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School Specialty Reports Second Quarter and Year-to-Date Results
  --  Second quarter revenue declines, but trend improving
  --  Margins are challenged, cash flow remains strong
  --  Company reduces debt by $70 million during second quarter
  --  Guidance updated


GREENVILLE, Wis., Nov. 18, 2010 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS) today reported fiscal 2011 second quarter and year-to-date financial results. Revenue for the second quarter of fiscal 2011 was $291.9 million as compared to $346.1 million in the same period last year, a decline of 15.7 percent. Excluding revenue from divestures in the prior-year quarter of $6.8 million, revenue declined 14.0 percent. Second quarter diluted earnings per share was $0.96, as compared to $1.57 in the second quarter of fiscal 2010. Gross margin was 40.3 percent, a reduction of 100 basis points over last year's second quarter due primarily to market pricing pressures in the Educational Resources Group, partially offset by product mix in the Accelerated Learning Group. Free cash flow for the quarter totaled $69.7 million, an increase of more than $6 million over fiscal 2010's second quarter.

Second quarter revenue for the Accelerated Learning Group was $104.0 million, a 4.3 percent increase over the same period last year, excluding divestiture revenue in the prior-year period, with improved results in the group's reading intervention and student planner categories. Segment revenue decreased 2.4 percent with the divestiture revenue included. Second quarter revenue for the Educational Resources Group was $187.7 million, a decline of 21.8 percent compared to the same period last year, the result of continued reductions in school furniture and consumable product purchases due to education funding cuts and lingering issues related to pricing and bid execution.

"While second quarter Educational Resources revenue met expectations, competitive pricing requirements lowered our profit margins more than we anticipated, especially in furniture where our year-over-year revenue declined 27 percent," said President and Chief Executive Officer David Vander Zanden. "Gross margin was also impacted by product mix, as we have seen more revenue reduction in our higher-margin classroom supplemental products.

"School budget pressures reduced revenue slightly from our expectations in Accelerated Learning," noted Vander Zanden. "We are seeing some states perform better as state and local revenue collections improve, and continue to believe that this school year represents the bottom of the cycle. We are increasing our marketing expenditures in Educational Resources as we go through the next several quarters, and expect to see improvements in consumables revenue in the fourth quarter of this year.

"I am especially pleased with our associates' success in generating free cash flow by bringing a new level of sophistication and discipline to our inventory management practices, improving accounts receivable collections and controlling capital spending. As a result of their efforts, we were able to achieve strong growth in free cash flow during the first half of the year, allowing us to reduce our total debt by $70 million in the second quarter," said Vander Zanden. "Their efforts enabled us to continue investing in our businesses to ensure we're prepared to capitalize on growth opportunities as the spending environment improves."

Second Quarter Financial Results

  --  Revenue for the second quarter was $291.9 million, compared with $346.1
      million for the same period last year.  The decrease was primarily
      related to the Educational Resources segment as both the supplies and
      furniture categories experienced continued reductions associated with
      ongoing school funding concerns and reduced school construction.
      Accelerated Learning had revenue growth of 4.3 percent, excluding last
      year's divestiture of School Specialty Publishing.

  --  Gross profit was $117.5 million compared with $143.1 million in last
      year's second quarter.   Consolidated gross margin declined 100 basis
      points to 40.3 percent. The decline in gross margin was primarily due to
      price discounting in response to competitive pressures in the
      Educational Resources segment.

  --  Selling, general and administrative (SG&A) expenses declined $7.1
      million to $79.3 million compared with the prior year's $86.4 million.
      The decline was related to the variable cost reduction associated with
      the volume decline.

  --  Second quarter net interest expense declined $1.0 million to $6.7
      million from last year's $7.7 million. This decline was attributable to
      a reduction in non-cash interest expense related to the company's
      convertible debt and lower debt levels. Non-cash interest expense
      declined from $3.2 million in last year's second quarter to $2.1 million
      in this year's second quarter. This reduction in non-cash interest
      expense was related to the retirement of the company's $133.0 million
      convertible bond issuance during the quarter.

  --  Net income in this year's second quarter was $18.1 million, or $0.96 per
      diluted share, compared with last year's second quarter net income of
      $29.6 million, or $1.57 per diluted share.


Six-Month Financial Results

  --  Revenue for the first half of fiscal 2011 was $544.9 million, compared
      with $676.5 million in the first half of last year, a decline of 19.5
      percent. Excluding $17.5 million of revenue in fiscal 2010 from the
      divestiture of School Specialty Publishing, consolidated revenue
      declined 17.3 percent. Revenue for the six-month period for Educational
      Resources declined 21.9 percent.  Accelerated Learning revenue declined
      14.8 percent, or 7.2 percent excluding revenue in the prior period from
      divestitures.  The decreases were primarily due to spending reductions
      by many school districts, a significant decline in school construction
      activity impacting furniture sales, and certain execution issues in the
      Educational Resources segment.

