For the quarterly period ended August 31, 2017
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Commission File No. 000-19860
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Delaware
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13-3385513
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification No.)
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557 Broadway, New York, New York
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10012
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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Title
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Number of shares outstanding
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of each class
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as of August 31, 2017
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Common Stock, $.01 par value
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33,358,951
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Class A Stock, $.01 par value
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1,656,200
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Page
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Item 1. Financial Statements
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SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Dollar amounts in millions, except per share data)
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|
Three months ended
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||||||
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August 31,
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August 31,
|
||||
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2017
|
|
2016
|
||||
Revenues
|
$
|
189.2
|
|
|
$
|
282.7
|
|
Operating costs and expenses:
|
|
|
|
|
|
||
Cost of goods sold
|
115.6
|
|
|
169.7
|
|
||
Selling, general and administrative expenses
|
158.8
|
|
|
166.0
|
|
||
Depreciation and amortization
|
9.9
|
|
|
9.5
|
|
||
Asset impairments
|
6.7
|
|
|
—
|
|
||
Total operating costs and expenses
|
291.0
|
|
|
345.2
|
|
||
Operating income (loss)
|
(101.8
|
)
|
|
(62.5
|
)
|
||
Interest income (expense), net
|
0.3
|
|
|
(0.3
|
)
|
||
Other components of net periodic benefit (cost)
|
(0.1
|
)
|
|
(0.6
|
)
|
||
Earnings (loss) from continuing operations before
income taxes
|
(101.6
|
)
|
|
(63.4
|
)
|
||
Provision (benefit) for income taxes
|
(37.9
|
)
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|
(23.9
|
)
|
||
Earnings (loss) from continuing operations
|
(63.7
|
)
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|
(39.5
|
)
|
||
Earnings (loss) from discontinued operations, net of tax
|
—
|
|
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(0.1
|
)
|
||
Net income (loss)
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$
|
(63.7
|
)
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|
$
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(39.6
|
)
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Basic and diluted earnings (loss) per Share of Class A
and Common Stock
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||
Basic:
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|
||
Earnings (loss) from continuing operations
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$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
Earnings (loss) from discontinued operations, net of tax
|
$
|
—
|
|
|
$
|
(0.00
|
)
|
Net income (loss)
|
$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
Diluted:
|
|
|
|
|
|
||
Earnings (loss) from continuing operations
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$
|
(1.81
|
)
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$
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(1.15
|
)
|
Earnings (loss) from discontinued operations, net of tax
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$
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—
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$
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(0.00
|
)
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Net income (loss)
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$
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(1.81
|
)
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$
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(1.15
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)
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Dividends declared per Class A and Common Share
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$
|
0.15
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$
|
0.15
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SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED
(Dollar amounts in millions)
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|
Three months ended
|
||||||
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August 31,
|
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August 31,
|
||||
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2017
|
|
2016
|
||||
Net income (loss)
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$
|
(63.7
|
)
|
|
$
|
(39.6
|
)
|
