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School Specialty Reports Third Quarter and Nine-Month Results
  --  Third quarter earnings per share (EPS) improves 22% or $0.27 over the
      prior year
  --  Gross profit margin improves 550 basis points; SG&A declines $8.3
      million
  --  Debt reduced by $60 million; cash position increased $22 million
  --  Revenue and EPS guidance updated; free cash flow guidance confirmed


GREENVILLE, Wis., Feb. 18, 2010 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS) today reported fiscal 2010 third quarter and year-to-date financial results. While revenue for the third quarter of fiscal 2010 declined to $103.1 million, compared with $121.7 million in the prior year's third quarter, continued gross margin improvements, operational efficiencies, cost reductions and lower interest expense led to a $4.9 million improvement in the company's third quarter net loss compared to the same period last year. Net loss in the seasonally slow third quarter this year was $18.5 million compared to last year's net loss of $23.4 million. The quarter's loss per share improved to $0.98, as compared to $1.25 per share loss in fiscal 2009.

Free cash flow was $87.2 million for the nine-month period, reflecting tighter inventory controls, improved accounts receivable collections and low capital spending. The company also continued to strengthen its balance sheet, reducing total debt by approximately $60 million over the past 12 months, and increasing its quarter-end cash balance by more than $22 million.

"We achieved improved year-over-year earnings per share in excess of 20 percent in the third quarter due to the exceptional efforts of our associates in driving efficiencies, controlling costs and strengthening our balance sheet," said Chief Executive Officer David J. Vander Zanden. "The reduction in our third quarter revenue reflects a continuing difficult school spending environment, particularly in furniture. However, I'm very encouraged by the progress in our Intervention category, where the acquisition of AutoSkill has brought us a major new business win in Texas, as well as other promising growth opportunities for its reading and math software programs. While sales in our supplies and supplemental categories have been modestly lower due to school budget issues, the furniture and school construction sector continued to be the most impacted by budget cuts and major project delays. We expect that the recovery in furniture will be slow, especially for the portion of the business tied to projects. In spite of these challenges, our associates continue to make important progress in consolidating functions, and streamlining how we reach and serve our customers. In addition to creating customer benefits, we are achieving permanent cost reductions that are supporting our current profitability, while preparing us for future growth."

Third Quarter Financial Results

  --  Revenue for the third quarter was $103.1 million, compared with $121.7
      million in last year's third quarter.  The decrease was primarily
      related to the Educational Resources segment, which experienced a $14.7
      million revenue decline. The general economic conditions have continued
      to affect school spending levels, particularly in the furniture product
      lines. Additional revenue in the quarter that related to the acquisition
      of AutoSkill International was offset by the revenue decline
      attributable to the divestiture of School Specialty Publishing.
  --  Gross profit was $42.4 million compared with $43.3 million in last
      year's third quarter.   Consolidated gross margin improved 550 basis
      points to 41.1 percent.  The improvement was primarily due to favorable
      product mix, particularly within the Publishing segment, and continued
      margin expansion within the Educational Resources segment related to
      product pricing and costing initiatives begun last year. The absence of
      promotions within the Science unit that reduced gross margin in the
      prior year's third quarter also contributed to the increase.
  --  Selling, general and administrative (SG&A) expenses declined $8.3
      million to $65.0 million compared with the prior year's $73.3 million. A
      majority of the decline is related to the company's cost-reduction
      efforts over the past 12 months. SG&A as a percent of revenue in the
      third quarter was 63.1 percent, compared with the prior year's 60.2
      percent.
  --  Operating loss for the third quarter improved to $22.6 million compared
      with a loss of $30.0 million for the same period last year.
  --  Third quarter net interest expense and other expense declined $0.5
      million to $7.5 million from $8.0 million in last year's third quarter.
      This decline was attributable to a reduction in average quarterly debt
      balances of approximately $90 million, which includes the elimination of
      an accounts receivable securitization program in fiscal 2009. The
      current quarter included non-cash interest expense of $3.3 million as
      compared to $3.0 million in last year's third quarter, as a result of
      the company adopting FASB ASC Topic 470-20 regarding new accounting
      rules for convertible debt.
  --  Net loss in the third quarter of fiscal 2010 was $18.5 million ($0.98
      per share) compared with last year's third quarter net loss of $23.4
      million ($1.25 per share). Both periods included non-cash charges
      related to convertible debt accounting, which increased the third
      quarter loss per share by $0.11 in fiscal 2010 and $0.10 in fiscal 2009.
      Fiscal 2010 diluted EPS has been reduced by $0.01 for the company's
      share of the net loss from its minority interest in Carson-Dellosa
      Publishing, LLC, which was formed during the third quarter. The
      company's minority interest was obtained through a contribution of
      publishing unit assets, including cash.


