UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS
PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2000
Commission file number 0-19860
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
SCHOLASTIC CORPORATION
IRS Employer Identification Number 13-3385513
555 Broadway
New York, New York 10012
(212) 343-6100
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
Table of Contents
Page Number
-----------
Report of Independent Auditors 1
Statements of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-8
Schedule of nonexempt transactions 9
Schedule of assets held for investment purposes at end of year 10
Signatures 11
Exhibits 12
Consent of Independent Auditors 13
Report of Independent Auditors
To the Retirement Plan Committee of the Board of Directors of Scholastic
Corporation
We have audited the accompanying statements of net assets available for benefits
of the Scholastic Corporation 401(k) Savings and Retirement Plan as of December
31, 2000 and 1999, and the related statement of changes in net assets for the
year ended December 31, 2000. These financial statements are the responsibility
of the Plan's Administrative Committee. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of nonexempt
transactions and the schedule of assets held for investment purposes at end of
year as of December 31, 2000 are presented for purposes of additional analysis
and are not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
Administrative Committee. These supplemental schedules have been subjected to
the auditing procedures applied in our audits of the financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ Ernst & Young LLP
New York, New York
June 26, 2001
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2000 and 1999
(amounts in thousands)
December 31,
2000 1999
---- ----
Investments, at fair value
The George Putnam Fund of Boston $ 19,101 $ 20,338
Putnam Investors Fund 16,227 18,608
Putnam S & P 500 Index Fund 14,272 --
Scholastic Corporation Common Stock 13,014 9,079
Stable Value Fund 8,162 --
Putnam New Opportunities Fund 7,656 7,728
The Putnam Fund for Growth & Income 4,598 3,824
Putnam OTC & Emerging Growth Fund 4,342 5,834
Putnam International Growth Fund 3,920 2,888
Putnam Bond Index Fund 2,291 --
Putnam Asset Allocation Fund - Balanced Portfolio 2,198 1,525
Putnam Asset Allocation Fund - Growth Portfolio 2,186 1,898
Putnam Asset Allocation Fund - Conservative Portfolio 843 938
Fidelity Spartan U.S. Equity Index Fund -- 15,323
Fidelity Retirement Money Market Fund -- 8,190
Putnam Income Fund -- 1,875
-------- --------
Total investments 98,810 98,048
-------- --------
Receivables
Loans receivable from participants 2,879 2,510
Participants contribution receivable 124 103
Employer contribution receivable 46 29
-------- --------
Total receivables 3,049 2,642
-------- --------
Cash -- 8
-------- --------
Net assets available for benefits $101,859 $100,698
======== ========
See accompanying notes
2
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 2000
(amounts in thousands)
Interest and dividend income $ 5,380
---------
Contributions
Employer 3,220
Participants 9,482
Rollovers 1,165
---------
13,867
---------
Total additions 19,247
Distributions to participants (6,174)
Net realized and unrealized depreciation in fair value of
investments (11,912)
---------
Net increase 1,161
Net assets available for benefits
Beginning of period 100,698
---------
End of period $ 101,859
=========
See accompanying notes
3
SCHOLASTIC CORPORATION
401(k) SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. DESCRIPTION OF THE PLAN
GENERAL
The Scholastic Corporation 401(k) Savings and Retirement Plan, amended and
restated effective January 1, 1998 and subsequently amended effective January 1,
1999 (the "Plan"), formerly the Scholastic Inc. 401(k) Savings and Retirement
Plan, is a defined contribution plan sponsored by Scholastic Corporation (the
"Company"). The Plan is administered by the Retirement Plan Committee of the
Board of Directors of the Company which has delegated certain responsibility and
authority to the Company's Administrative Committee which is composed of members
of senior management of the Company (the "Retirement Plan Committee", and to the
extent delegated to the Administrative Committee, collectively the "Committee").
Putnam Fiduciary Trust Company serves as Trustee for the Plan (the "Trustee").
In addition, Putnam Fiduciary Trust Company and/or its related companies
(collectively, "Putnam") also provide administrative and recordkeeping services
on behalf of the Plan (the "Record Keeper"). Investment products offered,
through December 31, 2000, to participants under the Plan, other than the
Company's Common Stock ("Company Stock") are provided by Putnam and Fidelity
Investments Institutional Services Company. Effective on January 1, 2001, all
investment products being offered, other than Company Stock, are provided by
Putnam.
