What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-09-24 compared with 2021-03-19 · 204 added, 375 removed, 452 unchanged (56% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended Nine months ended

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

2021 2020 2021 2020

Three months ended

August 31, August 31,

Revenues $ 259.8 $ 215.2

3 unchanged sentences

Depreciation and amortization 14.9 15.5

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 291.8 272.2

15 unchanged sentences

(Dollar amounts in millions)

Three months ended Nine months ended

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

2021 2020 2021 2020

Three months ended

August 31, August 31,

Net income (loss) $ ( 24.4 ) $ ( 39.8 )

10 unchanged sentences

(Dollar amounts in millions, except per share data)

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

August 31, 2021 May 31, 2021 August 31, 2020

(unaudited) (audited) (unaudited)

Current Assets:

71 unchanged sentences

Stock-based compensation — — — — 0.6 — — — 0.6 — 0.6

Purchases of treasury stock at cost — — ( 0.3 ) — — — — ( 12.6 ) ( 12.6 ) — ( 12.6 )

Treasury stock issued pursuant to equity-based plans — — 0.0 — ( 0.2 ) — — 0.5 0.3 — 0.3

2 unchanged sentences

Balance at August 31, 2020 1.7 $ 0.0 32.5 $ 0.4 $ 622.8 $ ( 47.5 ) $ 903.1 $ ( 332.8 ) $ 1,146.0 $ 1.4 $ 1,147.4

Net Income (loss) — — — — — — 71.0 — 71.0 0.0 71.0

Foreign currency translation adjustment — — — — — 3.9 — — 3.9 — 3.9

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

— — — — — 0.2 — — 0.2 — 0.2

Stock-based compensation — — — — 0.9 — — — 0.9 — 0.9

Proceeds pursuant to stock-based compensation plans — — — — 0.3 — — — 0.3 — 0.3

Purchases of treasury stock at cost — — ( 0.1 ) — — — — ( 7.1 ) ( 7.1 ) — ( 7.1 )

Treasury stock issued pursuant to equity-based plans — — 0.0 — ( 2.1 ) — — 2.7 0.6 — 0.6

Dividends ($ 0.15 per share)

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

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

13 unchanged sentences

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

Proceeds pursuant to stock-based compensation plans — — — — 0.5 — — — 0.5 — 0.5

Treasury stock issued pursuant to equity-based plans — — 0.1 — ( 0.9 ) — — 1.5 0.6 — 0.6

2 unchanged sentences

Balance at August 31, 2021 1.7 $ 0.0 32.8 $ 0.4 $ 627.6 $ ( 40.4 ) $ 887.0 $ ( 326.3 ) $ 1,148.3 $ 1.3 $ 1,149.6

Net Income (loss) — — — — — — 35.1 — 35.1 0.1 35.2

Foreign currency translation adjustment — — — — — 0.4 — — 0.4 — 0.4

Pension and post-retirement adjustments (net of tax of $ 1.8 )

— — — — — 5.4 — — 5.4 — 5.4

Stock-based compensation — — — — 3.0 — — — 3.0 — 3.0

Treasury stock issued pursuant to equity-based plans — — 0.1 — ( 1.5 ) — — 3.1 1.6 — 1.6

Dividends ($ 0.15 per share)

— — — — — — ( 5.1 ) — ( 5.1 ) — ( 5.1 )

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)

Nine months ended

February 28, February 29,

Three months ended

August 31, August 31,

Cash flows - operating activities:

6 unchanged sentences

Depreciation and amortization 16.4 16.4

Amortization of pension and postretirement actuarial gains and losses 0.0 0.7

Amortization of pension and postretirement plans ( 0.0 ) 0.1

Deferred income taxes 0.0 0.1

1 unchanged sentence

Income from equity-method investments ( 1.1 ) ( 0.8 )

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

(Gain) loss on sale of assets — ( 6.6 )

