View:
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K
__________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 17, 2005
__________________
SCHOLASTIC CORPORATION
(Exact Name of Registrant as Specified in Charter)
__________________
DELAWARE 000-19860 13-3385513
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
557 BROADWAY, NEW YORK, 10012
NEW YORK (Zip Code)
(Address of Principal Executive Offices)
(212) 343-6100
(Registrant's telephone number, including area code)
(Former Name or Former address, if Changed Since Last Report)
__________________
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
================================================================================
Item 2.02 Results of Operations and Financial Condition
On March 17, 2005, Scholastic Corporation issued the press release attached
hereto as Exhibit 99.1 announcing its results of operations for its quarter
ended February 28, 2005.
The information in this Current Report on Form 8-K, including Exhibits, is being
furnished to the Securities and Exchange Commission (the "SEC") and shall not be
deemed to be incorporated by reference into any of Scholastic's filings with the
SEC under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) The following exhibit is filed as part of this report:
Press release of Scholastic Corporation, dated March 17, 2005, is filed
as Exhibit 99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 17, 2005 SCHOLASTIC CORPORATION
(Registrant)
/s/ Mary A. Winston
-------------------
Name: Mary A. Winston
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Number Exhibit
- ------ -------
99.1 Press release of Scholastic Corporation, dated March 17, 2005.
Exhibit 99.1
Scholastic Announces Fiscal 2005 Third Quarter Results;
Improved Operating Profits, on Modest Revenue Growth and Higher Margins
NEW YORK--(BUSINESS WIRE)--March 17, 2005--Scholastic Corporation
(NASDAQ:SCHL) today announced its fiscal 2005 third quarter results.
For the quarter ended February 28, 2005, Scholastic generated an
operating profit of $5.8 million, compared to a loss of $2.3 million
in the year-ago period. Revenues were $480.8 million, up 2% from
$472.0 million a year ago. Net loss in the third quarter improved to
$0.7 million or $0.02 per diluted share, compared to a net loss of
$6.0 million or $0.15 per diluted share in the prior year period. The
third quarter is typically Scholastic's second smallest revenue
period.
"With continued focus on margins, we achieved higher profitability
in all operating segments last quarter," commented Richard Robinson,
Chairman, CEO and President of Scholastic. "Improved results in Trade
drove growth in the Children's Book Publishing and Distribution
segment, while profits also rose in International and in Educational
Publishing."
Mr. Robinson added, "With Internet orders up nearly 20% this
fiscal year and now representing more than 10% of Scholastic's
revenues, I'm also very excited by the recent appointment of Seth
Radwell as president of e-Scholastic. Seth's experience building new
print and electronic businesses, most recently at Bookspan and
Doubleday Interactive, will help us accelerate this momentum."
For fiscal 2005, the Company continues to expect earnings of
between $1.50 and $1.70 per diluted share, excluding severance
charges, on revenues of approximately $2.1 billion, and is on plan to
generate free cash flow of $40 to $50 million.
Third Quarter Results
Children's Book Publishing and Distribution. Operating profits in
the segment rose 56% from the prior year period to $16.5 million in
the third quarter of fiscal 2005, driven by lower returns and higher
gross sales in Trade Publishing. Segment revenues grew slightly to
$272.3 million, reflecting the improvement in Trade as well as in
School Book Fairs, where better product availability and merchandising
contributed to higher revenues per fair. This was partly offset by
lower Continuity revenues, which declined as a result of the Company's
strategy of focusing on more productive customers, and by a 1% decline
in School Book Club revenues.
Educational Publishing. For the quarter, segment operating profits
rose 25% to $4.0 million and revenues increased 14% to $79.3 million,
relative to the prior year period. Higher revenues and profits
reflected strong sales of educational technology, including Read
180(R), and higher circulation of classroom magazines.
International. Operating profits in the segment were $3.4 million
for the quarter, a $2.6 million increase from the prior year period,
primarily from improved results in the Company's Australian
operations. Revenues rose $4.4 million to $92.0 million, of which $3.8
million was due to foreign exchange benefits.
