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School Specialty Announces Fiscal 2013 First Quarter Results

Conference Call

The first quarter earnings conference call is scheduled for today at 11 a.m. ET/10 a.m. CT. The live audio webcast will include accompanying slides and is available on the Investors section of School Specialty's web site at www.schoolspecialty.com under Presentations.  The presentation will be archived on the company's website and available later in the day.

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. 

Accelerated Learning's major products include: Wordly Wise 3000 ®, Premier Agenda, Delta Education , FOSS ®, CPO Science , Frey Scientific ®, Educator's Publishing Service, Academy of Reading ®, Think Math! , MCI ®, S.P.I.R.E. ® and SPARK .   Educational Resources proprietary brands include: Education Essentials ®, Sportime ®, Childcraft ®, Sax ® Arts & Crafts, Califone ®, abc ®, Abilitations ®, School Smart ®, Classroom Select and Projects by Design ®.

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 "Financial 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 28, 2012, 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
  July 28, 2012 July 30, 2011
     
Revenues  $ 252,139  $ 276,084
Cost of revenues  148,542  164,808
Gross profit  103,597  111,276
Selling, general and administrative expenses  75,116  79,776
Operating income  28,481  31,500
     
Other expense:    
Interest expense  9,966  7,912
Expense associated with convertible debt exchange  --  1,090
Income before provision for income taxes  18,515  22,498
Provision for income taxes  259  8,928
Income before investment in unconsolidated affiliate  $ 18,256  $ 13,570
Equity in income/(losses) of unconsolidated affiliate  119  (20)
Net income  $ 18,375  $ 13,550
     
Weighted average shares outstanding:    
Basic  18,886  18,873
Diluted  18,893  18,925
     
Net Income/(Loss) per Share:    
Basic  $ 0.97  $ 0.72
Diluted  $ 0.97  $ 0.72
     
Earnings before interest, taxes, depreciation, amortization and impairment charges (EBITDA) reconciliation:    
Net income  $ 18,375  $ 13,550
Equity in (income)/losses of unconsolidated affiliate  (119)  20
Provision for income taxes  259  8,928
Loss on convertible debt exchange  --   1,090
Depreciation and amortization expense  7,016  7,218
Amortization of development costs  2,068  1,602
Net interest expense  9,966  7,912
EBITDA  $ 37,565  $ 40,320
     
SCHOOL SPECIALTY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
Unaudited
  July 28, 2012 April 28, 2012 July 30, 2011
ASSETS      
Current assets:      
Cash and cash equivalents  $ 8,250  $ 484  $ 3,927
Accounts receivable  178,293  62,826  194,507
Inventories  112,467  100,504  121,526
Deferred catalog costs  7,773  11,737  11,206
Prepaid expenses and other current assets  11,050  11,111  15,584
Refundable income taxes  3,580  3,570  --
Deferred taxes  4,797  4,797  1,875
Total current assets  326,210  195,029  348,625
Property, plant and equipment, net  54,238  57,491  62,268
Goodwill  41,010  41,263  129,091
Intangible assets, net  121,627  124,242  153,218
Other  40,274  35,206  36,063
Deferred taxes long-term  390  390  7,012
Investment in unconsolidated affiliate  10,019  9,900  20,380
Total assets  $ 593,768  $ 463,521  $ 756,657
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Current maturities - long-term debt  $ 79,444  $ 955  $ 42,765
Accounts payable  103,099  74,244  125,554
Accrued compensation  10,723  8,094  8,903
Deferred revenue  3,354  3,095  4,348
Accrued income taxes  --  --  13,856
Other accrued liabilities  26,027  18,932  37,583
Total current liabilities  222,647  105,320  233,009
Long-term debt - less current maturities  285,508  289,668  306,926
Other liabilities  587  587  688
Total liabilities  508,742  395,575  540,623
       
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 24,314,645; 24,300,545 and 24,290,345 shares issued, respectively  24  24  24
Capital paid-in excess of par value  444,456  444,428  442,764
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  22,308  23,631  25,818
(Accumulated deficit)  (195,125)  (213,500)  (65,935)
Total shareholders' equity  85,026  67,946  216,034
Total liabilities and shareholders' equity  $ 593,768  $ 463,521  $ 756,657
       