9 unchanged sentences

Deferred revenue 26.9 10.1

Other assets and liabilities 14.4 ( 3.0 )

Other accrued expenses ( 32.5 ) 3.9

Other, net ( 2.8 ) 0.9

Net cash provided by (used in) operating activities 63.6 ( 26.0 )

3 unchanged sentences

Net proceeds from sale of assets — 12.3

Acquisition of land — ( 3.3 )

Other investment and acquisition-related payments 0.1 ( 1.2 )

Net cash provided by (used in) investing activities ( 14.5 ) ( 8.9 )

3 unchanged sentences

Repayment of capital lease obligations ( 0.6 ) ( 0.5 )

Reacquisition of common stock — ( 32.2 )

Proceeds pursuant to stock-based compensation plans 0.5 —

17 unchanged sentences

Certain prior period amounts have been reclassified to conform with the current year presentation.

Noncontrolling Interest

The Company owns a 95.0% majority ownership interest in Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing company.

The founder and chief executive officer of MBI retains a 5.0% noncontrolling ownership interest in MBI.

The Company fully consolidated MBI as of the acquisition date, and the 5.0% noncontrolling interest is classified within stockholder's equity.

Interim Financial Statements

5 unchanged sentences

however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the Financial Statements for the periods presented.

The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education businesses operate on a school-year basis;

The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions businesses operate on a school-year basis;

therefore, the Company’s business is highly seasonal.

1 unchanged sentence

Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session.

Education channel revenues are generally higher in the first and fourth quarters.

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

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.

Presently, there remain uncertainties concerning the timing of and any patterns which may emerge with respect to school instruction, whether in-school, remote or hybrid for the school year, and the nature and continuing magnitude of the negative impact of COVID-19 into and beyond the second quarter of fiscal 2022.

Use of estimates

3 unchanged sentences

On an on-going basis, the Company evaluates the adequacy of its reserves and the estimates used in these calculations, including, but not limited to:

• Accounts receivable allowance for doubtful accounts

• Accounts receivable allowance for credit losses

• Pension and postretirement benefit plans

2 unchanged sentences

• Inventory reserves

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

• Cost of goods sold from book fair operations during interim periods based on estimated gross profit rates

4 unchanged sentences

• Variable consideration related to anticipated returns

• Allocation of transaction price to performance obligations

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

• Allocation of transaction price to contractual performance obligations

Sale 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.

3 unchanged sentences

Assets Held For Sale

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.

During the third quarter of fiscal 2021, the Company committed to a plan to sell the office building located in Lake Mary, Florida 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.

4 unchanged sentences

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 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.

As of August 31, 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 third fiscal quarter of 2021 which would impact the Company.

There were no new accounting pronouncements issued in the first quarter of fiscal 2022 which would impact the Company.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.

Current Fiscal Year Adoptions:

In June 2016, the FASB issued ASU No.

2016-13, "Measurement of Credit Losses on Financial Instruments" (ASU 2016-13).

ASU 2016-13, which was further updated and clarified by the FASB through the issuance of additional related ASUs, amends the guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and debt securities, by requiring recognition of an allowance for credit losses expected to be incurred over an asset's lifetime based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability.

This "expected loss" model may result in earlier recognition of credit losses than the current "as incurred" model, under which losses were recognized only upon an occurrence of an event that gave rise to the incurrence of a probable loss.

The Company adopted ASU 2016-13 as of the beginning of the first quarter of fiscal 2021 which did not have a material impact on the Company’s Consolidated Financial Statements.

Refer to Note 2, Revenues, for further discussion of the Company's accounting policy and disclosures related to the allowance for credit losses.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test (comparison of implied fair value of goodwill with the carrying amount of that goodwill for a reporting unit).

Instead, an entity will measure its goodwill impairment by the amount the carrying value exceeds the fair value of a reporting unit.

The Company adopted ASU No.

