What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-12-17 compared with 2021-09-24 · 212 added, 143 removed, 59 unchanged (86% of the section changed)

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

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 to allow for increased investment in digital learning and greater cross-selling opportunities across the entire segment’s portfolio of print and digital products.

Overview and Outlook

Revenues for the first quarter ended August 31, 2021 were $259.8 million, compared to $215.2 million in the prior fiscal year quarter, an increase of $44.6 million.

The Company reported net loss per diluted share of Class A and Common Stock of $0.70 in the first quarter of fiscal 2022, compared to net loss of $1.16 in the prior fiscal year quarter.

During the first quarter ended August 31, 2021, increased revenues were driven by the U.S.

education and trade channels.

Sales in the education channels were driven by the Company’s newly launched early childhood program, PreK On My Way TM , and summer learning product offerings.

Trade publishing revenues grew on the strength of the Company’s series publishing and strong backlist titles, including Harry Potter ® box sets and limited edition foil cover Dogman ® books.

Partially offsetting the revenue improvements was a reduction in sales in the International segment as countries around the world continued to encounter pandemic-related disruptions in their local markets.

Operating loss improved over the prior fiscal year quarter as a result of the higher sales volume as the Company is beginning to recover from the pandemic, coupled with the continued benefits of the restructuring program executed in the prior fiscal year.

The Company is currently experiencing increased demand for its products and programs as schools begin to re-open this fall with rising book club sponsorship and increased book fair bookings and expects sequential improvements in its school-based distribution channels in each quarter of the current fiscal year.

The Company is well-positioned to meet expected demand in these channels, especially in its book fairs businesses in the U.S., Canada and the UK.

Scholastic properties and titles continue to lead the market and the trade channel, including media, is expected to benefit from new releases including J.K.

Rowling's new title, The Christmas Pig , and the second season of The Baby-sitters Club ® on Netflix, both targeted for release in October.

In the education channel, the Company continues to closely monitor how federal stimulus funds will impact the overall K-12 education landscape and expects to benefit from a portion of this new spending.

Internationally, the Company expects the lockdowns in Australia to lift and continues to explore growth through the expansion of Scholastic’s range of English language learning digital product offerings in Asia.

However, inflationary pressures could impact paper, freight and other operating costs, while supply chain issues and potential labor shortages could adversely impact the Company's operating income through higher costs and/or revenue shortfalls.

The Company expects positive operating leverage and cash flow generation despite inflationary and execution pressures on its supply chain and labor pools and the discontinuation of certain COVID-related government subsidies.

The Company continues to identify further opportunities for incremental cost savings through process improvements and automation, consolidation of functions, and increased utilization of the Company’s international shared services resources.

Results of Operations

Revenues for the quarter ended August 31, 2021 increased to $259.8 million, compared to $215.2 million in the prior fiscal year.

The Children's Book Publishing and Distribution segment revenues increased by $23.5 million, primarily driven by higher trade channel revenues due to increased sales of backlist titles from best-selling series, which benefited from marketing and publicity activities for Harry Potter box sets and limited edition Dogman foil covers, as well as new releases of several frontlist titles, coupled with an increase in revenues in the school-based channels.

In the Education Solutions segment, revenues increased by $26.5 million, primarily driven by higher sales of instructional products and programs, the Company's traditional classroom book collections and digital products.

In local currency, the International segment revenues decreased by $9.0 million, primarily driven by lower revenues in Australia and New Zealand due to restrictions imposed by the COVID variant which were not in place in the prior fiscal year quarter, coupled with lower direct-to-home sales in Asia.

International segment revenues were impacted by favorable foreign exchange of $3.6 million in the quarter ended August 31, 2021.

revenues which have a higher mix of non-royalty bearing titles.

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

Selling, general and administrative expenses for the quarter ended November 30, 2021 increased to $188.3 million, compared to $151.9 million in the prior fiscal year quarter.