Other comprehensive income (loss), net:
|
|
|
|
|
|
||
Foreign currency translation adjustments
|
3.7
|
|
|
(1.9
|
)
|
||
Pension and post-retirement adjustments (net of tax)
|
0.5
|
|
|
0.7
|
|
||
Total other comprehensive income (loss)
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$
|
4.2
|
|
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$
|
(1.2
|
)
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Comprehensive income (loss)
|
$
|
(59.5
|
)
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|
$
|
(40.8
|
)
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SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollar amounts in millions, except per share data)
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|
August 31,
2017 |
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May 31,
2017 |
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August 31,
2016 |
||||||
ASSETS
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|||
Current Assets:
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|||
Cash and cash equivalents
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$
|
311.9
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$
|
444.1
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$
|
287.6
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Restricted cash held in escrow
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—
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—
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5.0
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|
|||
Accounts receivable, net
|
145.4
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199.2
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222.6
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|||
Inventories, net
|
386.5
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|
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282.5
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375.7
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|
|||
Prepaid expenses and other current assets
|
113.0
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|
44.3
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|
|
117.9
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|
|||
Current assets of discontinued operations
|
—
|
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|
0.4
|
|
|
0.5
|
|
|||
Total current assets
|
956.8
|
|
|
970.5
|
|
|
1,009.3
|
|
|||
Property, plant and equipment, net
|
487.1
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|
|
475.3
|
|
|
438.7
|
|
|||
Prepublication costs, net
|
43.6
|
|
|
43.3
|
|
|
42.6
|
|
|||
Royalty advances, net
|
42.6
|
|
|
41.8
|
|
|
45.3
|
|
|||
Goodwill
|
119.2
|
|
|
118.9
|
|
|
116.3
|
|
|||
Noncurrent deferred income taxes
|
53.8
|
|
|
53.7
|
|
|
69.0
|
|
|||
Other assets and deferred charges
|
56.5
|
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56.9
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54.0
|
|
|||
Total noncurrent assets
|
802.8
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|
|
789.9
|
|
|
765.9
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|
|||
Total assets
|
$
|
1,759.6
|
|
|
$
|
1,760.4
|
|
|
$
|
1,775.2
|
|
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|
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||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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|
|||
Current Liabilities:
|
|
|
|
|
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|
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|
|||
Lines of credit and current portion of long-term debt
|
$
|
12.0
|
|
|
$
|
6.2
|
|
|
$
|
12.1
|
|
Accounts payable
|
187.2
|
|
|
141.2
|
|
|
203.6
|
|
|||
Accrued royalties
|
51.9
|
|
|
34.2
|
|
|
66.3
|
|
|||
Deferred revenue
|
44.7
|
|
|
24.2
|
|
|
45.2
|
|
|||
Other accrued expenses
|
153.3
|
|
|
178.0
|
|
|
151.6
|
|
|||
Accrued income taxes
|
1.8
|
|
|
2.8
|
|
|
2.0
|
|
|||
Current liabilities of discontinued operations
|
—
|
|
|
0.5
|
|
|
0.3
|
|
|||
Total current liabilities
|
450.9
|
|
|
387.1
|
|
|
481.1
|
|
|||
Noncurrent Liabilities:
|
|
|
|
|
|
|
|
|
|||
Other noncurrent liabilities
|
65.7
|
|
|
65.4
|
|
|
75.5
|
|
|||
Total noncurrent liabilities
|
65.7
|
|
|
65.4
|
|
|
75.5
|
|
|||
|
|
|
|
|
|
||||||
Commitments and Contingencies (see Note 5)
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|||
Preferred Stock, $1.00 par value
|
—
|
|
|
—
|
|
|
—
|
|
|||
Class A Stock, $0.01 par value
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|||
Common Stock, $0.01 par value
|
0.4
|
|
|
0.4
|
|
|
0.4
|
|
|||
Additional paid-in capital
|
608.5
|
|
|
606.8
|
|
|
601.7
|
|
|||
Accumulated other comprehensive income (loss)
|
(90.0
|
)
|
|
(94.2
|
)
|
|
(87.9
|
)
|
|||
Retained earnings
|
1,022.2
|
|
|
1,091.2
|
|
|
1,015.0
|
|
|||
Treasury stock at cost
|
(298.1
|
)
|
|
(296.3
|
)
|
|
(310.6
|
)
|
|||
Total stockholders’ equity
|
1,243.0
|
|
|
1,307.9
|
|
|
1,218.6
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
1,759.6
|
|
|
$
|
1,760.4
|
|
|
$
|
1,775.2
|
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
(Dollar amounts in millions)
|
|
Three months ended
|
||||
|
August 31,
