Thursday, education company School Specialty Inc. (SCHS) reported a dip in second quarter earnings from last year, as revenues declined reflecting lower volume in sales of consumables, furniture and equipments. Going forward, the company backed its outlook for fiscal 2010.
The Greenville, Wisconsin-based School Specialty's second-quarter net income decreased to $29.6 million or $1.57 per share from $30.43 million or $1.61 per share a year ago.
On average, four analysts polled by Thomson Reuters expected the company to report earnings of $1.59 per share for the quarter. Analysts' estimates typically exclude special items.
Quarterly revenues dropped to $346.15 million from $390.31 million last year. Analysts expected revenue of $341.54 million for the quarter.
Commenting on the results, David Vander Zanden, chief executive officer, said, "Schools continue to struggle with their budget challenges. While volume in consumable and curriculum products, excluding adoptions, has been only modestly below the prior year, sales of furniture and equipment have been significantly lower because those purchases are more easily delayed."
The company noted that despite the volume decline, its successful restructuring and fixed-cost reductions resulted in a 130 basis-point operating margin increase in the second quarter, and a 50 basis-point improvement year to date.
Year-to-date, School Specialty's net income decreased to $58.0 million or $3.07 per share from $63.78 million or $3.36 per share in the corresponding period last year. Net income for the six-month period of fiscal 2010 included non-cash charges related to convertible debt accounting, which reduced six-month diluted earnings by $0.20 per share.
Revenues for the first half slipped to $676.51 million from $769.1 million in the first half of last year.
Additionally, School Specialty announced that it completed the divestiture of its retail trade book business, School Specialty Publishing, to Carson-Dellosa Publishing, LLC, a newly-formed business entity.
Under the agreement, School Specialty combined its publishing unit assets with those of Cookie Jar Education Inc. and received a minority equity interest in Carson-Dellosa Publishing. The company noted that future results from the business combination will be reported as an investment under the equity method of accounting, beginning in the third quarter of fiscal 2010.
Looking ahead, School Specialty maintained its fiscal 2010 guidance. The company still expects earnings per share in the range of $1.40 - $1.60 on revenues between $915 million and $940 million.
Excluding the impact of the convertible debt accounting change and the transaction integration costs, earnings for the full year are anticipated to be $1.88 - $2.10 per share.
Analysts are currently looking for earnings of $1.53 per share on revenues of $932.59 million for the year.
SCHS is trading at $23.95, down $0.21 or 0.87%, on a volume of about 30 thousand shares.
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