School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — Q3 FY2014 Earnings Presentation
23 slides from School Speciality's earnings presentation, Mar 5, 2014
Slide 1: School Specialty, Inc. Fiscal 2014 Third Quarter Update
School Specialty, Inc. Fiscal 2014 Third Quarter Update March 5, 2014
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements about School Specialty’s future financial conditions, results of operations, expectations, plans, or prospects, including the information under the headings, “Process Improvement Program: What Does it Mean’ and “FY14 Financial Outlook., tha
Slide 3: Financial Summary & Corporate Updates
Financial Summary & Corpor Fiscal Third Quarter Review + Revenuesin line with previously disclosed FY 14 guidance + Margins tracking to guidance, but seeing negative impact from mix shift and lower vendor rebates + —$G&A declined significantly; lower headcount and related expenses, process efficienc
Slide 4: FY14 3Q Financial Performance
FY14 3Q Financial Perfo Fiscal ‘14 3' Quarter Highlights: + Revenues decreased by 7.6% or $6.1 million to $74.7 million — Distribution segment revenues decreased 5.3% or $3.5 million — Curriculum segment revenues decreased 16.4% or $2.5 million — Both segments, while lower year-over-year, are in lin
Slide 5: Consolidated Combined Statements of Operations
Consolidated Combined State Fiscal Third Quarter Successor Predecessor In Thousands ‘Company ‘Company Unaudited /Non-GAAP Three Months Three Months Ended Ended January 25,2014 __ January 26,2013 Revenues. s 74.664 S 80,791 Cost of revenues. 48,216 51,385 Gross profit 26,448 729,406 Selling, general
Slide 6: Adjusted EBITDA Reconciliation
In Thousands Successor Predecessor Unaudited /Non-GAAP Company Company Three Months Three Months Ended Ended January 25, 2014 January 26, 2013 Adjusted Earnings before interest, taxes, depreciation, amortization, bankruptcy-related costs, restructuring and impairment charges (EBITDA) reconciliation:
Slide 7: FY14 Nine Month Financial Performance
FY14 Nine Month Financial Pe Fiscal ‘14 Nine Month Highlights: + Combined revenues decreased $47.3 million or 8.3% to $522.5 million — Distribution segment revenues decreased $30.5 million or 7.4% — Curriculum segment revenues decreased $16.4 million or 10.3% — Both segments, while lower year-over-y
Slide 8: Nine Month Combined Statements of Operations
In Thousands Unaudited /Non-GAAP Revenues. Cost of revenues. Gross profit Selling, general and administrative expenses. Restructuring charges. Impairment charge. Operating income (loss). Other expense: Impairment long-term asset. Interest expense Early termination of long-term indebtedness. Change i
Slide 9: Adjusted EBITDA Comparisons
fa Adjusted EBITDA Comparisons Fiscal Nine Month Review ° ~ In Thousands ‘Non-GAAP Predecessor Unaudited /Non-GAAP Combined Company ‘Nine Months Ended Nine Months Ended January 25,2014 __ January 26, 2013 Adjusted Earnings before interest, taxes, depreciation, amortization, bankruptcy-related costs,
Slide 10: Balance Sheet Review
Balance Sheet Reviev “| Key Highlights as of January 25, 2014 falue (As of 1/25/14) + Outstanding ABL facility balance was $0 \Cash 18 New ABL Facility, maturing in 2018 0 + Outstanding balance on Term Loan Credit % "9 Agreementwas $144.3 million New Tem Loan, maturing in 2019 444 — $1.4 million ref
Slide 11: Balance Sheet Review
Balance Sheet Review Continued improvements in inventory management — Inventory balance declines from $86.7 million to $73.2 million, a 15.5% improvement — Decline due to lower sales volumes and SKU rationalization program efforts — Expect to generate further cash through Process Improvement Program
Slide 12: Condensed Consolidated Balance Sheet Comparison
Condensed Consolidated Balance Sheet Comparison (In Thousands, Except Share and Per Share Data) Successor Company Pred ecessor Company January 25, 2014 April 27,2013 January 26, 2013 ASSETS Current assets sh equivalents sinsss | s able, less allowance for doubtful accounts 926 and S941, respectively
Slide 13: Consolidated Balance Sheet Comparison
Consolidated Balance Sheet Co (In Thousands, Except Share and Per Share Data) LIABILITIES AND STOCK HOLDERS’ EQUITY (DEFICIT) (Current liabilities: ‘Current maturities: Ascounts pavable “Accrued compensation. Deferred revenue “Accrued fee for early termination of lonz-term debt. Other accrued liabil
Slide 14: Sienaare 28.261
Sienaare 28.261 nace fe tenes 8 ona a 28 7a ED 9.668) ane al GP wast exp ra Bae SEB es Soe oS Se a4i913) 11.012 a0:716) he Bat E28 gaz ew ean S382 2 &5R ce 0) oS doe,
Slide 15: Process Improvement Program Updates
Process Improvement Program Updates “43 Critical Projects Underway”
Slide 16: Process Improvement Program
Process Improvement Program - + Phase | roll-out progressing according to plan — Initial focus on back-end — improving operational efficiencies to better service customer base + 13 critical work streams across the organization ‘SKU Rationalization - Warehouse Consolidation & Construction — Inventory
Slide 17: Successful consolidation of DC network
Successful consolidation of DC network from 4 facilities to 2 (Distribution business) Closed Fresno, CA and Salina, KS in the third quarter of Fiscal 2014, and transitioned inventory from closed locations to Mansfield, OH and Greenville, WI In process of reconfiguring Mansfield, OH with state-of-the
Slide 18: Process Improvement Program: Product Management / SKU Rationalization
Process Improvement Progr. Product Management / SKU R Initially removed over 11,000 SKU’s from the system and our offering In process of reviewing another 4,000 SKU’s and selectkits for potential rationalization Integrating core merchandising functions with operations to implementinventory managemen
Slide 19: Process Improvement Program: What does this mean for the Company?
Process Improvement Program: What does this mean for the Company? $6 million investment in Phase | / $10 million total estimated spend for identified actions $3-$5 million in savings and one-time cash generation of $20 million+ in FY14 ~$15 million of identified annualized savings (FY15 and beyond)
Slide 20: Sales and Marketing Programs and Customer Retention in FY15
Sales and Marketing Programs t and Customer Retention in FY15 an Sales and Marketing Growth Ini latives + State-by-state analysis — SSI and its competitors + Internal alignment review — by geography, state and district + Sales force configuration review — inside/outside coverage model + Category man
Slide 21: Fiscal Year 2014 Outlook
Fiscal Year 2014 Outlook
Slide 22: FY14 Financial Outlook
FY14 Financial Out Reiterating Prior Revenue and EBITDA Guidance Net revenues expectedto be $620 - $630 million, towards the mid to high-end of the range Business conditions continue to improve, post reorganization Gross profit margins to be comparable with prior years (w/in 40-60 bps) SG&A expected
Slide 23: Investor Contacts
Investor Contacts: Kevin Baehler Acting Chief Financial Officer / SVP, Corporate Controller 920.882.5882 kevin.baehler@schoolspecialty.com Glenn Wiener Investor Relations 920.243.5392 IR@schoolspecialty.com