|
|
August 31,
|
||
|
2017
|
|
2016
|
||
Cash flows - operating activities:
|
|
|
|
|
|
Net income (loss)
|
(63.7
|
)
|
|
(39.6
|
)
|
Earnings (loss) from discontinued operations, net of tax
|
—
|
|
|
(0.1
|
)
|
Earnings (loss) from continuing operations
|
(63.7
|
)
|
|
(39.5
|
)
|
Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used in) operating activities of continuing operations:
|
|
|
|
|
|
Provision for losses on accounts receivable
|
1.9
|
|
|
2.9
|
|
Provision for losses on inventory
|
3.5
|
|
|
4.1
|
|
Provision for losses on royalty advances
|
1.1
|
|
|
1.1
|
|
Amortization of prepublication and production costs
|
5.5
|
|
|
5.8
|
|
Depreciation and amortization
|
10.0
|
|
|
9.6
|
|
Amortization of pension and post-retirement actuarial gains and losses
|
0.6
|
|
|
1.0
|
|
Deferred income taxes
|
0.3
|
|
|
(0.3
|
)
|
Stock-based compensation
|
1.5
|
|
|
1.6
|
|
Income from equity investments
|
(1.2
|
)
|
|
(1.8
|
)
|
Non cash write off related to asset impairments
|
6.7
|
|
|
—
|
|
Changes in assets and liabilities, net of amounts acquired:
|
|
|
|
|
|
Accounts receivable
|
53.0
|
|
|
(29.3
|
)
|
Inventories
|
(104.3
|
)
|
|
(108.8
|
)
|
Prepaid expenses and other current assets
|
(67.7
|
)
|
|
(49.4
|
)
|
Royalty advances
|
(1.7
|
)
|
|
(2.5
|
)
|
Accounts payable
|
51.9
|
|
|
69.7
|
|
Other accrued expenses
|
(25.8
|
)
|
|
(24.3
|
)
|
Accrued income taxes
|
(1.1
|
)
|
|
0.4
|
|
Accrued royalties
|
17.0
|
|
|
34.9
|
|
Deferred revenue
|
20.2
|
|
|
21.7
|
|
Pension and post-retirement liabilities
|
(1.6
|
)
|
|
(1.6
|
)
|
Other noncurrent liabilities
|
0.4
|
|
|
(0.1
|
)
|
Other, net
|
1.1
|
|
|
0.3
|
|
Total adjustments
|
(28.7
|
)
|
|
(65.0
|
)
|
Net cash provided by (used in) operating activities of continuing operations
|
(92.4
|
)
|
|
(104.5
|
)
|
Net cash provided by (used in) operating activities of discontinued operations
|
—
|
|
|
(1.0
|
)
|
Net cash provided by (used in) operating activities
|
(92.4
|
)
|
|
(105.5
|
)
|
|
|
|
|
||
Cash flows - investing activities:
|
|
|
|
|
|
Prepublication and production expenditures
|
(5.9
|
)
|
|
(6.7
|
)
|
Additions to property, plant and equipment
|
(32.7
|
)
|
|
(10.2
|
)
|
Other investment and acquisition related payments
|
(0.2
|
)
|
|
(0.4
|
)
|
Net cash provided by (used in) investing activities of continuing operations
|
(38.8
|
)
|
|
(17.3
|
)
|
Changes in restricted cash held in escrow for discontinued assets
|
—
|
|
|
4.9
|
|
Net cash provided by (used in) investing activities
|
(38.8
|
)
|
|
(12.4
|
)
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
(Dollar amounts in millions)
|
|
Three months ended
|
||||||
|
August 31,
|
|
August 31,
|
||||
|
2017
|
|
2016
|
||||
Cash flows - financing activities:
|
|
|
|
|
|
||
Borrowings under lines of credit
|
20.1
|
|
|
12.4
|
|
||
Repayments of lines of credit
|
(13.6
|
)
|
|
(5.9
|
)
|
||
Repayment of capital lease obligations
|
(0.3
|
)
|
|
(0.3
|
)
|
||
Reacquisition of common stock
|
(4.2
|
)
|
|
—
|
|
||
Proceeds pursuant to stock-based compensation plans
|
2.8
|
|
|
5.2
|
|
||
Payment of dividends
|
(5.3
|
)
|
|
(5.2
|
)
|
||
Other
|
(0.8
|
)
|
|
(0.4
|
)
|
||
Net cash provided by (used in) financing activities
|
(1.3
|
)
|
|
5.8
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
0.3
|
|
|
0.0
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(132.2
|
)
|
|
(112.1
|
)
|
||
Cash and cash equivalents at beginning of period
|
444.1
|
|
|
399.7
|
|
||
Cash and cash equivalents at end of period
|
$
|
311.9
|
|
|
$
|
287.6
|
|
•
|
Accounts receivable reserves for returns
|
•
|
Accounts receivable allowance for doubtful accounts
|
•
|
Pension and other post-retirement obligations
|
•
|
Uncertain tax positions
|
•
|
Inventory reserves
|
•
|
Cost of goods sold from book fair operations during interim periods determined based on estimated gross profit rates
|
•
|
Sales tax contingencies
|
•
|
Royalty advance reserves
|
•
|
Unredeemed incentive programs
|
•
|
Impairment testing for goodwill for assessment and measurement, intangibles and other long-lived assets and investments
|
•
|
Assets and liabilities acquired in business combinations
|
•
|
Revenues for fairs which have not reported final results
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
•
|
Children’s Book Publishing and Distribution
operates as an integrated business which includes the publication and distribution of children’s books, ebooks, media and interactive products in the United States through its book clubs and book fairs in its school channels and through the trade channel. This segment is comprised of
three
operating segments.
|
•
|
Education
includes the publication and distribution to schools and libraries of children’s books, classroom magazines, supplemental and core classroom materials and related support services, and print and on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States. This segment is comprised of
two
operating segments.
|
•
|
International
includes the publication and distribution of products and services outside the United States by the Company’s international operations, and its export and foreign rights businesses. This segment is comprised of
three
operating segments.
