What changed in this filing

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Item 1. Financial Statements

2021-03-19 compared with 2020-12-18 · 231 added, 192 removed, 596 unchanged (42% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended Six months ended

November 30, November 30, November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

5 unchanged sentences

Severance 1.0 4.5 18.3 10.7

Asset impairments and write downs 10.9 40.0 10.9 40.0

Total operating costs and expenses 301.7 433.3 931.3 1,245.4

15 unchanged sentences

(Dollar amounts in millions)

Three months ended Six months ended

November 30, November 30, November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

11 unchanged sentences

(Dollar amounts in millions, except per share data)

November 30, 2020 (unaudited) May 31, 2020 (audited) November 30, 2019 (unaudited)

February 28, 2021 (unaudited) May 31, 2020 (audited) February 29, 2020 (unaudited)

Current Assets:

87 unchanged sentences

Balance at November 30, 2019 1.7 $ 0.0 33.0 $ 0.4 $ 621.3 $ ( 57.4 ) $ 1,014.7 $ ( 319.0 ) $ 1,260.0 $ 1.3 $ 1,261.3

Net Income (loss) — — — — — — ( 43.3 ) — ( 43.3 ) 0.1 ( 43.2 )

Foreign currency translation adjustment — — — — — ( 2.3 ) — — ( 2.3 ) — ( 2.3 )

Pension and post-retirement adjustments (net of tax of $ 0.0 )

— — — — — 0.3 — — 0.3 — 0.3

Stock-based compensation — — — — 0.7 — — — 0.7 — 0.7

Proceeds pursuant to stock-based compensation plans — — — — 0.4 — — — 0.4 — 0.4

Purchases of treasury stock at cost — — ( 0.4 ) — — — — ( 13.0 ) ( 13.0 ) — ( 13.0 )

Treasury stock issued pursuant to equity-based plans — — 0.0 — ( 0.5 ) — — 0.8 0.3 — 0.3

Dividends ($ 0.15 per share)

— — — — — — ( 5.2 ) — ( 5.2 ) — ( 5.2 )

Balance at February 29, 2020 1.7 $ 0.0 32.6 $ 0.4 $ 621.9 $ ( 59.4 ) $ 966.2 $ ( 331.2 ) $ 1,197.9 $ 1.4 $ 1,199.3

See accompanying notes

SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED (Dollar amounts in millions, except per share data)

Class A Stock Common Stock Additional Paid-in Capital Accumulated

26 unchanged sentences

Balance at November 30, 2020 1.7 $ 0.0 32.6 $ 0.4 $ 624.3 $ ( 41.7 ) $ 933.1 $ ( 329.7 ) $ 1,186.4 $ 1.5 $ 1,187.9

Net Income (loss) — — — — — ( 13.9 ) — ( 13.9 ) ( 0.1 ) ( 14.0 )

Foreign currency translation adjustment — — — — — 6.3 — — 6.3 — 6.3

Pension and post-retirement adjustments (net of tax of $ 0.1 )

— — — — — 0.0 — — 0.0 — 0.0

Stock-based compensation — — — — 1.5 — — — 1.5 — 1.5

Treasury stock issued pursuant to equity-based plans — — 0.1 — ( 0.4 ) — — 0.8 0.4 — 0.4

Dividends ($ 0.15 per share)

— — — — — — ( 5.3 ) — ( 5.3 ) — ( 5.3 )

Balance at February 28, 2021 1.7 $ 0.0 32.7 $ 0.4 $ 625.4 $ ( 35.4 ) $ 913.9 $ ( 328.9 ) $ 1,175.4 $ 1.4 $ 1,176.8

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions)

Six months ended

November 30, November 30,

Nine months ended

February 28, February 29,

Cash flows - operating activities:

10 unchanged sentences

Income from equity-method investments ( 6.1 ) ( 3.6 )

Non cash write off related to asset impairments and write downs 10.9 40.0

(Gain) loss on sale of assets ( 10.4 ) —

16 unchanged sentences

Acquisition of land — ( 3.3 )

Other investment and acquisition-related payments 0.1 ( 1.2 )

Net cash provided by (used in) investing activities ( 34.9 ) ( 74.4 )

6 unchanged sentences

Payment of dividends ( 15.4 ) ( 15.7 )

Other — ( 0.2 )

Net cash provided by (used in) financing activities ( 46.2 ) ( 39.7 )

26 unchanged sentences

Trade sales can vary throughout the year due to varying release dates of published titles.

While the Company generally experiences a loss from operations in the first and third quarters of each fiscal year, the second quarter of fiscal 2021, ending November 30, 2020, which is traditionally an income quarter, was negatively impacted by the COVID-19 pandemic, particularly in the book fairs channel.

Presently, there remain many uncertainties concerning the timing of and any patterns which may emerge from school instruction, whether in-school, remote or hybrid, for the remaining school year, and the nature and continuing magnitude of the negative impact of COVID-19 into and beyond the third quarter of fiscal 2021 will depend on the actual timing and emerging patterns of such school instruction throughout the United States.

Presently, there remain many uncertainties concerning the timing of and any patterns which may emerge with respect to school instruction, whether in-school, remote or hybrid for the remaining school year, and the nature and continuing magnitude of the negative impact of COVID-19 into and beyond the fourth quarter of fiscal 2021.

Use of estimates

11 unchanged sentences

• Royalty advance reserves and royalty expense accruals

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

• Impairment testing for goodwill, intangible and other long-lived assets and investments

2 unchanged sentences

• Allocation of transaction price to performance obligations

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Sale of Long-lived Assets

During the second quarter of fiscal 2021, there were no sales of long-lived assets.

During the third quarter of fiscal 2021, the Company sold the UK distribution center located in Southam.

The long-lived assets related to the Southam facility, which consisted of land, building and building improvements, were included in the International segment.

The assets had a carrying value of $ 1.3 and were classified as held for sale as of the fiscal year ended May 31, 2020.

The net proceeds from the sale were $ 5.1 and the Company recognized a gain on sale of $ 3.8 .

This amount is included within Gain (loss) on sale of assets and other within the Company's Condensed Consolidated Statements of Operations.

During the first quarter of fiscal 2021, the company-owned facility located in Danbury, Connecticut was sold and the Company relocated the book fairs warehousing and distribution operations conducted in Danbury to a warehouse in Allentown, Pennsylvania.

The long-lived assets related to the Danbury facility, which consisted of land, building, and building improvements, were included in the Overhead segment.

These assets had a carrying value of $ 5.7 and were classified as held for sale for the fiscal year ended May 31, 2020.

These assets had a carrying value of $ 5.7 and were classified as held for sale as of the fiscal year ended May 31, 2020.

