What changed in this filing

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Item 1. Financial Statements

2021-12-17 compared with 2021-09-24 · 273 added, 142 removed, 514 unchanged (45% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Revenues $ 524.2 $ 406.2 $ 784.0 $ 621.4

20 unchanged sentences

(Dollar amounts in millions)

Three months ended

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Net income (loss) $ 68.4 $ 35.2 $ 44.0 $ ( 4.6 )

10 unchanged sentences

(Dollar amounts in millions, except per share data)

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

November 30, 2021 May 31, 2021 November 30, 2020

(unaudited) (audited) (unaudited)

76 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) — — — — — — 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

See accompanying notes

Class A Stock Common Stock Additional Paid-in Capital Accumulated

18 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) — — — — — — 68.3 — 68.3 0.1 68.4

Foreign currency translation adjustment — — — — — ( 4.4 ) — — ( 4.4 ) — ( 4.4 )

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

— — — — — 0.5 — — 0.5 — 0.5

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

Proceeds pursuant to stock-based compensation plans — — — — 2.5 — — — 2.5 — 2.5

Purchases of treasury stock at cost — — ( 0.1 ) — — — — ( 4.2 ) ( 4.2 ) — ( 4.2 )

Treasury stock issued pursuant to equity-based plans — — 0.2 — ( 8.0 ) — — 8.0 — — —

Dividends ($ 0.15 per share)

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

Other (noncontrolling interest) — — — — — — — — — ( 0.2 ) ( 0.2 )

Balance at November 30, 2021 1.7 $ 0.0 32.9 $ 0.4 $ 625.1 $ ( 44.3 ) $ 950.1 $ ( 322.5 ) $ 1,208.8 $ 1.2 $ 1,210.0

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions)

Three months ended

August 31, August 31,

Six months ended

November 30, November 30,

Cash flows - operating activities:

21 unchanged sentences

Deferred revenue 94.0 33.0

Other accrued expenses ( 32.5 ) 3.9

Other, net ( 21.3 ) 23.1

4 unchanged sentences

Net proceeds from sale of assets 10.4 12.3

Other ( 0.1 ) —

Net cash provided by (used in) investing activities ( 17.2 ) ( 24.1 )

3 unchanged sentences

Repayment of capital lease obligations ( 1.1 ) ( 1.2 )

Reacquisition of common stock ( 4.2 ) —

Proceeds pursuant to stock-based compensation plans 3.0 —

34 unchanged sentences

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

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

19 unchanged sentences

Sale of Long-lived Assets

During the second quarter of fiscal 2022, the Company sold a facility, which included office and warehouse space, located in Lake Mary, Florida as part of an initiative to rightsize its real estate footprint to reduce occupancy costs.

The long-lived assets, which consisted of land, building, building improvements, furniture and fixtures, were included in the Children's Book Publishing and Distribution segment.

These assets had a carrying value of $ 4.2 and were classified as held for sale as of the third quarter of fiscal 2021.

The net proceeds from the sale were $ 10.4 and the Company recognized a gain on sale of $ 6.2 .

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 Easton, Pennsylvania.

4 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, 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.

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 result in a gain on sale.

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

The long-lived assets which consist of 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 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.

As of November 30, 2021, the carrying amount was $ 2.1 which is included in Property, plant and equipment, net within the Company's Condensed Consolidated Balance Sheets.

During the second quarter of fiscal 2022, the Company entered into a purchase and sale agreement for this facility and expects a gain on the sale to be recognized in the fourth quarter of fiscal 2022.

New Accounting Pronouncements

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

There were no new accounting pronouncements issued in the second 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.

4 unchanged sentences

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.

As of the first quarter of fiscal 2022, 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)

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

1 unchanged sentence

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

Three months ended

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Book Clubs - U.S.

$ 51.9 $ 67.0 $ 58.7 $ 72.8

Book Fairs - U.S.

176.2 47.7 192.2 60.9

109.4 116.4 189.5 182.2

Trade - International (1)

15.0 12.9 27.9 20.4

Total Children's Book Publishing and Distribution $ 352.5 $ 244.0 $ 468.3 $ 336.3

5 unchanged sentences

International - Other Markets (3)

13.4 21.6 29.8 40.9

Total International $ 92.2 $ 94.7 $ 156.1 $ 164.0

4 unchanged sentences

Estimated Returns

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.

A liability for expected returns of $ 50.7 , $ 45.2 , and $ 54.5 is recorded within Other accrued expenses as of November 30, 2021, May 31, 2021, and November 30, 2020, respectively.

