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School Specialty Reports Fourth Quarter and Fiscal 2011 Results
  --  Fourth Quarter Consolidated organic revenue growth of 2 percent
  --  Educational Resources grows 2 percent; Accelerated Learning grows 4
      percent
  --  Fiscal 2012 guidance issued


GREENVILLE, Wis., June 16, 2011 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS) today reported fiscal fourth quarter and year-end results with revenue growth in both segments, despite continuing budget pressures facing pre-kindergarten through grade 12 educators. Revenue for the final quarter of School Specialty's 2011 fiscal year grew 8.8 percent compared to last year's fourth quarter, reaching $127.4 million. Excluding the additional week in this year's fourth quarter, revenue was $119.3 million, an increase of 2 percent. Consistent with the seasonally slow fourth quarter, the company reported a fourth quarter loss of $22.6 million compared with a loss of $13.7 million in same period last year. The loss in the current-year fourth quarter includes pre-tax special charges related to an equity-method investment impairment of $6.9 million and a $1.9 million loss on exchange of debt. Excluding these special charges, the net loss for the fourth quarter was $17.2 million. Loss per share in the quarter was $1.20. Excluding special charges loss per share was $0.91 versus a prior-year loss of $0.73.

"We are cautiously optimistic with the business trends we saw in the fourth quarter," said Chief Executive Officer David J. Vander Zanden. "With state income and sales tax revenues starting to exceed most states' internal projections, we believe education budgets should stabilize and could lead to greater budget visibility and spending confidence on the part of educators for the remainder of the calendar year.

"During the fourth quarter we saw improvement in order volume both in supplies, which met our expectations, and furniture, which exceeded our expectations since that category has been the most impacted by reductions in spending and construction projects. Orders received subsequent to year end show loose furniture up 2 percent and supplies down 2 percent to prior year. Our margins in consumables continued to be impacted by pricing pressures. However, we expect this margin degradation to lessen as we proceed through the selling season and begin to grow as we implement new programs. Our fourth quarter furniture margins did show modest improvement from prior quarter levels, and we expect this improvement to continue through the heavy delivery season for furniture.

"Our Accelerated Learning Group reported revenue growth in the fourth quarter of about 4 percent after adjusting for the incremental week in fiscal 2011, led by our science, math and health categories. Science is building good momentum, with better prospects for state adoptions this year compared to the last selling season. We expect these trends to continue through the busy season."

Fourth Quarter Financial Results

  --  Revenue for the fourth quarter of fiscal 2011 was $127.4 million, an
      increase of 8.8 percent compared with $117.0 million in last year's
      fourth quarter. Excluding an incremental week in the fourth quarter of
      fiscal 2011 (14 weeks) as compared to the fourth quarter of fiscal 2010
      (13 weeks), revenue increased by 2 percent. The revenue increase
      reflects growth across both company segments.
  --  Gross profit was $49.0 million compared with $50.8 million in last
      year's fourth quarter. Consolidated gross margin declined 490 basis
      points to 38.5 percent, primarily due to one-time credits realized in
      fiscal 2010 and pricing discounts required in consumables and furniture.
      The company expects the rate of decline to lessen substantially over the
      next several quarters. In addition, product mix within the Accelerated
      Learning segment contributed to the decline, and is also expected to
      improve.
  --  As expected, selling, general and administrative expenses increased to
      $71.2 million from the prior year's $64.7 million, primarily due to the
      additional week in the current-year fourth quarter, higher volumes, and
      increased transportation and marketing costs in Educational Resources.
  --  A non-cash charge of $6.9 million was recorded in the fourth quarter of
      fiscal 2011 related to an impairment of the company's 35 percent
      ownership interest in an unconsolidated affiliate. Macro-economic
      conditions affecting school spending levels have impacted the results of
      this investment which led to a decreased valuation.
  --  Fourth quarter net interest expense was $6.9 million, a decrease of $0.8
      million from last year's fourth quarter due to a reduction in non-cash
      interest related to convertible debt.
  --  During the quarter $100 million of outstanding 3.75% convertible
      subordinated debentures was exchanged and refinanced with new
      debentures. Expenses of $1.9 million associated with this convertible
      debt exchange were recognized in the current-year's fourth quarter.
  --  Net loss in the fourth quarter was $22.6 million ($1.20 per share)
      compared to a loss of $13.7 million ($0.73 per share) in the same period
      last year.   Excluding the special charges described above, net loss in
      fiscal 2011's fourth quarter was $17.2 million ($0.91 per share).