2019-12 as of the beginning of the first quarter of fiscal 2022 which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

Most amendments within ASU No.

2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company adopted the applicable amendments of the ASU using the modified retrospective basis for those amendments that are not applied on a prospective basis.

The adoption of ASU No.

2019-12 did not have a material impact on the Company's Condensed Consolidated Financial Statements.

Prior Period Adjustments

During the first quarter of fiscal 2022, the Company determined that it is more appropriate for certain editorial costs to be included in Selling, general and administrative expenses rather than Cost of goods sold based on the nature of these costs and how management views the business.

As a result of this error in classification, Cost of goods sold was overstated and Selling, general and administrative expenses were understated by $37.8 as of May 31, 2021 and $41.7 as of May 31, 2020.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

The Company adopted ASU 2017-04 as of the beginning of the first quarter of fiscal 2021 which resulted in no impact to the Company's Consolidated Financial Statements.

In accordance with the provisions of SEC Staff Accounting Bulletin No.

108, the Company assessed the impact of these adjustments on prior period financial statements and concluded that these errors were not material individually or in the aggregate to any of the prior reporting periods.

To conform the prior periods to the current period presentation, the Company has adjusted the statement of operations for the periods ended May 31, 2021 and May 31, 2020 for the correction of the error and will make adjustments for future Form 10-Q and 10-K filings that include financial statements for the periods affected.

The adjustment resulted in a decrease in Cost of goods sold and an increase in Selling, general and administrative expenses in each of the periods presented.

There was no other impact to the financial statements.

The following table shows the adjusted Cost of goods sold and Selling, general and administrative expenses for those periods indicated:

Fiscal 2021 Fiscal Year Ended

May 31, 2021 Fiscal Year Ended

First Quarter Second Quarter Third Quarter Fourth Quarter

Cost of goods sold:

As previously reported $ 123.2 $ 199.3 $ 146.0 $ 198.0 $ 666.5 $ 751.0

Adjustment ( 8.2 ) ( 9.6 ) ( 10.1 ) ( 9.9 ) ( 37.8 ) ( 41.7 )

As adjusted $ 115.0 $ 189.7 $ 135.9 $ 188.1 $ 628.7 $ 709.3

Selling, general and administrative expenses:

As previously reported $ 133.5 $ 142.3 $ 130.1 $ 179.0 $ 584.9 $ 722.5

Adjustment 8.2 9.6 10.1 9.9 37.8 41.7

As adjusted $ 141.7 $ 151.9 $ 140.2 $ 188.9 $ 622.7 $ 764.2

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Disaggregated Revenue Data

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

Three months ended Nine months ended

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

2021 2020 2021 2020

Book Clubs $ 35.0 $ 43.4 $ 107.7 $ 137.3

Book Fairs 27.0 100.1 87.9 351.7

Trade 74.7 70.4 256.9 231.6

Education 66.2 74.3 187.0 192.5

Major Markets (1)

Effective June 1, 2021, the former “Education” reportable segment was renamed as the “Education Solutions” reportable segment, in connection with the consolidation of the segment’s multiple channels into a single Education Solutions group.

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

Three months ended

August 31, August 31,

Book Clubs - U.S.

Book Fairs - U.S.

Trade - International (1)

Total Children's Book Publishing and Distribution $ 115.8 $ 92.3

Education Solutions - U.S.

$ 80.1 $ 53.6

Other Markets (2)

Total Education Solutions $ 80.1 $ 53.6

International - Major Markets (2)

$ 47.5 $ 50.0

International - Other Markets (3)

Total International $ 63.9 $ 69.3

Total Revenues $ 259.8 $ 215.2

(1) Primarily includes foreign rights and certain product sales in the UK.

(2) Includes Canada, UK, Australia and New Zealand.

1 unchanged sentence

Estimated Returns

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.

A liability for expected returns of $ 44.9 , $ 45.2 , and $ 43.1 is recorded within Other accrued expenses as of August 31, 2021, May 31, 2021, and August 31, 2020, respectively.