In addition, a return asset of $ 5.0 , $ 3.4 , and $ 3.3 is recorded within Prepaid expenses and other current assets as of November 30, 2021, May 31, 2021, and November 30, 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 $ 15.3 and $ 16.9 for the three months ended August 31, 2021 and August 31, 2020, respectively.

The Company recognized revenue which was included in the opening deferred revenue balance in the amount of $ 27.9 and $ 24.2 for the three months ended November 30, 2021 and November 30, 2020, respectively, and $ 43.2 and $ 41.1 for the six months ended November 30, 2021 and November 30, 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

The Company reviews new information as it becomes available and makes adjustments to the reserves accordingly.

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

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

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 at May 31, 2021 $ 21.4

Balance as of June 1, 2021 $ 21.4

Current period provision 1.6

Write-offs and other ( 1.2 )

Balance at August 31, 2021 $ 21.8

Balance as of August 31, 2021 $ 21.8

Current period provision 4.2

Write-offs and other ( 3.1 )

Balance as of November 30, 2021 $ 22.9

SEGMENT INFORMATION

7 unchanged sentences

This segment is comprised of three operating segments.

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

August 31, August 31,

The following table sets forth the Company's revenue and operating income (loss) by segment for the fiscal quarters ended November 30, 2021 and November 30, 2020:

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Children's Book Publishing and Distribution $ 352.5 $ 244.0 $ 468.3 $ 336.3

9 unchanged sentences

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

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

US Revolving Loan $ 75.0 $ 175.0 $ 200.0

November 30, 2021 May 31, 2021 November 30, 2020

US Revolving Credit Agreement $ — $ 175.0 $ 175.0

Unsecured lines of credit 7.5 7.9 8.4

3 unchanged sentences

Total long-term debt $ — $ 7.3 $ 175.0

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

US Loan Agreement

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;

• 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;

• 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 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;

◦ 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 0.60 % for any Base 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 .

The Company's debt obligations as of November 30, 2021 have maturities of one year or less.

US Credit Agreement

On October 27, 2021, Scholastic Corporation (the “Corporation”) and its principal operating subsidiary, Scholastic Inc., entered into an amended and restated 5-year credit agreement with a syndicate of banks and Bank of America, N.A., as administrative agent (the “Credit Agreement”).

The arrangement was accounted for as a debt modification.

The revised terms of the amended Credit Agreement include the following:

• an increase in borrowing limits to $ 300.0 from $ 250.0 , as amended on December 16, 2020 ;

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

• an unlimited basket for permitted payments of dividends and other distributions in respect of capital stock so long as the Corporation’s pro forma Consolidated Net Leverage Ratio, as defined, is not in excess of 2.75 :1;

• the elimination of a minimum liquidity covenant;

• the removal of an interest rate floor;

• the extension of the maturity date to October 27, 2026.

The Credit Agreement provides for an unsecured revolving credit facility and allows the Company to borrow, repay or prepay and reborrow at any time prior to the October 27, 2026 maturity date.

Under the Credit 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 Credit 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 plus 1.00 % plus, in each case, an applicable margin ranging from 0.35 % to 0.75 %, as determined by the Company’s prevailing Consolidated Leverage Ratio (as defined in the Credit Agreement);

• a Eurodollar Rate equal to the London interbank offered rate (LIBOR), plus an applicable margin ranging from 1.35 % to 1.75 %, as determined by the Company’s prevailing Consolidated Leverage Ratio.

As of November 30, 2021, the applicable margin on Base Rate Advances was 0.35 % and the applicable margin on Eurodollar Advances was 1.35 %, both based on the Company’s prevailing Consolidated Leverage Ratio.

The Credit Agreement provides for payment of a commitment fee in respect of the aggregate unused amount of revolving credit commitments ranging from 0.20 % per annum to 0.30 % per annum based upon the Corporation’s then prevailing Consolidated Leverage Ratio.

As of November 30, 2021, the commitment fee rate was 0.20 %.

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.

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 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.

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 Credit 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, 2021, the Company had no outstanding borrowings under the Credit Agreement.

During the first and second quarters of fiscal 2022, the Company paid down $ 100.0 and $ 75.0 , respectively, of the remaining borrowings as of the beginning of the fiscal year.

The Credit Agreement contains certain financial covenants related to leverage and interest coverage ratios (as defined in the Credit Agreement), limitations on the amount of dividends and other distributions, and other limitations on fundamental changes to the Corporation or its business.

