- Company returns to growth in its fiscal 2014 fourth quarter;
revenues grew by 2.9% and Adjusted EBITDA improved by $7.3 million
versus the previous year
- Fiscal 2014 revenue of $630.7 million above high-end of
guidance; Adjusted EBITDA of $42.6 million at upper-end of
guidance
- Process Improvement Programs generating anticipated cost
savings and efficiencies
- Company provides FY15 guidance; expects revenues of $640-$660
million and EBITDA of $48-$54 million
School Specialty, Inc. (OTCQB:SCOO) ("School Specialty" or "the
Company"), a leading distributor of supplies,
furniture and both supplemental and curriculum products to the
education marketplace, today announced its fiscal 2014 results for
the period ended April 26, 2014.
Joseph M. Yorio, President and Chief Executive Officer of School
Specialty stated, "We finished the year strong, meeting the
projections we set and I'm pleased to report that during the fourth
quarter, we returned School Specialty to growth. The Process
Improvement Programs that were launched in fiscal 2014 have
resulted in significant improvements and efficiencies in our
operations and the desired cost-savings. These programs have also
resulted in a more cohesive and aligned organization, a stronger
infrastructure with greater accountability, and additional
resources to invest in growth areas of our business. I am very
confident in our ability to deliver for our customers and exceed
their expectations in this upcoming peak season and beyond."
Fourth Quarter Financial Results
- Revenues for the fiscal 2014 fourth quarter ended April 26,
2014 were $108.3 million, an increase of 2.9% or $3.1 million as
compared to $105.2 million reported for the three months ended
April 27, 2013. Distribution segment revenues increased by 0.2% or
$0.2 million and Curriculum segment revenues increased by 18.3% or
$2.9 million, both for the three-month periods ended April 26, 2014
as compared to April 27, 2013.
- Gross profit margin for the fiscal fourth quarter ended April
26, 2014 was 39.5% as compared to 36.3% for the comparable period
ended April 27, 2013, an increase of 320 basis
points. Distribution segment gross margin was 37.2% as
compared to 34.8% for the three months ended April 26, 2014 and
April 27, 2013, respectively, an increase of 240 basis
points. Curriculum segment gross margin was 50.8% as compared
to 44.7% for the three months ended April 26, 2014 and April 27,
2013, respectively, an increase of 610 basis points. Driving
the increase within the Curriculum segment were lower product
development costs and the spread over a larger revenue base in the
fiscal 2014 period.
- Selling, general and administrative (SG&A) expenses for the
three months ended April 26, 2014 were $55.7 million as compared to
$64.8 million for the comparable year-ago period, a decrease of
$9.1 million or 14.1%. SG&A attributable to the combined
Distribution and Curriculum segments decreased by $9.2 million and
Corporate SG&A increased by $0.1 million, when comparing the
fiscal 2014 and fiscal 2013 periods. The fiscal 2014 fourth
quarter period includes approximately $2.9 million of process
improvement and bankruptcy-related expenses.
- The Company reported an operating loss of $13.4 million for the
three months ended April 26, 2014 as compared to an operating loss
of $26.6 million in the comparable year-ago period.
- Net loss for the fourth quarter of fiscal 2014 was $19 million
compared with a net loss of $70.3 million in the comparable period
last year. On a diluted per share basis, net loss was $18.99
for the three months ended April 26, 2014 as compared to a net loss
of $3.72 for the three months ended April 27, 2013. Note, the
diluted net loss per share for the period ended April 26, 2014
takes into account the Company's successful reorganization under
Chapter 11 which resulted in a substantially lower share count.
- Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) was ($4) million in the fiscal 2014 fourth
quarter as compared to ($11.3) million in the comparable fiscal
2013 period.
Process Improvement Program Update
In the second quarter of fiscal 2014, School Specialty began to
implement companywide Process Improvement Programs to better align
its operating groups, enhance systems and processes, and drive
greater efficiency throughout the organization. The initial
focus was to improve back-end functions and streamline operations,
while also serving to enhance the customer experience. During
fiscal 2014, the Company realized approximately $4 million of cost
savings from the Process Improvement Programs and expects to
realize $10-$12 million of savings from these various programs in
FY15. The Company also believes that additional savings may be
realized longer-term, as new programs are implemented.
Mr. Yorio continued, "We are now embarking on the next phase,
taking a closer look at our Sales, Marketing and Merchandising
alignment and how we go-to-market. While we're projecting
modest growth this year, I believe the changes we have and continue
to implement will enable us to drive better top-line performance
and more meaningful returns for our stockholders, especially as the
domestic economy and education market improve. One of the
things that attracted me to School Specialty was the Company's
industry reputation for high-quality products and services and our
employees' commitment to our customers. In my brief time as
CEO, this has resonated true, and I believe we have significant
opportunities to improve our current assortment and distribution
network, grow with our customers, and enter into new markets that
will drive stockholder value."
