- Revenue and earnings decline; guidance updated
- Free cash flow and working capital management remain strong
- Convertible subordinated notes of $133 million retired
- Company to record goodwill impairment charge based on macro-economic factors
GREENVILLE, Wis., Aug. 19, 2010 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS) today reported fiscal 2011 first quarter financial results. Revenue for the first quarter was $253.0 million compared with $330.4 million in the first quarter of the prior fiscal year, a decline of 23 percent. The decline is higher than the estimated range of 17 percent to 20 percent previously discussed by management, and is primarily due to continued delays in school purchases, increasing price competition in the furniture markets, and the continued impact of execution issues created earlier in the year. Excluding revenue from divestitures of $10.7 million in fiscal 2010, comparable revenue declined 21 percent.
During the first quarter, the company performed its annual goodwill impairment testing. The continuation of state budget challenges and school spending cuts, and the resulting effects on the company's operating results, has created a shortfall in the fair value estimation for goodwill below the current book value. Based upon preliminary estimates, the company expects to record a pre-tax non-cash impairment charge in the range of $390 million to $440 million. This impairment is a non-cash expense that will not affect the company's debt position, cash flow, liquidity or financial ratios under its revolving credit facility.
Net income, excluding the estimated goodwill impairment charge, was $13.3 million compared with $28.4 million in last year's first quarter. Diluted earnings per share were $0.70 compared with $1.51 last year. Including the estimated goodwill impairment charge, the net loss reported is expected to be approximately $315 million to $353 million ($16.70 to $18.71 per share).