The $36.4 million increase was primarily attributable to higher employee-related costs as a result of higher headcount in the book fairs warehouses in order to scale the business to meet the increased demand, coupled with inflationary pressures and higher labor costs across the Company.

In the prior fiscal year quarter, the Company also incurred lower costs from the temporary closure of book fair distribution facilities which did not reoccur in the quarter.

In addition, the Company recognized lower subsidies from COVID-related governmental retention programs, which decreased by $4.2 million to $0.5 million as compared to $4.7 million in the prior fiscal year quarter, as well as lower equity investment income.

This increase was partially offset by lower severance expense related to restructuring programs, which decreased by $4.4 million to $0.8 million compared to $5.2 million in the prior fiscal year quarter.

Selling, general and administrative expenses for the six months ended November 30, 2021 increased to $331.9 million, compared to $293.6 million in the prior fiscal year period.

The $38.3 million increase was primarily attributable to higher employee related costs as a result of higher headcount in the book fairs warehouses in order to scale the business to meet the increased demand, coupled with inflationary pressures and higher labor costs across the Company.

In the prior fiscal year period, the Company also incurred lower costs from the temporary closure of book fair distribution facilities and employee furlough and reduced work week programs in the first fiscal quarter, which did not reoccur in the current fiscal year.

The Company also recognized lower subsidies from COVID-related governmental retention programs, which decreased by $8.4 million to $1.7 million as compared to $10.1 million in the prior fiscal year period, as well as lower equity investment income.

Partially offsetting the foregoing, the Company received $6.6 million of insurance recoveries in the period ended November 30, 2021 related to an intellectual property legal settlement accrued in fiscal 2021 and recognized lower severance expense, which included charges of $3.2 million and $17.2 million for the six months ended November 30, 2021 and November 30, 2020, respectively, related to cost-reduction and restructuring programs.

Depreciation and amortization expenses in the three and six months ended November 30, 2021 were $14.5 million and $29.4 million, respectively, compared to $15.8 million and $31.3 million, respectively in the prior fiscal year period.

The decrease in depreciation and amortization expenses in the three and six months ended was primarily attributable to lower capital spending and a shift towards spending in cloud computing arrangements in which the amortization expense is included in Selling, general and administrative expenses.

Net interest expense in the quarter ended November 30, 2021 was $0.5 million compared to $1.2 million in the prior fiscal year quarter.

Net interest expense in the six months ended November 30, 2021 was $1.8 million compared to $2.4 million in the prior fiscal year period.

The decrease in net interest expense was due to the lower average debt borrowings as compared to the prior fiscal year period.

The Company made a repayment of $100.0 million during the first fiscal year quarter and $75.0 million during the second fiscal year quarter, resulting in no outstanding borrowings under the U.S.

credit agreement as of November 30, 2021.

Gain (loss) on sale of assets and other in the quarter ended November 30, 2021 was $6.2 million.

The Company sold the 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, which resulted in a gain on sale.

Gain (loss) on sale of assets and other in the six months ended November 30, 2021 was $6.2 million compared to $6.6 million in the prior fiscal year period.

As indicated above, the Company sold the Lake Mary facility in the period ended November 30, 2021 and the Company-owned facility located in Danbury, Connecticut was sold in the prior fiscal year period, both of which resulted in a gain on sale.

The Company’s effective tax rate for the quarter ended November 30, 2021 was 23.2%, compared to 26.1% in the prior fiscal year quarter.

The Company's effective tax rate for the six months ended November 30, 2021 was 21.1% compared to 9.5% in the prior fiscal year period.

The increase in the interim effective tax rate for the six months period ended November 30, 2021 was impacted by higher anticipated profitability domestically and internationally in fiscal 2022, as compared to losses and a GILTI inclusion in the prior fiscal year period.

SCHOLASTIC CORPORATION Item 2.