In addition, a return asset of $ 4.2 , $ 3.4 , and $ 4.1 is recorded within Prepaid expenses and other current assets as of August 31, 2021, May 31, 2021, and August 31, 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 $ 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.

The Company recognized revenue which was included in the opening deferred revenue balance in the amount of $ 15.3 and $ 16.9 for the three months ended August 31, 2021 and August 31, 2020, respectively.

Allowance for Credit Losses

1 unchanged sentence

Reserves for estimated credit losses are established at the time of sale and are based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability, including specific reserves on a customer-by-customer basis, creditworthiness of the Company’s customers and prior collection experience.

At the time the Company determines that a receivable balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is then written off.

At the time the Company determines that a receivable

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

The following table presents the change in the allowance for credit losses, which is included in Accounts Receivable, net on the Condensed Consolidated Balance Sheets:

balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is then written off.

The following table presents the change in the allowance for credit losses, which is included in Accounts Receivable, net on the Condensed Consolidated Balance Sheet:

Allowance for Credit Losses

Balance as of June 1, 2020 $ 19.9

Current period provision 1.4

Write-offs and other ( 0.4 )

Balance as of August 31, 2020 $ 20.9

Current period provision 2.1

Write-offs and other ( 1.8 )

Balance as of November 30, 2020 $ 21.2

Balance at May 31, 2021 $ 21.4

Current period provision 1.6

Write-offs and other ( 1.2 )

Balance as of February 28, 2021 $ 19.0

Balance at August 31, 2021 $ 21.8

SEGMENT INFORMATION

The Company categorizes its businesses into three reportable segments:

Children’s Book Publishing and Distribution, Education and International .

Children’s Book Publishing and Distribution, Education Solutions and International .

• Children’s Book Publishing and Distribution operates as an integrated business which includes the publication and distribution of children’s books, ebooks, media and interactive products in the United States through its book clubs and book fairs in its school channels and through the trade channel.

This segment is comprised of three operating segments.

• Education includes the publication and distribution to schools and libraries of children’s books, classroom magazines, print and digital supplemental and core classroom materials and related support services, and print and on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States.

This segment is comprised of three operating segments.

• International includes the publication and distribution of products and services outside the United States by the Company’s international operations, and its export and foreign rights businesses.

• Education Solutions includes the publication and distribution to schools and libraries of children’s books, classroom magazines, print and digital supplemental and core classroom materials and related support services, and print and on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States.

This segment is comprised of one operating segment.

• International includes the publication and distribution of products and services outside the United States by the Company’s international operations and its export businesses.

This segment is comprised of three operating segments.

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)

Domestic International Total

Three months ended

February 28, 2021

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

Bad debt expense ( 0.5 ) 0.3 — ( 0.2 ) 0.1 ( 0.1 )

Depreciation and amortization (2)

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 )

Expenditures for other noncurrent assets (3)

9.3 3.7 8.8 21.8 2.5 24.3

The following table sets forth the Company's revenue and operating income (loss) by segment for the fiscal quarters ended August 31, 2021 and August 31, 2020:

Three months ended

February 29, 2020

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

Bad debt expense 1.2 0.7 — 1.9 1.1 3.0

Depreciation and amortization (2)

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 )

Expenditures for other noncurrent assets (3)

11.5 5.4 19.4 36.3 5.4 41.7

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 periods ended February 28, 2021 and February 29, 2020:

Distribution Education Overhead (1)

Domestic International Total

Nine months ended

February 28, 2021

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

Bad debt expense ( 0.4 ) 1.7 — 1.3 2.1 3.4

Depreciation and amortization (2)

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 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 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

Bad debt expense 2.8 1.5 — 4.3 3.0 7.3

Depreciation and amortization (2)

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 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)