The net proceeds from the sale were $ 12.3 and the Company recognized a gain on sale of $ 6.6 .

1 unchanged sentence

Assets Held For Sale

The Company committed to a plan to sell the UK distribution centers located in Witney and Southam to consolidate the operations into a new facility in Warwickshire which is currently under construction.

During the third quarter of fiscal 2021, the Company committed to a plan to sell the office building located in Lake Mary, FL and relocate to a leased office space as part of the initiative to reduce future operating costs.

These assets are included in the Children's Book Publishing and Distribution segment.

During the third quarter of fiscal 2020, the Company committed to a plan to sell the UK distribution center located in Witney to consolidate the operations into a new facility in Warwickshire.

These assets are included in the International segment.

The Company expects the sale of these facilities to be completed within one year and to recognize a gain on sale.

The Company expects the sale of these facilities to result in a gain on sale.

The long-lived assets which consist of land, building, and building improvements are classified as held for sale.

These assets are carried at the lower of carrying value or fair value less costs to sell and no additional depreciation is being recognized.

As of November 30, 2020, the carrying amounts totaled $ 3.3 which are included in Property, plant and equipment, net within the Company's Condensed Consolidated Balance Sheets.

The Company will continue to identify opportunities to reduce its real estate footprint related to owned and leased properties.

As of February 28, 2021, the carrying amounts were $ 4.1 and $ 2.2 for the Lake Mary and Witney facilities, respectively, which are included in Property, plant and equipment, net within the Company's Condensed Consolidated Balance Sheets.

New Accounting Pronouncements

There were no new accounting pronouncements in the second fiscal quarter of 2021 which would impact the Company.

There were no new accounting pronouncements in the third fiscal quarter of 2021 which would impact the Company.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2020 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.

16 unchanged sentences

The following table presents the Company’s disaggregated revenues by region and domestic channel:

Three months ended Six months ended

November 30, November 30, November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

11 unchanged sentences

Estimated Returns

A liability for expected returns of $ 54.5 , $ 43.5 , and $ 42.4 is recorded within Other accrued expenses as of November 30, 2020, May 31, 2020, and November 30, 2019, respectively.

In addition, a return asset of $ 3.3 , $ 2.7 , and $ 2.6 is recorded within Prepaid expenses and other current assets as of November 30, 2020, May 31, 2020, and November 30, 2019, respectively, for the recoverable cost of product estimated to be returned by customers.

A liability for expected returns of $ 51.6 , $ 43.5 , and $ 40.6 is recorded within Other accrued expenses as of February 28, 2021, May 31, 2020, and February 29, 2020, respectively.

In addition, a return asset of $ 3.9 , $ 2.7 , and $ 2.5 is recorded within Prepaid expenses and other current assets as of February 28, 2021, May 31, 2020, and February 29, 2020, respectively, for the recoverable cost of product estimated to be returned by customers.

Deferred Revenue

1 unchanged sentence

These liabilities are recorded within Deferred revenue on the Company's Condensed Consolidated Balance Sheets and are classified as short term, as substantially all of the associated performance obligations are expected to be satisfied, and related revenue recognized, within one year.

The Company recognized revenue which was included in the opening deferred revenue balance in the amount of $ 24.2 and $ 46.9 for the three months ended November 30, 2020 and November 30, 2019, respectively, and $ 41.1 and $ 74.0 for the six months ended November 30, 2020 and November 30, 2019, respectively.

The Company recognized revenue which was included in the opening deferred revenue balance in the amount of $ 15.5 and $ 33.0 for the three months ended February 28, 2021 and February 29, 2020, respectively, and $ 56.6 and $ 107.0 for the nine months ended February 28, 2021 and February 29, 2020, respectively.

Allowance for Credit Losses

14 unchanged sentences

Balance as of November 30, 2020 $ 21.2

Current period provision ( 0.1 )

Write-offs and other ( 2.1 )

Balance as of February 28, 2021 $ 19.0

SEGMENT INFORMATION

7 unchanged sentences

This segment is comprised of three operating segments.

The following table sets forth information for the Company's segments for the fiscal quarters ended November 30, 2020 and November 30, 2019:

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table sets forth information for the Company's segments for the fiscal quarters ended February 28, 2021 and February 29, 2020:

Distribution Education Overhead (1)

1 unchanged sentence

Three months ended

November 30, 2020

February 28, 2021

Revenues $ 141.3 $ 66.3 $ — $ 207.6 $ 69.9 $ 277.5

2 unchanged sentences

6.2 3.1 11.2 20.5 1.7 22.2

Asset impairments and write downs 2.4 — 8.5 10.9 — 10.9

Segment operating income (loss) ( 6.6 ) 10.1 ( 26.6 ) ( 23.1 ) ( 1.1 ) ( 24.2 )

2 unchanged sentences

Three months ended

November 30, 2019

February 29, 2020

Revenues $ 220.2 $ 74.3 $ — $ 294.5 $ 78.8 $ 373.3

2 unchanged sentences

6.7 3.3 10.8 20.8 1.9 22.7

Asset impairments and write downs — — 40.0 40.0 — 40.0

Segment operating income (loss) 2.2 9.8 ( 68.3 ) ( 56.3 ) ( 3.7 ) ( 60.0 )

4 unchanged sentences

(Dollar amounts in millions, except per share data)

The following table sets forth information for the Company's segments for the fiscal periods ended November 30, 2020 and November 30, 2019:

The following table sets forth information for the Company's segments for the fiscal periods ended February 28, 2021 and February 29, 2020:

Distribution Education Overhead (1)

Domestic International Total

Six months ended

November 30, 2020

Nine months ended

February 28, 2021

Revenues $ 472.5 $ 187.4 $ — $ 659.9 $ 239.0 $ 898.9

2 unchanged sentences

19.4 9.5 34.6 63.5 4.8 68.3

Asset impairments and write downs 2.4 — 8.5 10.9 — 10.9

Segment operating income (loss) 1.9 19.8 ( 77.4 ) ( 55.7 ) 23.3 ( 32.4 )

Segment assets at November 30, 2020 607.1 212.8 957.4 1,777.3 329.6 2,106.9

Goodwill at November 30, 2020 47.3 68.2 — 115.5 10.1 125.6

Segment assets at February 28, 2021 562.0 206.8 953.3 1,722.1 312.9 2,035.0

Goodwill at February 28, 2021 47.6 68.3 — 115.9 10.1 126.0

Expenditures for other noncurrent assets (3)

31.0 10.0 27.7 68.7 9.1 77.8

Other non-current assets at November 30, 2020 (3)