Media, Licensing and Advertising. Revenues in the segment were
$37.2 million, a $6.3 million decline from the prior year, principally
due to lower production revenues (and corresponding expenses) in
Scholastic Entertainment, which a year ago released CLIFFORD'S REALLY
BIG MOVIE(TM). Operating profits in the segment rose modestly to $1.3
million, primarily from improved results in software sales. Building
on its fall 2004 launch, the Company's new media property Maya &
Miguel(TM) now ranks number one among new shows on the PBS KIDS GO!
programming block and number two among all PBS programming for
children ages six to 11.
Other Financial Results. Operating profits in the quarter improved
to 1.2% of revenues versus an operating loss of 0.5% in the year ago
period, and free cash flow in the quarter was $37.3 million compared
to $19.9 million. Interest expense declined slightly to $6.9 million,
with net debt at the end of the quarter of $488.2 million, or $65.4
million lower than a year ago.
Results for Nine Months Ending February 28, 2005
Net income for the first nine months of fiscal 2005 was $21.7
million, or $0.54 per diluted share, compared to $35.9 million, or
$0.90 per diluted share, in the prior year period. Revenues this
fiscal year were $1,487.8 million versus $1,646.4 million a year ago.
Free cash use in the period was $4.8 million, compared to free cash
flow of $22.0 million in the prior year. These year-over-year
differences primarily reflect revenue declines in Harry Potter and in
Continuities, partially offset by growth in Educational Publishing and
non-Harry Potter Trade Publishing.
Upcoming Conference Call
Scholastic will hold a conference call tomorrow (March 18, 2005)
at 8:00 a.m. Eastern. To listen and/or ask questions, dial
888-338-6461 or 973-935-8510 (meeting leader is "Richard Robinson").
To view accompanying slides, go to the Investor Relations section of
www.scholastic.com. Following the call, the slides will be available
in the Investor Relations section of www.scholastic.com and an audio
replay will be available at 877-519-4471 PIN number 5760041.
About Scholastic
Scholastic Corporation (NASDAQ:SCHL) is the world's largest
publisher and distributor of children's books and a leader in
educational technology. Scholastic creates quality educational and
entertaining materials and products for use in school and at home,
including children's books, magazines, technology-based products,
teacher materials, television programming, film, videos and toys. The
Company distributes its products and services through a variety of
channels, including proprietary school-based book clubs, school-based
book fairs, and school-based and direct-to-home continuity programs;
retail stores, schools, libraries and television networks; and the
Company's Internet site, www.scholastic.com.
Forward-Looking Statements
This news release contains certain forward-looking statements.
Such forward-looking statements are subject to various risks and
uncertainties, including the conditions of the children's book and
educational materials markets and acceptance of the Company's products
within those markets, and other risks and factors identified from time
to time in the Company's filings with the Securities and Exchange
Commission. Actual results could differ materially from those
currently anticipated.
SCHOLASTIC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in millions except per share data)
THREE MONTHS ENDED
--------------------------------------
02/28/05 02/29/04 VARIANCE
------------------------- ------------
Revenues $480.8 $472.0 $8.8 2%
Operating costs and expenses:
Cost of goods sold 233.9 229.7 (4.2) -2%
Selling, general and
administrative expenses 213.1 214.1 1.0 0%
Selling, general and *
administrative expenses -
Continuity charges (1) - - -
Bad debt expenses 14.9 17.0 2.1 12%
Depreciation and amortization 13.1 13.5 0.4 3%
Special severance charges (2) - - - *
------------------------- -------
Total operating costs and
expenses 475.0 474.3 (0.7) 0%
Operating income/(loss) 5.8 (2.3) 8.1 *
Interest expense, net 6.9 7.1 0.2 3%
------------------------- -------
Earnings/(loss) before income
taxes (1.1) (9.4) 8.3 88%
Tax provision/(benefit) (0.4) (3.4) (3.0) -88%
------------------------- -------
Net income/(loss) ($0.7) ($6.0) $5.3 88%
========================= =======
Weighted average shares
outstanding:
Basic 40.0 39.4 0.60 2%
Diluted 41.1 40.4 0.70 2%
Net income/(loss) per share:
Basic ($0.02) ($0.15) $0.13 87%
Diluted ($0.02) ($0.15) $0.13 87%
NINE MONTHS ENDED
--------------------------------------
02/28/05 02/29/04 VARIANCE
------------------------ -------------
Revenues $1,487.8 $1,646.4 ($158.6) -10%
Operating costs and expenses:
Cost of goods sold 711.4 816.6 105.2 13%
Selling, general and
administrative expenses 627.8 639.4 11.6 2%
Selling, general and *
administrative expenses -
Continuity charges (1) 3.6 - (3.6)
Bad debt expenses 50.7 66.1 15.4 23%
Depreciation and amortization 39.1 39.8 0.7 2%
Special severance charges (2) - 3.2 3.2 *
------------------------ --------
Total operating costs and
expenses 1,432.6 1,565.1 132.5 8%
Operating income/(loss) 55.2 81.3 (26.1) -32%
Interest expense, net 21.6 25.2 3.6 14%
------------------------ --------
Earnings/(loss) before income
taxes 33.6 56.1 (22.5) -40%
Tax provision/(benefit) 11.9 20.2 8.3 -41%
------------------------ --------
Net income/(loss) $21.7 $35.9 ($14.2) -40%
======================== ========
Weighted average shares
outstanding:
Basic 39.8 39.4 0.40 1%
Diluted 40.5 40.1 0.40 1%
Net income/(loss) per share:
Basic $0.55 $0.91 ($0.36) -40%
Diluted $0.54 $0.90 ($0.36) -40%
(1) Results for the nine months ended February 28, 2005 include a
pre-tax charge of $3.6, or $0.06 per diluted share after-tax, for
severance related to staff reductions implemented in the first
quarter of fiscal 2005 related to the previously announced
reorganization of the Continuity business.
(2) Results for the nine months ended February 29, 2004 include
pre-tax charges of $3.2, or $0.05 per diluted share after-tax, for
staff reductions in the first and second quarters related to a
workforce reduction announced in May 2003.
* Percent change not meaningful.
- ----------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
- ----------------------------------------------------------------------
This news release contains certain forward-looking statements. Such
forward-looking statements, which are subject to various risks and
uncertainties including the conditions of the children's book and
instructional materials markets and acceptance of the Company's
products within those markets and other risks and factors identified
from time to time in the Company's filings with the Securities and
Exchange Commission. Actual results could differ materially from those
currently anticipated.
- ----------------------------------------------------------------------
SCHOLASTIC CORPORATION
RESULTS OF OPERATIONS - SEGMENTS
(UNAUDITED)
(Amounts in millions)
THREE MONTHS ENDED
-----------------------------------------
02/28/05 02/29/04 VARIANCE
--------------------------- -------------
Children's Book Publishing
& Distribution
Revenue $272.3 $271.5 $0.8 0%
Operating profit 16.5 10.6 5.9 56%
---------------------------
Operating margin 6.1% 3.9%
Educational Publishing
Revenue 79.3 69.4 9.9 14%
Operating profit 4.0 3.2 0.8 25%
---------------------------
Operating margin 5.0% 4.6%
International
Revenue 92.0 87.6 4.4 5%
Operating profit 3.4 0.8 2.6 *
---------------------------
Operating margin 3.7% 0.9%
Media, Licensing and
Advertising
Revenue 37.2 43.5 (6.3) -14%
Operating profit/(loss) 1.3 0.3 1.0 *
---------------------------
Operating margin 3.5% 0.7%
Overhead expense 19.4 17.2 (2.2) -13%
---------------------------
Operating income/(loss) $5.8 ($2.3) $8.1 *
=========================== ========
NINE MONTHS ENDED
-----------------------------------------
2/28/2005 (1) 2/29/2004 (2) VARIANCE
--------------------------- -------------
Children's Book Publishing
& Distribution
Revenue $819.1 $1,010.1 ($191.0) -19%
Operating profit 47.2 87.7 (40.5) -46%
---------------------------
Operating margin 5.8% 8.7%
Educational Publishing
Revenue 292.0 262.5 29.5 11%
Operating profit 46.8 32.0 14.8 46%
---------------------------
Operating margin 16.0% 12.2%
International
Revenue 280.0 267.5 12.5 5%
Operating profit 19.6 18.2 1.4 8%
---------------------------
Operating margin 7.0% 6.8%
Media, Licensing and
Advertising
Revenue 96.7 106.3 (9.6) -9%
Operating profit/(loss) (2.2) (1.6) (0.6) -38%
---------------------------
Operating margin -2.3% -1.5%
Overhead expense 56.2 55.0 (1.2) -2%
---------------------------
Operating income/(loss) $55.2 $81.3 ($26.1) -32%
=========================== ========
(1) Results for the nine months ended February 28, 2005 include a
pre-tax charge of $3.6, or $0.06 per diluted share after-tax, in
the Children's Book Publishing and Distribution segment for
severance related to staff reductions implemented in the first
quarter of fiscal 2005 related to the previously announced
reorganization of the Continuity business.
(2) Results for the nine months ended February 29, 2004 include
pre-tax Special severance charges of $3.2 for staff reductions
implemented in the first and second quarters related to a
workforce reduction announced in May 2003, but implemented in
Fiscal 2004, allocated as follows: $1.5 to Children's Book
Publishing and Distribution, $0.8 to Educational Publishing, $0.1
to Media, Licensing and Advertising, $0.3 to International and
$0.5 to Overhead Expense.
* Percent change not meaningful.
SCHOLASTIC CORPORATION
SUPPLEMENTAL INFORMATION
(UNAUDITED)
(Amounts in millions)
SELECTED BALANCE SHEET ITEMS
--------------------------------------
02/28/05 02/29/04 CHANGE
------------------------- ------------
Cash and cash equivalents $22.1 $20.9 $1.2 6%
Accounts receivable, net 249.1 261.4 (12.3) -5%
Inventories 468.0 484.0 (16.0) -3%
Total debt (lines of credit,
short-term debt and long-
term debt) 510.3 574.5 64.2 11%
Total stockholders' equity 900.6 820.0 80.6 10%
SELECTED CASH FLOW ITEMS
THREE MONTHS ENDED
--------------------------------------
02/28/05 02/29/04 CHANGE
------------------------- ------------
Net cash provided by
operating activities $77.8 $49.5 $28.3 57%
Additions to property, plant
and equipment 9.9 6.9 (3.0) -43%
Pre-publication and
production costs 19.9 15.7 (4.2) -27%
Royalty advances 10.7 7.0 (3.7) -53%
------------------------- -------
Free cash flow (cash use) (1) $37.3 $19.9 $17.4 87%
========================= =======
--------------------------------------
NINE MONTHS ENDED
--------------------------------------
02/28/05 02/29/04 CHANGE
------------------------- ------------
Net cash provided by
operating activities $105.0 $118.4 ($13.4) -11%
Additions to property, plant
and equipment 31.4 26.5 (4.9) -18%
Pre-publication and
production costs 53.7 51.5 (2.2) -4%
Royalty advances 24.7 18.4 (6.3) -34%
------------------------- -------
Free cash flow (cash use) (1) ($4.8) $22.0 ($26.8) *
========================= =======
(1) Free cash flow is defined by the Company as net cash provided by
operating activities, less spending on property, plant and
equipment; pre-publication and production costs; and royalty
advances. The Company believes this measure, which is a non-GAAP
financial measure, is useful to investors as an indicator of cash
flow available for debt repayment and other investing activities,
such as acquisitions. The Company utilizes free cash flow as a
further indicator of operating performance and for planning
investing activities.
* Percent change not meaningful.
CONTACT: Scholastic Corporation
Kyle Good, 212-343-4563