This description of the Plan provides only general information and is presented
to assist in understanding the Plan's financial statements. Participants should
refer to the Plan Document for a more complete description of the Plan's
provisions.
PLAN AMENDMENTS
As mentioned above, the plan document was amended and restated effective January
1, 1998 and subsequently amended effective January 1, 1999. Significant changes
to the Plan effective January 1, 1998 include: (i) daily valuations instead of
monthly valuation of participant account, participant enrollment, contribution
rate changes and participant directed transfer of assets among investment funds;
(ii) modification of the Plan's transfer election rule to permit transfers in
multiples of 1% rather than in multiples of 10%; and (iii) using forfeitures
generated from non-vested terminated participant accounts to reduce the
Company's matching contribution rather than allocating such amounts to active
participant accounts. The amendment effective January 1, 1999 amended the plan
eligibility requirements to be as of the date of hire rather than after the
completion of six months service. Additionally, the plan was amended to reflect
Scholastic Corporation as the defined "Company" under the Plan with all of the
powers, authority and responsibility of the Company as outlined under the Plan.
In connection with the Company's acquisition of Grolier Incorporated as of June
22, 2000, the Plan was amended effective January 1, 2001 in order to allow the
Grolier Incorporated Employee Savings and Investment Plan to merge with this
Plan. The other significant changes made under this amendment included: (i)
increasing the Plan's pre and after-tax deferral limits (on an
4
individual and combined basis) from 15% to 20% of annual compensation; (ii)
participants in the Grolier Incorporated Retirement Plan on December 31, 2000,
who have attained age 45, may make an irrevocable election to accrue benefits
under the Plan in accordance with benefit formulas that resemble the formulas
that existed under the Grolier Incorporated Employee Savings and Investment Plan
and the Grolier Incorporated Retirement Plan (Grolier Benefit Structure
Program); (iii) fully vesting the matching contributions for Grolier employees
with three or more years of service on December 31, 2000 and (iv) recognizing
past service with Grolier.
As a result of this plan merger, on January 2, 2001 funds totaling approximately
$29 million were transferred from the Grolier Incorporated Employee Savings and
Investment Plan's trust to the Scholastic Corporation 401(k) Savings and
Retirement Plan's trust.
ELIGIBILITY
Employees eligible to enroll in the Plan include all employees of the Company
and its domestic subsidiaries (other than "leased" employees) who have attained
the age of 18 ("Eligible Employees"). Eligible Employees may enroll into the
Plan on any business day after they become eligible to participate in the Plan.
PARTICIPANT CONTRIBUTIONS
As approved by the Committee and subject to the provisions of the Internal
Revenue Code, as amended (the "Code"), Eligible Employees may contribute during
the Plan Year at the participant's election into any of the Plan's fund options,
in pre-tax and/or after-tax compensation dollars; provided, that the sum of
pre-tax and after-tax contributions during any Plan Year does not exceed the
following limitations:
Pre-tax Compensation Contributions: Pre-tax compensation contributions are
limited to $10,500 for the Plan year ended December 31, 2000.
After-tax Compensation Contributions: After-tax compensation contributions are
limited to 15% of annual salary, overtime, bonuses and commissions,
("Compensation") subject to the requirements of the Code. Pursuant to the limits
set by the Company, contributions from employees having Compensation in excess
of $80,000 ("Highly Compensated Employees"), may be limited to a contribution of
6% of their Compensation.
Rollover Contributions: Any Eligible Employee may transfer to the Plan
contributions and such other amounts from an "eligible rollover plan" which
meets the requirements of the Code at the time of the transfer ("Rollover
Contributions").
EMPLOYER CONTRIBUTIONS
Under the Plan, the Company contributes a percentage of each participant's
Compensation, as determined by the Committee, at its sole discretion. The
Company's contributions for the benefit of the Plan participants are made in
cash in an amount equal to a percentage of the participant's pre-tax
contributions. For the Plan year ended December 31, 2000, the Company
contributed an amount equal to 100% of the first one hundred dollars of a
participant's contribution and 50% thereafter of the participant's pre-tax
compensation contributions, up to a maximum amount equal to 6% of the
participant's Compensation.
5
Effective on January 1, 2001, for those eligible participants electing to
participate in the "Grolier Benefit Structure Program", the Company will
contribute 15% of the participant's pre-tax compensation contributions, up to a
maximum amount equal to 6% of the participant's compensation.