Fiscal 2014 Financial Results
Non-GAAP combined results for the twelve months ended April 26,
2014 include results of operations for the Successor Company for
the forty-six weeks ended April 26, 2014 and the Predecessor
Company for the six weeks ended June 11, 2013. These results
are compared to the Predecessor Company for the twelve months ended
April 27, 2013.
- Combined revenues for fiscal 2014 were $630.7 million, a
decrease of 6.6% as compared to $675 million in fiscal 2013.
Approximately 93% of the decline was attributable to the
Company's first half of the year.
- Distribution segment combined revenues for fiscal 2014 were
$542.4 million as compared to $583.7 million in fiscal 2013, a
decrease of 7.1%. Curriculum segment combined revenues for
fiscal 2014 were $88.3 million as compared to $91.3 million in
fiscal 2013, a decrease of 3.3%.
- Combined gross margin decreased 10 basis points from 39.1% in
fiscal 2013 to 39.0% in fiscal 2014. Distribution segment
combined gross margin was unchanged at 36.8% for both fiscal year
periods. Curriculum segment combined gross margin decreased by
140 basis points from 53.6% in fiscal 2013 to 52.2% in fiscal 2014,
primarily due to product mix and overall market conditions.
- Combined SG&A expenses decreased 10% from $267.5 million in
fiscal 2013 to $240.6 million in fiscal 2014. Within this,
Distribution segment combined SG&A expenses decreased $23.1
million or 11.2%, from $206.5 million in fiscal 2013 to $183.4
million in fiscal 2014. Curriculum segment combined SG&A
decreased $4.5 million or 8.5%, from $53.5 million in fiscal 2013
to $48.9 million in fiscal 2014. As a percentage of revenue,
combined SG&A decreased from 39.6% in fiscal 2013 to 38.1% in
fiscal 2014.
- Combined operating loss for the fiscal year ended April 26,
2014 was $1.4 million as compared to an operating loss of $49.4
million in the previous fiscal year. Due to the significance
of the restructuring costs in fiscal 2014 and the pre-petition
bankruptcy related charges and impairment charges in fiscal 2013,
the Company believes it is more meaningful to compare operating
income excluding these costs and charges. Excluding the impact
of these costs and charges, the Company's operating income was
$13.5 million in fiscal 2014 as compared to $3.9 million in fiscal
2013.
- Combined net loss for the fiscal year ended April 26, 2014 was
$58.6 million compared with a net loss of $147.7 million in the
comparable fiscal 2013 period. On a diluted share basis, net
loss was $13.47 in fiscal 2014 as compared to a net loss of $7.81
in fiscal 2013.
- Combined Adjusted EBITDA was $42.6 million for both the fiscal
2014 and fiscal 2013 years ended April 26, 2014 and April 27,
2013. Savings realized in SG&A and greater efficiencies
throughout the organization offset the impact of the revenue
decline.
Financial Outlook
School Specialty today provided guidance for fiscal
2015. The Company anticipates revenues will be approximately
$640-$660 million, representing growth between 1.5 and 4.5
percent. The Company also expects a modest decline in its
gross margins due to the anticipated product mix, which are
expected to be offset by declines in SG&A
expenses. Additionally, the Company projects that Adjusted
EBITDA for fiscal 2015 will be approximately $48-$54
million. Capital expenditures are expected to be approximately
$17-$19 million.
Mr. Yorio concluded, "Following our emergence from
reorganization, the Board and management team set out on a journey
to improve operations and ensure we meet customer
expectations. Our goal was to stabilize our business while
putting in place a more cohesive infrastructure that would support
sustainable growth. I believe we delivered on our promises in
fiscal 2014 and set the foundation for the future. In fiscal
2015, we intend to continue process reforms and upgrade our
technology systems, in order to simplify and improve processes for
our customers. We will continue to drive improvements
in everything we do in order to deliver for our customers, our
partners and our stockholders."
School Specialty intends to publish an accompanying presentation
on its financial results shortly. The Company will not be
hosting a teleconference, but management will be available to
address questions after the filing of this supplemental
information. This information will also be available on our
website, www.schoolspecialty.com, in the Investor Relations
section.
About School Specialty, Inc.
School Specialty is a leading distributor of innovative and
proprietary products, programs and services to the education
marketplace. The Company designs, develops, and provides
educators with the latest and very best school supplies, furniture
and both curriculum and supplemental learning
resources. 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.