171.0 123.7 487.2 781.9 86.4 868.3

Six months ended

November 30, 2019

Other noncurrent assets at February 28, 2021 168.7 124.1 482.9 775.7 88.3 864.0

Nine months ended

February 29, 2020

Revenues $ 743.4 $ 192.6 $ — $ 936.0 $ 267.1 $ 1,203.1

2 unchanged sentences

19.9 9.8 32.7 62.4 5.4 67.8

Asset impairments and write downs — — 40.0 40.0 — 40.0

Segment operating income (loss) 70.1 2.6 ( 119.3 ) ( 46.6 ) 4.3 ( 42.3 )

Segment assets at November 30, 2019 674.6 196.1 846.8 1,717.5 314.2 2,031.7

Goodwill at November 30, 2019 47.2 68.2 — 115.4 10.0 125.4

Segment assets at February 29, 2020 594.1 208.5 853.9 1,656.5 291.9 1,948.4

Goodwill at February 29, 2020 47.1 68.2 — 115.3 10.0 125.3

Expenditures for other noncurrent assets (3)

40.2 15.0 37.6 92.8 18.1 110.9

Other non-current assets at November 30, 2019 (3)

219.6 122.4 514.3 856.3 98.6 954.9

Other noncurrent assets at February 29, 2020 183.0 123.1 499.1 805.2 76.6 881.8

(1) Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets.

Unallocated assets are principally comprised of deferred income taxes and property, plant and equipment related to the Company’s headquarters in the metropolitan New York area, its fulfillment and distribution facilities located in Missouri, and certain technology assets.

(2) Includes depreciation of property, plant and equipment and amortization of intangible assets, prepublication costs and cloud computing costs.

(2) Includes depreciation of property, plant and equipment and amortization of intangible assets, prepublication costs, deferred financing costs and cloud computing costs.

(3) Other noncurrent assets include property, plant and equipment, prepublication assets, cloud computing costs, royalty advances, goodwill, intangible assets and investments.

Expenditures for other noncurrent assets for the International segment include expenditures for long-lived assets of $ 1.5 and $ 4.2 for the three months ended November 30, 2020 and 2019, respectively, and $ 3.5 and $ 9.9 for the six months ended November 30, 2020 and 2019.

Other noncurrent assets for the International segment include long-lived assets of $ 46.6 and $ 66.8 as of November 30, 2020 and 2019, respectively.

Expenditures for other noncurrent assets for the International segment include expenditures for long-lived assets of $ 1.4 and $ 4.3 for the three months ended February 28, 2021 and February 29, 2020, respectively, and $ 4.9 and $ 14.2 for the nine months ended February 28, 2021 and February 29, 2020.

Other noncurrent assets for the International segment include long-lived assets of $ 46.5 and $ 44.1 as of February 28, 2021 and February 29, 2020, respectively.

ASSET WRITE DOWN

During the third quarter of fiscal 2021, the Company committed to a plan to cease use of certain leased office space in New York City and consolidate into the company-owned New York headquarters building.

The right-of-use (ROU) assets and the other long-lived assets associated with these operating leases are included in the Overhead segment.

An impairment expense of $ 8.5 was recognized in the current period, of which $ 7.0 related to the ROU assets and $ 1.5 related to other long-lived assets, primarily leasehold improvements.

Also during the third quarter of fiscal 2021, the Company committed to a plan to permanently close 12 of the 54 book fairs warehouses in the U.S.

as part of a branch consolidation project.

The ROU assets and the other long-lived assets

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

associated with these warehouse operating leases are included in the Children’s Book Publishing and Distribution segment.

An impairment expense of $ 2.4 was recognized in the current period, primarily related to the ROU assets.

The impact of the total $ 10.9 impairment was a loss per basic and diluted share of Class A and Common Stock of $ 0.23 in the three and nine month periods ended February 28, 2021.

During the third quarter of fiscal 2020, the Company implemented new systems, processes and a centralized management structure to better coordinate demand planning and procurement activity across North America, and optimized inventory utilization and management.

As a result of the foregoing, the Company determined that substantial quantities of inventory were not required to meet future profitable demand, and were donated, liquidated or disposed.

Accordingly, a $ 40.0 non cash write down was recognized in the prior period for this excess inventory and associated costs.

The inventory cost, net of reserves, was $ 37.6 .

In addition, $ 1.6 and $ 0.8 of author advances and prepublication costs, respectively, were written down as they were directly related to the inventory.

The related impact was a loss per basic and diluted share of Class A and Common Stock of $ 0.84 in the three and nine month periods ended February 29, 2020.

The following table summarizes the carrying value of the Company's debt as of the dates indicated:

November 30, 2020 May 31, 2020 November 30, 2019

February 28, 2021 May 31, 2020 February 29, 2020

US Revolving Loan $ 175.0 $ 200.0 $ —

Unsecured lines of credit (weighted average interest rates of 4.4 %, 4.6 % and 3.8 %, respectively)

Unsecured lines of credit 8.5 7.9 9.7

UK Loan 7.2 10.6 6.4

2 unchanged sentences

Total long-term debt $ — $ 210.6 $ 6.4

The following table sets forth the maturities of the carrying values of the Company’s debt obligations as of November 30, 2020 for the twelve-month periods ended November 30:

Total debt $ 194.8

The Company's debt obligations as of February 28, 2021 have maturities of one year or less.

US Loan Agreement

On December 16, 2020, the Company entered into an amendment to its existing loan agreement, which includes adjustments to, and suspension of, certain covenant thresholds, as well as a reduction in maximum commitments to $ 250.0 .

The amendment was executed in order to avoid noncompliance with certain covenants in the existing agreement at November, 30, 2020 due to the temporary impacts of COVID-19.

Refer to Note 17, Subsequent Events, for further discussion of Amendment No.

1 to the Loan Agreement which temporarily supersedes certain terms described below for the existing loan agreement.

On January 5, 2017, Scholastic Corporation and Scholastic Inc.

(each, a “Borrower” and together, the “Borrowers”) entered into a 5-year credit facility with certain banks (the “Loan Agreement”).

The Loan Agreement replaced the Company's then existing loan agreement and has substantially similar terms, except that:

• the borrowing limit was reduced to $ 375.0 from $ 425.0 ;

• the “starter” basket for permitted payments of dividends and other payments in respect of capital stock

was increased to $ 275.0 from $ 75.0 ;

• the maturity date was extended to January 5, 2022.

The prior loan agreement, which was originally entered into in 2007 and had a maturity date of December 5, 2017, was terminated on January 5, 2017 in connection with the entry into the new Loan Agreement and was treated as a debt modification.

The Loan Agreement allows the Company to borrow, repay or prepay and reborrow at any time prior to the January 5, 2022 maturity date.

Under the Loan Agreement, interest on amounts borrowed thereunder is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrower at the time each advance is made).