SCHOOL SPECIALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
  Three Months Ended
  July 28, 2012 July 30, 2011
Cash flows from operating activities:    
Net income  $ 18,375  $ 13,550
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and intangible asset amortization expense  7,016  7,218
Amortization of development costs  2,068  1,602
Amortization of debt fees and other  3,053  1,248
Share-based compensation expense  119  517
Deferred taxes  --  (3,728)
Equity in income/(losses) of unconsolidated affiliate  (119)  20
Expense associated with convertible debt exchange  --   1,090
Non cash convertible debt deferred financing costs  2,222  2,453
Changes in current assets and liabilities (net of assets acquired and liabilities assumed in business combinations):    
Accounts receivable  (115,498)  (127,066)
Inventories  (11,966)  (10,259)
Deferred catalog costs  3,964  5,433
Prepaid expenses and other current assets  49  (1,069)
Accounts payable  28,324  39,793
Accrued liabilities  9,492  15,573
Net cash used in operating activities  (52,901)  (53,625)
     
Cash flows from investing activities:    
Additions to property, plant and equipment  (1,185)  (1,265)
Investment in product development costs  (1,718)  (1,954)
Net cash used in investing activities  (2,903)  (3,219)
     
Cash flows from financing activities:    
Proceeds from bank borrowings  421,167  176,500
Repayment of debt and capital leases  (349,122)  (123,887)
Payment of debt fees and other  (8,475)  (1,663)
Net cash provided by financing activities  63,570  50,950
     
Net increase/(decrease) in cash and cash equivalents  7,766  (5,894)
Cash and cash equivalents, beginning of period  484  9,821
Cash and cash equivalents, end of period  $ 8,250  $ 3,927
     
Free cash flow reconciliation:    
Net cash used in operating activities  $ (52,901)  $ (53,625)
Additions to property and equipment  (1,185)  (1,265)
Investment in development costs  (1,718)  (1,954)
Free cash flow  $ (55,804)  $ (56,844)
     
School Specialty, Inc.
Segment Analysis - Revenues and Gross Profit/Margin Analysis
1st Quarter, Fiscal 2013
(In thousands)
Unaudited
             
Segment Revenues and Gross Profit/Margin Analysis-QTD        
          % of Revenues
  1Q13-QTD 1Q12-QTD Change $ Change % 1Q13-QTD 1Q12-QTD
Revenues            
Educational Resources  $ 173,687  $ 186,064  $ (12,377) -6.7% 68.9% 67.4%
Accelerated Learning Group  78,285  89,853  (11,568) -12.9% 31.0% 32.5%
Corporate and Interco Elims  167  167  --    0.1% 0.1%
Total Revenues  $ 252,139  $ 276,084  $ (23,945) -8.7% 100.0% 100.0%
             
          % of Revenues
  1Q13-QTD 1Q12-QTD Change $ Change % 1Q13-QTD 1Q12-QTD
Gross Profit            
Educational Resources  $ 60,559  $ 60,437  $ 122 0.2% 58.5% 54.3%
Accelerated Learning Group  42,874  50,156  (7,282) -14.5% 41.4% 45.1%
Intercompany Eliminations  164  683  (519)   0.1% 0.6%
Total Gross Profit  $ 103,597  $ 111,276  $ (7,679) -6.9% 100.0% 100.0%
             
Segment Gross Margin Summary-QTD          
             
Gross Margin 1Q13-QTD 1Q12-QTD        
Educational Resources 34.9% 32.5%        
Accelerated Learning Group 54.8% 55.8%        
Total Gross Margin 41.1% 40.3%        
             
School Specialty, Inc.
Reconciliation of GAAP Net Income and Net Income per Share to Adjusted Net Income and Net Earnings per Share
(In Thousands, Except Per Share Amounts)
Unaudited
     
  3 Months Ended
  July 28, 2012 July 30, 2011
     
GAAP Net Income  $ 18,375  $ 13,550
Special Items, net of tax:    -- 
Expense associated with convertible debt exchange  --   671
Expense associated with debt refinancing (included in interest expense)  2,490  -- 
Restructuring (included in SG&A)  1,103  -- 
Adjusted Net Income  $ 21,968  $ 14,221
     
  3 Months Ended
  July 28, 2012 July 30, 2011
     
GAAP Net Income per Share  $ 0.97  $ 0.72
Special Items, net of tax:    
Expense associated with convertible debt exchange  --   0.04
Expense associated with debt refinancing (included in interest expense)  0.13  -- 
Restructuring (included in SG&A)  0.06  -- 
Adjusted Earnings per share  $ 1.16  $ 0.75
     
Note: Totals may not foot due to rounding differences.    
 
School Specialty's financial results for the first quarter of fiscal 2013 and 2012 included certain items that management believes are not representative of its operating performance. This additional information and reconciliation is not meant to be considered in isolation or as a substitute for the company's results of operations as prepared and presented in accordance with GAAP.
     
CONTACT: David Vander Ploeg
         Executive VP and CFO
         920-243-5854
         
         Elizabeth M. Higashi, CFA
         Investor Relations
         920-243-5392

School Specialty, Inc.

Stock quotes in this article: SCHS 

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