Statement Concerning Forward-Looking
Information
Any statements made in this press release about School
Specialty's future financial conditions, results of operations,
expectations, plans, or prospects, including the information under
the headings "Process Improvement Program Update" and "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," "plans,"
"projects," "should," "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 26, 2014, which factors are
incorporated herein by reference. Any forward-looking
statement in this release speaks only as of the date in which it is
made. Except to the extent required under the federal
securities laws, School Specialty does not intend to update or
revise the forward-looking statements.
- Tables to Follow –
| SCHOOL SPECIALTY,
INC. |
| CONSOLIDATED COMBINED
STATEMENTS OF OPERATIONS |
| (In Thousands, Except Per Share
Amounts) |
| Unaudited / Non-GAAP |
| |
|
|
|
|
|
| |
Successor
Company |
Predecessor
Company |
Successor
Company |
Predecessor
Company |
Non-GAAP
Combined |
Predecessor
Company |
| |
Three Months
Ended April 26, 2014 |
Three Months
Ended April 27, 2013 |
Forty-Six Weeks
Ended April 26, 2014 |
Six Weeks Ended
June 11, 2013 |
Twelve Months
Ended April 26, 2014 |
Twelve Months
Ended April 27, 2013 |
| |
|
|
|
|
|
|
| Revenues |
$ 108,253 |
$ 105,202 |
$ 572,045 |
$ 58,697 |
$ 630,742 |
$ 674,998 |
| Cost of revenues |
65,464 |
67,025 |
349,845 |
35,079 |
384,924 |
411,118 |
| Gross profit |
42,789 |
38,177 |
222,200 |
23,618 |
245,818 |
263,880 |
| Selling, general and administrative
expenses |
55,653 |
64,782 |
213,144 |
27,473 |
240,617 |
267,491 |
| Restructuring charges |
518 |
-- |
6,552 |
-- |
6,552 |
-- |
| Impairment charge |
-- |
-- |
-- |
-- |
-- |
45,789 |
| Operating income (loss) |
(13,382) |
(26,605) |
2,504 |
(3,855) |
(1,351) |
(49,400) |
| Other expense: |
|
|
|
|
|
|
| Impairment long-term asset |
-- |
-- |
-- |
-- |
-- |
1,414 |
| Interest expense |
4,741 |
1,291 |
16,882 |
3,235 |
20,117 |
28,600 |
| Early termination of long-term
indebtedness |
-- |
1,193 |
-- |
-- |
-- |
26,247 |
| Loss on early extinguishment of
debt |
-- |
10,201 |
-- |
-- |
-- |
10,201 |
| Impairment of investment in
unconsolidated affiliate |
-- |
7,749 |
-- |
-- |
-- |
7,749 |
| Change in fair value of
interest rate swap |
(5) |
-- |
483 |
-- |
483 |
-- |
| Refund of early termination
fee |
-- |
-- |
(4,054) |
-- |
(4,054) |
-- |
| Reorganization items, net |
872 |
22,979 |
6,420 |
(84,799) |
(78,379) |
22,979 |
| Income (loss) before provision for income
taxes |
(18,990) |
(70,018) |
(17,227) |
77,709 |
60,482 |
(146,590) |
| Provision for (benefit from) income
taxes |
-- |
249 |
258 |
1,641 |
1,899 |
(334) |
| Income (loss) before income of
unconsolidated affiliate |
(18,990) |
(70,267) |
(17,485) |
76,068 |
58,583 |
(146,256) |
| Loss of unconsolidated affiliate |
-- |
-- |
-- |
-- |
-- |
(1,436) |
| Net income (loss) |
$ (18,990) |
$ (70,267) |
$ (17,485) |
$ 76,068 |
$ 58,583 |
$ (147,692) |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Adjusted Earnings
before interest, taxes, depreciation, amortization,
bankruptcy-related costs, restructuring and impairment charges
(EBITDA) reconciliation: |
|
|
|
|
|
|
| Net income
(loss) |
$ (18,990) |
$ (70,267) |
|
|
$ 58,583 |
$ (147,692) |
| Loss of
unconsolidated affiliate |
-- |
-- |
|
|
-- |
1,436 |
| Provision for
(benefit from) income taxes |
-- |
249 |
|
|
1,899 |
(334) |
| Reorganization
items, net |
872 |
22,979 |
|
|
(78,379) |
22,979 |
| Impairment
long-term asset |
-- |
-- |
|
|
-- |
1,414 |
| Impairment
charge |
-- |
-- |
|
|
-- |
45,789 |
|
Bankruptcy-related restructuring costs |