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Children’s
Book
Publishing &
Distribution
|
|
Education
|
|
Overhead
(1)
|
|
Total
Domestic
|
|
International
|
|
Total
|
||||||||||||
Three months ended
August 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenues
|
$
|
66.8
|
|
|
$
|
45.0
|
|
|
$
|
—
|
|
|
$
|
111.8
|
|
|
$
|
77.4
|
|
|
$
|
189.2
|
|
Bad debt
|
0.5
|
|
|
(0.1
|
)
|
|
—
|
|
|
0.4
|
|
|
1.5
|
|
|
1.9
|
|
||||||
Depreciation and amortization
(2)
|
5.2
|
|
|
2.2
|
|
|
6.3
|
|
|
13.7
|
|
|
1.7
|
|
|
15.4
|
|
||||||
Asset impairments
|
—
|
|
|
—
|
|
|
6.7
|
|
|
6.7
|
|
|
—
|
|
|
6.7
|
|
||||||
Segment operating income (loss)
|
(58.9
|
)
|
|
(12.5
|
)
|
|
(27.6
|
)
|
|
(99.0
|
)
|
|
(2.8
|
)
|
|
(101.8
|
)
|
||||||
Segment assets at 8/31/17
|
476.9
|
|
|
176.1
|
|
|
845.6
|
|
|
1,498.6
|
|
|
261.0
|
|
|
1,759.6
|
|
||||||
Goodwill at 8/31/17
|
40.9
|
|
|
68.3
|
|
|
—
|
|
|
109.2
|
|
|
10.0
|
|
|
119.2
|
|
||||||
Expenditures for other non-current assets
(3)
|
9.9
|
|
|
2.5
|
|
|
30.8
|
|
|
43.2
|
|
|
2.1
|
|
|
45.3
|
|
||||||
Other non-current assets at 8/31/17
(3)
|
140.2
|
|
|
94.5
|
|
|
429.7
|
|
|
664.4
|
|
|
68.0
|
|
|
732.4
|
|
||||||
Three months ended
August 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues
|
$
|
137.8
|
|
|
$
|
55.2
|
|
|
$
|
—
|
|
|
$
|
193.0
|
|
|
$
|
89.7
|
|
|
$
|
282.7
|
|
Bad debt
|
1.3
|
|
|
(0.1
|
)
|
|
—
|
|
|
1.2
|
|
|
1.7
|
|
|
2.9
|
|
||||||
Depreciation and amortization
(2)
|
5.6
|
|
|
2.0
|
|
|
5.7
|
|
|
13.3
|
|
|
2.0
|
|
|
15.3
|
|
||||||
Segment operating income (loss)
|
(36.2
|
)
|
|
(4.4
|
)
|
|
(26.1
|
)
|
|
(66.7
|
)
|
|
4.2
|
|
|
(62.5
|
)
|
||||||
Segment assets at 8/31/16
|
534.5
|
|
|
167.1
|
|
|
807.2
|
|
|
1,508.8
|
|
|
265.9
|
|
|
1,774.7
|
|
||||||
Goodwill at 8/31/16
|
40.9
|
|
|
65.4
|
|
|
—
|
|
|
106.3
|
|
|
10.0
|
|
|
116.3
|
|
||||||
Expenditures for other non-current assets
(3)
|
25.9
|
|
|
2.6
|
|
|
8.5
|
|
|
37.0
|
|
|
2.8
|
|
|
39.8
|
|
||||||
Other non-current assets at 8/31/16
(3)
|
144.6
|
|
|
83.1
|
|
|
382.1
|
|
|
609.8
|
|
|
65.1
|
|
|
$
|
674.9
|
|
|
(1)
|
Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets. Unallocated assets are principally comprised of deferred income taxes and property, plant and equipment related to the Company’s headquarters in the metropolitan New York area, its fulfillment and distribution facilities located in Missouri and its facility located in Connecticut.
|
(2)
|
Includes depreciation of property, plant and equipment and amortization of intangible assets and prepublication and production costs.