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

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.

At November 30, 2021, the Company had open standby letters of credit totaling $ 4.3 issued under certain credit lines, including $ 0.4 under the Credit Agreement and $ 3.9 under the domestic credit lines discussed below.

UK Loan Agreements

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

As of November 30, 2021, the borrowing limit was £ 3.2 .

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

2 unchanged sentences

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

As of August 31, 2021, the Company had $ 4.3 outstanding on the loan and $ 4.7 remaining available credit under this facility.

As of November 30, 2021, the Company had $ 4.2 outstanding on the loan and no 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.

3 unchanged sentences

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

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

As of November 30, 2021, the Company had $ 2.6 outstanding on the loan.

Lines of Credit

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 .

As of November 30, 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 November 30, 2021, May 31, 2021 and November 30, 2020.

As of November 30, 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 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 .

As of November 30, 2021, the Company had various local currency international credit lines totaling $ 34.2 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 7.5 at November 30, 2021 at a weighted average interest rate of 4.7 %, $ 7.9 at May 31, 2021 at a weighted average interest rate of 4.7 %, and $ 8.4 at November 30, 2020 at a weighted average interest rate of 4.4 %.

As of November 30, 2021, the amounts available under these facilities totaled $ 26.7 .

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.

1 unchanged sentence

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.

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

SCHOLASTIC CORPORATION

1 unchanged sentence

(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

5 unchanged sentences

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.

Without admitting to the allegations raised, the agreement required 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.

The settlement was paid 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 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 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

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Net income (loss) attributable to Class A and Common Stockholders $ 68.0 $ 35.1 $ 43.9 $ ( 4.7 )

5 unchanged sentences

Diluted $ 1.91 $ 1.02 $ 1.24 $ ( 0.14 )

* 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 month periods ended August 31, 2021 and August 31, 2020 and therefore did not allocate any loss to certain participating restricted stock units.

* 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 $ 0.3 and less than $ 0.1 for the three month periods ended November 30, 2021 and November 30, 2020, respectively, and $ 0.2 for the six month period ended November 30, 2021, 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 certain participating restricted stock units.

SCHOLASTIC CORPORATION

2 unchanged sentences

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

August 31, 2021 August 31, 2020

November 30, 2021 November 30, 2020

Options outstanding pursuant to stock-based compensation plans (in millions) 4.9 5.2

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.

There were 1.7 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of November 30, 2021.

A portion of the Company’s Restricted Stock Units ("RSUs"), which are granted to employees, participate in earnings through cumulative dividends.

These dividends 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 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.

As of November 30, 2021, $ 63.1 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date.

See Note 11, Treasury Stock, for a more complete description of the Company’s share buy-back program.

3 unchanged sentences

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

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

November 30, 2021 May 31, 2021 November 30, 2020

Gross beginning balance $ 165.9 $ 164.5 $ 164.5

5 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:

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

November 30, 2021 May 31, 2021 November 30, 2020

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

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Total other intangibles $ 9.2 $ 10.5 $ 11.8

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

There were no additions to intangible assets within the six months ended November 30, 2021 and November 30, 2020.

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

Intangible assets with definite lives consist principally of customer lists, intellectual property, tradenames and other agreements.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

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

Intangible assets with definite lives consist principally of customer lists, intellectual property, tradenames and other agreements.

Intangible assets with definite lives are amortized over their estimated useful lives.

3 unchanged sentences

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

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

November 30, 2021 May 31, 2021 November 30, 2020 Segment

Equity method investments $ 33.7 $ 34.3 $ 32.5 International

6 unchanged sentences

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 $ 1.1 and $ 0.8 for the three months ended August 31, 2021 and August 31, 2020, respectively.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 0.5 and $ 4.6 for the three months ended November 30, 2021 and November 30, 2020, respectively, and $ 1.6 and $ 5.4 for the six months ended November 30, 2021 and November 30, 2020, respectively.

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

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

November 30, November 30,

2021 2020 2021 2020

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Total $ 0.2 $ 0.1 $ ( 0.2 ) $ ( 0.1 )

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)

UK Pension Plan US Postretirement Benefits

Six months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Components of net periodic benefit cost:

Interest cost $ 0.5 $ 0.3 $ 0.1 $ 0.2

Expected return on assets ( 0.6 ) ( 0.4 ) — —

Amortization of prior service (credit) loss 0.0 0.0 ( 0.4 ) ( 0.2 )

Amortization of net actuarial (gain) loss 0.4 0.3 — 0.0

Total $ 0.3 $ 0.2 $ ( 0.3 ) $ 0.0

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.