518 |
-- |
|
|
6,552 |
-- |
|
Bankruptcy-related costs incl in SG&A |
2,907 |
1,118 |
|
|
8,276 |
5,851 |
| Change in fair
value of interest rate swap |
(5) |
-- |
|
|
483 |
-- |
| Early termination
fee |
-- |
1,193 |
|
|
(4,054) |
26,247 |
| Loss on early
extinguishment of debt |
-- |
10,201 |
|
|
-- |
10,201 |
| Impairment of
investment in unconsolidated affiliate |
-- |
7,749 |
|
|
-- |
7,749 |
| Depreciation and
amortization expense |
4,586 |
12,186 |
|
|
21,859 |
33,220 |
| Amortization of
development costs |
1,370 |
2,043 |
|
|
7,224 |
7,179 |
| Net interest
expense |
4,741 |
1,291 |
|
|
20,117 |
28,600 |
|
Adjusted EBITDA |
$ (4,001) |
$ (11,258) |
|
|
$ 42,560 |
$ 42,639 |
| |
|
|
|
|
|
|
| |
| SCHOOL SPECIALTY,
INC. |
| CONSOLIDATED BALANCE
SHEETS |
| (In Thousands, Except Share
Data) |
| |
Successor
Company |
Predecessor
Company |
| |
April 26,
2014 |
April 27,
2013 |
| ASSETS |
|
|
| Current assets: |
|
|
| Cash and cash equivalents |
$ 9,008 |
$ 20,769 |
| Restricted cash |
-- |
26,302 |
| Accounts receivable, less
allowance for doubtful accounts of $984 and $926, respectively |
62,631 |
58,942 |
| Inventories, net |
93,387 |
92,582 |
| Deferred catalog costs |
8,057 |
8,924 |
| Prepaid expenses and other
current assets |
18,043 |
29,901 |
| Refundable income taxes |
-- |
9,793 |
| Deferred taxes |
-- |
-- |
| Asset Held for Sale |
2,200 |
-- |
| Total current
assets |
193,326 |
247,213 |
| Property, plant and equipment, net |
39,045 |
39,209 |
| Goodwill |
21,588 |
-- |
| Intangible assets, net |
48,251 |
110,306 |
| Development costs and other, net |
36,646 |
30,079 |
| Deferred taxes long-term |
48 |
51 |
| Investment in unconsolidated affiliate |
715 |
715 |
| Amortization of Debt Financing Fees |
|
|
| Total assets |
$ 339,619 |
$ 427,573 |
| |
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) |
|
|
| Current liabilities: |
|
|
| Current maturities of long-term
debt |
$ 12,388 |
$ 198,302 |
| Accounts payable |
42,977 |
22,897 |
| Accrued compensation |
8,966 |
7,197 |
| Deferred revenue |
2,613 |
2,237 |
| Accrued fee for early
termination of long-term debt |
-- |
25,000 |
| Other accrued liabilities |
14,460 |
21,905 |
| Total current
liabilities |
81,404 |
277,538 |
| Long-term debt less current maturities |
153,987 |
-- |
| Other liabilities |
1,171 |
925 |
| Liabilities subject to compromise |
-- |
228,302 |
| Total liabilities |
236,562 |
506,765 |
| |
|
|
| |
|
|
| Stockholders' equity (deficit): |
|
|
| Predecessor preferred stock,
$0.001 par value per share, 1,000,000 shares authorized; none
outstanding |
-- |
-- |
| Predecessor common stock,
$0.001 par value per share, 150,000,000 shares authorized;
24,599,159 shares issued |
-- |
24 |
| Predecessor capital in excess
of par value |
-- |
446,232 |
| Predecessor treasury stock, at
cost, 5,420,210 shares |
-- |
(186,637) |
| Successor preferred stock,
$0.001 par value per share, 500,000 shares authorized; none
outstanding |
-- |
-- |
| Successor common stock, $0.001
par value per share, 2,000,000 shares authorized; 1,000,004 shares
outstanding |
1 |
-- |
| Successor capital in excess of
par value |
120,955 |
-- |
| Accumulated other comprehensive
income (loss) |
(414) |
22,381 |
| Retained earnings (accumulated
deficit) |
(17,485) |
(361,192) |
| Total
stockholders' equity (deficit) |
103,057 |
(79,192) |
| Total liabilities
and stockholders' equity (deficit) |
$ 339,619 |
$ 427,573 |
| |
|
|
CONTACT: Company Contact
Kevin Baehler
Kevin.baehler@SchoolSpecialty.com
Tel: 920-882-5882
Company Contact
Glenn Wiener
IR@SchoolSpecialty.com
Tel: 212-786-6011
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