  --  Gross profit in the first half of the fiscal year was $225.6 million
      compared with $285.9 million in the same period last year.
      Consolidated gross margin declined 90 basis points to 41.4 percent,
      compared with the prior year's 42.3 percent. The decline in gross margin
      was primarily related to higher customer discounts within the
      Educational Resources segment, partially offset by a favorable product
      mix.

  --  SG&A expenses declined $17.5 million to $157.2 million compared with the
      prior year's $174.7 million. The decrease is primarily attributable to
      lower volume and the ongoing favorable impact of last year's cost
      reduction, integration and divestiture activities.

  --  Interest expense in the first half of the fiscal year was $14.9 million
      compared with last year's $15.3 million. Fiscal 2011 interest expense
      for the first six months included $5.5 million of non-cash interest
      expense related to the company's convertible debt, compared to $6.4
      million of non-cash interest expense in last year's first half. The
      decrease in non-cash interest expense has been partially offset by
      approximately $0.4 million of incremental loan commitment fees
      associated with the company's revolving credit facility.

  --  A non-cash impairment charge of $411.3 million, or $344.9 million net of
      tax, was recorded in the first half of the current fiscal year
      associated with the annual assessment of goodwill and other
      indefinite-lived intangible assets. The tax benefit associated with the
      impairment was negatively impacted by the portion of the goodwill which
      is non-deductible for tax purposes.

  --  Net loss was $313.5 million, or a loss of $16.62 per share, in the first
      half of fiscal 2011 compared with net income of $58.0 million, or $3.07
      per diluted share, in last year's first half. Excluding the net of tax
      impact of the impairment charge, net income was $31.4 million, or $1.66
      per diluted share, in the current year's first half.


Outlook

School Specialty is maintaining its prior revenue guidance for fiscal 2011 of $735 million to $770 million, and updating its guidance for earnings and free cash flow. The company now expects to report a loss per share in a range of $0.30 to $0.60 for the fiscal year, excluding the non-cash impairment charge of $18.28 per share. The new range reflects continued pricing pressures and compares with the prior guidance of diluted earnings per share of $0.15 to $0.45, excluding the impairment charge. Both the current EPS range and the previous range included a non-cash charge of $0.32 related to the convertible debt. Fiscal 2011 free cash flow guidance is expected to range from $50 million to $60 million, which compares with the prior guidance of $40 million to $50 million.

Conference Call

School Specialty will host a conference call to discuss its fiscal 2011 second quarter financial results. The conference call begins today, November 18, 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.

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


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

                               October     October                   October
                                 23,         24,       October 23,     24,
                                 2010        2009         2010         2009
                              ----------  ----------  ------------  ----------

  Revenues                     $ 291,879   $ 346,146     $ 544,863   $ 676,513

  Cost of revenues               174,357     203,041       319,269     390,617
                              ----------  ----------  ------------  ----------
   Gross profit                  117,522     143,105       225,594     285,896
  Selling, general and
   administrative expenses        79,318      86,445       157,166     174,697

  Impairment Charge                   --          --       411,390          --
                              ----------  ----------  ------------  ----------
   Operating income/(loss)        38,204      56,660     (342,962)     111,199

  Other (income) expense:
   Interest expense                6,747       7,739        14,876      15,298

   Interest income                    --          --            --        (10)
                              ----------  ----------  ------------  ----------
  Income/(Loss) before
   provision for income
   taxes                          31,457      48,921     (357,838)      95,911
  Provision for (benefit
   from) income taxes             13,222      19,324      (44,447)      37,885
                              ----------  ----------  ------------  ----------
   income/(loss) before
    investment in

    unconsolidated affiliate    $ 18,235    $ 29,597   $ (313,391)    $ 58,026
                              ----------  ----------  ------------  ----------
  Equity in (losses) of
   unconsolidated

   affiliate                       (135)          --         (135)          --
                              ----------  ----------  ------------  ----------

   Net income/(loss)            $ 18,100    $ 29,597   $ (313,526)    $ 58,026
                              ==========  ==========  ============  ==========

  Weighted average shares
   outstanding:
   Basic                          18,870      18,837        18,867      18,833
   Diluted                        18,873      18,911        18,867      18,892