Fiscal 2011 Financial Results

  --  Revenue for fiscal 2011 was $762.1 million compared with $896.7 million
      last year, a decline of 15.0 percent. Excluding $17.5 million of revenue
      in fiscal 2010 from School Specialty Publishing, which was sold prior to
      last year's third quarter, consolidated revenue declined 13.3 percent.
      The decline in revenue was due to K-12 education budget pressures
      resulting in reduced spending by schools, a significant decline in
      furniture sales as a result of fewer construction projects, and various
      performance challenges within the Educational Resources segment.
  --  Gross profit for the year was $307.5 million compared with $379.1
      million last year.   Gross margin declined 190 basis points to 40.4
      percent versus last year's 42.3 percent. Most of the reduction was due
      to competitive pricing pressures within the Educational Resources
      segment.
  --  Selling, general and administrative expenses declined to $287.6 million
      (37.7 percent of revenue), from the prior year's $304.5 million (34.0
      percent of revenue). The expense decrease is primarily attributable to
      lower revenue, general cost reductions, operational consolidations and a
      divestiture.
  --  Non-cash impairment charges totaling $418.3 million, or $349.1 million
      net of tax, were recorded in fiscal 2011 associated with impairment of
      goodwill and other indefinite-lived intangible assets, and the charge
      associated with the decreased valuation of the company's ownership
      interest in its unconsolidated affiliate. The tax benefit associated
      with the impairment was negatively impacted by the portion of the
      goodwill that is non-deductible for tax purposes.
  --  Full-year net interest expense decreased $2.3 million to $28.2 million
      from last year's $30.5 million. This decrease was attributable to the
      reduction in non-cash interest expense primarily due to the retirement
      of $133.0 million of convertible debt early in the company's second
      quarter.
  --  Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"), was $53.1 million in fiscal 2011 as compared to $106.6
      million in fiscal 2010. The decrease is related to a combination of the
      revenue declines and the reduction in gross margin.
  --  Fiscal 2011's net loss was $356.3 million ($18.88 per share), including
      the non-cash impairment and debt exchange charges, compared to net
      income of $25.9 million ($1.37 per diluted share) in the same period
      last year. Excluding the net of tax impact of all special charges, net
      loss was $5.9 million ($0.31 per share).
  --  Free cash flow for fiscal 2011 was $35.2 million. Free cash flow was
      impacted by the company's increased inventory investments of nearly $11
      million over earlier plans due to early buying opportunities and
      business growth.


Outlook

For fiscal 2012, School Specialty is expecting:

  --  Revenue to be in the range of $755 million to $780 million, representing
      flat to positive 3.5 percent growth, on a normalized 52-week comparison.
  --  EBITDA to be in the range of $53 million to $59 million, representing
      margins of 7.0 percent to 7.5 percent.
  --  Loss per share to be in the range of $0.35 per share to $0.10 per share.
      This range reflects a charge of $0.25 per share for non-cash interest
      related to the convertible debt.
  --  Free cash flow to be in the range 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 2011 financial results. The conference call begins today, June 16, 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 or prospects, 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 24, 2010, 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        Fiscal Year Ended
                                          ------------------------  ------------------------

                                           April 30,    April 24,    April 30,     April 24,
                                             2011         2010          2011         2010
                                          -----------  -----------  ------------  ----------

  Revenues                                  $ 127,355    $ 117,039     $ 762,078   $ 896,678