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

Components of Cost of goods sold for the three months ended August 31, 2021 and August 31, 2020 are as follows:

Three months ended

August 31, August 31,

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

Product, service and production costs $ 76.3 29.4 % $ 61.1 28.4 %

Royalty costs 27.8 10.6 % 23.4 10.9 %

Prepublication amortization 6.9 2.7 % 6.5 3.0 %

Postage, freight, shipping, fulfillment and other 22.3 8.6 % 24.0 11.1 %

Total $ 133.3 51.3 % $ 115.0 53.4 %

Cost of goods sold for the quarter ended August 31, 2021 was $133.3 million, or 51.3% of revenues, compared to $115.0 million, or 53.4% of revenues, in the prior fiscal year quarter.

The decrease in Cost of goods sold as a percentage of revenues was primarily driven by lower fixed costs on a higher revenue base in the domestic channels, partially offset by higher inventory reserves recognized in Canada, primarily in the book fairs channel.

During fiscal 2022, Cost of goods sold will be negatively impacted by inflationary pressures such as higher costs due to shortages in labor and transportation and supply chain issues impacting paper and printing costs.

Selling, general and administrative expenses in the quarter ended August 31, 2021 increased to $143.6 million, compared to $141.7 million in the prior fiscal year quarter.

The $1.9 million increase was primarily attributable to higher employee related costs as the prior fiscal year quarter benefited from the temporary closure of book fair distribution facilities and employee furlough and reduced work week programs, which did not reoccur in the current fiscal year quarter.

In addition, the Company recognized lower subsidies from COVID-related governmental retention programs in Canada, the UK, Australia and New Zealand which decreased by $4.3 million to $1.2 million as compared to $5.5 million in the prior fiscal year quarter.

Partially offsetting this increase, the Company received $6.6 million of insurance recoveries in the current fiscal year quarter related to an intellectual property legal settlement accrued in fiscal 2021 and recognized lower severance expense, which included charges of $2.4 million and $12.0 million for the quarters ended August 31, 2021 and August 31, 2020, respectively, related to cost-reduction and restructuring programs.

Depreciation and amortization expenses in the quarter ended August 31, 2021 were $14.9 million which were relatively consistent to $15.5 million in the prior fiscal year quarter.

There were no significant changes to the assets in service in the first quarter of fiscal 2022.

Net interest expense in the quarter ended August 31, 2021 was $1.3 million compared to $1.2 million in the prior fiscal year quarter.

Net interest expense was relatively consistent as the Company had lower average debt borrowings with higher interest rates as compared to the prior fiscal year quarter.

The Company expects Net interest expense to decline in future periods as a result of the lower debt balance resulting from the $100.0 million repayment at the end of the first fiscal year quarter and expected lower interest rates.

Gain (loss) on sale of assets and other in the prior fiscal year quarter ended August 31, 2020 was $6.6 million.

The company-owned facility located in Danbury, Connecticut was sold in the prior fiscal quarter which resulted in a gain on sale.

The Company’s effective tax rate for the quarter ended August 31, 2021 was 26.7%, compared to 23.2% in the prior fiscal year quarter.

Net loss attributable to Scholastic Corporation for the quarter ended August 31, 2021 decreased by $15.6 million to $24.2 million, compared to Net loss of $39.8 million in the prior fiscal year quarter.

Loss per basic and diluted share of Class A and Common Stock was $0.70 and $0.70, respectively, for the fiscal quarter ended August 31, 2021, compared to loss per basic and diluted share of Class A and Common Stock of $1.16 and $1.16, respectively, in the prior fiscal year quarter.

Net loss attributable to noncontrolling interest for the quarter ended August 31, 2021 was $0.2 million compared to net income attributable to noncontrolling interest of less than $0.1 million in the prior fiscal year quarter.

SCHOLASTIC CORPORATION

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

Net income attributable to Scholastic Corporation for the quarter ended November 30, 2021 increased by $33.2 million to $68.3 million, compared to $35.1 million in the prior fiscal year quarter.