Nine-Month Financial Results

  --  Revenue for the first nine months fiscal 2010 was $779.6 million
      compared with $890.8 million in the same period last year. The reduction
      is primarily due to spending reductions by schools, and the expected $21
      million decline in state science adoption revenue.
  --  Year-to-date gross profit was $328.3 million compared with $366.4
      million in the first nine months of last year.   Gross margin improved
      100 basis points to 42.1 percent. The improvement was due primarily to
      product pricing and successful vendor costing initiatives.
  --  SG&A expenses declined $34.7 million in the first nine months of the
      year to $239.7 million compared with $274.4 million in the first nine
      months of fiscal 2009. As a percent of sales, year-to-date SG&A declined
      10 basis points to 30.7 percent.  Cost reductions resulting from
      operational consolidations, improved supply chain management and various
      expense controls all contributed to the year-over-year decline.
  --  Year-to-date operating income was $88.6 million, compared with operating
      income of $92.0 million in the same period last year. Improved gross
      margin and SG&A leverage resulted in a 110 basis point improvement in
      operating margin to 11.4 percent for the first nine months of fiscal
      2010, compared to 10.3 percent for the same period last year.
  --  Net interest expense and other expense for fiscal 2010's first nine
      months declined $2.4 million to $22.8 million from $25.2 million in the
      same period last year. This decline was attributable to a reduction in
      average debt balances of approximately $100 million, which includes the
      elimination of an accounts receivable securitization program in fiscal
      2009. The current year included non-cash interest expense of $9.7
      million compared to $8.9 million last year, as a result of the company's
      adoption of the new accounting rules for convertible debt.
  --  Net income for the first nine months of fiscal 2010 was $39.6 million
      ($2.09 per diluted share) compared with $40.3 million ($2.13 per diluted
      share) for the first nine months of fiscal 2009.   Both periods included
      non-cash charges related to convertible debt accounting, which reduced
      nine-month diluted EPS by $0.31 this year and $0.29 in fiscal 2009.
      Fiscal 2010 diluted EPS has been reduced by $0.01 for the company's
      share of the net loss from its minority interest in Carson-Dellosa
      Publishing, LLC.


Outlook

School Specialty is updating its fiscal 2010 guidance for revenue and earnings per share, and confirming its previously issued guidance for free cash flow. The company is reducing its revenue guidance from $915 million to $940 million to a range of $895 million to $910 million. This revenue range includes a projected $22 million decline in curriculum adoption revenue and an approximate $8 million decline due to the net effect of the divestiture of School Specialty Publishing and the acquisition of AutoSkill International, Inc. The projected diluted earnings per share range has been narrowed to $1.40 to $1.54 from the previous range of $1.40 to $1.60 per diluted share. As with the previous guidance, these figures include a $0.42 non-cash charge for adoption of the new convertible debt accounting rules, and one-time integration costs of $0.06 to $0.08 per diluted share from acquisition and divestiture activity. The company is confirming the free cash flow range of $70 million to $80 million ($3.71 to $4.24 per diluted share), which excludes the $11.7 million purchase price of the AutoSkill acquisition announced in the second quarter.