The interest pricing under the Loan Agreement is dependent upon the Borrower’s election of a rate that is either:

• A Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus 0.50 % or (iii) the Eurodollar Rate for a one month interest period plus 1.00 % plus, in each case, an applicable spread ranging from 0.175 % to 0.60 %, as determined by the Company’s prevailing consolidated debt to total capital ratio.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

• A Eurodollar Rate equal to the London interbank offered rate (LIBOR) plus an applicable spread ranging from 1.175 % to 1.60 %, as determined by the Company’s prevailing consolidated debt to total capital ratio.

As of November 30, 2020, the indicated spread on Base Rate Advances was 0.175 % and the indicated spread on Eurodollar Advances was 1.175 %, both based on the Company’s prevailing consolidated debt to total capital ratio.

The Loan Agreement also provides for the payment of a facility fee in respect of the aggregate amount of revolving credit commitments ranging from 0.20 % to 0.40 % per annum based upon the Company’s prevailing consolidated debt to total capital ratio.

At November 30, 2020, the facility fee rate was 0.20 %.

Scholastic Corporation and Scholastic Inc.

(each, a “Borrower” and together, the “Borrowers”) are parties to a 5-year credit facility with certain banks (the “Loan Agreement”) with a maturity date of January 5, 2022.

The Loan Agreement allows the Company to borrow, repay or prepay and reborrow at any time prior to the maturity date.

On December 16, 2020, the Company entered into an amendment to the Loan Agreement (the "Amendment") with a syndicate of banks and Bank of America, N.A., as administrative agent (the "Agent").

The Amendment was accounted for as a debt modification.

The principal terms of the credit agreement, as modified, include the following:

• the aggregate maximum commitments of the lenders is $ 250.0 , a reduction from the $ 375.0 pre-amendment commitme nts, o f which a maximum of $ 225.0 is available until the Company satisfies the pre-amendment covenants in the credit agreement;

• the pre-amendment covenants include interest coverage and leverage ratio tests, in which the minimum interest coverage covenant is suspended until after the end of the Company’s fourth fiscal quarter ending May 31, 2021.

In addition, the Company is subject to a new covenant requiring Consolidated Liquidity (as defined) of a minimum amount of $ 200.0 ;

• the securitization of the Company’s inventory and accounts receivable;

• a modified limitation on asset sales (not to exceed 10 % of Consolidated Total Assets, as defined, excluding sale of collateral);

• a facility fee rate of 0.40 %;

• a limitation on Acquisitions (as defined) to an aggregate amount of $ 25.0 per fiscal year;

• the interest pricing is dependent upon the Borrower’s election of a rate that is either:

◦ a Eurodollar Rate equal to the London interbank offered rate (LIBOR), subject to a minimum of 0.25 %, plus a spread equal to 2.25 %, until receipt of the Company's financial statements and related certificates for the fiscal year ending May 31, 2021, and a spread of 1.60 % for any Eurodollar Rate Advance drawn after the delivery by the Company of its financial statements and related certificates for the fiscal year ending May 31, 2021;

◦ a Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus 0.50 % or (iii) the Eurodollar Rate for a one month interest period plus 1.00 % plus, in each case, a spread equal to 1.25 %, until receipt of the Company's financial statements and related certificates for the fiscal year ending May 31, 2021, and a spread of 0.60 % for any Base Rate Advance drawn after the delivery by the Company of its financial statements and related certificates for the fiscal year ending May 31, 2021;

• a limit on quarterly cash dividends of $ 5.2 per fiscal quarter plus the dollar amount of all cash dividends payable (at the rate applicable as of December 16, 2020) in such fiscal quarter in respect of capital stock of the Company issued after December 16, 2020 as a result of the regular vesting or exercise of issued and outstanding stock awards in the normal course of business.

Other restricted payments (e.g., for share repurchases, etc.) are limited to the "builder basket" and leverage construct in the pre-amendment credit agreement together with an additional requirement that the Company have Consolidated Liquidity (as defined) that exceeds $ 300.0 .

Prior to the Agent's receipt of the Company's financial statements for the fiscal year ending May 31, 2021, use of this restricted payment basket (apart from dividends) is capped at $ 30.0 ;

• a portion of the revolving credit facility, up to a maximum of $ 50.0 , is available for the issuance of letters of credit.

In addition, a portion of the revolving credit facility, up to a maximum of $ 15.0 , is available for swingline loans.

The Loan Agreement has an accordion feature which permits the Company, provided certain conditions are satisfied, to increase the facility by up to an additional $ 150.0 .

As of November 30, 2020, the Company had outstanding borrowings of $ 175.0 under the Loan Agreement.

The Company incurred this obligation in the fourth quarter of fiscal 2020 as a precautionary measure due to the uncertainty resulting from the COVID-19 pandemic.

Under the Loan Agreement, as amended, interest on amounts borrowed is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrower at the time each advance is made).

As of February 28, 2021, the all-in borrowing rate on the outstanding borrowings was 2.50 %.

As of February 28, 2021, the Company had outstanding borrowings of $ 175.0 under the Loan Agreement.

As of the third quarter of fiscal 2021, all outstanding borrowings under the Loan Agreement are classified as current.

The Company's current outstanding borrowings were incurred in the fourth quarter of fiscal 2020 as a precautionary measure due to the uncertainty resulting from the COVID-19 pandemic.

While this obligation is not due until the January 5, 2022 maturity date, the Company may, from time to time, make payments to reduce this obligation when cash from operations becomes available for this purpose.

No borrowings were outstanding under the Loan Agreement as of November 30, 2019.

At November 30, 2020, the Company had open standby letters of credit totaling $ 4.3 issued under certain credit lines, including $ 0.4 under the Loan Agreement and $ 3.9 under the domestic credit lines discussed below.

The Company intends to extend the current Loan Agreement, or enter into a new long-term agreement, prior to its expiration on January 5, 2022.

No borrowings were outstanding under the Loan Agreement as of February 29, 2020.

The Company was in compliance with required covenants for all periods presented.

The Amendment suspended the minimum interest coverage covenant until after the end of the Company’s fourth fiscal quarter ending May 31, 2021.

At February 28, 2021, the Company had open standby letters of credit totaling $ 4.3 issued under certain credit lines, including $ 0.4 under the Loan Agreement and $ 3.9 under the domestic credit lines discussed below.

UK Loan Agreement

On September 23, 2019, Scholastic Limited UK entered into a term loan agreement to borrow £ 2.0 to fund a land purchase in connection with the construction of a new UK facility.

On January 24, 2020, Scholastic Limited UK entered into a term loan facility with a borrowing limit of £ 6.6 to fund the construction of the new UK facility in Warwickshire.