  Cost of revenues                             78,378       66,205       454,557     517,530
                                          -----------  -----------  ------------  ----------
   Gross profit                                48,977       50,834       307,521     379,148
  Selling, general and administrative
   expenses                                    71,225       64,745       287,560     304,451
  Impairment of goodwill and intangible
   assets                                          --           --       411,390          --
                                          -----------  -----------  ------------  ----------
   Operating income (loss)                   (22,248)     (13,911)     (391,429)      74,697

  Other (income) expense:
   Interest expense                             6,916        7,705        28,157      30,532
   Interest income                                 --         (33)            --        (66)
   Impairment of equity-method
    investment                                  6,861           --         6,861          --

   Loss on convertible debt exchange            1,920           --         1,920          --
                                          -----------  -----------  ------------  ----------
  Income (loss) before provision for
   income taxes                              (37,945)     (21,583)     (428,367)      44,231
  Provision for (benefit from) income
   taxes                                     (15,299)      (8,320)      (73,132)      17,678
                                          -----------  -----------  ------------  ----------
   Income (loss) before investment in
    unconsolidated affiliate               $ (22,646)   $ (13,263)   $ (355,235)    $ 26,553
                                          -----------  -----------  ------------  ----------
  Equity in (losses) earnings of
   unconsolidated affiliate                        47        (460)       (1,038)       (701)
                                          -----------  -----------  ------------  ----------

   Net income (loss)                       $ (22,599)   $ (13,723)   $ (356,273)    $ 25,852
                                          ===========  ===========  ============  ==========

  Weighted average shares outstanding:
   Basic                                       18,868       18,859        18,870      18,843
   Diluted                                     18,868       18,859        18,870      18,874

  Net Income (Loss) Per Share:
   Basic                                     $ (1.20)     $ (0.73)     $ (18.88)      $ 1.37
   Diluted                                   $ (1.20)     $ (0.73)     $ (18.88)      $ 1.37

  Earnings before interest, taxes,
   depreciation, amortization and
   impairment charges (EBITDA)
   reconciliation:
   Net income (loss)                       $ (22,599)   $ (13,723)   $ (356,273)    $ 25,852
   Equity in (losses) earnings of
    unconsolidated affiliate                     (47)          460         1,038         701
   Provision for income taxes                (15,299)      (8,320)      (73,132)      17,678
   Loss on convertible debt exchange            1,920           --         1,920          --
   Impairment of equity-method
    investment                                  6,861           --         6,861          --
   Impairment of goodwill and intangible
    assets                                         --           --       411,390          --
   Depreciation and amortization expense        7,090        6,964        27,832      26,847
   Amortization of development costs            1,496          875         5,334       5,067

   Net interest expense                         6,916        7,672        28,157      30,466
                                          -----------  -----------  ------------  ----------

   EBITDA                                  $ (13,662)    $ (6,072)      $ 53,127   $ 106,611
                                          ===========  ===========  ============  ==========


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


                                  April 30,    April 24,
                                    2011          2010
                                 -----------  ------------
  ASSETS                         (Unaudited)   (Unaudited)
  Current assets:
   Cash and cash equivalents         $ 9,821      $ 21,035
   Accounts receivable, net           67,442        72,734
   Inventories, net                  111,266        99,910
   Deferred catalog costs             16,639        13,593
   Prepaid expenses and other
    current assets                    14,516        14,318
   Refundable income taxes                --         1,539

   Deferred taxes                         --         9,867
                                 -----------  ------------
    Total current assets             219,684       232,996
  Property, plant and
   equipment, net                     65,571        66,607
  Goodwill                           129,390       540,248
  Intangible assets, net             155,889       166,552
  Other                               36,383        33,118
  Deferred taxes - long-term           9,676            --
  Investment in unconsolidated
   affiliate                          20,400        28,299
                                 -----------  ------------

    Total assets                   $ 636,993   $ 1,067,820
                                 ===========  ============

  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities:
   Current maturities -
    long-term debt                  $ 95,207     $ 132,397
   Accounts payable                   85,639        47,954
   Accrued income taxes               14,089            --
   Accrued compensation                7,972         7,501
   Deferred revenue                    3,600         4,312
   Deferred taxes                      1,973            --

