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): September 21, 2004
SCHOLASTIC CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE |
000-19860 |
13-3385513 |
(State or Other Jurisdiction |
(Commission File Number) |
(I.R.S. Employer |
of Incorporation) |
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 September 21, 2004, Scholastic Corporation issued the press release attached hereto as Exhibit 99.1 announcing its results of operations for its quarter ended August 31, 2004.
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 September 21, 2004, 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: September 21, 2004 | SCHOLASTIC CORPORATION | |
| (Registrant) | ||
| By: | /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 September 21, 2004 |
Exhibit 99.1
CONTACTS:
Media: Judy Corman (212) 343-6833
Investors: Ray Marchuk (212) 343-6741
SCHOLASTIC REPORTS FIRST QUARTER RESULTS
STRONG PERFORMANCE IN EDUCATIONAL PUBLISHING
DRIVES SMALLER THAN EXPECTED SEASONAL LOSS
NEW YORK, SEPTEMBER 21, 2004 -- Scholastic Corporation (NASDAQ: SCHL) today
announced results for the first fiscal quarter ended August 31, 2004.
Scholastic's first quarter is its smallest revenue period, as most schools are
not in session, resulting in a seasonal loss. Last year's first quarter loss was
unusually low due to the benefit of approximately $170 million in revenues
related to the release of the record-setting best seller, HARRY POTTER AND THE
ORDER OF THE PHOENIX.
Net loss for the quarter ended August 31, 2004 was $50.3 million, or $1.27 per
share, which included $3.6 million pre-tax, or $0.06 per diluted share, in
severance costs relating to the previously announced fiscal 2004 reorganization
of the Continuities business. This compares to the year-ago net loss of $24.8
million, or $0.63 per share, which included Special severance charges of $2.0
million pre-tax, or $0.03 per diluted share. Revenues were $323.7 million in the
quarter, as compared to $475.4 million in the year-ago quarter.
"We are off to a good start to achieve Scholastic's fiscal 2005 financial
goals," said Richard Robinson, Chairman, President and Chief Executive Officer.
"Strong performance in Educational Publishing, driven by technology sales, and
improved results in International helped us achieve a smaller than expected loss
for the first quarter. Our Continuities business met expectations as we
successfully executed on our plan. Non-HARRY POTTER trade revenue resumed
growth, reflecting improved sales of front-list titles. Cash use was
approximately flat with the year-ago quarter, and debt at August 31st was down
$82 million versus last year."
Scholastic's fiscal 2005 goals include revenue of $2.1 to $2.2 billion, earnings
per diluted share of $1.50 to $1.70, excluding severance charges, and free cash
flow of $40 to $50 million.
FIRST QUARTER SEGMENT ANALYSIS
CHILDREN'S BOOK PUBLISHING & DISTRIBUTION - Segment revenue was $121.8 million,
as compared to $287.9 million in the year-ago quarter, and operating loss was
$65.0 million, as compared to $16.6 million. Trade revenue declined in
comparison to the year-ago period, due to last year's release of HARRY POTTER
AND THE ORDER OF THE PHOENIX, partially offset by an 8% increase in other trade
revenues in the fiscal 2005 first quarter. As planned, Continuities results
improved on lower revenue as a result of reduced bad debt and fewer returns.
EDUCATIONAL PUBLISHING - Segment revenue was $118.2 million, as compared to
$105.8 million in the year-ago quarter, and operating income was $22.2 million,
as compared to $15.5 million. A more than 50% increase in sales of the READ
180(R) technology program fueled a 25% increase in Curriculum revenue compared
to the year ago quarter. Library Publishing results improved, with revenue up
18%, while sales of collections of children's books to schools declined
modestly.
Page 1 of 2
INTERNATIONAL - Segment revenue was $71.8 million, as compared to $65.3 million
in the year-ago quarter, and the operating loss was $3.0 million, as compared to
$3.9 million. Segment results reflected improved revenues and profits in the
Company's Australian operations. Revenue also benefited from $4 million in
foreign currency translation.
MEDIA, LICENSING & ADVERTISING - Segment revenue was $11.9 million, as compared
to $16.4 million in the year-ago quarter, and operating loss was $6.7 million,
as compared to $4.9 million. The revenue decline primarily reflects different
production delivery schedules of animated television series in fiscal 2004 and
fiscal 2005. MAYA & MIGUEL(TM), Scholastic's new media, licensing and publishing
franchise, with a focus on the adventures of a Latino family, will debut on PBS
on October 11th.
CONFERENCE CALL
Scholastic will hold a conference call tomorrow (September 22, 2004) at 8:00
a.m. Eastern time. To listen and ask questions, dial 888-338-6461 or
973-935-8510 (meeting leader "Richard Robinson"). To view accompanying slides,
go to the Investor Relations section of Scholastic.com at
WWW.SCHOLASTIC.COM/GO/HOMEPAGE/COMPANY/INVESTORS.HTM. Following the
presentation, the slides will be available on the Investor Relations section of
Scholastic.com and an audio replay will be available starting 10 a.m. at
877-519-4471, PIN number 5162970.