The loan has a maturity date of July 31, 2021.

2 unchanged sentences

The Base Rate is currently equal to 0.10 % per annum and is subject to change.

As of November 30, 2020, the Company had $ 2.7 outstanding on the loan.

On January 24, 2020, Scholastic Limited UK entered into a term loan facility with a borrowing limit of £ 6.6 to fund the construction of the new UK facility.

As of February 28, 2021, the Company had $ 4.4 outstanding on the loan and $ 4.7 remaining available credit under this facility.

On September 23, 2019, Scholastic Limited UK entered into a term loan agreement to borrow £ 2.0 to fund a land purchase in connection with the construction of the new UK facility in Warwickshire.

The loan has a maturity date of July 31, 2021.

2 unchanged sentences

The Base Rate is currently equal to 0.10 % per annum and is subject to change.

As of November 30, 2020, the Company had $ 8.7 outstanding on the loan and no remaining available credit under this facility.

As of February 28, 2021, the Company had $ 2.8 outstanding on the loan.

Lines of Credit

As of November 30, 2020, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $ 10.0 .

There were no outstanding borrowings under these credit lines as of November 30, 2020, May 31, 2020 and November 30, 2019.

As of November 30, 2020, availability under these unsecured money market bid rate credit lines totaled $ 6.1 .

As of February 28, 2021, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $ 10.0 .

There were no outstanding borrowings under these credit lines as of February 28, 2021, May 31, 2020 and February 29, 2020.

As of February 28, 2021, availability under these unsecured money market bid rate credit lines totaled $ 6.1 .

All loans made under these credit lines are at the sole discretion of the lender and at an interest rate and term agreed to at the time each loan is made, but not to exceed 365 days.

These credit lines may be renewed, if requested by the Company, at the option of the lender.

As of November 30, 2020, the Company had various local currency international credit lines totaling $ 36.7 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 8.4 at November 30, 2020 at a weighted average interest rate of 4.4 %, $ 7.9 at May 31, 2020 at a weighted average interest rate of 4.6 %, and $ 13.5 at November 30, 2019 at a weighted average interest rate of 3.8 %.

As of November 30, 2020, the amounts available under these facilities totaled $ 28.3 .

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender.

As of February 28, 2021, the Company had various local currency international credit lines totaling $ 31.9 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 8.5 at February 28, 2021 at a weighted average interest rate of 4.6 %, $ 7.9 at May 31, 2020 at a weighted average interest rate of 4.6 %, and $ 9.7 at February 29, 2020 at a weighted average interest rate of 4.6 %.

As of February 28, 2021, the amounts available under these facilities totaled $ 23.4 .

These credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender.

COMMITMENTS AND CONTINGENCIES

The COVID-19 pandemic and actions taken, or which may be taken in the future following any easing of current restrictions based on the future course of the pandemic, by governments, businesses and individuals to limit the spread of the virus may continue to have an adverse effect on the Company’s results of operations and financial condition.

The Company is not currently aware of any loss contingencies related to the foregoing that would require recognition in the second quarter of fiscal 2021.

The Company is not currently aware of any loss contingencies related to the foregoing that would require recognition in the third quarter of fiscal 2021.

Legal Matters

4 unchanged sentences

The Company does not expect, in the case of those various claims and lawsuits arising in the normal course of business where a loss is considered probable or reasonably possible, that the reasonably possible losses from such claims and lawsuits (either individually or in the aggregate) would have a material adverse effect on the Company’s consolidated financial position or results of operations.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

EARNINGS (LOSS) PER SHARE

The following table summarizes the reconciliation of the numerators and denominators for the basic and diluted earnings (loss) per share computation for the periods indicated:

Three months ended Six months ended

November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

6 unchanged sentences

Diluted $ ( 0.41 ) $ ( 1.25 ) $ ( 0.54 ) $ ( 0.89 )

* The Company experienced a net loss for the six month period ended November 30, 2020 and therefore did not report any dilutive share impact.

Net income (loss) attributable to Class A and Common Stockholders excludes earnings of less than $ 0.1 and $ 0.1 for the three month periods ended November 30, 2020 and November 30, 2019, respectively, and less than $ 0.1 for the six month period ended November 30, 2019, for earnings attributable to participating restricted stock units.

The Company experienced a loss for the six month period ended November 30, 2020 and therefore did not allocate any loss to the participating restricted stock units.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

* The Company experienced a net loss for all periods presented and therefore did not report any dilutive share impact.

The Company experienced a loss for the three and nine month periods ended February 28, 2021 and February 29, 2020 and therefore did not allocate any loss to the participating restricted stock units.

The following table sets forth options outstanding pursuant to stock-based compensation plans as of the dates indicated:

November 30, 2020 November 30, 2019

February 28, 2021 February 29, 2020

Options outstanding pursuant to stock-based compensation plans (in millions) 5.1 3.0

On October 1, 2020, the Company made an additional stock option grant to employees as a non-cash incentive.

There were 2.8 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of November 30, 2020.

There were 2.5 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of February 28, 2021.

A portion of the Company’s Restricted Stock Units ("RSUs") which are granted to employees participate in earnings through cumulative dividends which are payable and non-forfeitable to the employees upon vesting of the RSUs.

Accordingly, the Company measures earnings per share based upon the lower of the Two-class method or the Treasury Stock method.

As of November 30, 2020, $ 67.3 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date.

As of February 28, 2021, $ 67.3 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date, subject to temporary limitations under the amended credit agreement as defined in Note 5, Debt.

See Note 12, Treasury Stock, for a more complete description of the Company’s share buy-back program.

2 unchanged sentences

The Company monitors impairment indicators in light of changes in market conditions, near and long-term demand for the Company’s products and other relevant factors.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table summarizes the activity in Goodwill for the periods indicated:

November 30, 2020 May 31, 2020 November 30, 2019

February 28, 2021 May 31, 2020 February 29, 2020

Gross beginning balance $ 164.5 $ 164.8 $ 164.8

6 unchanged sentences

The following table summarizes the activity in other intangibles included in Other assets and deferred charges on the Company’s Financial Statements for the periods indicated:

November 30, 2020 May 31, 2020 November 30, 2019

February 28, 2021 May 31, 2020 February 29, 2020

Beginning balance - Other intangibles subject to amortization $ 10.5 $ 12.2 $ 12.2

Additions — 1.6 1.6

Adjustments ( 0.5 ) — —

Amortization expense ( 1.7 ) ( 3.2 ) ( 2.4 )

4 unchanged sentences

Total other intangibles $ 10.9 $ 12.6 $ 13.6

There were no additions to intangible assets within the six months ended November 30, 2020.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

There were no additions to intangible assets within the nine months ended February 28, 2021.