   Other accrued liabilities          25,428        30,905
                                 -----------  ------------
    Total current liabilities        233,908       223,069
  Long-term debt - less current
   maturities                        201,073       199,742
  Deferred taxes and other                --        92,398

  Other liabilities                      383         1,423
                                 -----------  ------------

    Total liabilities                435,364       516,632
                                 -----------  ------------

  Commitments and contingencies
  Shareholders' equity:
   Preferred stock, $0.001 par
    value per share, 1,000,000
    shares authorized; none
    outstanding                           --            --
   Common stock, $0.001 par
    value per share,
    150,000,000 authorized and
    24,290,345 and 24,280,097
    shares issued, respectively           24            24
   Capital paid-in excess of
    par value                        441,335       436,959
   Treasury stock, at cost -
    5,420,210 and 5,420,210
    shares, respectively           (186,637)     (186,637)
   Accumulated other
    comprehensive income              26,390        24,052
   Retained earnings
    (accumulated deficit)           (79,483)       276,790
                                 -----------  ------------

    Total shareholders' equity       201,629       551,188
                                 -----------  ------------
    Total liabilities and
     shareholders' equity          $ 636,993   $ 1,067,820
                                 ===========  ============


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


                                                 Fiscal Year Ended
                                              ------------------------

                                               April 30,     April 24,
                                                  2011         2010
                                              ------------  ----------
  Cash flows from operating activities:
   Net income (loss)                           $ (356,273)    $ 25,852
   Adjustments to reconcile net income to
    net cash provided by operating
    activities:
    Depreciation and intangible asset
     amortization expense                           27,832      26,847
    Amortization of development costs                5,334       5,067
    Investment in unconsolidated affiliate           1,038         701
    Amortization of debt fees and other              2,162       2,420
    Share-based compensation expense                 2,846       2,448
    Impairment of goodwill and intangible
     assets                                        411,390          --
    Impairment of equity-method investment           6,861          --
    Loss on convertible debt exchange                1,920          --
    Deferred taxes                                (92,090)       5,981
    Loss on disposal of property, equipment
     and other                                          --         652
    Non-cash convertible debt deferred
     financing costs                                 9,999      13,062
    Changes in current assets and
     liabilities (net of assets acquired and
     liabilities assumed in business
     combinations):
     Accounts receivable                             5,783      29,008
     Inventories                                  (11,297)      13,586
     Deferred catalog costs                        (3,046)       1,944
     Prepaid expenses and other current
      assets                                         1,347       1,417
     Accounts payable                               38,430     (9,267)

     Accrued liabilities                             7,774     (7,659)
                                              ------------  ----------
       Net cash provided by operating
        activities                                  60,010     112,059
                                              ------------  ----------

  Cash flows from investing activities:
   Cash paid in acquisitions, net of cash
    acquired                                         (360)    (11,700)
   Additions to property, plant and
    equipment                                     (15,789)    (13,832)
   Acquisition of intangible and other
    assets                                              --     (1,800)
   Proceeds from note receivable                        --         700
   Investment in product development costs         (9,052)    (10,035)
   Proceeds from disposal of property, plant
    and equipment                                       --       2,083

   Investment in Noncontrolling Interest                --     (2,226)
                                              ------------  ----------

       Net cash used in investing activities      (25,201)    (36,810)
                                              ------------  ----------

  Cash flows from financing activities:
   Proceeds from bank borrowings                   810,600     304,400
   Repayment of debt and capital leases          (720,068)   (356,979)
   Redemption of Convertible Debt                (133,000)          --
   Proceeds from exercise of stock options              --         117

   Payment of debt fees and other                  (3,555)     (3,623)
                                              ------------  ----------

       Net cash used in financing activities      (46,023)    (56,085)
                                              ------------  ----------

  Net increase in cash and cash equivalents       (11,214)      19,164
  Cash and cash equivalents, beginning of
   period                                           21,035       1,871
                                              ------------  ----------

  Cash and cash equivalents, end of period         $ 9,821    $ 21,035
                                              ============  ==========

