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School Specialty Announces Fiscal 2013 First Quarter Results

  • Revenue of $252.1 Million and Net Income of $18.4 Million
  • Gross Margins Improve to 41.1 Percent in Quarter

GREENVILLE, Wis., Aug. 23, 2012 (GLOBE NEWSWIRE) -- School Specialty (Nasdaq:SCHS), a leading K-12 education company with the broadest array of products in the market, today reported first quarter results for the period ending July 28, 2012. Revenue for the first quarter of fiscal 2013 was $252.1 million, compared with $276.1 million in the prior year, a decline of 8.7 percent. Net income for the first quarter of fiscal 2013 was $18.4 million or $0.97 in diluted earnings per share compared with $13.6 million or $0.72 per diluted share last year.

Income before provision for income taxes declined $4.0 million to $18.5 million in the first quarter from $22.5 million last year. Interest expense in this year's first quarter included the non-cash write-off of $2.5 million in debt issuance costs related to the debt refinancing announced in late May. In addition, $1.1 million of restructuring charges were recorded in the first quarter of fiscal 2013.

"Our focus on improving profitability remains a top priority. Although the overall market remains challenging, we continue to make progress on our immediate priorities and long term initiatives with continued careful management of operating expenses in combination with consecutive quarters of gross margin expansion," said Michael P. Lavelle, President and Chief Executive Officer. "Of course, first quarter results should be viewed as only a portion of the school selling season, whose busiest months extend into our second fiscal quarter," he said.

First Quarter Financial Results

  • Revenue for fiscal 2013's first quarter was $252.1 million, compared with $276.1 million in fiscal 2012, a decline of 8.7 percent. The decline in sales reflects continued softness in educational spending in both Educational Resources and Accelerated Learning.   
  • Gross profit was $103.6 million compared with $111.3 million last year, a decline of 6.9 percent. Consolidated gross margin improved to 41.1 percent, an increase of 80 basis points, primarily due to strong margin improvement by Educational Resources which was offset somewhat by weaker margins in Accelerated Learning.  
  • Selling, general and administrative (SG&A) expenses were $75.1 million compared with $79.8 million, a decline of 5.8 percent, reflecting strong cost controls and lower overall sales levels. Current quarter expenses were impacted by $1.1 million of restructuring charges.  
  • Interest expense for the first quarter was $10.0 million compared with $7.9 million in the previous year. The increase in interest expense reflected the $2.5 million write-off of debt issuance costs related to the company's former revolving credit facility which was refinanced in the first quarter of fiscal 2013. The former revolving credit facility and delayed draw term loan with a total capacity of $233.7 million were replaced with an asset-based line with a maximum capacity of $200.0 million and a term loan of $70.0 million.  
  • The provision for income taxes in fiscal 2013 was $0.3 million compared with $8.9 million in the previous year. The decline in taxes was related to projected annual tax losses for fiscal 2013, for which tax benefits are not expected to be recognized at this time due to valuation allowances.  The decrease in tax expense of $8.7 million amounted to $0.46 per diluted share.  
  • Earnings before income taxes, depreciation and amortization (EBITDA) declined $2.8 million or 6.8 percent to $37.6 million.   
  • Net income increased 35.6 percent to $18.4 million compared with $13.6 million last year. Diluted earnings per share in this year's first quarter increased 34.7 percent to $0.97 versus $0.72 in the prior year. Excluding special charges, adjusted net income was $22.0 million, or $1.16 per share compared with $14.2 million and $0.75 per share in the prior year.

Financial Outlook

"We now believe that given the challenging educational market, fiscal year 2013 revenues are expected to decline in the low single digits compared with fiscal 2012 results. Although revenue is behind our expected performance levels for fiscal 2013, given our margin and cost reduction actions, we continue to believe that fiscal 2013 will look similar to fiscal 2012 actual results in terms of EBITDA," said Lavelle.

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