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-- 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