UNITED STATES
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): December 17, 2003
SCHOLASTIC CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 000-19860 13-3385513
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
557 BROADWAY, NEW YORK, NEW YORK 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 343-6100
SCHOLASTIC CORPORATION
CURRENT REPORT ON FORM 8-K, DATED December 17, 2003
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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99.1 Press release of Scholastic Corporation, dated
December 17, 2003.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On December 17, 2003, Scholastic Corporation issued the press release attached
hereto as Exhibit 99.1 announcing its results of operations for its quarter
ended November 30, 2003.
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.
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.
SCHOLASTIC CORPORATION
(Registrant)
Date: December 17, 2003 /s/Kevin J. McEnery
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Kevin J. McEnery
Executive Vice President
& Chief Financial Officer
SCHOLASTIC CORPORATION
CURRENT REPORT ON FORM 8-K, DATED December 17, 2003
EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
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Exhibit 99.1 Press release of
Scholastic Corporation,
dated December 17, 2003.
EXHIBIT 99.1
CONTACTS:
MEDIA: JUDY CORMAN (212) 343-6833
INVESTORS: RAY MARCHUK (212) 343-6741
SCHOLASTIC REPORTS SECOND QUARTER FINANCIAL RESULTS
IMPROVED PERFORMANCE IN SCHOOL BOOK CLUBS AND FAIRS
NEW YORK, December 17, 2003 -- Scholastic Corporation (NASDAQ: SCHL) today
announced second quarter results consistent with its plan to improve earnings
and cash flow in Fiscal 2004.
For the quarter ended November 30, 2003, Scholastic reported revenue of $699.0
million and net income of $66.7 million, or $1.67 per diluted share, compared to
revenue of $660.3 million and net income of $75.0 million, or $1.85 per diluted
share, in the corresponding year-ago quarter. For the first six months of Fiscal
2004, Scholastic reported revenue of $1,174.4 million and net income of $41.9
million, or $1.05 per diluted share, compared to revenue of $967.2 million and
net income of $30.4 million, or $0.75 per diluted share, in the similar year-ago
period.
"During the second quarter, results improved in our core school-based
distribution channels, with revenue increases of 16% in Book Clubs and 5% in
Book Fairs," said Richard Robinson, Chairman, President and CEO. "We also
experienced revenue gains of 16% in International and 13% in Educational
Publishing. Year to date, we have achieved more than half our $40 million Fiscal
2004 cost savings plan, and cash flow has increased significantly due to better
first half results and lower capital expenditures. We're pleased with our
performance so far this year and we are on track to achieve our profit and cash
flow goals for Fiscal 2004."
As part of its plan for Fiscal 2004, the Company had anticipated lower profits
for the second quarter compared to the prior year quarter, primarily due to
lower Trade revenue, based largely on the timing of HARRY POTTER(R) sales, which
were concentrated in the second quarter of the prior fiscal year and in the
first quarter of the current fiscal year. Lower results in Continuity Programs,
due primarily to higher bad debt, also contributed to the decline in profits.
These declines were partially offset by improved profits in School Book Clubs
and School Book Fairs and in International.
SECOND QUARTER SEGMENT ANALYSIS
CHILDREN'S BOOK PUBLISHING & DISTRIBUTION. Revenue increased 3% to $450.4
million compared to $438.3 million in the year ago quarter. Book Club revenue
grew on more orders, helped in part by the July 2003 acquisition of selected
assets of Troll Book Clubs. Book Fair revenue was driven by increases in the
number of fairs held and by higher revenue per fair. Continuity revenue was up
3%. Trade revenue declined by approximately $22 million, reflecting HARRY POTTER
revenue of $13 million compared to $25 million in the year-ago quarter, and a
weak bookselling environment, particularly for backlist titles.
For the first six months of Fiscal 2004, Trade revenue increased 95% to $255
million, compared to $131 million in the year-ago period, with year to date
HARRY POTTER revenue of about $185 million compared to approximately $40 million
in the year-ago period. Much of this year's HARRY POTTER revenue comes from the
sale of about 12 million copies of HARRY POTTER AND THE ORDER OF THE PHOENIX,
which continues to top children's bestseller lists.
EDUCATIONAL PUBLISHING. Revenue increased 13% to $87.3 million compared to $77.1
million in the year ago quarter. Increased sales of classroom libraries and of
the READ 180(R) intervention program more than offset continued soft Scholastic
Library revenue.
