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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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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, 2006
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SCHOLASTIC CORPORATION
(Exact Name of Registrant as Specified in Charter)
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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)
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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, 2006, Scholastic Corporation issued the press release attached
hereto as Exhibit 99.1 announcing its results of operations for its quarter
ended August 31, 2006.
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, 2006, 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, 2006 SCHOLASTIC CORPORATION
(Registrant)
/s/ Mary A. Winston
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Name: Mary A. Winston
Title: Executive Vice President and Chief
Financial Officer
EXHIBIT INDEX
Number Exhibit
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99.1 Press release of Scholastic Corporation, dated September 21, 2006
Exhibit 99.1
Scholastic Reports First Quarter Results for Fiscal 2007
NEW YORK--(BUSINESS WIRE)--Sept. 21, 2006--Scholastic Corporation
(NASDAQ: SCHL) today reported results for the fiscal 2007 first
quarter ended August 31, 2006. Scholastic typically records minimal
revenues from its School Book Fairs and Book Clubs in the first
quarter of the fiscal year, as most schools are not in session,
resulting in seasonal loss. Last year's first quarter loss was
unusually low due to the benefit of the record-setting best-seller,
Harry Potter and The Half-Blood Prince.
Revenues in the first quarter were $334.9 million versus $498.4
million in the prior year period. Net loss for the quarter was $46.9
million, or $1.12 per share. This compares to a net loss of $21.2
million, or $0.52 per share, in the prior year period.
"We are executing our plan and making solid progress toward our
fiscal 2007 goals," commented Richard Robinson, Chairman, President
and Chief Executive Officer. "The pressing need to raise students'
reading achievement continued to drive strong educational technology
sales in the first quarter, especially of READ 180(R), and higher
profits in Educational Publishing. The summer was also marked by a
number of strong Trade releases, including the newest title in the
Captain Underpants series, which debuted at number two on the USA
Today best-seller list. Additionally, School Book Clubs implemented
its streamlined promotion plans for this school year. Finally, we are
on track to meet our fiscal 2007 cost savings target, as we continue
to take steps to reduce overhead company-wide during the quarter."
Scholastic continues to expect fiscal 2007 revenue of $2.1 to $2.2
billion, earnings per diluted share of $1.55 to $1.85 and free cash
flow of $75 to $85 million.
First Quarter Results
Children's Book Publishing and Distribution. Segment revenue in
the first quarter declined to $112.6 million from $275.3 million in
the prior year period, due to Harry Potter Trade revenues of
approximately $5 million compared to approximately $185 million in the
year-ago period, when the Company released Harry Potter and The
Half-Blood Prince. This expected decline was partially offset by
higher revenues from new Trade releases, as well as growth in
Continuities revenues. The operating loss for the segment was $67.3
million, compared to an operating loss of $19.7 million in the prior
year period, primarily reflecting the lower Trade revenues.
Educational Publishing. Segment revenue in the first quarter was
$127.4 million compared to $128.3 million in the prior year period.
Educational technology revenues rose 9%, driven by strong sales of
READ 180, as well as Scholastic Reading Inventory(TM) and Read
About(R), while revenues from classroom libraries and Library
Publishing declined. Operating income rose 19% to $32.7 million
relative to the prior year period, primarily reflecting higher
educational technology sales and improved results in professional
books and Library Publishing.
International. Segment revenue in the first quarter rose 3% to
$79.2 million from $76.7 million in the prior year period, though was
flat in local currencies. The operating loss for the segment was $5.5
million in the first quarter, level with the year ago period. The
first quarter is also typically the smallest for the International
segment, with schools out of session in the United Kingdom and Canada,
two of the Company's largest operations, resulting in a seasonal loss.
Media, Licensing and Advertising. Segment revenue declined $2.4
million to $15.7 million in the first quarter compared to the prior
year period, primarily due to lower production revenue from fewer
deliveries of television episodes in the quarter. Operating loss for
the segment was $6.1 million compared with $5.7 million in the year
ago period.
Other Financial Results. Corporate overhead declined 9% to $19.9
million from $21.8 million. Company-wide actions under the previously
announced cost-savings plan positively impacted corporate overhead and
results in the operating segments. This was partially offset by
severance expense in the quarter of $0.08 per diluted share compared
to $0.05 in the prior year period. Free cash use (as defined) in the
quarter decreased to $160.9 million from $178.3 million a year ago,
reflecting improvements in working capital compared to last year's
Harry Potter-related levels, partially offset by higher net loss. Net
debt (as defined) declined to $456.1 million from $561.4 million a
year ago, reflecting strong free cash flow in the intervening period.
Conference Call
The conference call and accompanying slides will be webcast and
accessible through the Investor Relations section of Scholastic's
Web site, scholastic.com. Participation by telephone will be available
by dialing 888-338-6461 from within the U.S. or +1-973-935-8510
internationally. From approximately 10:00 a.m. ET following the call,
slides and an audio replay will be available in the Investor Relations
section of scholastic.com or for audio only, by dialing 877-519-4471
and entering participant code 7553822.
Upcoming Investor Meeting
The Company will hold a meeting for investors and analysts at 9:00
a.m. ET on September 27, 2006 in New York City. At the meeting, which
will be available live and by replay through the Investor Relations
section of scholastic.com, senior management will present the
Company's long-term strategy.
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, 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)
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THREE MONTHS ENDED
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08/31/06 08/31/05 Favorable/(Unfavorable)
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Revenues $334.9 $498.4 ($163.5) (33%)
Operating costs and
expenses:
Cost of goods sold 171.8 293.0 121.2 41%
Selling, general and
administrative
expenses 196.6 202.4 5.8 3%
Bad debt expense 15.7 12.6 (3.1) (25%)
Depreciation and
amortization 16.9 15.6 (1.3) (8%)
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Total operating costs and
expenses 401.0 523.6 122.6 23%
Operating loss (66.1) (25.2) (40.9) *
Interest expense, net 7.4 8.5 1.1 13%
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Loss before income taxes (73.5) (33.7) (39.8) *
Tax benefit 26.6 12.5 14.1 *
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Net loss ($46.9) ($21.2) ($25.7) *
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Basic and diluted
weighted average shares
outstanding 42.0 41.0 (1.0) (2%)
Basic and diluted loss *
per share ($1.12) ($0.52) ($0.60)
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* Percent change not meaningful.
SCHOLASTIC CORPORATION
RESULTS OF OPERATIONS - SEGMENTS
(UNAUDITED)
(Amounts in millions)
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THREE MONTHS ENDED
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08/31/06 08/31/05 Favorable/(Unfavorable)
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Children's Book
Publishing &
Distribution
Revenue $112.6 $275.3 ($162.7) (59%)
Operating loss (67.3) (19.7) (47.6) *
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Operating margin * *
Educational Publishing
Revenue 127.4 128.3 (0.9) (1%)
Operating income 32.7 27.5 5.2 19%
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Operating margin 25.7% 21.4%
International
Revenue 79.2 76.7 2.5 3%
Operating loss (5.5) (5.5) 0.0 N/A
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Operating margin * *
Media, Licensing and
Advertising
Revenue 15.7 18.1 (2.4) (13%)
Operating loss (6.1) (5.7) (0.4) (7%)
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Operating margin * *
Overhead expense 19.9 21.8 1.9 9%
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Operating loss ($66.1) ($25.2) ($40.9) *
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* Percent change not meaningful.
SCHOLASTIC CORPORATION
SUPPLEMENTAL INFORMATION
(UNAUDITED)
(Amounts in millions)
SELECTED BALANCE SHEET ITEMS
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08/31/06 08/31/05 Favorable/(Unfavorable)
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Cash and cash equivalents $19.7 $18.4 $1.3 7%
Accounts receivable, net 249.8 411.7 (161.9) (39%)
Inventories 548.0 509.2 38.8 8%
Accounts payable 164.3 179.3 15.0 8%
Accrued royalties 47.7 127.2 79.5 63%
Lines of credit, short- *
term debt and current
portion of long-term
debt 301.5 33.8 (267.7) *
Long-term debt, excluding
current portion 174.3 546.0 371.7 *
Capital lease obligations 67.7 78.0 10.3 13%
Total stockholders'
equity 999.9 926.0 73.9 8%
Net debt (1) 456.1 561.4 105.3 19%
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SELECTED CASH FLOW ITEMS
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THREE MONTHS ENDED
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08/31/06 08/31/05 Favorable/(Unfavorable)
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Net cash used in
operating activities ($138.1) ($138.8) $0.7 1%
Additions to property,
plant and equipment 6.2 15.4 9.2 60%
Pre-publication and
production costs 10.5 16.9 6.4 38%
Royalty advances 6.1 7.2 1.1 15%
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Free cash flow (use) (2) ($160.9) ($178.3) $17.4 10%
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(1) Net debt is defined by the Company as lines of credit and
short-term debt plus long-term-debt, net of cash and cash
equivalents. The Company utilizes this non-GAAP financial measure,
and believes it is useful to investors, as an indicator of the
Company's effective leverage and financing needs.
(2) Free cash flow (use) 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 that 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
Media:
Kyle Good, 212-343-4563
or
Investors:
Jeffrey Mathews, 212-343-6741