August 31, August 31,

Children's Book Publishing and Distribution $ 115.8 $ 92.3

Education Solutions 80.1 53.6

International 63.9 69.3

Total $ 259.8 $ 215.2

Operating income (loss)

Children's Book Publishing and Distribution $ ( 21.7 ) $ ( 29.0 )

Education Solutions 7.3 ( 2.4 )

International ( 1.7 ) 4.8

( 15.9 ) ( 30.4 )

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

Total $ ( 32.0 ) $ ( 57.0 )

(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, 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 $ 1.4 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(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:

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

August 31, 2021 May 31, 2021 August 31, 2020

US Revolving Loan $ 75.0 $ 175.0 $ 200.0

4 unchanged sentences

Total long-term debt $ — $ 7.3 $ 200.0

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

The Company's debt obligations as of August 31, 2021 have maturities of one year or less.

US Loan Agreement

5 unchanged sentences

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 aggregate maximum commitments of the lenders is $ 250.0 , a reduction from the $ 375.0 pre-amendment commitme nts;

• in addition to the pre-amendment covenants, 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;

3 unchanged sentences

• 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 Eurodo llar Rate equal to the London interbank offered rate (LIBOR), subject to a minimum of 0.25 %, plu s a spread equal to 1.60 % for any Eurodollar Rate Advance;

• restricted payments (e.g., for dividends and share repurchases, etc.) are limited to the "builder basket" in the amended credit agreement together with an additional requirement that the Company have Consolidated Liquidity (as defined) not less than $ 300.0 .

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

1 unchanged sentence

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.

As of August 31, 2021, the all-in borrowing rate on the outstanding borrowings was 1.85 %.

As of August 31, 2021, the Company had current outstanding borrowings of $ 75.0 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.

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.

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.

During the first quarter of fiscal 2022, the Company paid down $ 100.0 of the borrowing.

The Company intends to amend and extend the current Loan Agreement prior to its expiration on January 5, 2022.

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.

At August 31, 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 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.

The loan had an original maturity date of July 31, 2021, which was extended to July 31, 2022 in May 2021.

Under the agreement, the principal balance is due in full in a single payment on the last day of the term and interest on the amount borrowed is due and payable quarterly.

The interest is charged at 1.77 % per annum over the Base Rate.

The interest was charged at 1.77 % per annum over the Base Rate until July 31, 2021 and 2.25 % per annum over the Base Rate thereafter.

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

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

As of August 31, 2021, the Company had $ 4.3 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.

The loan had an original maturity date of July 31, 2021, which was extended to July 31, 2022 in May 2021.

Under the agreement, the principal balance is due in full in a single payment on the last day of the term and interest on the amount borrowed is due and payable quarterly.

The interest is charged at 1.77 % per annum over the Base Rate.

The interest was charged at 1.77 % per annum over the Base Rate until July 31, 2021 and 2.25 % per annum over the Base Rate thereafter.

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

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

As of August 31, 2021, the Company had $ 2.8 outstanding on the loan.

Lines of Credit

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 .

As of August 31, 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 August 31, 2021, May 31, 2021 and August 31, 2020.

As of August 31, 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 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 .

As of August 31, 2021, the Company had various local currency international credit lines totaling $ 27.9 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 7.4 at August 31, 2021 at a weighted average interest rate of 4.8 %, $ 7.9 at May 31, 2021 at a weighted average interest rate of 4.7 %, and $ 8.5 at August 31, 2020 at a weighted average interest rate of 4.2 %.

As of August 31, 2021, the amounts available under these facilities totaled $ 20.5 .

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 third quarter of fiscal 2021.

The COVID-19 pandemic and actions taken, or which may be taken in the future following any changes in 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.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The Company is not currently aware of any loss contingencies related to the foregoing that would require recognition in the first quarter of fiscal 2022.