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.

For the six months ended November 30, 2021, the Company contributed $ 0.8 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.

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

Three months ended

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Stock option expense $ 1.8 $ 2.5 $ 2.5 $ 2.8

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

Three months ended

August 31, August 31,

Three months ended Six months ended

November 30, November 30,

2021 2020 2021 2020

Common Stock issued pursuant to stock-based compensation plans (in millions) 0.2 0.1 0.3 0.1

In September 2021, the Class A Stockholders approved the 2021 Stock Incentive Plan (the "2021 Plan") which provides for the issuance of certain equity awards, including non-qualified stock options, time-vested restricted stock units, performance-based restricted stock units, incentive stock options and other equity awards.

There are 2,500,000 shares available for issuance pursuant to awards granted under the 2021 Plan.

No further awards can be granted under the 2011 Stock Incentive Plan.

TREASURY STOCK

The Board has authorized the Company to repurchase Common Stock, from time to time as conditions allow, on the open market or through negotiated private transactions.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The table below represents the Board authorizations at the dates indicated:

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Less repurchases made under these authorizations $ ( 36.9 )

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.

Remaining Board authorization at November 30, 2021 $ 63.1

Remaining Board authorization at November 30, 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.

Repurchases of the Company's Common Stock were $ 4.2 during the three and six months ended November 30, 2021.

The Company's repurchase program may be suspended at any time without prior notice.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The 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, 2021

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at September 1, 2021 $ ( 35.9 ) $ ( 4.5 ) $ ( 40.4 )

Other comprehensive income (loss) before reclassifications ( 4.4 ) 0.5 ( 3.9 )

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

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

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

— ( 0.2 ) ( 0.2 )

Other comprehensive income (loss) ( 4.4 ) 0.5 ( 3.9 )

Ending balance at November 30, 2021 $ ( 40.3 ) $ ( 4.0 ) $ ( 44.3 )

Three months ended November 30, 2020

Foreign currency translation adjustments Retirement benefit plans Total

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

Other comprehensive income (loss) before reclassifications 0.4 5.3 5.7

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) 0.4 5.4 5.8

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

SCHOLASTIC CORPORATION

1 unchanged sentence

(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 August 31, 2021

Six months ended November 30, 2021

Foreign currency translation adjustments Retirement benefit plans Total

6 unchanged sentences

Other comprehensive income (loss) ( 10.2 ) 0.6 ( 9.6 )

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

Three months ended August 31, 2020

Ending balance at November 30, 2021 $ ( 40.3 ) ( 4.0 ) ( 44.3 )

Six months ended November 30, 2020

Foreign currency translation adjustments Retirement benefit plans Total

4 unchanged sentences

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

— ( 0.1 ) ( 0.1 )

Other comprehensive income (loss) 11.1 5.5 16.6

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

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

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

Three months ended Condensed Consolidated Statements of Operations line item

August 31, August 31,

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

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

2021 2020 2021 2020

Employee benefit plans:

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• 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.

• 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.

SCHOLASTIC CORPORATION

1 unchanged sentence

(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.

The Company’s financial assets and liabilities measured at fair value consisted of cash and cash equivalents, debt and foreign currency forward contracts.

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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.

The Company has deferred employer-side social security payments resulting in a future liability.

As of November 30, 2021 the Company has a current liability of $ 3.2 and a non-current liability of $ 3.8 .

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.

and the related receivable was $ 11.9 as of November 30, 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.

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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

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.

SCHOLASTIC CORPORATION

1 unchanged sentence

(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's interim effective tax rate, inclusive of discrete items, for the three and six months period ended November 30, 2021 was 23.2 % and 21.1 %, respectively, compared to 26.1 % and 9.5 %, respectively, for the prior fiscal year period.

The interim effective tax rate for the six months ended November 30, 2021 varies from the statutory rate primarily due to the release of an uncertain tax position in the current fiscal quarter related to an effective settlement recognized as part of ongoing audit, offset by the state income effective tax rate.

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

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

As of November 30, 2021, there is approximately $ 20.0 in receivables from the IRS related to the years under audit included in Income tax receivable in the Company’s Condensed Consolidated Balance Sheet.

Non-income Taxes

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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.