Earnings per basic and diluted share of Class A and Common Stock was $1.97 and $1.91, respectively, for the fiscal quarter ended November 30, 2021, compared to earnings per basic and diluted share of Class A and Common Stock of $1.02 and $1.02, respectively, in the prior fiscal year quarter.

Net income attributable to Scholastic Corporation for the six months ended November 30, 2021 increased by $48.8 million to $44.1 million, compared to a net loss of $4.7 million in the prior fiscal year period.

Earnings per basic and diluted share of Class A and Common Stock was $1.27 and $1.24, respectively, for the six months ended November 30, 2021, compared to loss per basic and diluted share of Class A and Common Stock of $0.14 and $0.14, respectively, in the prior fiscal year period.

Net income attributable to noncontrolling interest for the quarter ended November 30, 2021 was $0.1 million compared to $0.1 million in the prior fiscal year quarter.

Net loss attributable to noncontrolling interest for the six months ended November 30, 2021 was $0.1 million compared to net income attributable to noncontrolling interest of $0.1 million in the prior fiscal year period.

Children’s Book Publishing and Distribution

Three months ended

August 31, August 31, $ %

Three months ended November 30, Six months ended November 30,

($ amounts in millions)

2021 2020 Change Change

2021 2020 Change Change 2021 2020 Change Change

Revenues $ 352.5 $ 244.0 $ 108.5 44.5 % $ 468.3 $ 336.3 $ 132.0 39.3 %

2 unchanged sentences

110.5 87.0 23.5 27.0 % 181.9 152.2 29.7 19.5 %

Operating income (loss) $ (21.7) $ (29.0) $ 7.3 25.2 %

Operating income (loss) $ 85.2 $ 35.4 $ 49.8 140.7 % $ 63.5 $ 6.4 $ 57.1 NM

Operating margin 24.2 % 14.5 % 13.6 % 1.9 %

(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses and depreciation and amortization.

Revenues for the quarter ended August 31, 2021 increased by $23.5 million to $115.8 million, compared to $92.3 million in the prior fiscal year quarter.

The increase in segment revenues was primarily driven by higher trade channel revenues of $19.7 million due to increased sales of backlist titles from best-selling series, which benefited from marketing and publicity activities for Harry Potter box sets and limited edition Dogman foil covers, and new releases from the Company's popular series, including The Baby-sitters Club ® Graphix TM and Baby-sitters Little Sisters ® Graphix TM , Five Nights at Freddy’s TM , The Bad Guys TM and Nat Enough TM , coupled with the continued success of Alan Gratz’s Refugee and Ground Zero and Pam Munoz Ryan’s Esperanza Rising.

In addition, sales increased for specialty products within the Company's Klutz division, as well as the Make Believe Ideas TM business, which included the launch of a plush product line, Sensory Snuggables TM .

Book fairs channel revenues increased $2.8 million as a result of higher revenue per fair and book clubs channel revenues increased $1.0 million driven by an increase in the number of teacher sponsors.

Book fair bookings are expected to improve each sequential season as schools re-open, with bookings for the current fall season substantially ahead of last spring.

Cost of goods sold for the quarter ended August 31, 2021 was $66.1 million, or 57.1% of revenues, compared to $56.1 million, or 60.8% of revenues, in the prior fiscal year quarter.

The decrease in Cost of Goods sold as a percentage of revenue was primarily attributable to lower fixed costs on a higher revenue base, partially offset by higher royalty costs associated with increased trade channel revenues.

Other operating expenses for the quarter ended August 31, 2021 increased to $71.4 million, compared to $65.2 million in the prior fiscal year quarter.

The $6.2 million increase was primarily attributable to higher employee related costs as the prior fiscal year quarter benefited from the employee furlough and reduced work week programs as well as the temporary closure of book fair distribution facilities, all of which did not reoccur in the current fiscal year quarter.

Segment operating loss for the quarter ended August 31, 2021 was $21.7 million, compared to $29.0 million in the prior fiscal year quarter.

