Impairment Loss: School Specialty, Inc.

School Specialty, Inc. (SCHS) may be worth looking at. The company recorded a huge $441 million non-cash impairment loss in the quarter ended July 2010 which annihilated operating income.

I'll never understand how an impairment loss can be considered part of operating income, but nevertheless, that loss, coupled with decreased revenue due to state and local budget deficits and funding pressure has depressed SCHS stock price considerably in 2010, perhaps far below intrinsic value.

SCHS closed at $13.87 vs. the $34 it was trading at in August of 2008.  The company has a solid history of financial health, profitability and free cash flow. Though it remains to be seen if SCHS's slow recovery is a product of a slow recovery by state and local governments, or if the company's current troubles are an indication of a more fundamental problem in its product and strategy.

Check out Seeking Alpha for more about School Specialty, Inc. and its industry or you can check out the SEC filings here for your own further research.