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)

On July 20, 2021, the Company, along with its co-defendants in a certain legal proceeding, executed a settlement agreement regarding certain licenses and trademarks related to intellectual property used in formerly owned products, which were included in the sale of the educational technology and services business that occurred in fiscal 2015.

Without admitting to the allegations raised, the agreement requires the Company to pay $ 20.0 in a one-time cash payment to avoid the uncertainties of trial and the additional costs of preparing for and presenting an on-going legal defense in this matter.

The Company recognized an accrual for the settlement amount in fiscal 2021 as the events that gave rise to the litigation had taken place prior to May 31, 2021.

As of August 31, 2021, the liability of $ 20.0 is reflected in Accounts Payable in the Company’s Condensed Consolidated Balance Sheet.

The settlement was paid subsequent to quarter end in September 2021.

The Company received $ 6.6 in recoveries from its insurance programs during the first quarter of fiscal 2022 which was recognized as an offset to the legal settlement and is reflected in Selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations.

While the Company expects to receive additional recoveries from its insurance programs, it is too premature to determine with any level of probability or accuracy the amount of those recoveries at this time.

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 Nine months ended

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

2021 2020 2021 2020

Three months ended

August 31, August 31,

Net income (loss) attributable to Class A and Common Stockholders $ ( 24.2 ) $ ( 39.8 )

6 unchanged sentences

* 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 Company experienced a loss for the three month periods ended August 31, 2021 and August 31, 2020 and therefore did not allocate any loss to certain participating restricted stock units.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

February 28, 2021 February 29, 2020

August 31, 2021 August 31, 2020

Options outstanding pursuant to stock-based compensation plans (in millions) 4.9 3.0

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

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

There were 2.1 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of August 31, 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 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.

As of August 31, 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 4, Debt.

See Note 11, 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:

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

August 31, 2021 May 31, 2021 August 31, 2020

Gross beginning balance $ 165.9 $ 164.5 $ 164.5

1 unchanged sentence

Beginning balance $ 126.3 $ 124.9 $ 124.9

Additions — — —

Foreign currency translation ( 0.4 ) 1.4 0.7

2 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:

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

August 31, 2021 May 31, 2021 August 31, 2020

Beginning balance - Other intangibles subject to amortization $ 8.4 $ 10.5 $ 10.5

Additions — 1.6 1.6

Adjustments — ( 0.5 ) —

5 unchanged sentences

Total other intangibles $ 9.9 $ 10.5 $ 12.3

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 .

There were no additions to intangible assets within the three months ended August 31, 2021 and August 31, 2020.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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:

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

August 31, 2021 May 31, 2021 August 31, 2020 Segment

Equity method investments $ 34.4 $ 34.3 $ 27.9 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.

This equity investment does not have a readily determinable fair value and the Company has elected to apply the measurement alternative and report this investment at cost, less impairment on the Company's Consolidated Balance Sheets.

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 $ 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.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 1.1 and $ 0.8 for the three months ended August 31, 2021 and August 31, 2020, respectively.

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

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

2021 2020 2021 2020

Components of net periodic benefit cost:

Interest cost $ 0.2 $ 0.2 $ 0.0 $ 0.2

Expected return on assets ( 0.2 ) ( 0.3 ) — —

Net amortization of prior service (credit) cost 0.0 0.0 ( 0.2 ) 0.0

Amortization of (gains) losses 0.1 0.3 0.0 —

Total $ 0.1 $ 0.2 $ ( 0.2 ) $ 0.2

UK Pension Plan US Postretirement Benefits

Nine months ended Nine months ended

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

August 31, August 31, August 31, August 31,

2021 2020 2021 2020

2 unchanged sentences

Expected return on assets ( 0.3 ) ( 0.2 ) — —

Net amortization of prior service (credit) cost 0.0 0.0 ( 0.4 ) ( 0.1 )

Amortization of (gains) losses 0.4 0.8 0.0 —

Amortization of prior service (credit) loss 0.0 0.0 ( 0.2 ) 0.0

Amortization of net actuarial (gain) loss 0.2 0.1 0.0 —

Total $ 0.1 $ 0.1 $ ( 0.1 ) $ 0.1

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 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.