Conference Call

School Specialty will host a conference call to discuss its fiscal 2010 third quarter financial results. The conference call begins today, February 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 25, 2009, 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        Nine Months Ended
                              ------------------------  ----------------------
                                               (As                     (As
                                            Adjusted)*              Adjusted)*

                              January 23,  January 24,   January     January
                                 2010         2009       23, 2010    24, 2009
                              -----------  -----------  ----------  ----------

  Revenues                      $ 103,126    $ 121,710   $ 779,639   $ 890,810

  Cost of revenues                 60,708       78,411     451,325     524,392
                              -----------  -----------  ----------  ----------
   Gross profit                    42,418       43,299     328,314     366,418
  Selling, general and
   administrative expenses         65,009       73,283     239,706     274,389
                              -----------  -----------  ----------  ----------
   Operating income              (22,591)     (29,984)      88,608      92,029

  Other (income) expense:
   Interest expense                 7,527        7,343      22,827      22,698
   Interest income                   (22)        (102)        (33)       (322)

   Other                               --          714          --       2,803
                              -----------  -----------  ----------  ----------
  Income before provision
   for income taxes              (30,096)     (37,939)      65,814      66,850

  Provision for income taxes     (11,886)     (14,498)      25,998      26,516
                              -----------  -----------  ----------  ----------
   Income (loss) from
    continuing operations
    before income taxes and
    income (loss) from
    investment in
    unconsolidated affiliate   $ (18,210)   $ (23,441)    $ 39,816    $ 40,334
                              -----------  -----------  ----------  ----------
  Equity in (losses)
   earnings of
   unconsolidated affiliate,
   net of tax                       (241)           --       (241)          --
                              -----------  -----------  ----------  ----------

   Net income                  $ (18,451)   $ (23,441)    $ 39,575    $ 40,334
                              ===========  ===========  ==========  ==========
                                                     .
  Weighted average shares
   outstanding:
   Basic                           18,849       18,788      18,838      18,804
   Diluted                         18,849       18,788      18,901      18,927

  Net Income Per Share:
   Basic                         $ (0.98)     $ (1.25)      $ 2.10      $ 2.14
   Diluted                       $ (0.98)     $ (1.25)      $ 2.09      $ 2.13

  *The Company adopted at the beginning of Fiscal 2010 Financial Accounting
   Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic
   470-20, "Debt with Conversion and Other" ("FASB ASC Topic 470-20"). The
   adoption of FASB ASC Topic 470-20 required an adjustment of previously
   reported amounts assigned to debt, deferred taxes, equity and interest
   expense.

                          SCHOOL SPECIALTY, INC.
                   CONSOLIDATED CONDENSED BALANCE SHEETS
                              (In Thousands)
                                              (As Adjusted
                                              from Audited       (As
                                              Statements)*   Adjusted)*

                                 January 23,   April 25,     January 24,
                                    2010          2009          2009
                                ------------  ------------  ------------
  ASSETS                         (Unaudited)                 (Unaudited)
  Current assets:
   Cash and cash equivalents        $ 23,459       $ 1,871       $ 1,258
   Accounts receivable                92,894       103,683        65,220
   Inventories                        89,844       127,108       132,615
   Deferred catalog costs             10,619        15,537        19,435
   Prepaid expenses and other
    current assets                     9,113        17,347        17,911
   Refundable income taxes                --         1,566            --

   Deferred taxes                      9,805         9,805        16,232
                                ------------  ------------  ------------
    Total current assets             235,734       276,917       252,671
  Property, plant and
   equipment, net                     65,332        70,183        70,379
  Goodwill                           536,975       532,318       530,960
  Intangible assets, net             167,449       168,082       170,134
  Other                               28,019        27,551        28,056
  Investment in unconsolidated
   affiliate                          29,046            --            --
                                ------------  ------------  ------------

    Total assets                 $ 1,062,555   $ 1,075,051   $ 1,052,200
                                ============  ============  ============

  LIABILITIES AND
   SHAREHOLDERS' EQUITY
  Current liabilities:
   Current maturities -
    long-term debt                 $ 131,013     $ 127,071     $ 125,807
   Accounts payable                   25,145        56,786        47,295
   Accrued compensation                9,915        12,821        14,223
   Deferred revenue                    5,141         4,254         3,645
   Accrued income taxes                7,837            --         7,043

   Other accrued liabilities          26,718        28,231        32,008
                                ------------  ------------  ------------
    Total current liabilities        205,769       229,163       230,021
  Long-term debt - less
   current maturities                197,935       244,586       204,008
  Deferred taxes                      92,427        86,109        93,513

  Other liabilities                      913           913           785
                                ------------  ------------  ------------

    Total liabilities                497,044       560,771       528,327
                                ------------  ------------  ------------

  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
    24,277,777; 24,243,438 and
    24,209,938 shares issued,
    respectively                          24            24            24
   Capital paid-in excess of
    par value                        437,811       435,150       433,377
   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              19,799        10,804         8,965

   Retained earnings                 294,514       254,939       268,144
                                ------------  ------------  ------------

    Total shareholders' equity       565,511       514,280       523,873
                                ------------  ------------  ------------
    Total liabilities and
     shareholders' equity        $ 1,062,555   $ 1,075,051   $ 1,052,200
                                ============  ============  ============

  *The Company adopted at the beginning of Fiscal 2010 Financial
   Accounting Standards Board ("FASB") Accounting Standards Codification
   ("ASC") Topic 470-20, "Debt with Conversion and Other" ("FASB ASC
   Topic 470-20"). The adoption of FASB ASC Topic 470-20 required an
   adjustment of previously reported amounts assigned to debt, deferred
   taxes, equity and interest expense.

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


                                                 Nine Months Ended
                                              ----------------------
                                                             (As
                                                          Adjusted)*

                                               January     January
                                                 23,         24,
                                                 2010        2009
                                              ----------  ----------
  Cash flows from operating activities:
   Net income                                   $ 39,575    $ 40,334
   Adjustments to reconcile net income to
    net cash provided
   by operating activities:
    Depreciation and intangible asset
     amortization expense                         19,882      18,196
    Amortization of development costs              4,191       4,593
    Loss from unconsolidated affiliate               241          --
    Amortization of debt fees and other            1,642       1,529
    Share-based compensation expense               3,033       3,192
    Deferred taxes                                 6,071       6,860
    Loss (gain) on disposal of property,
     equipment and other                             275         484
    Non-cash convertible debt deferred
     financing costs                               9,696       8,932
    Changes in current assets and
     liabilities (net of assets
    acquired and liabilities assumed in
     business combinations):
     Change in amounts sold under
      receivables securitization, net                 --     (3,000)
     Accounts receivable                           8,773      13,318
     Inventories                                  23,277      16,800
     Deferred catalog costs                        4,918     (4,590)
     Prepaid expenses and other current
      assets                                       5,903      11,259
     Accounts payable                           (32,400)    (18,260)

     Accrued liabilities                           5,248       4,488
                                              ----------  ----------
      Net cash provided by operating
       activities                                100,325     104,135
                                              ----------  ----------

  Cash flows from investing activities:
   Cash paid in acquisitions, net of cash
    acquired                                    (11,700)          --
   Additions to property, plant and
    equipment                                    (8,494)     (7,730)
   Proceeds from disposal of discontinued
    operations                                       800       2,485
   Investment in product development costs       (6,679)     (6,152)
   Proceeds from disposal of property, plant
    and equipment                                  2,083         192

   Investment in non-controlling interest        (2,226)          --
                                              ----------  ----------

      Net cash used in investing activities     (26,216)    (11,205)
                                              ----------  ----------

  Cash flows from financing activities:
   Proceeds from bank borrowings                 304,400     533,800
   Repayment of debt and capital leases        (356,803)   (618,467)
   Purchase of treasury stock                         --    (15,250)
   Payment of debt fees and other                  (238)          --
   Proceeds from exercise of stock options           120       2,692
   Excess income tax benefit from exercise
    of stock options                                  --       1,519
                                              ----------  ----------

      Net cash used in financing activities     (52,521)    (95,706)
                                              ----------  ----------

  Net increase in cash and cash equivalents       21,588     (2,776)
  Cash and cash equivalents, beginning of
   period                                          1,871       4,034
                                              ----------  ----------

  Cash and cash equivalents, end of period      $ 23,459     $ 1,258
                                              ==========  ==========

  Free cash flow reconciliation:
   Net cash used in operating activities       $ 100,325   $ 104,135
   Additions to property and equipment           (8,494)     (7,730)
   Investment in development costs               (6,679)     (6,152)
   Proceeds from disposal of property and
    equipment                                      2,083         192
   Net accounts receivable securitization
    facility activity                                 --       3,000
                                              ----------  ----------