In fiscal 2020, the Company purchased a U.S.-based book fair business resulting in $ 1.6 of amortizable intangible assets.

During the third quarter of fiscal 2021, the Company recorded a purchase accounting adjustment which decreased the amortizable intangible assets acquired by $ 0.5 .

Intangible assets with indefinite lives consist principally of trademark and tradename rights.

5 unchanged sentences

The following table summarizes the Company’s investments as of the dates indicated:

November 30, 2020 May 31, 2020 November 30, 2019 Segment

February 28, 2021 May 31, 2020 February 29, 2020 Segment

Equity method investments $ 33.8 $ 25.0 $ 26.4 International

3 unchanged sentences

Equity method income from this investment is reported in the International segment.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The Company has a 4.6 % ownership interest in a financing and production company that makes film, television, and digital programming designed for the youth market.

1 unchanged sentence

There have been no impairments or adjustments to the carrying value of this investment.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 4.6 and $ 2.0 for the three months ended November 30, 2020 and November 30, 2019, respectively, and $ 5.4 and $ 3.0 for the six months ended November 30, 2020 and November 30, 2019, respectively.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 0.7 and $ 0.6 for the three months ended February 28, 2021 and February 29, 2020, respectively, and $ 6.1 and $ 3.6 for the nine months ended February 28, 2021 and February 29, 2020, respectively.

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

November 30, November 30, November 30, November 30,

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

5 unchanged sentences

Total $ 0.1 $ 0.2 $ ( 0.2 ) $ 0.2

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

UK Pension Plan US Postretirement Benefits

Six months ended Six months ended

November 30, November 30, November 30, November 30,

Nine months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

6 unchanged sentences

The Company’s funding practice with respect to the UK Pension Plan is to contribute on an annual basis at least the minimum amounts required by applicable law.

For the six months ended November 30, 2020, the Company contributed $ 0.6 to the UK Pension Plan.

For the nine months ended February 28, 2021, the Company contributed $ 0.9 to the UK Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately $ 1.0 to the UK Pension Plan for the fiscal year ending May 31, 2021.

3 unchanged sentences

The related prior service credit will be amortized as a Component of net periodic benefit (cost) over the average remaining life expectancy of plan participants of approximately 12 years.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense included in Selling, general and administrative expenses for the periods indicated:

Three months ended Six months ended

November 30, November 30, November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

6 unchanged sentences

The following table sets forth Common Stock issued pursuant to stock-based compensation plans for the periods indicated:

Three months ended Six months ended

November 30, November 30, November 30, November 30,

Three months ended Nine months ended

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

Common Stock issued pursuant to stock-based compensation plans (in millions) 0.1 0.0 0.2 0.1

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

TREASURY STOCK

6 unchanged sentences

Less repurchases made under these authorizations $ ( 32.7 )

Remaining Board authorization at November 30, 2020 $ 67.3

Remaining Board authorization at November 30, 2020 represents the amount remaining under the Board authorization for Common share repurchases on March 21, 2018 and the current $ 50.0 Board authorization for Common share repurchases announced on March 18, 2020, which is available for further repurchases, from time to time as conditions allow, on the open market or through negotiated private transactions.

There were no repurchases of the Company's Common Stock for the three and six months ended November 30, 2020.

Remaining Board authorization at February 28, 2021 $ 67.3

Remaining Board authorization at February 28, 2021 represents the amount remaining under the Board authorization for Common share repurchases on March 21, 2018 and the current $ 50.0 Board authorization for Common share repurchases announced on March 18, 2020, which is available for further repurchases, from time to time as conditions allow, on the open market or through negotiated private transactions, subject to temporary limitations under the amended credit agreement as defined in Note 5, Debt.

There were no repurchases of the Company's Common Stock for the three and nine months ended February 28, 2021.

The Company’s repurchase program is temporarily suspended at this time due to COVID-19 uncertainties.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

T he following tables summarize the activity in Accumulated other comprehensive income (loss), net of tax, by component, for the periods indicated:

Three months ended November 30, 2020

Three months ended February 28, 2021

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at September 1, 2020 $ ( 39.3 ) $ ( 8.2 ) $ ( 47.5 )

Beginning balance at December 1, 2020 $ ( 38.9 ) $ ( 2.8 ) $ ( 41.7 )

Other comprehensive income (loss) before reclassifications 6.3 — 6.3

4 unchanged sentences

Other comprehensive income (loss) 6.3 0.0 6.3

Ending balance at November 30, 2020 $ ( 38.9 ) $ ( 2.8 ) $ ( 41.7 )

Three months ended November 30, 2019

Ending balance at February 28, 2021 $ ( 32.6 ) $ ( 2.8 ) $ ( 35.4 )

Three months ended February 29, 2020

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at September 1, 2019 $ ( 49.1 ) $ ( 12.4 ) $ ( 61.5 )

Beginning balance at December 1, 2019 $ ( 45.2 ) $ ( 12.2 ) $ ( 57.4 )

Other comprehensive income (loss) before reclassifications ( 2.3 ) — ( 2.3 )

2 unchanged sentences

Amortization of prior service credit (net of tax of $ 0.0 )

— ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) ( 2.3 ) 0.3 ( 2.0 )

Ending balance at November 30, 2019 $ ( 45.2 ) $ ( 12.2 ) $ ( 57.4 )

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Six months ended November 30, 2020

Ending balance at February 29, 2020 $ ( 47.5 ) $ ( 11.9 ) $ ( 59.4 )

Nine months ended February 28, 2021

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at June 1, 2020 $ ( 50.0 ) $ ( 8.3 ) $ ( 58.3 )

Other comprehensive income (loss) before reclassifications 11.1 5.3 16.4

Other comprehensive income (loss) before reclassifications (net of tax of $1.7) 17.4 5.3 22.7

Less amount reclassified from Accumulated other comprehensive income (loss):

3 unchanged sentences

Other comprehensive income (loss) 17.4 5.5 22.9

Ending balance at November 30, 2020 $ ( 38.9 ) $ ( 2.8 ) $ ( 41.7 )

Six months ended November 30, 2019

Ending balance at February 28, 2021 $ ( 32.6 ) $ ( 2.8 ) $ ( 35.4 )

Nine months ended February 29, 2020

Foreign currency translation adjustments Retirement benefit plans Total

6 unchanged sentences

Other comprehensive income (loss) ( 0.4 ) 0.7 0.3

Ending balance at November 30, 2019 $ ( 45.2 ) $ ( 12.2 ) $ ( 57.4 )

Ending balance at February 29, 2020 $ ( 47.5 ) $ ( 11.9 ) $ ( 59.4 )

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table presents the impact on earnings of reclassifications out of Accumulated other comprehensive income (loss) for the periods indicated:

Three months ended Six months ended Condensed Consolidated Statements of Operations line item

November 30, November 30, November 30, November 30,

Three months ended Nine months ended Condensed Consolidated Statements of Operations line item

February 28, February 29, February 28, February 29,

2021 2020 2021 2020

9 unchanged sentences

• Level 2 Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

• Level 3 Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.

