For the quarterly period ended
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November 30, 2019
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Commission File No.
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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,
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New York,
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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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Title of Class
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Trading Symbol
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
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SCHL
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The NASDAQ Stock Market LLC
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
|
☐
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Title of each class
|
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Number of shares outstanding as of November 30, 2019
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Common Stock, $.01 par value
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32,950,239
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Class A Stock, $.01 par value
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1,656,200
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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)
|
|
Three months ended
|
|
Six months ended
|
||||||||
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November 30,
|
|
November 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Revenues
|
$597.2
|
|
$604.7
|
|
$829.8
|
|
$823.1
|
||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
||
Cost of goods sold
|
264.3
|
|
262.4
|
|
401.4
|
|
387.7
|
||||
Selling, general and administrative expenses
|
212.4
|
|
229.7
|
|
379.9
|
|
393.4
|
||||
Depreciation and amortization
|
15.4
|
|
14.4
|
|
30.8
|
|
27.6
|
||||
Total operating costs and expenses
|
492.1
|
|
506.5
|
|
812.1
|
|
808.7
|
||||
Operating income (loss)
|
105.1
|
|
98.2
|
|
17.7
|
|
14.4
|
||||
Interest income (expense), net
|
0.0
|
|
0.5
|
|
0.7
|
|
1.3
|
||||
Other components of net periodic benefit (cost)
|
(0.2)
|
|
(0.3)
|
|
(0.6
|
)
|
|
(0.7)
|
|||
Earnings (loss) before income taxes
|
104.9
|
|
98.4
|
|
17.8
|
|
15.0
|
||||
Provision (benefit) for income taxes
|
33.8
|
|
26.8
|
|
5.2
|
|
4.7
|
||||
Net income (loss)
|
71.1
|
|
71.6
|
|
12.6
|
|
10.3
|
||||
Less: Net income attributable to noncontrolling interests
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Net income (loss) attributable to Scholastic Corporation
|
$71.0
|
|
$71.6
|
|
$12.5
|
|
$10.3
|
||||
Basic and diluted earnings (loss) per Share of Class A
and Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$2.04
|
|
$2.03
|
|
$0.36
|
|
$0.29
|
||||
Diluted
|
$2.02
|
|
$1.99
|
|
$0.35
|
|
$0.29
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED
(Dollar amounts in millions)
|
|
Three months ended
|
|
Six months ended
|
||||||
|
November 30,
|
|
November 30,
|
||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||
Net income (loss)
|
$71.1
|
|
$71.6
|
|
$12.6
|
|
$10.3
|
||
Other comprehensive income (loss), net:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
3.9
|
|
(0.6)
|
|
1.9
|
|
(3.7)
|
||
Pension and postretirement adjustments (net of tax)
|
0.2
|
|
2.7
|
|
0.4
|
|
2.9
|
||
Total other comprehensive income (loss), net
|
4.1
|
|
2.1
|
|
2.3
|
|
(0.8)
|
||
Comprehensive income (loss)
|
75.2
|
|
73.7
|
|
14.9
|
|
9.5
|
||
Less: Net income attributable to noncontrolling interests
|
0.1
|
|
—
|
|
|
0.1
|
|
—
|
|
Comprehensive income (loss) attributable to Scholastic Corporation
|
$75.1
|
|
$73.7
|
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$14.8
|
|
$9.5
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED (Dollar amounts in millions, except per share data) |
|
November 30, 2019 (unaudited)
|
|
May 31, 2019 (audited)
|
|
November 30, 2018 (unaudited)
|
|||
ASSETS
|
|
|
|
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|
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|
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Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$277.8
|
|
$334.1
|
|
$358.1
|
|||
Accounts receivable, net
|
325.1
|
|
250.1
|
|
377.3
|
|||
Inventories, net
|
357.8
|
|
323.7
|
|
365.6
|
|||
Prepaid expenses and other current assets
|
61.9
|
|
52.7
|
|
71.3
|
|||
Total current assets
|
1,022.6
|
|
960.6
|
|
1,172.3
|
|||
Noncurrent Assets:
|
|
|
|
|
|
|||
Property, plant and equipment, net
|
578.5
|
|
577.7
|
|
571.3
|
|||
Prepublication costs, net
|
71.3
|
|
70.2
|
|
62.1
|
|||
Operating lease right-of-use assets, net
|
76.4
|
|
—
|
|
|
—
|
|
|
Royalty advances, net
|
52.3
|
|
47.5
|
|
48.9
|
|||
Goodwill
|
125.4
|
|
125.2
|
|
119.1
|
|||
Noncurrent deferred income taxes
|
37.3
|
|
37.0
|
|
41.4
|
|||
Other assets and deferred charges
|
67.9
|
|
60.3
|
|
66.8
|
|||
Total noncurrent assets
|
1,009.1
|
|
917.9
|
|
909.6
|
|||
Total assets
|
$2,031.7
|
|
$1,878.5
|
|
$2,081.9
|
|||
|
|
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Lines of credit and current portion of long-term debt
|
$13.5
|
|
$7.3
|
|
$13.5
|
|||
Accounts payable
|
188.9
|
|
195.3
|
|
250.3
|
|||
Accrued royalties
|
54.7
|
|
41.9
|
|
58.5
|
|||
Deferred revenue
|
190.5
|
|
130.8