In the second quarter of fiscal 2021, the Company announced a change in benefits for certain US postretirement benefit plan participants.

Beginning January 1, 2021, the plan will establish Health Reimbursement Accounts (HRAs) to provide these participants with additional flexibility to choose healthcare options based on individual needs.

As a result of this change, the Company remeasured its Postretirement Benefit obligation as of November 30, 2020, and recognized a reduction of $ 7.6 to its benefit obligation and a reduction to its accumulated comprehensive loss of $ 7.6 in the second quarter of fiscal 2021.

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.

Actuarial gains and losses are amortized using a corridor approach.

The gain or loss corridor is equal to 10% of the greater of the projected benefit obligation and the market-related value of assets.

Gains and losses in excess of the corridor are amortized over the future working lifetime.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

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 three months ended August 31, 2021, the Company contributed $ 0.4 to the UK Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately $ 1.6 to the UK Pension Plan for the fiscal year ending May 31, 2022.

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 Nine months ended

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

2021 2020 2021 2020

Three months ended

August 31, August 31,

Stock option expense $ 0.7 $ 0.3

3 unchanged sentences

Total stock-based compensation expense $ 1.5 $ 0.6

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

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

Three months ended Nine months ended

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

2021 2020 2021 2020

Three months ended

August 31, August 31,

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

7 unchanged sentences

Less repurchases made under these authorizations $ ( 32.7 )

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.

Remaining Board authorization at August 31, 2021 $ 67.3

Remaining Board authorization at August 31, 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 4, Debt.

There were no repurchases of the Company's Common Stock for the three months ended August 31, 2021.

SCHOLASTIC CORPORATION

3 unchanged sentences

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 February 28, 2021

Foreign currency translation adjustments Retirement benefit plans Total

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

Other comprehensive income (loss) before reclassifications 6.3 — 6.3

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

Amortization of gains and losses (net of tax of $ 0.0 )

Amortization of prior service credit (net of tax of $ 0.1 )

— ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) 6.3 0.0 6.3

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 December 1, 2019 $ ( 45.2 ) $ ( 12.2 ) $ ( 57.4 )

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

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

Amortization of gains and losses (net of tax of $ 0.0 )

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

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

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

Nine months ended February 28, 2021

Three months ended August 31, 2021

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at June 1, 2021 $ ( 30.1 ) $ ( 4.6 ) $ ( 34.7 )

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

Other comprehensive income (loss) before reclassifications ( 5.8 ) — ( 5.8 )

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

Amortization of gains and losses (net of tax of $ 0.0 )

Amortization of prior service credit (net of tax of $ 0.2 )

Amortization of net actuarial (gain) loss (net of tax of $ 0.0 )

Amortization of prior service (credit) cost (net of tax of $ 0.1 )

— ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) ( 5.8 ) 0.1 ( 5.7 )

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

Nine months ended February 29, 2020

Ending balance at August 31, 2021 $ ( 35.9 ) $ ( 4.5 ) $ ( 40.4 )

Three months ended August 31, 2020

Foreign currency translation adjustments Retirement benefit plans Total

4 unchanged sentences

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

— ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) 10.7 0.1 10.8

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)

Ending balance at August 31, 2020 $ ( 39.3 ) $ ( 8.2 ) $ ( 47.5 )

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

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

Three months ended Condensed Consolidated Statements of Operations line item

August 31, August 31,

Employee benefit plans:

Amortization of unrecognized (gain) loss $ 0.1 $ 0.3 $ 0.4 $ 0.8 Other components of net periodic benefit (cost)

Amortization of prior service credit ( 0.2 ) 0.0 ( 0.4 ) ( 0.1 ) Other components of net periodic benefit (cost)

Amortization of net actuarial (gain) loss $ 0.2 $ 0.1 Other components of net periodic benefit (cost)

Amortization of prior service (credit) loss ( 0.2 ) 0.0 Other components of net periodic benefit (cost)

Tax effect 0.1 0.0 Provision (benefit) for income taxes

5 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.