  Free cash flow reconciliation:
   Net cash provided by operating activities      $ 60,010   $ 112,059
   Additions to property and equipment            (15,789)    (13,832)
   Investment in development costs                 (9,052)    (10,035)
   Proceeds from disposal of property and
    equipment                                           --       2,083
                                              ------------  ----------

   Free cash flow                                 $ 35,169    $ 90,275
                                              ============  ==========


                                     School Specialty, Inc.
                  Segment Analysis - Revenues and Gross Profit/Margin Analysis
                                    4th Quarter, Fiscal 2011
                                         (In thousands)
                                           Unaudited


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

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

                                                                    Change
                               4Q11-QTD    4Q10-QTD     Change $       %    4Q11-QTD  4Q10-QTD
                              ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources       $ 101,906    $ 94,258       $ 7,648    8.1%     80.0%     80.5%
   Accelerated Learning           25,282      22,584         2,698   11.9%     19.9%     19.3%
   Corporate and Interco
    Elims                            167         197          (30)              0.1%      0.2%
                              ----------  ----------  ------------          --------  --------

    Total Revenues             $ 127,355   $ 117,039      $ 10,316            100.0%    100.0%
                              ==========  ==========  ============    8.8%  ========  ========


                                                                             % of Gross Profit
                                                                            ------------------

                                                                    Change
                               4Q11-QTD    4Q10-QTD     Change $       %    4Q11-QTD  4Q10-QTD
                              ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources        $ 36,333    $ 37,476     $ (1,143)   -3.0%     74.2%     73.7%
   Accelerated Learning           12,383      12,498         (115)   -0.9%     25.3%     24.6%
   Corporate and Interco
    Elims                            261         860         (599)              0.5%      1.7%
                              ----------  ----------  ------------          --------  --------

    Total Gross Profit          $ 48,977    $ 50,834     $ (1,857)            100.0%    100.0%
                              ==========  ==========  ============   -3.7%  ========  ========


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


  Gross Margin                 4Q11-QTD    4Q10-QTD
                              ----------  ----------
   Educational Resources           35.7%       39.8%
   Accelerated Learning            49.0%       55.3%
    Total Gross Margin             38.5%       43.4%


  --------------------------------------------------------------------------------------------


  --------------------------------------------------------------------------------------------


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

                                                                               % of Revenue
                                                                            ------------------

                                                                    Change
                               4Q11-YTD    4Q10-YTD     Change $       %    4Q11-YTD  4Q10-YTD
                              ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources       $ 534,803   $ 641,048   $ (106,245)  -16.6%     70.2%     71.5%
   Accelerated Learning          226,607     256,157      (29,550)  -11.5%     29.7%     28.6%
   Corporate and Interco
    Elims                            668       (527)         1,195              0.1%     -0.1%
                              ----------  ----------  ------------          --------  --------

    Total Revenues             $ 762,078   $ 896,678   $ (134,600)            100.0%    100.0%
                              ==========  ==========  ============  -15.0%  ========  ========


                                                                             % of Gross Profit
                                                                            ------------------

                                                                    Change
                               4Q11-YTD    4Q10-YTD     Change $       %    4Q11-YTD  4Q10-YTD
                              ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources       $ 179,379   $ 233,011    $ (53,632)  -23.0%     58.4%     61.5%
   Accelerated Learning          125,868     143,442      (17,574)  -12.3%     40.9%     37.8%
   Corporate and Interco
    Elims                          2,274       2,695         (421)              0.7%      0.7%
                              ----------  ----------  ------------          --------  --------

    Total Gross Profit         $ 307,521   $ 379,148    $ (71,627)            100.0%    100.0%
                              ==========  ==========  ============  -18.9%  ========  ========


  Segment Gross Margin Summary-YTD
  --------------------------------------


  Gross Margin                 4Q11-YTD    4Q10-YTD
                              ----------  ----------
   Educational Resources           33.5%       36.3%
   Accelerated Learning            55.5%       56.0%
    Total Gross Margin             40.4%       42.3%

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
Mark Fleming
Investor Relations & Communications
920-882-5646