7 unchanged sentences

• Long-lived assets

• Operating lease right-of-use (ROU) assets

• Investments

5 unchanged sentences

See Note 9, Investments, for a more complete description of the fair value measurements employed.

Operating lease ROU assets were recorded at fair value in connection with an impairment and fair value was determined using the discounted cash flow method.

See Note 4, Asset Write Down, for a more complete description of the impairment recognized.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

INCOME TAXES AND OTHER TAXES

7 unchanged sentences

to previous periods which were taxed at the higher 35% federal corporate tax rate and provisions related to the Employee Retention Credit, which was created by the CARES Act to encourage entities to keep employees on their payroll despite experiencing economic hardship due to the COVID-19 pandemic.

The Company is deferring employer-side social security payments which have resulted in a long term liability of $ 8.7 as of November 30, 2020.

The Company is deferring employer-side social security payments which have resulted in a current liability of $ 2.8 and a non-current liability of $ 4.8 as of February 28, 2021.

Internationally, the Company is applying for employee retention credits when applicable and appropriate.

5 unchanged sentences

While the Company does not anticipate a material impact on the overall income tax provision, the final regulations, specifically the high-tax exception, will reduce taxable income.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses.

2 unchanged sentences

The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.

The Company's interim effective tax rate, inclusive of discrete items, was 26.1 % for the three month period ended November 30, 2020 and 9.5 % for the six month period ended November 30, 2020.

The effective tax rate for the six month period ended November 30, 2020 varies from the statutory tax rate primarily due to employee stock option cancellations and additional GILTI inclusions.

The Company's interim effective tax rate, inclusive of discrete items, was 36.4 % for the three month period ended February 28, 2021 and 29.0 % for the nine month period ended February 28, 2021.

The Company recorded a benefit in the third quarter of fiscal 2021 related to the finalization of the fiscal 2020 U.S.

income tax return, which was partially offset by an estimated increase in GILTI for fiscal 2021, primarily associated with the Company's results in the UK.

The Company, including its domestic subsidiaries, files a consolidated U.S.

3 unchanged sentences

The Company has been notified by the IRS that there will be an examination of the income tax return for fiscal 2015.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Non-income Taxes

9 unchanged sentences

The Company marks-to-market these instruments and records the changes in the fair value of these items in Selling, general and administrative expenses and it recognizes the unrealized gain or loss in Other current assets or Other current liabilities.

The notional values of the contracts as of November 30, 2020 and November 30, 2019 were $ 29.2 and $ 26.0 , respectively.

A net unrealized loss of $ 1.1 and a net unrealized gain $ 0.3 were recognized for the six months ended November 30, 2020 and November 30, 2019, respectively.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The notional values of the contracts as of February 28, 2021 and February 29, 2020 were $ 26.5 and $ 26.0 , respectively.

A net unrealized loss of $ 1.6 and a net unrealized gain of $ 0.7 were recognized for the nine months ended February 28, 2021 and February 29, 2020, respectively.

OTHER ACCRUED EXPENSES

Other accrued expenses consisted of the following as of the dates indicated:

November 30, 2020 May 31, 2020 November 30, 2019

February 28, 2021 May 31, 2020 February 29, 2020

Accrued payroll, payroll taxes and benefits $ 37.5 $ 38.8 $ 39.6

6 unchanged sentences

SUBSEQUENT EVENTS

The Board declared a quarterly cash dividend of $ 0.15 per share on the Company’s Class A and Common Stock for the third quarter of fiscal 2021.

The dividend is payable on March 15, 2021 to shareholders of record as of the close of business on January 29, 2021.

On December 16, 2020, the Company and its principal operating subsidiary, Scholastic Inc., entered into an amendment to its existing credit agreement with a syndicate of banks and Bank of America, N.A., as administrative agent, which includes adjustments to, and suspension of, certain covenant thresholds.

The principal revised terms of the credit agreement effected by the amendment include the following:

• The aggregate maximum commitments of the lenders have been reduced to $ 250.0 , of which a maximum of $ 225.0 is available until the Company satisfies the pre-amendment covenants in the credit agreement and a new covenant requiring Consolidated Liquidity (as defined) of a minimum amount of $ 200.0 ;

• The minimum interest coverage covenant is suspended until after the end of the Company’s fourth fiscal quarter ending May 31, 2021;

• The securitization of the Company’s inventory and accounts receivable;

• A modified limitation on asset sales (not to exceed 10 % of Consolidated Total Assets, as defined, excluding sale of collateral);

• A facility fee rate of 0.40 %;

• A limitation on Acquisitions (as defined) to an aggregate amount of $ 25.0 per fiscal year;

• Modification of the interest rate and fees during the remaining period of the credit facility, pursuant to which the revised interest rate is equal to 2.25 % for any Eurodollar Rate Advance and 1.25 % with respect to any Base Rate Advance, until receipt of the Company's financial statements and related certificates for the fiscal year ending May 31, 2021, and 1.60 % for any Eurodollar Rate Advance and 0.60 % for any Base Rate Advance drawn after the delivery by the Company of its financial statements and related certificates for the fiscal year ending May 31, 2021.

• A limit on quarterly cash dividends of $ 5.2 per fiscal quarter plus the dollar amount of all cash dividends payable (at the rate applicable as of the First Amendment Effective Date) in such fiscal quarter in respect of capital stock of the Company issued after the First Amendment Effective Date as a result of the regular vesting or exercise of issued and outstanding stock awards in the normal course of business.

Prior to the Agent's receipt of the Company's financial statements for the fiscal year ending May 31, 2021, use of this restricted payment basket (apart from dividends) is capped at $ 30.0 .

The Board declared a quarterly cash dividend of $ 0.15 per share on the Company’s Class A and Common Stock for the fourth quarter of fiscal 2021.

The dividend is payable on June 15, 2021 to shareholders of record as of the close of business on April 30, 2021.

SCHOLASTIC CORPORATION

1 unchanged sentence

Overview and Outlook

Revenues for the second quarter ended November 30, 2020 were $406.2 million, compared to $597.2 million in the prior fiscal year quarter, a decrease of $191.0 million.

The Company reported net earnings per diluted share of Class A and Common Stock of $1.02 in the second quarter of fiscal 2021, compared to $2.02 in the prior fiscal year quarter.