|
(3)
|
Other non-current assets include property, plant and equipment, prepublication, production, royalty advances, goodwill, intangible assets and investments. Expenditures for other non-current assets for the International reportable segment include expenditures for long-lived assets of
$1.3
and
$1.3
for the three months ended August 31, 2017 and August 31, 2016, respectively. Other non-current assets for the International reportable segment include long-lived assets of
$33.9
and
$34.2
as of August 31, 2017 and August 31, 2016, respectively.
|
|
August 31, 2017
|
|
May 31, 2017
|
|
August 31, 2016
|
||||||
Revolving Loan (interest rates of n/a)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Unsecured short term lines of credit (weighted average interest rates of 3.8%, 4.1% and 4.1%, respectively)
|
12.0
|
|
|
6.2
|
|
|
12.1
|
|
|||
Total debt
|
$
|
12.0
|
|
|
$
|
6.2
|
|
|
$
|
12.1
|
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
(i)
|
the borrowing limit was reduced to
$375.0
from
$425.0
;
|
(ii)
|
the “starter” basket for permitted payments of dividends and other payments in respect of capital stock was increased to
$275.0
from
$75.0
; and
|
(iii)
|
the maturity date was extended to
January 5, 2022
.
|
•
|
A Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus
0.50%
or (iii) the Eurodollar Rate for a one month interest period plus
1%
plus, in each case, an applicable spread ranging from
0.175%
to
0.60%
, as determined by the Company’s prevailing consolidated debt to total capital ratio.
|
•
|
A Eurodollar Rate equal to the London interbank offered rate (LIBOR) plus an applicable spread ranging from
1.175%
to
1.60%
, as determined by the Company’s prevailing consolidated debt to total capital ratio.
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended
|
||||||
|
August 31,
|
|
August 31,
|
||||
|
2017
|
|
2016
|
||||
Earnings (loss) from continuing operations attributable to Class A and Common Shares
|
$
|
(63.7
|
)
|
|
$
|
(39.5
|
)
|
Earnings (loss) from discontinued operations attributable to Class A and Common Shares, net of tax
|
—
|
|
|
(0.1
|
)
|
||
Net income (loss) attributable to Class A and Common Shares
|
$
|
(63.7
|
)
|
|
$
|
(39.6
|
)
|
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)
|
35.2
|
|
|
34.4
|
|
||
Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)
|
*
|
|
|
*
|
|
||
Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings (loss) per share (in millions)
|
*
|
|
|
*
|
|
||
Earnings (loss) per share of Class A Stock and Common Stock:
|
|
|
|
|
|
||
Basic earnings (loss) per share:
|
|
|
|
|
|
||
Earnings (loss) from continuing operations
|
$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
Earnings (loss) from discontinued operations, net of tax
|
$
|
—
|
|
|
$
|
(0.00
|
)
|
Net income (loss)
|
$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
||
Earnings (loss) from continuing operations
|
$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
Earnings (loss) from discontinued operations, net of tax
|
$
|
—
|
|
|
$
|
(0.00
|
)
|
Net income (loss)
|
$
|
(1.81
|
)
|
|
$
|
(1.15
|
)
|
|
August 31, 2017
|
|
August 31, 2016
|
Options outstanding pursuant to stock-based compensation plans (in millions)
|
2.6
|
|
2.8
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended
August 31, 2017 |
|
Twelve months ended
May 31, 2017 |
|
Three months ended
August 31, 2016 |
||||||
Beginning balance
|
$
|
118.9
|
|
|
$
|
116.2
|
|
|
$
|
116.2
|
|
Additions
|
—
|
|
|
2.8
|
|
|
—
|
|
|||
Foreign currency translation
|
0.3
|
|
|
(0.1
|
)
|
|
0.1
|
|
|||
Total goodwill
|
$
|
119.2
|
|
|
$
|
118.9
|
|
|
$
|
116.3
|
|
|
Three months ended
August 31, 2017 |
|
Twelve months ended
May 31, 2017 |
|
Three months ended
August 31, 2016 |
||||||
Beginning balance other intangibles subject to amortization
|
$
|
9.0
|
|
|
$
|
4.7
|
|
|
$
|
4.7
|
|
Additions
|
0.1
|
|
|
7.0
|
|
|
0.2
|
|
|||
Amortization expense
|
(0.5
|
)
|
|
(2.5
|
)
|
|
(0.6
|
)
|
|||
Foreign currency translation
|
0.0
|
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|||
Total other intangibles subject to amortization, net of accumulated amortization of $22.5, $22.0 and $20.1, respectively
|
$
|
8.6
|
|
|
$
|
9.0
|
|
|
$
|
4.2
|
|
Total other intangibles not subject to amortization
|
$
|
2.1
|
|
|
$
|
2.1
|
|
|
$
|
2.1
|
|
Total other intangibles
|
$
|
10.7
|
|
|
$
|
11.1
|
|
|
$
|
6.3
|
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
U.S. Pension Plan
|
|
UK Pension Plan
|
|
Post-Retirement Benefits
|
||||||||||||||||||
|
Three months ended
|
|
Three months ended
|
|
Three months ended
|
||||||||||||||||||
|
August 31,
|
|
August 31,
|
|
August 31,
|
|
August 31,
|
|
August 31,
|
|
August 31,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Components of net periodic (benefit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.0
|
|
|
$
|
0.0
|
|
Interest cost
|
0.7
|
|
|
0.8
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
||||||
Expected return on assets
|
(1.5
|
)
|
|
(1.5
|
)
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Amortization of (gain) loss
|
0.3
|
|
|
0.2
|
|
|
0.3
|
|
|
0.2
|
|
|
0.0
|
|
|
0.6
|
|
||||||
Net periodic (benefit) cost
|
$
|
(0.5
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
0.3
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
0.9
|
|
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended
|
||||||
|
August 31,
|
|
August 31,
|
||||
|
2017
|
|
2016
|
||||
Stock option expense
|
$
|
0.8
|
|
|
$
|
0.8
|
|
Restricted stock unit expense
|
0.6
|
|
|
0.7
|
|
||
Management stock purchase plan
|
0.0
|
|
|
0.0
|
|
||
Employee stock purchase plan
|
0.1
|
|
|
0.1
|
|
||
Total stock-based compensation expense
|
$
|
1.5
|
|
|
$
|
1.6
|
|
|
Three months ended
|
||||
|
August 31,
|
|
August 31,
|
||
|
2017
|
|
2016
|
||
Common Stock issued pursuant to stock-based compensation plans (in millions)
|
0.1
|
|
|
0.2
|
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Amount
|
|
||
July 2015
|
50.0
|
|
|
|
Less repurchases made under the authorization as of August 31, 2017
|
(16.1
|
)
|
|
|
Remaining Board authorization at August 31, 2017
|
$
|
33.9
|
|
|
|
Three months ended August 31, 2017
|
||||||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
||||||
Beginning balance
|
$
|
(45.3
|
)
|
|
$
|
(48.9
|
)
|
|
$
|
(94.2
|
)
|
Other comprehensive income (loss) before reclassifications
|
3.7
|
|
|
—
|
|
|
3.7
|
|
|||
Less: amount reclassified from Accumulated other
comprehensive income (loss)
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|||
Other comprehensive income (loss)
|
3.7
|
|
|
0.5
|
|
|
4.2
|
|
|||
Ending balance
|
$
|
(41.6
|
)
|
|
$
|
(48.4
|
)
|
|
$
|
(90.0
|
)
|
|
Three months ended August 31, 2016
|
||||||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
||||||
Beginning balance
|
$
|
(40.0
|
)
|
|
$
|
(46.7
|
)
|
|
$
|
(86.7
|
)
|
Other comprehensive income (loss) before reclassifications
|
(1.9
|
)
|
|
—
|
|
|
(1.9
|
)
|
|||
Less: amount reclassified from Accumulated other
comprehensive income (loss) |
—
|
|
|
0.7
|
|
|
0.7
|
|
|||
Other comprehensive income (loss)
|
(1.9
|
)
|
|
0.7
|
|
|
(1.2
|
)
|
|||
Ending balance
|
$
|
(41.9
|
)
|
|
$
|
(46.0
|
)
|
|
$
|
(87.9
|
)
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
•
|
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
|
•
|
Level 2
Observable inputs other than unadjusted quoted prices in active markets for identical assets or liabilities such as
|
|
○
|
Quoted prices for similar assets or liabilities in active markets
|
|
○
|
Quoted prices for identical or similar assets or liabilities in inactive markets
|
|
○
|
Inputs other than quoted prices that are observable for the asset or liability
|
|
○
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means
|
•
|
Level 3
Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.