|
|
187.2
|
|||
Other accrued expenses
|
178.2
|
|
164.8
|
|
227.8
|
|||
Accrued income taxes
|
1.4
|
|
1.4
|
|
2.1
|
|||
Operating lease liabilities
|
23.5
|
|
—
|
|
|
—
|
|
|
Total current liabilities
|
650.7
|
|
541.5
|
|
739.4
|
|||
Noncurrent Liabilities:
|
|
|
|
|
|
|||
Long-term debt
|
2.6
|
|
—
|
|
|
—
|
|
|
Operating lease liabilities
|
56.0
|
|
—
|
|
|
—
|
|
|
Other noncurrent liabilities
|
61.1
|
|
64.2
|
|
57.9
|
|||
Total noncurrent liabilities
|
119.7
|
|
64.2
|
|
57.9
|
|||
Commitments and Contingencies (see Note 5)
|
|
|
|
|
|
|||
Stockholders’ Equity:
|
|
|
|
|
|
|||
Preferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, none
|
—
|
|
|
—
|
|
|
—
|
|
Class A Stock, $0.01 par value: Authorized, 4.0 shares; Issued and Outstanding, 1.7 shares
|
0.0
|
|
0.0
|
|
0.0
|
|||
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 33.0, 33.4 and 33.6 shares, respectively
|
0.4
|
|
0.4
|
|
0.4
|
|||
Additional paid-in capital
|
621.3
|
|
620.8
|
|
617.9
|
|||
Accumulated other comprehensive income (loss)
|
(57.4)
|
|
(59.7)
|
|
(56.5)
|
|||
Retained earnings
|
1,014.7
|
|
1,012.6
|
|
1,018.4
|
|||
Treasury stock, at cost: 9.9, 9.5 and 9.3 shares, respectively
|
(319.0)
|
|
(302.6)
|
|
(295.6)
|
|||
Total stockholders’ equity of Scholastic Corporation
|
1,260.0
|
|
1,271.5
|
|
1,284.6
|
|||
Noncontrolling interest
|
1.3
|
|
1.3
|
|
—
|
|
||
Total stockholders’ equity
|
1,261.3
|
|
1,272.8
|
|
1,284.6
|
|||
Total liabilities and stockholders’ equity
|
$2,031.7
|
|
$1,878.5
|
|
$2,081.9
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED (Dollar amounts in millions, except per share data) |
|
Class A Stock
|
Common Stock
|
Additional Paid-in Capital
|
Accumulated
Other Comprehensive Income (Loss) |
Retained
Earnings |
Treasury Stock
At Cost |
Total
Stockholders' Equity of Scholastic Corporation |
|
Noncontrolling Interest
|
|
Total
Stockholders' Equity |
||||||||||||||||||||
|
Shares
|
|
Amount
|
Shares
|
|
Amount
|
|||||||||||||||||||||||||
Balance at June 1, 2018
|
1.7
|
|
$0.0
|
33.3
|
|
$0.4
|
|
$614.4
|
|
$(55.7)
|
|
$1,065.2
|
|
$(303.5)
|
|
$1,320.8
|
|
$0.0
|
|
$1,320.8
|
|||||||||||
Net Income (loss)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61.3
|
)
|
|
—
|
|
|
(61.3
|
)
|
|
—
|
|
|
(61.3
|
)
|
Adoption of ASC 606 ( net of tax of $16.0)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46.5
|
)
|
|
—
|
|
|
(46.5
|
)
|
|
—
|
|
|
(46.5
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
(3.1
|
)
|
Pension and post-retirement adjustments (net of tax of $0.0)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
Proceeds pursuant to stock-based compensation plans
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
2.8
|
|
Treasury stock issued pursuant to equity-based plans
|
—
|
|
|
—
|
|
0.1
|
|
|
—
|
|
|
(3.2
|
)
|
|
—
|
|
|
—
|
|
|
3.5
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
Dividends ($0.15 per share)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
(5.3
|
)
|
Balance at August 31, 2018
|
1.7
|
|
|
$0.0
|
33.4
|
|
|
$0.4
|
|
$615.5
|
|
$(58.6)
|
|
$952.1
|
|
$(300.0)
|
|
$1,209.4
|
|
$0.0
|
|
$1,209.4
|
|||||||||
Net Income (loss)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71.6
|
|
|
—
|
|
|
71.6
|
|
|
—
|
|
|
71.6
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
Pension and post-retirement adjustments (net of tax of $0.8)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
|
3.7
|
|
Proceeds pursuant to stock-based compensation plans
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
|
2.5
|
|
Purchases of treasury stock at cost
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Treasury stock issued pursuant to equity-based plans
|
—
|
|
|
—
|
|
0.2
|
|
|
—
|
|
|
(3.8
|
)
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
Dividends ($0.15 per share)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
(5.3
|
)
|
Balance at November 30, 2018
|
1.7
|
|
|
$0.0
|
33.6
|
|
|
$0.4
|
|
$617.9
|
|
$(56.5)
|
|
$1,018.4
|
|
$(295.6)
|
|
$1,284.6
|
|
$0.0
|
|
$1,284.6
|
|
Class A Stock
|
Common Stock
|
Additional Paid-in Capital
|
Accumulated
Other Comprehensive
Income (Loss)
|
Retained
Earnings
|
Treasury Stock
At Cost
|
Total
Stockholders'
Equity of Scholastic Corporation
|
|
Noncontrolling interest
|
|
Total
Stockholders' Equity |
||||||||||||||||||||
|
Shares
|
|
Amount
|
Shares
|
|
Amount
|
|||||||||||||||||||||||||
Balance at June 1, 2019
|
1.7
|
|
|
$0.0
|
33.4
|
|
|
$0.4
|
|
$620.8
|
|
$(59.7)
|
|
$1,012.6
|
|
$(302.6)
|
|
$1,271.5
|
|
$1.3
|
|
$1,272.8
|
|||||||||
Net Income (loss)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58.5
|
)
|
|
—
|
|
|
(58.5
|
)
|
|
—
|
|
|
(58.5
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
(2.0
|
)
|
Pension and post-retirement adjustments (net of tax of $0.0)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
Purchases of treasury stock at cost
|
—
|
|
|
—
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.6
|
)
|
|
(12.6
|
)
|
|
—
|
|
|
(12.6
|
)
|
Treasury stock issued pursuant to equity-based plans
|
—
|
|
|
—
|
|
0.0
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
Dividends ($0.15 per share)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
|
(5.2
|
)
|
Noncontrolling interest in Make Believe Ideas
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.0
|
)
|
|
—
|
|
Balance at August 31, 2019
|
1.7
|
|
|
$0.0
|
33.1
|
|
|
$0.4
|
|
$622.2
|
|
$(61.5)
|
|
$948.9
|
|
$(314.6)
|
|
$1,195.4
|
|
$1.3
|
|
$1,196.7
|
|||||||||
Net Income (loss)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71.0
|
|
|
—
|
|
|
71.0
|
|
|
—
|
|
|
71.0
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
3.9
|
|
Pension and post-retirement adjustments (net of tax of $0.0)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Stock-based compensation plans
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
Proceeds pursuant to stock-based compensation plans
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
Purchases of treasury stock at cost
|
—
|
|
|
—
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.1
|
)
|
|
(7.1
|
)
|
|
—
|
|
|
(7.1
|
)
|
Treasury stock issued pursuant to equity-based plans
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
Dividends ($0.15 per share)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
|
(5.2
|
)
|
|
—
|
|
|
(5.2
|
)
|
Noncontrolling interest in Make Believe Ideas
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.0
|
|
|
—
|
|
Balance at November 30, 2019
|
1.7
|
|
|
$0.0
|
33.0
|
|
|
$0.4
|
|
$621.3
|
|
$(57.4)
|
|
$1,014.7
|
|
$(319.0)
|
|
$1,260.0
|
|
$1.3
|
|
$1,261.3
|
SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED (Dollar amounts in millions) |
|
Six months ended
|
||||
|
November 30,
|
||||
|
2019
|
|
2018
|
||
Cash flows - operating activities:
|
|
|
|
|
|
Net income (loss) attributable to Scholastic Corporation
|
$12.5
|
|
$10.3
|
||
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
Provision for losses on accounts receivable
|
4.3
|
|
4.1
|
||
Provision for losses on inventory
|
7.9
|
|
7.7
|
||
Provision for losses on royalty advances
|
2.4
|
|
2.0
|
||
Amortization of prepublication and production costs
|
13.0
|
|
10.7
|
||
Depreciation and amortization
|
32.1
|
|
29.1
|
||
Amortization of pension and postretirement actuarial gains and losses
|
0.4
|
|
0.4
|
||
Deferred income taxes
|
(0.3)
|
|
(0.3)
|
||
Stock-based compensation
|
2.4
|
|
5.2
|
||
Income from equity investments
|
(3.0)
|
|
(4.5)
|
||
Changes in assets and liabilities, net of amounts acquired:
|
|
|
|
||
Accounts receivable
|
(78.3)
|
|
(147.5)
|
||
Inventories
|
(41.5)
|
|
(82.8)
|
||
Prepaid expenses and other current assets
|
(11.1)
|
|
(16.8)
|
||
Income tax receivable
|
1.9
|
|
7.1
|
||
Royalty advances
|
(7.3)
|
|
(6.3)
|
||
Accounts payable
|
(4.6)
|
|
62.7
|
||
Accrued income taxes
|
(0.1)
|
|
0.3
|
||
Accrued royalties
|
12.7
|
|
24.2
|
||
Deferred revenue
|
59.6
|
|
76.8
|
||
Other assets and liabilities
|
11.3
|
|
57.1
|
||
Net cash provided by (used in) operating activities
|
14.3
|
|
39.5
|
||
|
|
|
|
||
Cash flows - investing activities:
|
|
|
|
|
|
Prepublication and production expenditures
|
(14.4)
|
|
(20.6)
|
||
Additions to property, plant and equipment
|
(30.7)
|
|
(51.3)
|
||
Acquisition of land
|
(3.3)
|
|
—
|
|
|
Other investment and acquisition-related payments
|
—
|
|
|
(0.6)
|
|
Net cash provided by (used in) investing activities
|
(48.4)
|
|
(72.5)
|
||
|
|
|
|
||
Cash flows - financing activities:
|
|
|
|
|
|
Proceeds from long-term debt
|
2.5
|
|
—
|
|
|
Repayments of long-term debt
|
—
|
|
|
—
|
|
Borrowings under lines of credit
|
20.3
|
|
29.3
|
||
Repayments of lines of credit
|
(14.2)
|
|
(23.2)
|
||
Repayment of capital lease obligations
|
(0.9)
|
|
(0.7)
|
||
Reacquisition of common stock
|
(19.6)
|
|
—
|
|
|
Proceeds pursuant to stock-based compensation plans
|
0.3
|
|
5.2
|
||
Payment of dividends
|
(10.5)
|
|
(10.6)
|
||
Net cash provided by (used in) financing activities
|
(22.1)
|
|
0.0
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(0.1)
|
|
(0.8)
|
||
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(56.3)
|
|
(33.8)
|
||
Cash and cash equivalents at beginning of period
|
334.1
|
|
391.9
|
||
Cash and cash equivalents at end of period
|
$277.8
|
|
$358.1
|
•
|
Accounts receivable allowance for doubtful accounts
|
•
|
Pension and postretirement benefit plans
|
•
|
Uncertain tax positions
|
•
|
The timing and amount of future income taxes and related deductions
|
•
|
Inventory reserves
|
•
|
Cost of goods sold from book fair operations during interim periods based on estimated gross profit rates
|
•
|
Sales tax contingencies
|
•
|
Royalty advance reserves and royalty expense accruals
|
•
|
Impairment testing for goodwill, intangible and other long-lived assets and investments
|
•
|
Assets and liabilities acquired in business combinations
|
•
|
Variable consideration related to anticipated returns
|
•
|
Allocation of transaction price to performance obligations
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended
|
Six months ended
|
||||
|
November 30,
|
November 30,
|
||||
|
2019
|
2018
|
2019
|
2018
|
||
U.S. Book Clubs
|
$85.9
|
$101.3
|
$93.9
|
$110.4
|
||
U.S. Book Fairs
|
224.1
|
220.7
|
251.6
|
245.9
|
||
U.S. Trade
|
93.5
|
95.9
|
161.2
|
157.3
|
||
U.S. Education
|
69.8
|
71.4
|
118.2
|
|
119.3
|
|
Non-U.S. Major Markets(1)
|
94.6
|
88.0
|
150.9
|
138.3
|
||
Non-U.S. Other Markets(2)
|
29.3
|
27.4
|
54.0
|
51.9
|
||
Total Revenues
|
$597.2
|
$604.7
|
$829.8
|
$823.1
|
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, print and digital 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 three 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.
|
|
Children’s
Book Publishing & Distribution |
|
Education
|
|
Overhead (1)
|
|
Total
Domestic |
|
International
|
|
Total
|
|
Three months ended
November 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$413.6
|
|
$69.9
|
|
$0.0
|
|
$483.5
|
|
$113.7
|
|
$597.2
|
|
Bad debt expense
|
1.1
|
|
0.8
|
|
—
|
|
|
1.9
|
|
0.8
|
|
2.7
|
Depreciation and amortization (2)
|
6.5
|
|
3.4
|
|
10.9
|
|
20.8
|
|
1.8
|
|
22.6
|
|
Segment operating income (loss)
|
109.6
|
|
6.2
|
|
(22.4)
|
|
93.4
|
|
11.7
|
|
105.1
|
|
Expenditures for other noncurrent assets (3)
|
14.7
|
|
5.0
|
|
10.6
|
|
30.3
|
|
5.8
|
|
36.1
|
|
Three months ended
November 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$417.9
|
|
$71.5
|
|
$0.0
|
|
$489.4
|
|
$115.3
|
|
$604.7
|
|
Bad debt expense
|
1.6
|
|
0.7
|
|
—
|
|
|
2.3
|
|
0.4
|
|
2.7
|
Depreciation and amortization (2)
|
5.9
|
|
2.1
|
|
10.8
|
|
18.8
|
|
1.8
|
|
20.6
|
|
Segment operating income (loss)
|
106.3
|
|
8.3
|
|
(29.4)
|
|
85.2
|
|
13.0
|
|
98.2
|
|
Expenditures for other noncurrent assets (3)
|
20.2
|
|
5.0
|
|
15.1
|
|
40.3
|
|
3.1
|
|
43.4
|
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
|
||||||
Six months ended
November 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$523.2
|
|
$118.3
|
|
$0.0
|
|
$641.5
|
|
$188.3
|
|
$829.8
|
||||||
Bad debt expense
|
1.6
|
|
|
0.8
|
|
|
—
|
|
|
2.4
|
|
|
1.9
|
|
|
4.3
|
|
Depreciation and amortization (2)
|
13.2
|
|
|
6.5
|
|
|
21.9
|
|
|
41.6
|
|
|
3.5
|
|
|
45.1
|
|
Segment operating income (loss)
|
67.9
|
|
|
(7.2
|
)
|
|
(51.0
|
)
|
|
9.7
|
|
|
8.0
|
|
|
17.7
|
|
Segment assets at November 30, 2019
|
674.6
|
|
|
196.1
|
|
|
846.8
|
|
|
1,717.5
|
|
|
314.2
|
|
|
2,031.7
|
|
Goodwill at November 30, 2019
|
47.2
|
|
|
68.2
|
|
|
—
|
|
|
115.4
|
|
|
10.0
|
|
|
125.4
|
|
Expenditures for other noncurrent assets (3)
|
28.7
|
|
|
9.6
|
|
|
18.2
|
|
|
56.5
|
|
|
12.7
|
|
|
69.2
|
|
Other noncurrent assets at
November 30, 2019 (3) |
$219.6
|
|
$122.4
|
|
$514.3
|
|
$856.3
|
|
$98.6
|
|
$954.9
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Six months ended
November 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$513.6
|
|
$119.4
|
|
$0.0
|
|
$633.0
|
|
$190.1
|
|
$823.1
|
||||||
Bad debt expense
|
2.4
|
|
|
0.7
|
|
|
—
|
|
|
3.1
|
|
|
1.0
|
|
|
4.1
|
|
Depreciation and amortization (2)
|
11.6
|
|
|
4.1
|
|
|
20.7
|
|
|
36.4
|
|
|
3.4
|
|
|
39.8
|
|
Segment operating income (loss)
|
60.3
|
|
|
(6.6
|
)
|
|
(50.3
|
)
|
|
3.4
|
|
|
11.0
|
|
|
14.4
|
|
Segment assets at November 30, 2018
|
622.4
|
|
|
175.9
|
|
|
990.6
|
|
|
1,788.9
|
|
|
293.0
|
|
|
2,081.9
|
|
Goodwill at November 30, 2018
|
40.9
|
|
|
68.2
|
|
|
—
|
|
|
109.1
|
|
|
10.0
|
|
|
119.1
|
|
Expenditures for other noncurrent assets (3)
|
31.0
|
|
|
10.1
|
|
|
40.6
|
|
|
81.7
|
|
|
7.4
|
|
|
89.1
|
|
Other noncurrent assets at
November 30, 2018 (3) |
$164.1
|
|
$109.6
|
|
$499.8
|
|
$773.5
|
|
$78.0
|
|
$851.5
|
(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, its facility located in Connecticut and certain technology assets.
|
(2)
|
Includes depreciation of property, plant and equipment and amortization of intangible assets and prepublication and production costs.
|
(3)
|
Other noncurrent assets include property, plant and equipment, prepublication assets, production assets, royalty advances, goodwill, intangible assets and investments. Expenditures for other noncurrent assets for the International segment include expenditures for long-lived assets of $4.2 and $1.6 for the three months ended November 30, 2019 and 2018, respectively, and $9.9 and $4.4 for the six months ended November 30, 2019 and 2018, respectively. Other noncurrent assets for the International segment include long-lived assets of $66.8 and $36.5 as of November 30, 2019 and 2018, respectively.
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
November 30, 2019
|
|
May 31, 2019
|
|
November 30, 2018
|
|||
Revolving Loan
|
—
|
|
|
—
|
|
|
—
|
|
Unsecured lines of credit (weighted average interest rates of 3.8%, 4.1% and 3.8%, respectively)
|
$13.5
|
|
$7.3
|
|
$13.5
|
|||
UK long-term debt (average interest rate of 2.5%, n/a and n/a, respectively)
|
2.6
|
|
|
—
|
|
|
—
|
|
Total debt
|
$16.1
|
|
$7.3
|
|
$13.5
|
|||
Less lines of credit, short-term debt and current
portion of long-term debt
|
(13.5
|
)
|
|
(7.3
|
)
|
|
(13.5
|
)
|
Total long-term debt
|
$2.6
|
|
$0.0
|
|
$0.0
|
•
|
the borrowing limit was reduced to $375.0 from $425.0;
|
•
|
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)
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income (loss) attributable to Class A and Common Stockholders
|
$70.9
|
|
$71.4
|
|
$12.5
|
|
$10.3
|
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)
|
34.8
|
|
35.2
|
|
34.8
|
|
35.2
|
Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)
|
0.3
|
|
0.7
|
|
0.4
|
|
0.6
|
Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings (loss) per share (in millions)
|
35.1
|
|
35.9
|
|
35.2
|
|
35.8
|
Earnings (loss) per share of Class A Stock and Common Stock:
|
|
|
|
|
|
|
|
Basic
|
$2.04
|
|
$2.03
|
|
$0.36
|
|
$0.29
|
Diluted
|
$2.02
|
|
$1.99
|
|
$0.35
|
|
$0.29
|
|
November 30, 2019
|
|
November 30, 2018
|
Options outstanding pursuant to stock-based compensation plans (in millions)
|
3.0
|
|
2.9
|
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)
|
|
November 30, 2019
|
|
May 31, 2019
|
|
November 30, 2018
|
|||
Gross beginning balance
|
$164.8
|
|
$158.8
|
|
$158.8
|
|||
Accumulated impairment
|
(39.6
|
)
|
|
(39.6
|
)
|
|
(39.6
|
)
|
Beginning balance
|
$125.2
|
|
$119.2
|
|
$119.2
|
|||
Additions
|
—
|
|
|
6.3
|
|
|
—
|
|
Foreign currency translation
|
0.2
|
|
|
(0.3
|
)
|
|
(0.1
|
)
|
Ending balance
|
$125.4
|
|
$125.2
|
|
$119.1
|
|
November 30, 2019
|
|
May 31, 2019
|
|
November 30, 2018
|
|||
Beginning balance other intangibles subject to amortization
|
$12.2
|
|
$10.1
|
|
$10.1
|
|||
Additions
|
—
|
|
|
4.5
|
|
|
0.6
|
|
Amortization expense
|
(1.5
|
)
|
|
(2.8
|
)
|
|
(1.3
|
)
|
Foreign currency translation
|
0.0
|
|
|
(0.2
|
)
|
|
(0.1
|
)
|
Other
|
—
|
|
|
0.6
|
|
|
—
|
|
Total other intangibles subject to amortization, net of accumulated amortization of $28.4, $26.9 and $25.4, respectively
|
10.7
|
|
12.2
|
|
9.3
|
|||
Total other intangibles not subject to amortization
|
2.1
|
|
2.1
|
|
2.1
|
|||
Total other intangibles
|
$12.8
|
|
$14.3
|
|
$11.4
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
November 30, 2019
|
|
May 31, 2019
|
|
November 30, 2018
|
|
Segment
|
Equity method investments
|
$26.0
|
|
$23.4
|
|
$34.3
|
|
International
|
Other equity investments
|
6.0
|
|
6.0
|
|
0.0
|
|
Children's Book Publishing & Distribution
|
Total Investments
|
$32.0
|
|
$29.4
|
|
$34.3
|
|
|
|
UK Pension Plan
|
|
Postretirement Benefits
|
||||||||
|
Three months ended November 30,
|
|
Three months ended November 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Components of net periodic (benefit) cost:
|
|
|
|
|
|
|
|
||||
Service cost
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
||||
Interest cost
|
0.2
|
|
|
0.3
|
|
|
0.1
|
|
|
0.2
|
|
Expected return on assets
|
(0.3
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
Net amortization of prior service credit
|
0.0
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Amortization of (gains) losses
|
0.3
|
|
|
0.2
|
|
|
0.0
|
|
|
—
|
|
Net periodic (benefit) cost
|
$0.2
|
|
$0.2
|
|
$0.0
|
|
$0.1
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
UK Pension Plan
|
|
Postretirement Benefits
|
|||||||
|
Six months ended November 30,
|
|
Six months ended November 30,
|
|||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|||
Components of net periodic (benefit) cost:
|
|
|
|
|
|
|
|
|||
Service cost
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
|||
Interest cost
|
0.4
|
|
0.5
|
|
0.3
|
|
0.4
|
|||
Expected return on assets
|
(0.5)
|
|
(0.5)
|
|
—
|
|
|
—
|
|
|
Net amortization of prior service credit
|
0.0
|
|
—
|
|
|
(0.1)
|
|
(0.1)
|
||
Amortization of (gains) losses
|
0.5
|
|
0.4
|
|
—
|
|
|
—
|
|
|
Net periodic (benefit) cost
|
$0.4
|
|
$0.4
|
|
$0.2
|
|
$0.3
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
November 30, 2019
|
|
Location within Condensed Consolidated Balance Sheet
|
Operating leases
|
$76.4
|
|
Operating lease right-of-use assets, net
|
Finance leases
|
11.1
|
|
Property, plant and equipment, net
|
Total lease assets
|
$87.5
|
|
|
|
|
|
|
Operating leases :
|
|
|
|
Current portion
|
23.5
|
|
Current portion of operating lease liabilities
|
Non-current portion
|
56.0
|
|
Long-term operating lease liabilities
|
Total operating lease liabilities
|
$79.5
|
|
|
|
|
|
|
Finance leases :
|
|
|
|
Current portion
|
2.0
|
|
Other accrued expenses
|
Non-current portion
|
9.8
|
|
Other noncurrent liabilities
|
Total finance lease liabilities
|
$11.8
|
|
|
Total lease liabilities
|
$91.3
|
|
|
|
Three Months Ended November 30, 2019
|
|
Six Months Ended November 30, 2019
|
|
Location within Condensed Consolidated Statement of Operations
|
|
Operating lease expense
|
$7.1
|
|
$14.2
|
|
Selling, general and administrative expenses
|
|
Finance lease costs :
|
|
|
|
|
|
|
Depreciation of leased assets
|
0.5
|
|
0.9
|
|
Selling, general and administrative expenses
|
|
Accretion of lease liabilities
|
0.1
|
|
0.2
|
|
Interest income (expense), net
|
|
Total lease expense
|
$7.7
|
|
$15.3
|
|
|
|
Six Months Ended November 30, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
Operating cash flows from operating leases
|
$3.2
|
Operating cash flows from finance leases
|
0.2
|
Financing cash flows from finance leases
|
0.9
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Operating
|
|
Finance
|
|
Leases
|
|
Leases
|
Remainder of Fiscal 2020 (1)
|
$14.0
|
|
$1.2
|
Fiscal 2021
|
23.0
|
|
2.4
|
Fiscal 2022
|
18.6
|
|
2.3
|
Fiscal 2023
|
12.8
|
|
2.1
|
Fiscal 2024
|
7.3
|
|
2.0
|
Fiscal 2025 and thereafter
|
11.4
|
|
3.3
|
Total lease payments
|
87.1
|
|
13.3
|
Less: interest
|
(7.6)
|
|
(1.5)
|
Total lease liabilities
|
$79.5
|
|
$11.8
|
|
Operating
|
|
Finance
|
|
Leases
|
|
Leases
|
Weighted-average remaining lease term (years)
|
4.3
|
|
6.2
|
Weighted-average discount rate
|
3.9%
|
|
3.8%
|
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Stock option expense
|
$0.4
|
|
$2.8
|
|
$1.0
|
|
$3.6
|
Restricted stock unit expense
|
0.4
|
|
0.7
|
|
1.2
|
|
1.3
|
Management stock purchase plan
|
0.0
|
|
0.2
|
|
0.0
|
|
0.2
|
Employee stock purchase plan
|
0.1
|
|
0.0
|
|
0.2
|
|
0.1
|
Total stock-based compensation expense
|
$0.9
|
|
$3.7
|
|
$2.4
|
|
$5.2
|
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Common Stock issued pursuant to stock-based compensation plans (in millions)
|
0.1
|
|
0.2
|
|
0.1
|
|
0.3
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
Authorizations
|
Amount
|
July 2015
|
$50.0
|
March 2018
|
50.0
|
Total current Board authorizations at June 1, 2019
|
$100.0
|
Less repurchases made under these authorizations
|
(66.8)
|
Remaining Board authorization at November 30, 2019
|
$33.2
|
|
Three months ended November 30, 2019
|
|||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
|||
Beginning balance at September 1, 2019
|
$(49.1)
|
|
$(12.4)
|
|
$(61.5)
|
|||
Other comprehensive income (loss) before reclassifications
|
3.9
|
|
|
—
|
|
|
3.9
|
|
Less amount reclassified from Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|||
Amortization of gains and losses (net of tax of $0.0)
|
—
|
|
|
0.3
|
|
|
0.3
|
|
Amortization of prior service credit (net of tax of $0.0)
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Other comprehensive income (loss)
|
3.9
|
|
|
0.2
|
|
|
4.1
|
|
Ending balance at November 30, 2019
|
$(45.2)
|
|
$(12.2)
|
|
$(57.4)
|
|||
|
|
|
|
|
|
|||
|
Three months ended November 30, 2018
|
|||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
|||
Beginning balance at September 1, 2018
|
$(45.0)
|
|
$(13.6)
|
|
$(58.6)
|
|||
Other comprehensive income (loss) before reclassifications
|
(0.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
Less amount reclassified from Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|||
Amortization of gains and losses (net of tax of $0.0)
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Postretirement benefit plan remeasurement (net of tax of $0.7)
|
—
|
|
|
2.0
|
|
|
2.0
|
|
Amortization of prior service credit (net of tax of $0.0)
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Other reclassifications (net of tax of $0.2)
|
—
|
|
|
0.6
|
|
|
0.6
|
|
Other comprehensive income (loss)
|
(0.6
|
)
|
|
2.7
|
|
|
2.1
|
|
Ending balance at November 30, 2018
|
$(45.6)
|
|
$(10.9)
|
|
$(56.5)
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
|
Six months ended November 30, 2019
|
||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
||
Beginning balance at June 1, 2019
|
$(47.1)
|
|
$(12.6)
|
|
$(59.7)
|
||
Other comprehensive income (loss) before reclassifications
|
1.9
|
|
—
|
|
|
1.9
|
|
Less amount reclassified from Accumulated other comprehensive income (loss):
|
|
|
|
|
|
||
Amortization of gains and losses (net of tax of $0.0)
|
—
|
|
|
0.5
|
|
0.5
|
|
Amortization of prior service credit (net of tax of $0.0)
|
—
|
|
|
(0.1)
|
|
(0.1)
|
|
Other comprehensive income (loss)
|
1.9
|
|
0.4
|
|
2.3
|
||
Ending balance at November 30, 2019
|
$(45.2)
|
|
$(12.2)
|
|
$(57.4)
|
||
|
|
|
|
|
|
||
|
Six months ended November 30, 2018
|
||||||
|
Foreign currency translation adjustments
|
|
Retirement benefit plans
|
|
Total
|
||
Beginning balance at June 1, 2018
|
$(41.9)
|
|
$(13.8)
|
|
$(55.7)
|
||
Other comprehensive income (loss) before reclassifications
|
(3.7)
|
|
—
|
|
|
(3.7)
|
|
Less amount reclassified from Accumulated other comprehensive income (loss):
|
|
|
|
|
|
||
Amortization of gains and losses (net of tax of $0.0)
|
—
|
|
|
0.4
|
|
0.4
|
|
Postretirement benefit plan remeasurement (net of tax of $0.7)
|
—
|
|
|
2.0
|
|
2.0
|
|
Amortization of prior service credit (net of tax of $0.0)
|
—
|
|
|
(0.1)
|
|
(0.1)
|
|
Other reclassifications (net of tax of $0.2)
|
—
|
|
|
0.6
|
|
0.6
|
|
Other comprehensive income (loss)
|
(3.7)
|
|
2.9
|
|
(0.8)
|
||
Ending balance at November 30, 2018
|
$(45.6)
|
|
$(10.9)
|
|
$(56.5)
|
•
|
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
|
•
|
Level 2 Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets,
|
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
|
•
|
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
|
•
|
Impairment assessment of Goodwill and 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)
|
|
November 30, 2019
|
|
May 31, 2019
|
|
November 30, 2018
|
|||
Accrued payroll, payroll taxes and benefits
|
$41.7
|
|
$41.2
|
|
$42.3
|
|||
Accrued bonus and commissions
|
13.3
|
|
|
13.7
|
|
|
16.8
|
|
Returns liability
|
42.4
|
|
|
34.5
|
|
|
78.7
|
|
Accrued other taxes
|
30.2
|
|
|
29.3
|
|
|
31.3
|
|
Accrued advertising and promotions
|
12.3
|
|
|
9.6
|
|
|
9.2
|
|
Other accrued expenses
|
38.3
|
|
|
36.5
|
|
|
49.5
|
|
Total accrued expenses
|
$178.2
|
|
$164.8
|
|
$227.8
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
($ amounts in millions)
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
||||
Product, service and production costs
|
$152.5
|
|
25.5
|
%
|
|
$148.8
|
|
24.6
|
%
|
|
$220.7
|
|
26.5
|
%
|
|
$208.6
|
|
25.4
|
%
|
Royalty costs
|
40.5
|
|
6.8
|
%
|
|
42.3
|
|
7.0
|
%
|
|
62.8
|
|
7.6
|
%
|
|
63.2
|
|
7.7
|
%
|
Prepublication and production amortization
|
7.1
|
|
1.2
|
%
|
|
5.6
|
|
0.9
|
%
|
|
13.7
|
|
1.7
|
%
|
|
11.0
|
|
1.3
|
%
|
Postage, freight, shipping, fulfillment and other
|
64.2
|
|
10.8
|
%
|
|
65.7
|
|
10.9
|
%
|
|
104.2
|
|
12.6
|
%
|
|
104.9
|
|
12.7
|
%
|
Total
|
$264.3
|
|
44.3
|
%
|
|
$262.4
|
|
43.4
|
%
|
|
$401.4
|
|
48.4
|
%
|
|
$387.7
|
|
47.1
|
%
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||||||||||||||||||
($ amounts in millions)
|
2019
|
|
2018
|
|
$
change
|
|
%
change
|
|
2019
|
|
2018
|
|
$
change |
|
%
change |
||||||||
Revenues
|
$413.6
|
|
|
$417.9
|
|
|
$(4.3)
|
(1.0
|
)%
|
|
$523.2
|
|
$513.6
|
|
$9.6
|
|
1.9
|
%
|
|||||
Cost of goods sold
|
171.5
|
|
|
168.4
|
|
|
3.1
|
|
1.8
|
%
|
|
237.0
|
|
224.2
|
|
12.8
|
|
5.7
|
%
|
||||
Other operating expenses (1)
|
132.5
|
|
|
143.2
|
|
|
(10.7)
|
|
(7.5
|
)%
|
|
218.3
|
|
229.1
|
|
(10.8)
|
|
(4.7
|
)%
|
||||
Operating income (loss)
|
$109.6
|
|
|
$106.3
|
|
|
$3.3
|
|
3.1
|
%
|
|
$67.9
|
|
$60.3
|
|
$7.6
|
|
12.6
|
%
|
||||
Operating margin
|
|
26.5
|
%
|
|
|
25.4
|
%
|
|
|
|
|
|
13.0
|
%
|
|
11.7
|
%
|
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended November 30,
|
Six months ended November 30,
|
|||||||||||||||||||||||
($ amounts in millions)
|
2019
|
|
2018
|
|
$
change
|
|
%
change
|
|
2019
|
|
2018
|
|
$ change
|
|
%
change
|
||||||||||
Revenues
|
$69.9
|
|
|
$71.5
|
|
|
$(1.6)
|
|
(2.2
|
)%
|
|
$118.3
|
$119.4
|
|
$
|
(1.1
|
)
|
|
(0.9
|
)%
|
|||||
Cost of goods sold
|
23.2
|
|
|
22.0
|
|
|
1.2
|
5.5
|
%
|
|
44.1
|
|
41.9
|
|
2.2
|
|
5.3
|
%
|
|||||||
Other operating expenses (1)
|
40.5
|
|
|
41.2
|
|
|
(0.7)
|
(1.7
|
)%
|
|
81.4
|
|
84.1
|
|
(2.7)
|
|
(3.2
|
)%
|
|||||||
Operating income (loss)
|
$6.2
|
|
|
$8.3
|
|
|
$(2.1)
|
(25.3
|
)%
|
|
$(7.2)
|
|
$(6.6)
|
|
$(0.6)
|
|
*
|
|
|||||||
Operating margin
|
|
8.9
|
%
|
|
|
11.6
|
%
|
|
|
|
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
|
Three months ended November 30,
|
|
Six months ended November 30,
|
||||||||||||||||||||
($ amounts in millions)
|
2019
|
|
2018
|
|
$
change
|
|
%
change
|
|
2019
|
|
2018
|
|
$ change
|
|
% change
|
||||||||
Revenues
|
$113.7
|
|
|
$115.3
|
|
|
$(1.6)
|
|
(1.4
|
)%
|
|
$188.3
|
|
$190.1
|
|
$(1.8)
|
|
(0.9
|
)%
|
||||
Cost of goods sold
|
59.3
|
|
|
60.4
|
|
|
(1.1)
|
|
(1.8
|
)%
|
|
98.0
|
|
98.7
|
|
(0.7)
|
|
(0.7
|
)%
|
||||
Other operating expenses (1)
|
42.7
|
|
|
41.9
|
|
|
0.8
|
|
1.9
|
%
|
|
82.3
|
|
80.4
|
|
1.9
|
|
2.4
|
%
|
||||
Operating income (loss)
|
$11.7
|
|
|
$13.0
|
|
|
$(1.3)
|
|
(10.0
|
)%
|
|
$8.0
|
|
$11.0
|
|
$(3.0)
|
|
(27.3
|
)%
|
||||
Operating margin
|
|
10.3
|
%
|
|
|
11.3
|
%
|
|
|
|
|
|
|
4.2
|
%
|
|
5.8
|
%
|
|
|
|
|
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) |
($ amounts in millions)
|
Fiscal Year Maturity
|
||||||||||||||||||||
|
2020(1)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
Fair
Value @ 11/30/2019 |
||||||
Debt Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of Credit and current
portion of long-term debt
|
$13.5
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$13.5
|
|
$13.5
|
||||||
Average interest rate
|
3.8
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Long-term debt
|
$0.0
|
|
$0.0
|
|
$2.6
|
|
$0.0
|
|
$0.0
|
|
$0.0
|
|
$2.6
|
|
$2.6
|
||||||
Average interest rate
|
—
|
|
|
—
|
|
|
2.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|||
September 1 through September 30, 2019
|
|
4,555
|
|
|
37.27
|
|
|
4,555
|
|
|
$40.0
|
|
October 1 through October 31, 2019
|
|
85,054
|
|
|
36.65
|
|
|
85,054
|
|
|
36.9
|
|
November 1 through November 30, 2019
|
|
103,849
|
|
|
36.68
|
|
|
103,849
|
|
|
33.2
|
|
Total
|
|
193,458
|
|
|
|
|
193,458
|
|
|
$33.2
|
|
|
|
10.1
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32
|
|
|
|
101
|
Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended November 30, 2019, formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
|
104
|
Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.
|
|
Exhibit Number
|
Description of Document
|
10.1 *
|
Offer of employment letter, effective November 18, 2019, between Scholastic Corporation and Sasha Quinton.
|
|
|
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
|
Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended November 30, 2019, formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
|
104
|
Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.
|
|
|
|
|
|
SCHOLASTIC CORPORATION
|
|
|
|
(Registrant)
|
|
|||
Date: December 20, 2019
|
By:
|
/s/ Richard Robinson
|
|
|
|
||
|
|||
|
|
|
Richard Robinson
|
|
|
|
Chairman of the Board,
President and Chief
Executive Officer
|
|
|||
Date: December 20, 2019
|
By:
|
/s/ Kenneth J. Cleary
|
|
|
|
||
|
|||
|
|
|
Kenneth J. Cleary
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
Exhibit 10.1
|
Richard Robinson
CEO, President & Chairman
drobinson@scholastic.com
|
|
|
Exhibit 10.1
|
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.
|
Date: December 20, 2019
|
/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.
|
Date: December 20, 2019
|
/s/ Kenneth J. Cleary
|
|
|
|
|
|
Kenneth J. Cleary
|
|
|
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 November 30, 2019 (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: December 20, 2019
|
/s/ Richard Robinson
|
|
|
|
|
|
Richard Robinson
|
|
|
Chief Executive Officer
|
|
|
|
|
Date: December 20, 2019
|
/s/ Kenneth J. Cleary
|
|
|
|
|
|
Kenneth J. Cleary
|
|
|
Chief Financial Officer
|
|