The notional values of the contracts as of November 30, 2021 and November 30, 2020 were $ 27.3 and $ 29.2 , respectively.

A net unrealized gain of $ 0.6 and a net unrealized loss of $ 1.1 were recognized for the six months ended November 30, 2021 and November 30, 2020, respectively.

OTHER ACCRUED EXPENSES

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

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

November 30, 2021 May 31, 2021 November 30, 2020

Accrued payroll, payroll taxes and benefits $ 35.1 $ 32.4 $ 38.6

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 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.

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 2022.

The dividend is payable on March 15, 2022 to shareholders of record as of the close of business on January 31, 2022.

SCHOLASTIC CORPORATION

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

Overview and Outlook

Revenues for the second quarter ended November 30, 2021 were $524.2 million, compared to $406.2 million in the prior fiscal year quarter, an increase of $118.0 million.

The Company reported net earnings per diluted share of Class A and Common Stock of $1.91 in the second quarter of fiscal 2022, compared to $1.02 in the prior fiscal year quarter.

During the second quarter ended November 30, 2021, increased revenues were primarily driven by the U.S.

book fairs and education channels.

With schools back in session, the demand for in-person book fairs returned and customer engagement improved, resulting in increased fair count and revenue per fair.

Comprehensive instruction offerings, including PreK On My Way TM , and professional learning services continued to drive revenue in the quarter;

however, the primary driver of the revenue increase in the education channel was revenues from the Company’s new Rising Voices Library ® offering which meets the increasing demand for culturally responsive content and instruction.

Also during the quarter, the live-action movie adaptation of Clifford the Big Red Dog ® from Paramount was released as was Cat Kid Comic Club ® :

Perspectives , the second title in the bestselling series by Dav Pilkey, and J.K.

Rowling’s The Christmas Pig .

However, revenues in trade publishing were lower than the prior fiscal year quarter due to the successful introduction of J.K.

Rowling’s The Ickabog and Harry Potter ® illustrated editions in the prior period.

Internationally, Canada performed well with higher revenues in all channels;

however, Australia and New Zealand experienced additional lockdowns during their school year resulting in lower revenues and the Asia markets continued to be impacted by COVID-related shutdowns and recently adopted restrictive regulations in China.

Operating income improved $34.6 million over the prior fiscal year quarter as a result of the higher sales volume as the Company recovers from the pandemic.

The Company experienced and will continue to experience higher inflationary pressures in printing, paper, transportation and labor costs, which partially offset the increases in revenues.

The Company expects the U.S.

book fairs business to continue its momentum into the spring season.

The Company is carefully monitoring the impact any COVID variant may have on the school market’s ability to host in-person fairs and remains optimistic that wide-scale school closures are unlikely.

book clubs, the Company will focus on clearing a backlog in orders that resulted from the industry-wide labor shortages and a separate systems issue impacting order flow, and will re-engage sponsors at the start of the new calendar year.

The Education Solutions segment is well-positioned to take advantage of new literacy opportunities in K-12 that may arise from the federal stimulus funds education landscape.

In addition, the Company has successfully been awarded the contract for the New Worlds Reading Initiative throughout the state of Florida, a five-year agreement with the University of Florida's Lastinger Center for Learning that will begin shipping in December.

Internationally, the Company is optimistic that schools in Australia and New Zealand will experience fewer COVID-related interruptions after they return from summer break in January 2022.

Throughout the remainder of the fiscal year, the Company's financial results will reflect the increasing impact of rising cost pressures in paper, printing, and freight as current period inventory, with an associated higher cost of product, is sold.

Similarly, the Company expects higher labor costs due to continuing inflationary pressures and on-going labor shortages, especially in its warehouse and distribution operations.

The Company’s management is taking actions, when available, to mitigate these rising costs and continues to identify further opportunities for incremental cost savings through process improvements and automation, proactive resource allocation, diversifying its vendor base and pricing and product rationalization.

Results of Operations

Revenues for the quarter ended November 30, 2021 increased to $524.2 million, compared to $406.2 million in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment revenues increased by $108.5 million, primarily driven by higher book fairs channel revenues resulting from increased fair count and higher revenue per fair due to increased demand and improved customer engagement as schools re-opened for the fall season.

The revenue increase was partially offset by lower trade channel revenues due to the successful introduction of J.K.

Rowling’s The Ickabog and Harry Potter illustrated editions in the prior fiscal year quarter, as well as lower book clubs channel revenues due to the current shipping backlog.

In the Education Solutions segment, revenues increased by $12.0 million, primarily driven by revenues from the Company’s new Rising Voices Library offering which meets the increasing demand for culturally responsive content and instruction, coupled with higher sales of instructional products and programs and professional learning services, as well as increased circulation revenue from the Magazines+ business.

In local currency, the International segment revenues decreased by $5.3 million, primarily driven by lower sales in Asia as the local markets continued to be impacted by COVID-related shutdowns and the recently adopted restrictive regulations in China.

Revenues also

SCHOLASTIC CORPORATION

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

decreased in Australia and New Zealand, primarily in the school-based channels, due to additional lockdowns imposed by the COVID variant, partially offset by higher sales in Canada across all channels.

International segment revenues were impacted by favorable foreign exchange of $2.8 million in the quarter ended November 30, 2021.

Revenues for the six months ended November 30, 2021 increased to $784.0 million, compared to $621.4 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues increased by $132.0 million primarily driven by higher book fairs channel revenues, particularly in the second quarter, resulting from increased fair count and higher revenue per fair due to increased demand and improved customer engagement as schools re-opened for the fall season.

Additionally, trade channel revenues were higher, primarily due to increased sales of backlist titles from best-selling series, including Harry Potter and Dog Man ® , and new releases of frontlist titles including J.K.

Rowling’s The Christmas Pig and Dav Pilkey's Cat Kid Comic Club ® :

Perspectives, partially offset by lower revenues in the book clubs channel due to the shipping backlog.

In the Education Solutions segment, revenues increased by $38.5 million primarily driven by higher sales of instructional products and programs, including the early childhood curriculum program PreK On My Way, and professional learning services, coupled with revenues from the Company’s new Rising Voices Library ® offering which meets the increasing demand for culturally responsive content and instruction.

In addition, revenues increased as a result of higher circulation revenue from the Magazines+ business and higher sales of digital products, including Scholastic Literacy Pro ® and Scholastic F.I.R.S.T.

In local currency, the International segment revenues decreased by $14.3 million primarily driven by lower sales in Asia as the local markets continued to be impacted by COVID-related shutdowns and the restrictive regulations in China.

Revenues also decreased in Australia and New Zealand in the school-based channels due to additional lockdowns imposed by the COVID variant, partially offset by higher sales in Canada across all channels.

International segment revenues were impacted by favorable foreign exchange of $6.4 million in the six months ended November 30, 2021.

Components of Cost of goods sold for the three and six months ended November 30, 2021 and November 30, 2020 are as follows:

Three months ended Six months ended

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

2021 2020 2021 2020

($ amounts in millions) $ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue

Product, service and production costs $ 136.5 26.0 % $ 104.5 25.8 % $ 212.8 27.1 % $ 165.6 26.6 %

Royalty costs 45.0 8.6 % 40.3 9.9 % 72.8 9.3 % 63.7 10.3 %

Prepublication amortization 6.9 1.3 % 6.6 1.6 % 13.8 1.8 % 13.1 2.1 %

Postage, freight, shipping, fulfillment and other 49.6 9.5 % 38.3 9.4 % 71.9 9.2 % 62.3 10.0 %

Total $ 238.0 45.4 % $ 189.7 46.7 % $ 371.3 47.4 % $ 304.7 49.0 %

Cost of goods sold for the quarter ended November 30, 2021 was $238.0 million, or 45.4% of revenues, compared to $189.7 million, or 46.7% of revenues, in the prior fiscal year quarter.

Cost of goods sold was impacted by inflationary pressures including higher costs due to shortages in labor and transportation and supply chain issues impacting paper and printing costs.

The Company expects inflationary pressures to continue to negatively impact costs during fiscal 2022 and Cost of goods sold will reflect the higher costs as current period inventory is sold using the first-in, first-out method.

The increased costs due to inflationary pressures were more than offset by lower royalty costs due to the substantial increase in book fairs channel revenues which have a higher mix of non-royalty bearing titles.

In addition, the quarter benefited from higher revenue per unit shipped primarily in the education channel.

Cost of goods sold for the six months ended November 30, 2021 was $371.3 million, or 47.4% of revenues, compared to $304.7 million, or 49.0% of revenues, in the prior fiscal year period.

Cost of goods sold was impacted by inflationary pressures including higher costs due to shortages in labor and transportation and supply chain issues impacting paper and printing costs.

The increased costs due to inflationary pressures were more than offset by lower royalty costs due to the substantial increase in book fairs channel

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