During the second quarter ended November 30, 2020, the Company continued to reduce its operating costs, right-size its employee base, and match inventory purchases to customer demand to help mitigate the impact of lower fairs’ revenues on its profitability and cash position.

While the book fairs channel continued to have a significant decline in sales, as schools were generally not hosting in-person book fairs as a result of coronavirus concerns and restrictions and the resulting patterns of school instruction, operating income improved over the prior fiscal year quarter for a majority of the Company's other businesses in the U.S.

and internationally.

The trade channel continued to exceed prior fiscal year quarter results as new titles were released in the fiscal quarter ended November 30, 2020, including Dav Pilkey's Dog Man:

Grime and Punishment and The Ickabog ® by J.K.

Rowling, in addition to increased sales of other best-selling trade titles.

The Company also benefited from higher revenues within the Education segment, excluding the custom publishing magazine business which is winding down, from products including Grab and Go reading packs, teaching resources workbooks, and digital product subscriptions.

The Company has identified opportunities for additional savings in the second half of the fiscal year, which cost-cutting actions, along with the continued expectation of increased performance in the Company’s trade and education businesses, are expected to help mitigate the impact of lower expected book fairs revenues in the third fiscal quarter.

Scheduled new releases in the second half of fiscal 2021 are expected to continue to position the trade business for further growth, and the Company’s growing media and entertainment business, through its production partnerships and the licensing of the Company's content and characters, is expected to continue to complement the Company’s book sales.

Revenues for the third quarter ended February 28, 2021 were $277.5 million, compared to $373.3 million in the prior fiscal year quarter, a decrease of $95.8 million.

The Company reported net loss per diluted share of Class A and Common Stock of $0.41 in the third quarter of fiscal 2021, compared to net loss of $1.25 in the prior fiscal year quarter.

During the third quarter ended February 28, 2021, the Company's cost-saving initiatives partially offset the impact of the lower revenue levels primarily in the book fairs channel, as a large percentage of schools were still operating in remote or hybrid mode as a result of coronavirus concerns and restrictions.

The trade channel continued to exceed the prior fiscal year quarter as sales increased for frontlist titles such as Dav Pilkey's newly released Cat Kid Comic Club ® , as well as increased sales of book-based activity kits within the Klutz ® product line, as parents sought ways to keep their children engaged and learning while at home due to COVID.

Within the Education segment, revenues from teaching resources and digital education subscriptions continued to exceed the prior fiscal year quarter as sales increased for early readers, workbooks and digital subscription products.

The Company expects to have increasing opportunities to help students as they return to the classroom with the Company's rich and diverse print and digital content and through its school-based fair and club channels and curriculum services.

The Company expects to continue to reduce its cost base in response to lower expected revenues in the book fairs channels due to COVID-related school closings.

The trade channel is expected to be positioned for further growth as a result of scheduled new spring releases of frontlist titles from a number of the Company’s top-selling properties and authors, including Dav Pilkey and Wings of Fire™ author, Tui T.

Results of Operations

Revenues for the quarter ended November 30, 2020 decreased to $406.2 million, compared to $597.2 million in the prior fiscal year.

The Children's Book Publishing and Distribution segment revenues decreased by $173.3 million, primarily driven by lower book fairs channel revenues due to lower in-person fair count as schools were not hosting fairs on-site due to COVID-19, partially offset by increased trade channel revenues driven by the release of a number of best-selling frontlist titles combined with higher backlist sales from best-selling series.

In the Education segment, revenues decreased by $2.4 million, primarily due to the wind down of the custom publishing magazine business, partially offset by increased sales of Grab and Go reading packs and digital product subscriptions as well as higher sales in the teaching resources business.

In local currency, the International segment revenues decreased by $17.8 million, primarily driven by lower revenues in the book fairs channels in Canada and the UK and lower direct-to-home sales in Asia, partially offset by increased revenues in the trade channel across all international markets.

International segment revenues were impacted by favorable foreign exchange of $2.5 million in the quarter ended November 30, 2020.

Revenues for the six months ended November 30, 2020 decreased to $621.4 million, compared to $829.8 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues decreased by $192.0 million, primarily driven by lower book fairs channel revenues due to lower in-person fair count as schools were not hosting fairs on-site due to COVID-19, partially offset by increased trade channel revenues driven by the release of a number of best-selling frontlist titles combined with higher backlist sales from best-selling series.

In the Education segment, revenues increased by $2.8 million, primarily due to higher sales of digital products in literacy programs and take-home Grab and Go reading packs, as well as higher sales in the teaching resources business, partially offset by the wind down of the customer publishing magazine business.

In local currency, the International segment revenues decreased by $22.1 million, primarily driven by lower revenues in the school-based channels in Canada, lower book fairs channel revenues in the UK and lower direct-to-home sales in Asia, partially offset by increased revenues in the trade channel across all international markets.

Revenues for the quarter ended February 28, 2021 decreased to $277.5 million, compared to $373.3 million in the prior fiscal year.

The Children's Book Publishing and Distribution segment revenues decreased by $78.9 million, primarily driven by lower book fairs channel revenues due to a significantly lower in-person fair count as a result of the continued impact of COVID-19, partially offset by increased trade channel revenues driven by increased sales of frontlist titles.

In the Education segment, revenues decreased by $8.0 million, primarily due to lower sales of classroom magazines and the wind-down of the custom publishing business, partially offset by higher sales in the teaching resources and digital subscription lines of businesses.

In local currency, the International segment revenues decreased by $12.4 million, primarily driven by lower revenues in the school-based channels in Canada and the book fairs channel in the UK, as well as lower direct-to-home sales in Asia.

International segment revenues were impacted by favorable foreign exchange of $3.5 million in the quarter ended February 28, 2021.

Revenues for the nine months ended February 28, 2021 decreased to $898.9 million, compared to $1,203.1 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues decreased by $270.9 million, primarily driven by lower book fairs channel revenues due to the significantly lower in-person fair count as schools were not hosting fairs on-site due to COVID-19, partially offset by increased trade channel revenues driven by the release of a number of best-selling frontlist titles combined with higher backlist sales from best-selling series.

In the Education segment, revenues decreased by $5.2 million, primarily due to the wind-down of the custom publishing business and lower classroom magazine revenues, partially offset by higher sales in the teaching resources and digital subscription lines of business.

In local currency, the International segment revenues decreased by $34.5 million, primarily driven by lower revenues in the school-based channels in Canada, lower book fairs channel revenues in the UK and lower direct-to-home sales in Asia, partially offset by increased revenues in the trade channel in Canada, Australia and the UK.

International segment revenues were impacted by favorable foreign exchange of $6.4 million in the period.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements