(Source: Business Wire)
Scholastic Corporation (NASDAQ:SCHL) today reported a 14% rise in
revenue from continuing operations to $315.6 million in the fiscal 2010
first quarter ended August 31, 2009. The loss per share from continuing
operations also improved significantly to $0.68, compared to $1.13 in
the prior year period. Stronger results reflected higher sales of
educational technology to schools and of children's books in retail
channels during the quarter. Scholastic typically records a seasonal
loss in the fiscal first quarter, when the Company's School Book Fairs
and Book Clubs generate minimal revenue.
Including discontinued operations, the consolidated loss per share in
the quarter was $0.63 compared to $1.30 in the prior year period. Free
cash flow (as defined) in the first quarter was a use of $77.5 million,
reflecting an $85.2 million improvement from a year ago. Net debt (as
defined) at quarter end was $236.4 million, compared to $400.7 million a
year ago.
"Scholastic's strong first quarter puts the Company firmly on plan to
achieve significantly higher earnings and free cash flow this fiscal
year, and to reach our goal of 9% operating margins if we attain the
upper end of our guidance. In particular Scholastic Education had a
record quarter, with technology sales up more than 50% as a result of
strong execution, new products and adoptions, and the arrival of Federal
stimulus funds in local districts," commented Richard Robinson,
Chairman, President and Chief Executive Officer. "Trade sales of
Scholastic's children's books rose by 25%, driven by best-selling series
including The 39 Clues®and Harry Potter®.
Our balance sheet has also benefited from working capital improvements
and from substantial free cash flow over the past twelve months, and we
have reduced net debt levels by over 40% from a year ago."
Scholastic affirmed its outlook for fiscal 2010 earnings per diluted
share from continuing operations of $1.80 to $2.30. This guidance
excludes severance and other one-time cash and non-cash expenses
associated with anticipated cost reductions. Free cash flow continues to
be forecast at $90 million to $120 million.
First Quarter Results
Reflecting the increasing connection between print and other media in
the children's book industry, all sales through School Book Club and
Fair channels, including sales of media and interactive products, are
now recorded in the Children's Book Publishing and Distribution segment,
consistent with the Company's internal organization and management
reporting. Previously, the revenue and expense from media and
interactive products sold through the proprietary school-based channels
were recorded in the Media, Licensing and Advertising segment. This
segment now includes interactive product sales through third party
channels, as well as revenue from entertainment, toys and consumer
magazine products. Prior periods have been reclassified accordingly.
Children's Book Publishing and Distribution. Segment revenue in
the first quarter rose substantially to $76.2 million from $61.1 million
in the prior year period, reflecting strong sales in retail channels.
There was strong demand for the paperback edition of Harry Potter and
the Deathly Hallows, published on July 7, and of backlist titles in
the series. The successful August 11th launch of the fifth title in The
39 Clues® also continued the strong performance of that
series, which remains a New York Times bestseller. Among other
best-selling titles, The
Hunger Games by Suzanne Collins continued to perform very
strongly a year after its initial publication, spurred by anticipation
of the September 1st release of Catching Fire, the second book in
the trilogy. Revenue in School Book Clubs and Fairs is minimal in the
first quarter, when most U.S. schools are not in session; therefore year
over year differences in these businesses are not meaningful. The
operating loss for the quarter was $47.5 million, compared to $54.6
million in the prior year period, reflecting the strong Trade results.
Educational Publishing. Segment revenue in the seasonally
important first quarter rose 29% to $148.7 million from $115.1 million,
and segment operating income improved to $41.3 million from $21.5
million a year ago. Driving these higher segment results, sales of
educational technology rose approximately $35 million. Continued strong
sales of READ
180, new product releases including last winter's launch of System
44, and a new adoption in California were key factors in this
growth. Federal stimulus funding, which began to reach school districts,
was another growth driver of technology sales. Sales of classroom
libraries were flat, though outperforming the supplemental materials
market which continues to be challenged by limited state and local
funding.
International. Segment revenue in the first quarter was $75.6
million, compared to $84.1 million in the prior year period, primarily
reflecting a $7.6 million negative foreign exchange impact. The
segment's seasonal operating loss improved to $1.9 million from a loss
of $3.3 million, as a result of higher results in Asia and Export. Based
on the Company's plan to restructure operations in the U.K., one-time
severance and costs, including asset impairments, associated with these
actions are now expected to be between $7 million and $10 million, or
$0.19 and $0.27 per share, in fiscal 2010. As previously noted these
expenses are excluded from guidance.
