Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SCHOOL SPECIALTY INC | d8k.htm |
Exhibit 99.1
|
|
FOR IMMEDIATE RELEASE THURSDAY, AUGUST 25, 2011 | |||
| Contact: David Vander Ploeg Executive VP and CFO 920-882-5854 |
||||
W6316 Design Drive, Greenville, WI 54942
P.O. Box 1579, Appleton, WI 54912-1579
SCHOOL SPECIALTY REPORTS FISCAL 2012 FIRST QUARTER RESULTS
| ¡ | First quarter revenues increase 9 percent; organic revenue grows 2 percent |
| ¡ | Diluted earnings per share of $0.72; includes $0.05 refinancing charge |
| ¡ | Full year guidance confirmed |
Greenville, WI, August 25, 2011—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.
-More-
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-
-More-
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Unaudited
| Three Months Ended | ||||||||
| July 30, 2011 |
July 24, 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 assocated 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.
-More-
SCHOOL SPECIALTY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
Unaudited
| July 30, 2011 |
April 30, 2011 |
July 24, 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 unconolidated 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, $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 |
||||||||||||
| 24,300,545; 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 | ||||||
|
|
|
|
|
|
|
|||||||
-More-
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
| Three Months Ended | ||||||||
| July 30, 2011 |
July 24, 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) | ||||
|
|
|
|
|
|||||
-More-
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 | ||||||||||||||||||||||||||
| 1Q12-QTD | 1Q11-QTD | Change $ | 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 | 9.1% | 100.0% | 100.0% | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| % of Revenues | ||||||||||||||||||||||||||
| 1Q12-QTD | 1Q11-QTD | Change $ | 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 | 3.0% | 100.0% | 100.0% | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 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% | ||||||||||||||||||||||||
-####-