The $7.3 million improvement was primarily driven by the increased revenues across all channels, primarily in the trade channel, partially offset by higher employee-related costs due to the absence of furlough and reduced work week programs that benefited the prior fiscal year quarter.

NM Not meaningful

Revenues for the quarter ended November 30, 2021 increased by $108.5 million to $352.5 million, compared to $244.0 million in the prior fiscal year quarter.

The increase in segment revenues was primarily driven by higher book fairs channel revenues of $128.5 million 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.

Increased book fairs channel revenues were partially offset by lower trade channel revenues of $4.9 million and lower book clubs channel revenues of $15.1 million.

In the trade channel, current quarter releases included J.K.

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

Perspectives and Our Table by Peter Reynolds.

However, the prior fiscal year quarter benefited from the release of The Ickabog and increased demand for Harry Potter:

The Illustrated Collection , which drove revenues higher compared to the quarter ended November 30, 2021.

This was partially offset by increased sales within the Make Believe Ideas TM business, resulting from the launch of the plush product line, Sensory Snuggables TM , as well as higher specialty book sales from the improvement in the U.S.

school-based channels.

In the book clubs channel, industry-wide labor shortages and a discrete systems issue in the Company's fulfillment operations caused a backlog in shipments which led to lower revenues in the quarter, despite increased demand for book clubs products.

Revenues for the six months ended November 30, 2021 increased by $132.0 million to $468.3 million, compared to $336.3 million in the prior fiscal year period.

The increase in segment revenues was primarily driven by higher book fairs channel revenues of $131.3 million resulting from increased fair count and higher revenue per fair due to increased demand and improved customer engagement, particularly in the second quarter, as schools re-opened for the fall season.

Trade channel revenues increased $14.8 million primarily due to increased sales of backlist titles and box sets from best-selling series, including Dog Man and Harry Potter .

New releases in the period ended November 30, 2021 included J.K.

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

Perspectives , and Brian Selznick’s Kaleidoscope , as well as new releases from the Company's best-selling series, including The Baby-sitters Club ® Graphix TM , Baby-sitters Little Sisters ® Graphix TM , Five Nights at Freddy’s TM , The Bad Guys TM and I Survived.

In addition, sales increased for specialty products within the Company's Klutz division, as well as the Make Believe Ideas TM business, which benefited from the launch of the plush product line, Sensory Snuggables TM , and the improvement of the U.S.

school-based channels in the second quarter.

The revenue increase was partially offset by lower book clubs channel revenues of $14.1 million due to industry-wide

SCHOLASTIC CORPORATION

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

labor shortages and a discrete systems issue in the Company's fulfillment operations which caused a backlog in shipments which led to lower revenues in the period, despite increased demand for book clubs products.

Cost of goods sold for the quarter ended November 30, 2021 was $156.8 million, or 44.5% of revenues, compared to $121.6 million, or 49.8% of revenues, in the prior fiscal year quarter.

Cost of good sold for the six months ended November 30, 2021 was $222.9 million, or 47.6% of revenues, compared to $177.7 million, or 52.8% of revenues, in the prior fiscal year period.

The decrease in Cost of Goods sold as a percentage of revenue for the three and six months ended November 30, 2021 was primarily driven by the benefit of higher revenue on fixed cost components partially offset by the increasing inflationary pressures on costs.

In addition, royalty costs were lower due to increased book fairs channel revenues which have a higher mix of non-royalty bearing titles.

Other operating expenses for the quarter ended November 30, 2021 increased to $110.5 million, compared to $87.0 million in the prior fiscal year quarter.

The $23.5 million increase was primarily attributable to higher employee-related costs, largely in the book fairs channel, as the Company increased headcount at the warehouses in order to scale the business to meet the increased demand, coupled with higher costs due to labor shortages and increased inflationary pressures.

In addition, in the prior fiscal year quarter, the Company incurred lower costs from the temporary closure of book fair distribution facilities which did not reoccur in the quarter ended November 30, 2021.