ABOUT SCHOLASTIC
Scholastic 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.
Page 2 of 2
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SCHOLASTIC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS -- UNAUDITED
FOR THE THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
(Dollars in millions except per share data)
-------------------------------------------------------
THREE MONTHS ENDED
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8/31/04 08/31/03 VARIANCE
----------------------------- ------------------------
Revenues $323.7 $475.4 ($151.7) -32%
Operating costs and expenses:
Cost of goods sold 176.4 281.4 (105.0) -37%
Selling, general and administrative expenses 185.1 188.1 (3.0) -2%
Selling, general and administrative expenses --
Continuity charges (1) 3.6 --- 3.6 *
Bad debt expense 16.2 20.7 (4.5) -22%
Depreciation and amortization 13.4 13.0 0.4 3%
Special severance charges (2) --- 2.0 (2.0) *
----------------------------- ------------
Total operating costs and expenses 394.7 505.2 (110.5) -22%
Operating income (71.0) (29.8) (41.2) -138%
Interest expense, net 7.0 8.9 (1.9) -21%
----------------------------- ------------
Loss before income taxes (78.0) (38.7) (39.3) 102%
Benefit from income taxes 27.7 13.9 13.8 99%
----------------------------- ------------
Net loss ($50.3) ($24.8) ($25.5) -103%
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Weighted average shares outstanding (in millions) 39.6 39.3
Basic and diluted loss per share ($1.27) ($0.63) ($0.64) -102%
-------------------------------------------------------
(1) Results for the three months ended August 31, 2004 include pre-tax charges
of $3.6, or $0.06 per share after-tax, for severance related to staff
reductions implemented in that quarter related to the previously announced
reorganization of the Continuities business.
(2) Results for the three months ended August 31, 2003 include a pre-tax
Special severance charge of $2.0, or $0.03 per share after-tax, for staff
reductions implemented in that quarter related to a workforce reduction
announced in May 2003.
* Percent change not meaningful.
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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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SCHOLASTIC CORPORATION
RESULTS OF OPERATIONS - SEGMENTS - UNAUDITED
FOR THE THREE MONTHS ENDED AUGUST 31, 2004 AND 2003 (1) (2)
(Dollars in millions)
-------------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------------------------
08/31/04 08/31/03 VARIANCE
----------------------------------- ------------------------
Children's Book Publishing and Distribution
Revenue $121.8 $287.9 ($166.1) -58%
Operating profit/(loss) (65.0) (16.6) (48.4) -
-------------------------------
Operating margin -53.4% -5.8%
Educational Publishing
Revenue 118.2 105.8 12.4 12%
Operating profit/(loss) 22.2 15.5 6.7 43%
-------------------------------
Operating margin 18.8% 14.6%
International
Revenue 71.8 65.3 6.5 10%
Operating profit/(loss) (3.0) (3.9) 0.9 -23%
-------------------------------
Operating margin -4.2% -6.0%
Media, Licensing and Advertising
Revenue 11.9 16.4 (4.5) -27%
Operating profit/(loss) (6.7) (4.9) (1.8) -37%
-------------------------------
Operating margin -55.5% -29.9%
Overhead Expense 18.5 19.9 (1.4) -7%
-------------------------------
Operating Income ($71.0) ($29.8) ($41.2) -138%
=============================== ============
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(1) Results for the three months ended August 31, 2004 include pre-tax charges
of $3.6 in the Children's Book Publishing and Distribution segment for
severance related to staff reductions implemented in that quarter related
to the previously announced reorganization of the Continuities business.
(2) Results for the three months ended August 31, 2003 include a pre-tax
Special severance charge of $2.0 for staff reductions implemented in that
quarter related to a workforce reduction announced in May 2003, allocated
as follows: $0.9 to Children's Book Publishing and Distribution, $0.5 to
Educational Publishing, $0.1 to International, and $0.5 to Overhead
Expense.
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SCHOLASTIC CORPORATION
SUPPLEMENTAL INFORMATION - UNAUDITED
(Dollars in millions)
SELECTED BALANCE SHEET ITEMS
-----------------------------------------------------------
08/31/04 08/31/03 CHANGE
--------------------------------- ------------------------
Cash and cash equivalents $13 $9 $4 44%
Accounts receivable, net $242 $365 -$123 -34%
Inventories $534 $492 $42 9%
Total debt (lines of credit, short-term
debt and long-term debt) $619 $701 -$82 -12%
Total stockholders' equity $807 $747 $60 8%
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SELECTED CASH FLOW ITEMS
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FOR THE QUARTER ENDED
-----------------------------------------------------------
08/31/04 08/31/03 CHANGE
--------------------------------- ------------------------
Net cash used by operating activities ($79) ($80) $1 1%
Additions to property, plant and equipment (10) (8) (2) -25%
Prepublication and production expenditures (14) (17) 3 18%
Royalty advances (7) (6) (1) -17%
--------------------------------- ------------
Free cash flow (cash use) (1) ($110) ($111) $1 1%
================================= ============
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(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.
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