  Net Income Per Share:
   Basic                          $ 0.96      $ 1.57     $ (16.62)      $ 3.08
   Diluted                        $ 0.96      $ 1.57     $ (16.62)      $ 3.07


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

                                 October 23,
                                               April 24,     October 24,
                                    2010          2010          2009
                                 -----------  ------------  ------------
  ASSETS                         (Unaudited)                 (Unaudited)
  Current assets:
   Cash and cash equivalents         $ 8,105      $ 21,035       $ 8,836
   Accounts receivable               147,057        72,734       192,633
   Inventories                        75,190        99,910       109,784
   Deferred catalog costs              7,997        13,593         5,843
   Prepaid expenses and other
    current assets                    16,099        14,318        13,651
   Refundable income taxes                --         1,539            --

   Deferred taxes                      9,866         9,867         9,805
                                 -----------  ------------  ------------
     Total current assets            264,314       232,996       340,552
  Property, plant and
   equipment, net                     64,259        66,607        68,331
  Goodwill                           127,146       540,248       545,222
  Intangible assets, net             160,852       166,552       170,154
  Development costs and other         33,321        33,118        28,760
  Investment in unconsolidated
   affiliate                          28,080        28,299            --
                                 -----------  ------------  ------------

     Total assets                  $ 677,972   $ 1,067,820   $ 1,153,019
                                 ===========  ============  ============

  LIABILITIES AND SHAREHOLDERS'
   EQUITY
  Current liabilities:
   Current maturities -
    long-term debt                     $ 849     $ 132,397     $ 129,663
   Accounts payable                   81,412        47,954        40,315
   Accrued compensation                8,567         7,501        12,953
   Deferred revenue                    4,895         4,312         4,579
   Accrued income taxes               29,103            --        21,380

   Other accrued liabilities          33,567        30,905        38,788
                                 -----------  ------------  ------------
     Total current liabilities       158,393       223,069       247,678
  Long-term debt - less current
   maturities                        266,471       199,742       230,658
  Deferred taxes                      15,252        92,398        93,896

  Other liabilities                    1,423         1,423           913
                                 -----------  ------------  ------------

     Total liabilities               441,539       516,632       573,145
                                 -----------  ------------  ------------

  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; 24,280,097 and
     24,265,678 shares issued,
     respectively                         24            24            24
  Capital paid-in excess of par
   value                             437,943       436,959       436,923
  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               21,839        24,052        20,599

  Retained (deficit)/earnings       (36,736)       276,790       308,965
                                 -----------  ------------  ------------

     Total shareholders' equity      236,433       551,188       579,874
                                 -----------  ------------  ------------
     Total liabilities and
      shareholders' equity         $ 677,972   $ 1,067,820   $ 1,153,019
                                 ===========  ============  ============


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


                                                  Six Months Ended
                                              ------------------------

                                                             October
                                               October 23,     24,
                                                  2010         2009
                                              ------------  ----------
  Cash flows from operating activities:
   Net income                                  $ (313,526)    $ 58,026
   Adjustments to reconcile net income to
    net cash provided
    by operating activities:
    Depreciation and intangible asset
     amortization expense                           13,869      13,196
    Amortization of development costs                2,931       3,514
    Amortization of debt fees and other              1,118       1,055
    Share-based compensation expense                 1,443       2,159
    Impairment charge                              411,390          --
    Investment in unconsolidated affiliate             135          --
    Deferred taxes                                (77,606)       7,452
    Loss (gain) on disposal of property,
     equipment and other                                --         275
    Non-cash convertible debt deferred
     financing costs                                 5,542       6,398
    Changes in current assets and
     liabilities (net of assets
     acquired and liabilities assumed in
      business combinations):
      Accounts receivable                         (74,064)    (86,610)
      Inventories                                   24,718      17,653
      Deferred catalog costs                         5,596       9,694
      Prepaid expenses and other current
       assets                                        (243)       3,967
      Accounts payable                              33,051    (17,190)

      Accrued liabilities                           33,248      25,189
                                              ------------  ----------
       Net cash provided by operating
        activities                                  67,602      44,778
                                              ------------  ----------

  Cash flows from investing activities:
   Cash paid in acquisitions, net of cash
    acquired                                            --    (11,700)
   Additions to property, plant and
    equipment                                      (5,917)     (6,364)
   Proceeds from disposal of discontinued
    operations                                          --         500
   Investment in product development costs         (4,254)     (4,436)
   Proceeds from disposal of property, plant
    and equipment                                       --       2,083
                                              ------------  ----------

       Net cash used in investing activities      (10,171)    (19,917)
                                              ------------  ----------