|
•
|
Long-lived assets
|
•
|
Investments
|
•
|
Assets acquired in a business combination
|
•
|
Goodwill, definite and indefinite-lived intangible assets
|
•
|
Long-lived assets held for sale
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
August 31, 2017
|
|
May 31, 2017
|
|
August 31, 2016
|
||||||
Accrued payroll, payroll taxes and benefits
|
$
|
46.3
|
|
|
$
|
48.5
|
|
|
$
|
42.9
|
|
Accrued bonus and commissions
|
13.3
|
|
|
33.8
|
|
|
13.1
|
|
|||
Accrued other taxes
|
21.5
|
|
|
26.1
|
|
|
25.4
|
|
|||
Accrued advertising and promotions
|
31.9
|
|
|
34.9
|
|
|
31.9
|
|
|||
Accrued insurance
|
7.5
|
|
|
7.6
|
|
|
8.0
|
|
|||
Other accrued expenses
|
32.8
|
|
|
27.1
|
|
|
30.3
|
|
|||
Total accrued expenses
|
$
|
153.3
|
|
|
$
|
178.0
|
|
|
$
|
151.6
|
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended
|
||||||||||||
|
August 31,
|
|
August 31,
|
||||||||||
|
2017
|
|
2016
|
||||||||||
($ amounts in millions)
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
||||||
Product, service and production costs
|
$
|
51.5
|
|
|
27.2
|
%
|
|
$
|
71.2
|
|
|
25.2
|
%
|
Royalty costs
|
18.1
|
|
|
9.6
|
%
|
|
50.7
|
|
|
17.9
|
%
|
||
Prepublication and production amortization
|
5.5
|
|
|
2.9
|
%
|
|
5.7
|
|
|
2.0
|
%
|
||
Postage, freight, shipping, fulfillment and other
|
40.5
|
|
|
21.4
|
%
|
|
42.1
|
|
|
14.9
|
%
|
||
Total
|
$
|
115.6
|
|
|
61.1
|
%
|
|
$
|
169.7
|
|
|
60.0
|
%
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended
|
|||||||||||||||
|
August 31,
|
August 31,
|
$
|
|
%
|
|||||||||||
($ amounts in millions)
|
2017
|
|
2016
|
|
change
|
|
change
|
|||||||||
Revenues
|
$
|
66.8
|
|
|
$
|
137.8
|
|
|
$
|
(71.0
|
)
|
|
-51.5
|
%
|
||
Cost of goods sold
|
43.2
|
|
|
87.1
|
|
|
(43.9
|
)
|
|
-50.4
|
%
|
|||||
Other operating expenses*
|
82.5
|
|
|
86.9
|
|
|
(4.4
|
)
|
|
-5.1
|
%
|
|||||
Operating income (loss)
|
$
|
(58.9
|
)
|
|
$
|
(36.2
|
)
|
|
$
|
(22.7
|
)
|
|
|
|
||
Operating margin
|
|
—
|
%
|
|
|
—
|
%
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended
|
|||||||||||||||
|
August 31,
|
August 31,
|
$
|
|
%
|
|||||||||||
($ amounts in millions)
|
2017
|
|
2016
|
|
change
|
|
change
|
|||||||||
Revenues
|
$
|
45.0
|
|
|
$
|
55.2
|
|
|
$
|
(10.2
|
)
|
|
-18.5
|
%
|
||
Cost of goods sold
|
18.9
|
|
|
21.9
|
|
|
(3.0
|
)
|
|
-13.7
|
%
|
|||||
Other operating expenses*
|
38.6
|
|
|
37.7
|
|
|
0.9
|
|
|
2.4
|
%
|
|||||
Operating income (loss)
|
$
|
(12.5
|
)
|
|
$
|
(4.4
|
)
|
|
$
|
(8.1
|
)
|
|
|
|
||
Operating margin
|
|
—
|
%
|
|
|
—
|
%
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended
|
|||||||||||||||
|
August 31,
|
August 31,
|
$
|
|
%
|
|||||||||||
($ amounts in millions)
|
2017
|
|
2016
|
|
change
|
|
change
|
|||||||||
Revenues
|
$
|
77.4
|
|
|
$
|
89.7
|
|
|
$
|
(12.3
|
)
|
|
-13.7
|
%
|
||
Cost of goods sold
|
40.3
|
|
|
47.9
|
|
|
(7.6
|
)
|
|
-15.9
|
%
|
|||||
Other operating expenses*
|
39.9
|
|
|
37.6
|
|
|
2.3
|
|
|
6.1
|
%
|
|||||
Operating income (loss)
|
$
|
(2.8
|
)
|
|
$
|
4.2
|
|
|
$
|
(7.0
|
)
|
|
|
|
||
Operating margin
|
|
—
|
%
|
|
|
4.7
|
%
|
|
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
($ amounts in millions)
|
Fiscal Year Maturity
|
||||||||||||||||||||||||||||||
|
2018
(1)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Fair
Value @ 08/31/2017 |
||||||||||||||||
Debt Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lines of Credit and current
portion of long-term debt
|
$
|
12.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12.0
|
|
|
$
|
12.0
|
|
Average interest rate
|
3.8
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
(1)
|
Fiscal 2018 includes the remaining nine months of the current fiscal year ending May 31, 2018.