The Company, at its sole discretion, may also make discretionary contributions
for the benefit of all participants regardless of whether they elected to make
pre-tax contributions to the Plan ("Discretionary Contributions"). The amount of
such discretionary contributions is to be determined by the Board of Directors.
No discretionary contributions were made to the Plan by the Company for the year
ended December 31, 2000.
Forfeitures are used to offset the Company's matching contributions. In 2000,
employer contributions were reduced by $540,000 from forfeited non-vested
accounts. At December 31, 2000, forfeited non-vested accounts totaled $44,000.
These forfeiture accounts will be used to reduce future employer contributions.
VESTING
Participants are immediately vested in their Compensation Contributions and
Rollover Contributions. Matching contributions made by the Company and its
domestic subsidiaries vest at the rate of 20% per year of service by a
participant. A participant becomes 100% vested after either five years of
credited service, or upon death or disability while employed, or upon reaching
age 65. Effective January 1, 2001 employees of Grolier Inc. with three or more
years of service on December 31, 2000 who are, or became participants of the
Scholastic 401(k) Savings and Retirement Plan are fully vested in Company
matching contributions.
PARTICIPANT ACCOUNT DISTRIBUTIONS
A participant's account may be distributed in full upon cessation of employment
for any reason, including termination, death, disability or retirement. On a
daily basis, a participant, for any reason, may withdraw all or a portion of
after-tax contributions. All distributions from the Plan are in cash or, if
elected by the participant, in whole shares of Company Stock, to the extent that
the participant is invested in the Company Stock. In the event of attainment of
age 59-1/2, a participant may withdraw his entire vested balance during
employment. Benefits payable as of December 31, 2000 and 1999 were $0 and
$55,000, respectively.
In the event of a hardship, a participant may withdraw during employment such
portion of his or her account to meet such hardship. In addition, once each Plan
year, participants may request a loan from the Plan of up to 50% of the vested
value of their account not to exceed $50,000. In no event may a participant have
more than one principal residence loan outstanding or more than two outstanding
loans at anytime. All loans must be repaid in equal installments of principal
and interest through automatic payroll deductions over a period not to exceed
five years, except for certain loans made to purchase a participant's principal
residence, which may be repaid over a period of up to ten years pursuant to the
Code. Participants may not otherwise withdraw any portion of their account
balance during employment.
PLAN EXPENSES
The Company and its domestic subsidiaries pay substantially all of the Plan
expenses.
6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA"). The financial statements of the Plan are prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The Plan's accounts are maintained on the accrual basis. Purchases and sales of
investment securities are recorded at market value on the trade date.
VALUATION OF INVESTMENTS
Investments in the Plan's funds are valued at redemption prices based on the net
asset values of the funds. Investments in the Company's Common Stock are valued
at the closing price as quoted on the NASDAQ National Market System on the
valuation date. Loans receivable from participants are valued at cost which
approximates fair value.
3. TAX STATUS
The Company received a favorable determination letter from the Internal Revenue
Service as of November 1, 1995 that the Plan qualifies under Section 401(a) of
the Code. Therefore, the Plan's assets are not subject to tax under Section
501(a) of the Code. The Plan is required to operate in conformity with the Code
in order to maintain its qualification. If any operational defects are
identified, the Company will take all action necessary to correct and maintain
the qualified status of the Plan. As a result of amending and restating the
Plan, the Company is required to file for a new determination letter on or
before December 31, 2001.
4. PLAN TERMINATION
While the Plan is intended to be permanent, it may be terminated at any time by
a resolution of the Board of Directors of the Company, subject, however, to the
provisions of ERISA. Upon termination of the Plan, all necessary provisions of
the Plan shall remain in effect, no further contributions may be made to the
Plan and the account of each participant shall become fully vested and
non-forfeitable. In the event of termination, the Plan assets may continue to be
held by the plan trustee. If however, upon a determination that the continuance
of such an arrangement is not in the best interest of the Plan's participants,
the Board of Directors may terminate the arrangement, and upon such termination,
the trustee shall apply for the benefit of each participant (or beneficiary) the
full value of such participant's account.
5. NONEXEMPT TRANSACTIONS
During the course of year 2000 there was one instance where the Company failed
to remit Participant contributions and the related matching contributions on a
timely basis. This failure to remit funds on a timely basis constitutes a
nonexempt prohibited transaction under the Code.