  Cash flows from financing activities:
   Proceeds from bank borrowings                   449,400     283,700
   Repayment of debt and capital leases          (386,761)   (301,433)
   Redemption of convertible debt                (133,000)          --
   Payment of debt and other                            --       (238)

   Proceeds from exercise of stock options              --          75
                                              ------------  ----------

       Net cash used in financing activities      (70,361)    (17,896)
                                              ------------  ----------

  Net (decrease)/increase in cash and cash
   equivalents                                    (12,930)       6,965
  Cash and cash equivalents, beginning of
   period                                           21,035       1,871
                                              ------------  ----------

  Cash and cash equivalents, end of period         $ 8,105     $ 8,836
                                              ============  ==========

  Free cash flow reconciliation:
   Net cash used in operating activities          $ 67,602    $ 44,778
   Additions to property and equipment             (5,917)     (6,364)
   Investment in development costs                 (4,254)     (4,436)
   Proceeds from disposal of property and
    equipment                                           --       2,083
                                              ------------  ----------

   Free cash flow                                 $ 57,431    $ 36,061
                                              ============  ==========


                                     School Specialty, Inc.
                  Segment Analysis - Revenues and Gross Profit/Margin Analysis
                                    2nd Quarter, Fiscal 2011
                                         (In thousands)
                                           Unaudited


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

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

                                                                    Change
                               2Q11-QTD    2Q10-QTD     Change $       %    2Q11-QTD  2Q10-QTD
                              ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources       $ 187,693   $ 239,864    $ (52,171)  -21.8%     64.3%     69.3%
   Accelerated Learning          104,019     106,610       (2,591)   -2.4%     35.6%     30.8%
   Corporate and Interco
    Elims                            167       (328)           495              0.1%     -0.1%
                              ----------  ----------  ------------          --------  --------

    Total Revenues             $ 291,879   $ 346,146    $ (54,267)            100.0%    100.0%
                              ==========  ==========  ============  -15.7%  ========  ========


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

                                                                    Change
                               2Q11-QTD    2Q10-QTD     Change $       %    2Q11-QTD  2Q10-QTD
                              ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources        $ 58,740    $ 82,776    $ (24,036)  -29.0%     50.0%     57.8%
   Accelerated Learning           57,903      59,693       (1,790)   -3.0%     49.3%     41.7%
   Corporate and Interco
    Elims                            879         636           243              0.7%      0.5%
                              ----------  ----------  ------------          --------  --------

    Total Gross Profit         $ 117,522   $ 143,105    $ (25,583)            100.0%    100.0%
                              ==========  ==========  ============  -17.9%  ========  ========


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


  Gross Margin                 2Q11-QTD    2Q10-QTD
                              ----------  ----------
   Educational Resources           31.3%       34.5%
   Accelerated Learning            55.7%       56.0%
    Total Gross Margin             40.3%       41.3%


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


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


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

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

                                                                    Change
                               2Q11-YTD    2Q10-YTD     Change $       %    2Q11-YTD  2Q10-YTD
                              ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources       $ 363,111   $ 464,807   $ (101,696)  -21.9%     66.6%     68.7%
   Accelerated Learning          181,418     212,956      (31,538)  -14.8%     33.3%     31.5%
   Corporate and Interco
    Elims                            334     (1,250)         1,584              0.1%     -0.2%
                              ----------  ----------  ------------          --------  --------

    Total Revenues             $ 544,863   $ 676,513   $ (131,650)            100.0%    100.0%
                              ==========  ==========  ============  -19.5%  ========  ========


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

                                                                    Change
                               2Q11-YTD    2Q10-YTD     Change $       %    2Q11-YTD  2Q10-YTD
                              ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources       $ 120,850   $ 165,492    $ (44,642)  -27.0%     53.6%     57.9%
   Accelerated Learning          103,218     119,208      (15,990)  -13.4%     45.8%     41.7%
   Corporate and Interco
    Elims                          1,526       1,196           330              0.7%      0.4%
                              ----------  ----------  ------------          --------  --------

    Total Gross Profit         $ 225,594   $ 285,896    $ (60,302)            100.1%    100.0%
                              ==========  ==========  ============  -21.1%  ========  ========


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


  Gross Margin                 2Q11-YTD    2Q10-YTD
                              ----------  ----------
   Educational Resources           33.3%       35.6%
   Accelerated Learning            56.9%       56.0%
    Total Gross Margin             41.4%       42.3%

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

SOURCE: School Specialty, Inc.

CONTACT:  School Specialty, Inc.
David Vander Ploeg, Executive VP and CFO
920-882-5854
Mark Fleming, Communications & Investor Relations
920-882-5646