   Free cash flow                               $ 87,235    $ 93,445
                                              ==========  ==========

  *The Company adopted at the beginning of Fiscal 2010 Financial
   Accounting Standards Board ("FASB") Accounting Standards
   Codification ("ASC") Topic 470-20, "Debt with Conversion and
   Other" ("FASB ASC Topic 470-20"). The adoption of FASB ASC Topic
   470-20 required an adjustment of previously reported amounts
   assigned to debt, deferred taxes, equity and interest expense.

                                    School Specialty, Inc.
                 Segment Analysis - Revenues and Gross Profit/Margin Analysis
                                   3rd Quarter, Fiscal 2010
                                        (In thousands)
                                           Unaudited


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

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

                                                                  Change
                             3Q10-QTD    3Q09-QTD     Change $       %    3Q10-QTD  3Q09-QTD
                            ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources      $ 81,984    $ 96,698    $ (14,714)  -15.2%     79.5%     79.4%
   Publishing                   21,007      24,948       (3,941)  -15.8%     20.4%     20.5%
   Corporate and Interco
    Elims                          135          64            71              0.1%      0.1%
                            ----------  ----------  ------------          --------  --------

    Total Revenues           $ 103,126   $ 121,710    $ (18,584)            100.0%    100.0%
                            ==========  ==========  ============  -15.3%  ========  ========



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

                                                                  Change
                             3Q10-QTD    3Q09-QTD     Change $       %    3Q10-QTD  3Q09-QTD
                            ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources      $ 30,044    $ 33,133     $ (3,089)   -9.3%     70.8%     76.5%
   Publishing                   11,884       9,561         2,323   24.3%     28.0%     22.1%
   Corporate and Interco
    Elims                          490         605         (115)              1.2%      1.4%
                            ----------  ----------  ------------          --------  --------

    Total Gross Profit        $ 42,418    $ 43,299       $ (881)            100.0%    100.0%
                            ==========  ==========  ============   -2.0%  ========  ========



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


  Gross Margin               3Q10-QTD    3Q09-QTD
                            ----------  ----------
   Educational Resources         36.6%       34.3%
   Publishing                    56.6%       38.3%
    Total Gross Margin           41.1%       35.6%



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

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

                                                                  Change
                             3Q10-YTD    3Q09-YTD     Change $       %    3Q10-YTD  3Q09-YTD
                            ----------  ----------  ------------  ------  --------  --------
  Revenues
   Educational Resources     $ 546,791   $ 615,234    $ (68,443)  -11.1%     70.1%     69.1%
   Publishing                  233,573     275,865      (42,292)  -15.3%     30.0%     31.0%
   Corporate and Interco
    Elims                        (725)       (289)         (436)             -0.1%     -0.1%
                            ----------  ----------  ------------          --------  --------

    Total Revenues           $ 779,639   $ 890,810   $ (111,171)            100.0%    100.0%
                            ==========  ==========  ============  -12.5%  ========  ========



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

                                                                  Change
                             3Q10-YTD    3Q09-YTD     Change $       %    3Q10-YTD  3Q09-YTD
                            ----------  ----------  ------------  ------  --------  --------
  Gross Profit
   Educational Resources     $ 195,536   $ 210,398    $ (14,862)   -7.1%     59.6%     57.4%
   Publishing                  130,944     153,650      (22,706)  -14.8%     39.9%     41.9%
   Corporate and Interco
    Elims                        1,834       2,370         (536)              0.5%      0.7%
                            ----------  ----------  ------------          --------  --------

    Total Gross Profit       $ 328,314   $ 366,418    $ (38,104)            100.0%    100.0%
                            ==========  ==========  ============  -10.4%  ========  ========



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


  Gross Margin               3Q10-YTD    3Q09-YTD
                            ----------  ----------
   Educational Resources         35.8%       34.2%
   Publishing                    56.1%       55.7%
    Total Gross Margin           42.1%       41.1%

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

SOURCE: School Specialty, Inc.

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