Other operating expenses for the six months ended November 30, 2021 increased to $181.9 million, compared to $152.2 million in the prior fiscal year period.

The $29.7 million increase was primarily attributable to higher employee-related costs as the prior fiscal year period benefited from the employee furlough and reduced work week programs in the first quarter of the period, and the Company incurred lower costs from the temporary closure of book fair distribution facilities, none of which reoccurred in the period ended November 30, 2021.

In addition, the Company incurred higher labor costs due to increased headcount at the warehouses in order to scale the business to meet the increased demand, coupled with higher costs due to labor shortages and increased inflationary pressures.

Segment operating income for the quarter ended November 30, 2021 was $85.2 million, compared to $35.4 million in the prior fiscal year quarter.

The $49.8 million improvement was primarily driven by the increased revenues in the book fairs channel as schools re-opened for the fall season.

The prior year's cost saving initiatives were partially offset by inflationary pressures on labor, freight, paper and printing, which resulted in increased costs.

The Company expects inflationary pressures to continue to negatively impact costs.

Segment operating income for the six months ended November 30, 2021 was $63.5 million, compared to $6.4 million in the prior fiscal year period.

The $57.1 million improvement was primarily driven by the increased revenues in the book fairs channel as schools re-opened for the fall season, coupled with increased trade channel revenues.

The prior year's cost saving initiatives were partially offset by inflationary pressures on labor, freight, paper and printing, which resulted in increased costs.

The Company expects inflationary pressures to continue to negatively impact costs.

Education Solutions

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2021 2020 Change Change

Three months ended November 30, Six months ended November 30,

($ amounts in millions) 2021 2020 Change Change 2021 2020 Change Change

Revenues $ 79.5 $ 67.5 $ 12.0 17.8 % $ 159.6 $ 121.1 $ 38.5 31.8 %

2 unchanged sentences

36.4 35.7 0.7 2.0 % 76.4 68.9 7.5 10.9 %

Operating income (loss) $ 7.3 $ (2.4) $ 9.7 NM

Operating income (loss) $ 15.6 $ 10.3 $ 5.3 51.5 % $ 22.9 $ 7.9 $ 15.0 189.9 %

Operating margin 19.6 % 15.3 % 14.3 % 6.5 %

(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses and depreciation and amortization.

NM Not meaningful

Revenues for the quarter ended August 31, 2021 increased to $80.1 million, compared to $53.6 million in the prior fiscal year quarter, resulting in an increase of $26.5 million.

The increase in segment revenues was primarily driven by higher sales of instructional products and programs, including the newly launched PreK On My Way ,

Revenues for the quarter ended November 30, 2021 increased to $79.5 million, compared to $67.5 million in the prior fiscal year quarter, resulting in an increase of $12.0 million.

The increase in segment revenues was primarily driven by revenues from the Company’s new Rising Voices Library offering which meets the increasing demand for culturally responsive content and instruction.

In addition, increased revenues were driven by higher sales of instructional products and programs, including the recently launched early childhood curriculum program PreK

SCHOLASTIC CORPORATION

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

an early childhood program, and the Company's summer learning product offerings and Leveled Bookroom, coupled with increased sales of the Company's traditional classroom book collections and digital products.

On My Way , and professional learning services, as well as increased circulation revenue from the Magazines+ business.

The revenue increase was partially offset by lower revenues from the Company's teaching resources business, which benefited in the prior fiscal year quarter as parents used these products to supplement remote and hybrid learning resulting from COVID-19.

The Company anticipates federal stimulus funds to be utilized by schools during the 2021/2022 school year to help students accelerate their learning post-pandemic.

Cost of goods sold for the quarter ended August 31, 2021 was $32.8 million, or 40.9% of revenues, compared to $22.8 million, or 42.5% of revenues, in the prior fiscal year quarter.

The decrease in Cost of goods sold as a percentage of revenues was primarily attributable to lower fixed costs on a higher revenue base, coupled with favorable product mix from higher digital sales.

