School Specialty Inc. (SCHS) reported third quarter loss of 98 cents per share which was 2 cents better than the Zacks Consensus Estimate. The loss improved 21.6% year-over-year.
During the quarter, the company posted a 15.3% decline in total revenue to $103.1 million from $121.7 million in the year-ago period. The decrease was primarily attributable to the contraction of sales in the Educational Resources segment, which dipped by $14.7 million. In addition, the general economic conditions also continued to affect school spending levels, particularly in the furniture product lines. Furthermore, the divestiture of the School Specialty Publishing also impacted the top line.
However, gross margin for the quarter expanded 555 basis points (bps) to 41.1% versus 35.6% in the comparable prior-year quarter. The increase was primarily due to product pricing and vendor costing initiatives.
The operating loss for the quarter improved to $22.6 million from $29.9 million in the comparable prior-year period. The improvement was primarily related to cost reductions resulting from operational consolidations and improved supply chain management.
Year-to-date, the company had cash and cash equivalents of $23.5 million, while free cash flow was $87.2 million. Moreover, the company also reduced its total debt by approximately $60 million.
Concurrent with the earnings release, management lowered its guidance for fiscal 2010. The company now expects revenues to be in the range of $895 million to $910 million. Previous guidance was in the range of $915 million to $940 million.
Management also narrowed its earnings guidance to a range of $1.40 to $1.54 per share compared to the earlier guidance of $1.40 to $1.60 per share. However, free cash flow is reiterated in the range of $70 million to $80 million.
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