabilities and
        shareholders' equity   $ 756,657   $ 637,544   $ 765,983
                              ==========  ==========  ==========

                         SCHOOL SPECIALTY, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In Thousands)
                                Unaudited

                                                 Three Months Ended
                                              -------------------------

                                               July 30,      July 24,
                                                 2011          2010
                                              -----------  ------------
  Cash flows from operating activities:
    Net income/(loss)                            $ 13,550   $ (331,627)
    Adjustments to reconcile net income to
     net cash provided
     by operating activities:
     Depreciation and intangible asset
      amortization expense                          7,218         6,988
     Amortization of development costs              1,602         1,537
     Amortization of debt fees and other            1,062           625
     Share-based compensation expense                 517           827
     Deferred taxes                               (3,728)      (64,712)
     Equity in losses of unconsolidated
      affiliate                                        20            --
     Impairment charge                                 --       411,390
     Expense associated with convertible
      debt exchange                                 1,090            --
     Non cash convertible debt deferred
      financing costs                               2,453         3,436
     Changes in current assets and
      liabilities (net of assets
      acquired and liabilities assumed in
       business combinations):
      Accounts receivable.                      (127,066)     (105,190)
      Inventories                                (10,259)      (26,921)
      Deferred catalog costs                        5,433         3,325
      Prepaid expenses and other current
       assets                                     (1,069)         (259)
      Accounts payable.                            39,793        77,721

      Accrued liabilities.                         15,573        15,181
                                              -----------  ------------
       Net cash used in operating
        activities.                              (53,811)       (7,679)
                                              -----------  ------------

  Cash flows from investing activities:
    Additions to property, plant and
     equipment.                                   (1,265)       (2,410)

    Investment in product development costs       (1,954)       (2,181)
                                              -----------  ------------

       Net cash used in investing activities      (3,219)       (4,591)
                                              -----------  ------------

  Cash flows from financing activities:
    Proceeds from bank borrowings                 176,500        35,400
    Repayment of debt and capital leases.       (123,887)      (35,579)

    Payment of debt fees and other.               (1,477)            --
                                              -----------  ------------
       Net cash provided by financing
        activities                                 51,136         (179)
                                              -----------  ------------

  Net decrease in cash and cash equivalents.      (5,894)      (12,449)
  Cash and cash equivalents, beginning of
   period                                           9,821        21,035
                                              -----------  ------------

  Cash and cash equivalents, end of period        $ 3,927       $ 8,586
                                              ===========  ============

  Free cash flow reconciliation:
    Net cash used in operating activities      $ (53,811)     $ (7,679)
    Additions to property and equipment           (1,265)       (2,410)

    Investment in development costs               (1,954)       (2,181)
                                              -----------  ------------

    Free cash flow                             $ (57,030)    $ (12,270)
                                              ===========  ============

                                     School Specialty, Inc.
                 Segment Analysis - Revenues and Gross Profit/Margin Analysis
                                   1st Quarter, Fiscal 2012
                                         (In thousands)
                                           Unaudited


  Segment Revenues and Gross Profit/Margin
   Analysis-QTD
  ---------------------------------------------------

                                                                              % of Revenues
                                                                           ------------------

                                                                   Change
                                1Q12-QTD    1Q11-QTD    Change $      %    1Q12-QTD  1Q11-QTD
                               ----------  ----------  ----------  ------  --------  --------
  Revenues
    Educational Resources       $ 186,064   $ 175,418    $ 10,646    6.1%     67.4%     69.3%
    Accelerated Learning
     Group                         89,853      77,399      12,454   16.1%     32.5%     30.6%
    Corporate and Interco
     Elims                            167         167          --              0.1%      0.1%
                               ----------  ----------  ----------          --------  --------

       Total Revenues           $ 276,084   $ 252,984    $ 23,100            100.0%    100.0%
                               ==========  ==========  ==========    9.1%  ========  ========


                                                                              % of Revenues
                                                                           ------------------

                                                                   Change
                                1Q12-QTD    1Q11-QTD    Change $      %    1Q12-QTD  1Q11-QTD
                               ----------  ----------  ----------  ------  --------  --------
  Gross Profit
    Educational Resources        $ 60,437    $ 62,110   $ (1,673)   -2.7%     54.3%     57.5%
    Accelerated Learning
     Group                         50,156      45,315       4,841   10.7%     45.1%     41.9%

    Intercompany Eliminations         683         647          36              0.6%      0.6%
                               ----------  ----------  ----------  ------  --------  --------

       Total Gross Profit       $ 111,276   $ 108,072     $ 3,204            100.0%    100.0%
                               ==========  ==========  ==========    3.0%  ========  ========


  Segment Gross Margin Summary-QTD
  ---------------------------------------


  Gross Margin                 1Q12-QTD    1Q11-QTD
                               ----------  ----------
    Educational Resources           32.5%       35.4%
    Accelerated Learning
     Group                          55.8%       58.5%
       Total Gross Margin           40.3%       42.7%

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: School Specialty, Inc.

CONTACT: David Vander Ploeg
Executive VP and CFO
920-882-5854