4 unchanged sentences

The fair values of foreign currency forward contracts, used by the Company to manage the impact of foreign exchange rate changes, are based on quotations from financial institutions, a Level 2 fair value measure.

See Note 16, Derivatives and Hedging, for a more complete description of the fair value measurements employed.

Non-financial assets for which the Company employs fair value measures on a non-recurring basis include:

• Long-lived assets

• Long-lived assets, including held for sale

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

2 unchanged sentences

• Impairment assessment of goodwill and intangible assets

• Long-lived assets held for sale

Level 2 and Level 3 inputs are employed by the Company in the fair value measurement of these assets.

1 unchanged sentence

See Note 8, 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

5 unchanged sentences

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The Company expects to benefit from certain provisions in the CARES Act, including the provision to carry back net operating losses generated in the U.S.

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 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.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law.

The Tax Cuts and Jobs Act, among other things, reduced the U.S.

federal corporate tax rate from 35% to 21% and imposed a new minimum tax on Global Intangible Low-Taxed Income ("GILTI") earned by foreign subsidiaries.

On July 20, 2020, final regulations were issued for GILTI which include a high-tax exception for income earned by foreign subsidiaries if the foreign tax rate is in excess of 90% of the U.S.

tax rate of 21%.

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.

The Company filed its Federal income tax return and benefited from the provisions in the CARES Act to carry back net operating losses generated in the U.S.

to previous periods which were taxed at the higher 35% federal corporate tax rate.

The Company also took advantage of the 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 has deferred 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 August 31, 2021.

In fiscal 2021, the Company applied for employee retention credits in the U.S.

and the related receivable was $ 11.9 as of August 31, 2021.

During the first quarter of fiscal 2022, the Company received a federal tax refund of $ 63.1 primarily related to the carry back of net operating losses generated in the U.S.

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.

The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates.

The effect of discrete items, such as changes in estimates, changes in enacted tax laws or rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs.

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 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.

income tax return, and also files tax returns in various states and other local jurisdictions.

Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions.

The Company is routinely audited by various tax authorities and the fiscal 2015 through fiscal 2019 tax years remain open.

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

The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs.

The accounting estimates used to compute the provision

SCHOLASTIC CORPORATION

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(Dollar amounts in millions, except per share data)

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 26.7 % for the three month period ended August 31, 2021 as compared to 23.2 % for the prior fiscal year quarter.

The interim effective tax rate was impacted by anticipated higher profitability domestically and internationally.

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

income tax return, and also files tax returns in various states and other local jurisdictions.

Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions.

The Company is routinely audited by various tax authorities.

The IRS is currently examining the US income tax returns for the fiscal 2015 through fiscal 2020 tax years.

Non-income Taxes

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These derivative contracts are economic hedges and are not designated as cash flow hedges.

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 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.

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 recognizes the unrealized gain or loss in Other current assets or Other current liabilities.

The notional values of the contracts as of August 31, 2021 and August 31, 2020 were $ 26.8 and $ 25.5 , respectively.

Net unrealized losses of less than $ 0.1 and $ 1.0 were recognized for the three months ended August 31, 2021 and August 31, 2020, respectively.

OTHER ACCRUED EXPENSES

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

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

August 31, 2021 May 31, 2021 August 31, 2020

Accrued payroll, payroll taxes and benefits $ 35.1 $ 32.4 $ 41.4

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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 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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview and Outlook

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 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.

The Board declared a quarterly cash dividend of $ 0.15 per share on the Company’s Class A and Common Stock for the second quarter of fiscal 2022.

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

SCHOLASTIC CORPORATION

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