7
The Company has taken corrective action and funded the Participant accounts,
including payment of lost earnings on these amounts, if any, and is in the
process of paying the applicable excise taxes.
6. INVESTMENTS
During 2000, the Plan's net realized and unrealized appreciation (depreciation)
in the fair value of investments was as follows (in thousands):
The George Putnam Fund of Boston $ 923
Putnam Investors Fund (3,861)
Scholastic Corporation Common Stock 3,952
Putnam New Opportunities Fund (3,873)
The Putnam Fund for Growth & Income 169
Putnam OTC & Emerging Growth Fund (5,766)
Putnam International Growth Fund (728)
Putnam Asset Allocation Fund - Balanced Portfolio (364)
Putnam Asset Allocation Fund - Growth Portfolio (655)
Putnam Asset Allocation Fund-Conservative Portfolio (108)
Fidelity Spartan U.S. Equity Index Fund (1,611)
Putnam Income Fund 10
--------
$(11,912)
========
8
EIN #13-3385513
PLAN #004
SCHOLASTIC CORPORATION 401(k) SAVINGS AND RETIREMENT PLAN
SCHEDULE G, PART III
SCHEDULE OF NONEXEMPT TRANSACTIONS
DECEMBER 31, 2000
Description of Transactions
Including Maturity Date, Rate
Relationship to Plan, Employer of Interest, Collateral, Par or
Identity of Party Involved or Other Party-in-Interest Maturity value
- -------------------------------------------------------------------------------------------------------------------
Scholastic Corporation Employer Contributions and loans in
the amount of $5,704
for the February 18, 2000
payroll were deposited on
May 5, 2000. Investment
losses of $167 were not
allocated to the affected
participants.
9
EIN #13-3385513
PLAN #004
SCHOLASTIC CORPORATION 401(k) SAVINGS AND RETIREMENT PLAN
SCHEDULE H, LINE 4i
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
DECEMBER 31, 2000
(amounts in thousands)
- -----------------------------------------------------------------------------------------------------------------
Identity of Description of Number Current
Issue Investment of Shares Value
- -----------------------------------------------------------------------------------------------------------------
Putnam The George Putnam Fund of Boston 1,112 $19,101
Putnam Putnam Investors Fund 1,056 16,227
Putnam Putnam S & P 500 Index Fund 451 14,272
Scholastic Corp.* Common Stock 147 13,014
Putnam Stable Value Fund - 8,162
Putnam Putnam New Opportunities Fund 131 7,656
Putnam The Putnam Fund for Growth & Income 235 4,598
Putnam Putnam OTC &
Emerging Growth Fund 312 4,342
Putnam Putnam International Growth Fund 159 3,920
Putnam Putnam Bond Index Fund 208 2,291
Putnam Putnam Asset Allocation
Fund - Balanced Portfolio 203 2,198
Putnam Putnam Asset Allocation
Fund - Growth Portfolio 199 2,186
Putnam Putnam Asset Allocation
Fund - Conservative Portfolio 91 843
Loans Receivable 6.5% - 10.00% Interest
from Participants Rate, Repayment
Terms: 2 to 10 years - 2,879
--------------
$ 101,689
==============
*Indicates party-in-interest to the Plan.
10
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Retirement Plan Committee of the Scholastic Corporation 401(k) Savings and
Retirement Plan which administers the Plan has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
SCHOLASTIC CORPORATION 401(k) SAVINGS
AND RETIREMENT PLAN
Date: June 26, 2001 /s/ Richard M. Spaulding
----------------------------------------------------
Richard M. Spaulding
Executive Vice President, Scholastic Corporation and
Chairman of the Retirement Plan Committee and
Administrative Committee of the
Scholastic Corporation 401(k) Savings and
Retirement Plan
11
Exhibits
Exhibit No. Document
- ----------- --------
23 Consent of Independent Auditors
12
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-48655, No. 33-69058 and No. 33-91090) pertaining to the
Scholastic Corporation 401(k) Savings and Retirement Plan of our report dated
June 26, 2001, with respect to the financial statements and schedules of the
Scholastic Corporation 401(k) Savings and Retirement Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 2000.
/s/ Ernst & Young LLP
New York, New York
June 26, 2001
13