|
|
|
|
|
|
|
Period
|
|
Total number of
shares purchased
|
|
Average
price paid
per share
|
|
Total number of shares
purchased as part of publicly
announced plans or
programs
|
|
Maximum number of shares (or
approximate dollar value) that may yet be purchased under the plans or programs
(i)
|
|
||||||
June 1, 2017 through June 30, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
38.6
|
|
|
July 1, 2017 through July 31, 2017
|
|
5,000
|
|
|
$
|
41.00
|
|
|
5,000
|
|
|
$
|
38.4
|
|
|
August 1, 2017 through August 31, 2017
|
|
114,446
|
|
|
$
|
39.05
|
|
|
114,446
|
|
|
$
|
33.9
|
|
|
Total
|
|
119,446
|
|
|
$
|
39.13
|
|
|
119,446
|
|
|
$
|
33.9
|
|
|
|
|
10.1
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32
|
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definitions Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Labels Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit Number
|
Description of Document
|
|
|
** 10.1
|
Scholastic Corporation 2017 Outside Directors Stock Incentive Plan.
|
|
|
** 10.2
|
Form of Non-Qualified Stock Option Agreement under the Scholastic Corporation 2017 Outside Directors Stock Incentive Plan.
|
|
|
** 10.3
|
Form of Restricted Stock Unit Agreement under the Scholastic Corporation 2017 Outside Directors Stock Incentive Plan.
|
|
|
31.1
|
Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32
|
Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS
|
XBRL Instance Document *
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document *
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Document *
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definitions Document *
|
|
|
101.LAB
|
XBRL Taxonomy Extension Labels Document *
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Document *
|
|
|
|
|
|
|
|
SCHOLASTIC CORPORATION
|
|
|
|
(Registrant)
|
|
|||
Date: September 21, 2017
|
By:
|
/s/ Richard Robinson
|
|
|
|
||
|
|||
|
|
|
Richard Robinson
|
|
|
|
Chairman of the Board,
President and Chief
Executive Officer
|
|
|||
Date: September 21, 2017
|
By:
|
/s/ Maureen O’Connell
|
|
|
|
||
|
|||
|
|
|
Maureen O’Connell
|
|
|
|
Executive Vice President,
Chief Administrative Officer
and Chief Financial Officer
(Principal Financial Officer)
|
1.
|
Name and General Purpose
|
2.
|
Grants to Outside Directors
|
3.
|
Exercise of Options
|
4.
|
Restricted Stock Units
|
5.
|
Termination of Service of Outside Directors
|
6.
|
Transferability
|
7.
|
Shares Reserved
|
8.
|
Adjustments Due to Stock Splits, Mergers, Consolidations, etc.
|
9.
|
Withholding or Deduction of Taxes
|
10.
|
Administration
|
11.
|
Compliance with Applicable Law
|
12.
|
Amendment and Termination
|
13.
|
Effective Date
|
14.
|
Governing Law
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Scholastic Corporation;
|
|
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:
|
|
|
||
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
||
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
||
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
||
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
||
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
||
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Richard Robinson
|
|
|
|
|
|
Richard Robinson
|
|
|
Chairman of the Board,
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Scholastic Corporation;
|
|
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
||
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
||
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
||
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
||
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
||
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
||
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Maureen O’Connell
|
|
|
|
|
|
Maureen O’Connell
|
|
|
Executive Vice President,
|
|
|
Chief Administrative Officer
|
|
|
and Chief Financial Officer
|
|
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Scholastic Corporation, a Delaware corporation (the “Company”), does hereby certify, to the best of such officer’s knowledge, that:
|
|
|
|
|
|
1.
|
The Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2017 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
|
|
|
2.
|
Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: September 21, 2017
|
/s/ Richard Robinson
|
|
|
|
|
|
Richard Robinson
|
|
|
Chief Executive Officer
|
|
|
|
|
Date: September 21, 2017
|
/s/ Maureen O’Connell
|
|
|
|
|
|
Maureen O’Connell
|
|
|
Chief Financial Officer
|
|