INTERNATIONAL. Revenue increased 16% to $114.6 million compared to $98.7 million
in the year ago quarter. The increase reflected the positive effect of foreign
currency translations and growth in exports, primarily due to a Department of
Defense order for educational materials. In local currencies, revenue was higher
in Canada and down modestly in Australia and the UK compared to the year-ago
quarter.
MEDIA, LICENSING AND ADVERTISING. Revenue increased 1% to $46.7 million compared
to $46.2 million in the year ago quarter. The current year quarter included $8
million of revenue from the Back to Basics Toys catalog business acquired in
August 2003, while the year ago quarter included high margin syndication revenue
for THE MAGIC SCHOOL BUS(R) TV series.
CONFERENCE CALL
Scholastic will hold a conference call tomorrow (December 18, 2003) at 8:00 AM
Eastern. To listen and ask questions, dial 973-935-8510 or 888-338-6461 (meeting
leader is "Richard Robinson"). To view accompanying slides, go to the Investor
Relations section of Scholastic.com. Following the call, the slides will be
available on the Investor Relations section of Scholastic.com and an audio
replay will be available at 877-519-4471, PIN number 4362104.
UPCOMING INVESTOR PRESENTATIONS
Ray Marchuk, Senior Vice President-Finance and Investor Relations, is currently
scheduled to make presentations to institutional investors at the Smith Barney
Media and Entertainment Conference in Phoenix on January 5, 2004. Barbara
Marcus, President of Children's Book Publishing and Distribution, and Mr.
Marchuk are also scheduled to present at the Merrill Lynch Advertising,
Publishing and Education Conference in New York City on March 4, 2004. Further
details will be posted in the Investor Relations section of WWW.SCHOLASTIC.COM
when available.
ABOUT SCHOLASTIC
Scholastic Corporation is the world's largest publisher and distributor of
children's books. 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.
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SCHOLASTIC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
(UNAUDITED)
(AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA)
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THREE MONTHS ENDED
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11/30/03 11/30/02(1) VARIANCE
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Revenue
Children's book publishing & distribution $450.4 $438.3 $12.1 3%
Educational publishing 87.3 77.1 10.2 13%
International 114.6 98.7 15.9 16%
Media, licensing & advertising 46.7 46.2 0.5 1%
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Total revenue 699.0 660.3 38.7 6%
Costs and expenses (2) 585.6 536.9 (48.7) -9%
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Operating income 113.4 123.4 (10.0) -8%
Interest expense 9.2 8.2 (1.0) -12%
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Income before taxes 104.2 115.2 (11.0) -10%
Tax provision 37.5 40.2 2.7 7%
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Net income $66.7 $75.0 ($8.3) -11%
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Weighted average shares outstanding:
Basic 39.3 39.1
Diluted 40.0 40.6
Net income per share:
Basic $1.70 $1.92 ($0.22) -11%
Diluted $1.67 $1.85 ($0.18) -10%
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SIX MONTHS ENDED
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11/30/03 11/30/02(1) VARIANCE
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Revenue
Children's book publishing & distribution $738.6 $578.6 $160.0 28%
Educational publishing 193.1 165.2 27.9 17%
International 179.9 160.4 19.5 12%
Media, licensing & advertising 62.8 63.0 (0.2) 0%
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Total revenue 1,174.4 967.2 207.2 21%
Costs and expenses (2) 1,090.8 905.9 (184.9) -20%
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Operating income 83.6 61.3 22.3 36%
Interest expense 18.1 15.8 (2.3) -15%
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Income before taxes 65.5 45.5 20.0 44%
Tax provision 23.6 15.1 (8.5) -56%
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Net income 41.9 30.4 11.5 38%
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Weighted average shares outstanding:
Basic 39.3 39.1
Diluted 39.9 40.4
Net income per share:
Basic $1.07 $0.78 $0.29 37%
Diluted $1.05 $0.75 $0.30 40%
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(1) Revenues reflect a reclassification of Scholastic.com results to Children's
book publishing & distribution and Educational publishing from Media,
licensing & advertising.
(2) Results for the three and six months ended November 30, 2003 include a
pre-tax charge of $1.2, or $0.02 per share after-tax, and a pre-tax charge
of $3.2, or $0.05 per share after-tax, respectively, related to severance
for staff reductions announced in May 2003, but implemented during the
respective periods. Results for the six months ended November 30, 2002
include a pre-tax charge of $1.9, or $0.03 per share after-tax, to settle a
securities lawsuit from 1997.
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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 instructional material
markets and acceptance of the Company's product 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.
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