Media, Licensing and Advertising. Based on the reclassification
discussed above, segment revenue in the first quarter was $15.1 million
compared to $16.1 million in the prior year period, due to lower sales
of interactive products through retail channels. Segment operating loss
was $3.7 million, an improvement of $1.1 million, reflecting improved
results from advertising sales and in Scholastic Entertainment, as well
as lower costs.
Other Financial Results. Corporate overhead in the quarter was
$23.5 million compared to $21.1 million in the prior year period. This
reflected higher severance of $4.3 million or $0.07 per share, compared
to $3.0 million or $0.05 per share in the prior year period, as well as
higher stock-based compensation expense of $4.9 million or $0.08 per
share, compared to $2.2 million or $0.03 per share a year ago. Net
inventories declined to $435.0 million from $471.0 million, reflecting
timing and more efficient purchasing in all areas of the Children's Book
Publishing and Distribution segment. As a result of lower working
capital usage and strong free cash flow over the past 12 months, net
debt (as defined) at quarter end was $236.4 million, down $164.3 million
from a year ago.
Conference Call
The Company will hold a conference call to discuss its results at 8:30
am ET today, September 24, 2009. Scholastic's Chairman, President and
CEO, Richard Robinson, and Executive Vice President, CAO and CFO,
Maureen O'Connell, will moderate the call.
The conference call and accompanying slides will be webcast and
accessible through the Investor Relations section of Scholastic's
website, investor.scholastic.com.
Participation by telephone will be available by dialing (888) 857-6930
from within the U.S. or +1 (719) 457-2621 internationally. Shortly
following the call, an archived webcast and accompany slides from the
conference call will also be posted at investor.scholastic.com.
An audio only replay of the call will be available toll-free at (888)
203-1112 or, for international calls, at +1 (719) 457-0820 and by
entering access code 2714701. The recording will be available through
Friday, November 6, 2009.
About Scholastic
Scholastic Corporation (NASDAQ:SCHL) is the world's largest publisher
and distributor of children's books and a leader in educational
technology and children's media. 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 and school-based
book fairs, retail stores, schools, libraries, 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
8/31/2009 8/31/2008
Revenues $315.6 $276.4
Operating costs and expenses:
Cost of goods sold 156.1 146.0
Selling, general and administrative expenses 178.0 175.9
Bad debt expense 2.1 1.1
Depreciation and amortization 14.7 15.7
Total operating costs and expenses 350.9 338.7
Operating loss (35.3 ) (62.3 )
Other income (1) 0.9 -
Interest expense, net 3.9 5.9
Loss from continuing operations before income taxes (38.3 ) (68.2 )
Benefit for income taxes (13.7 ) (25.3 )
Loss from continuing operations (24.6 ) (42.9 )
Earnings (loss) from discontinued operations, net of tax (2) 1.6 (6.2 )
Net loss ($23.0 ) ($49.1 )
Basic and diluted earnings (loss) per Share of Class A and Common Stock:
Basic:
Loss from continuing operations (0.68 ) (1.13 )
Earnings (loss) from discontinued operations, net of tax 0.05 (0.17 )
Net loss (0.63 ) (1.30 )
Diluted:
Loss from continuing operations (0.68 ) (1.13 )
Earnings (loss) from discontinued operations, net of tax 0.05 (0.17 )
Net loss (0.63 ) (1.30 )
Basic weighted average shares outstanding 36.4 37.9
Diluted weighted average shares outstanding 36.6 38.1
(1) Other income for the three months ended August 31, 2009 was $0.9 which related to a gain on the repurchase of 5% Notes on the open market.
(2) In fiscal 2008, the Company determined to sell or shut down its domestic, Canadian and UK continuities businesses, and intends to sell a related warehousing and distribution facility located in Maumelle, Arkansas and an office and distribution facility in Danbury, Connecticut. During fiscal 2009, the Company also ceased its operations in Argentina and Mexico, its door-to-door selling operations in Puerto Rico as well as its continuities business in Australia and New Zealand, its corporate book fairs business and closed its Scarsdale, NY store. The Company also sold a trade magazine. Additionally, the Company sold a non-core market research business and a non-core on-line resource for teachers business and intends to sell a Spanish language book channel. All of the above businesses are classified as discontinued operations in the Company's financial statements.
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SCHOLASTIC CORPORATION
RESULTS OF CONTINUING OPERATIONS - SEGMENTS
(UNAUDITED)
(Amounts in millions)
THREE MONTHS ENDED
8/31/2009 (1 ) 8/31/2008 (1 ) Change
Children's Book Publishing & Distribution (2)
Revenue
Book Clubs $8.2 $8.8 ($0.6 ) (7 %)
Trade 49.6 39.7 9.9 25 %
Book Fairs 18.4 12.6 5.8 46 % A service of YellowBrix, Inc.