Other operating expenses for the quarter ended August 31, 2021 increased to $40.0 million, compared to $33.2 million in the prior fiscal year quarter.

The increase in Other operating expenses was primarily related to higher employee-related costs as the prior fiscal year quarter benefited from employee furlough and reduced work week programs that did not reoccur in the current fiscal year quarter.

Segment operating income for the quarter ended August 31, 2021 was $7.3 million, compared to an operating loss of $2.4 million in the prior fiscal year quarter.

The $9.7 million improvement was primarily driven by higher revenues of instructional products and programs, traditional classroom book collections and digital products, partially offset by increased employee-related costs due to the absence of furlough and reduced work week programs that benefited the prior fiscal year quarter.

Revenues for the six months ended November 30, 2021 increased to $159.6 million, compared to $121.1 million in the prior fiscal year period, resulting in an increase of $38.5 million.

The increase in segment revenues was primarily driven by higher sales of instructional products and programs, including the recently launched early childhood curriculum program PreK On My Way , the Company's summer learning product offerings and Scholastic Bookroom , as well as professional learning services and revenues from the Company’s new Rising Voices Library offering.

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.

The revenue increase was partially offset by lower revenues from the Company's teaching resources business, which benefited in the prior fiscal year period as parents used these products to supplement remote and hybrid learning resulting from COVID-19.

Cost of goods sold for the quarter ended November 30, 2021 was $27.5 million, or 34.6% of revenues, compared to $21.5 million, or 31.9% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenues was primarily attributable to higher royalty costs due to the mix of royalty bearing products sold in the quarter, coupled with increased costs due to inflationary pressures, partially offset by the benefit from higher revenue per unit shipped.

Cost of goods sold for the six months ended November 30, 2021 was $60.3 million, or 37.8% of revenues, compared to $44.3 million, or 36.6% of revenues, in the prior fiscal year period.

The increase in Cost of goods sold as a percentage of revenues was primarily attributable to higher royalty costs associated with Scholastic Literacy Pro digital products and the Company's summer learning product offerings, coupled with increased costs due to inflationary pressures, partially offset by the benefit from higher revenue per unit shipped.

Other operating expenses for the quarter ended November 30, 2021 were $36.4 million, compared to $35.7 million in the prior fiscal year quarter.

The increase in Other operating expenses was primarily related to higher employee-related costs due to inflationary pressures on labor costs.

Other operating expenses for the six months ended November 30, 2021 increased to $76.4 million, compared to $68.9 million in the prior fiscal year period.

The increase in Other operating expenses was primarily related to higher employee-related costs as the prior fiscal year period benefited from employee furlough and reduced work week programs in the first quarter of that period that did not reoccur in the period ended November 30, 2021, in addition to inflationary pressures on labor costs.

Segment operating income for the quarter ended November 30, 2021 was $15.6 million, compared to $10.3 million in the prior fiscal year quarter.

The $5.3 million improvement was primarily driven by higher revenues as a result of revenues from the Company’s new Rising Voices Library offering, coupled with higher sales of instructional products and programs and professional learning services, as well as increased circulation revenue from the Magazines+ business.

The Company expects inflationary pressures on labor, freight, paper and printing to continue to negatively impact costs.

Segment operating income for the six months ended November 30, 2021 was $22.9 million, compared to $7.9 million in the prior fiscal year period.

The $15.0 million improvement was primarily driven by higher revenues as a result of increased sales of instructional products and programs and professional learning services, and revenues from the Company’s new Rising Voices Library offering, as well as higher circulation revenue from the Magazines+ business and higher sales of digital products, partially offset by increased employee-related costs.

The Company expects inflationary pressures on labor, freight, paper and printing to continue to negatively impact costs.

SCHOLASTIC CORPORATION

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

International

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2021 2020 Change Change

Three months ended November 30, Six months ended November 30,

($ amounts in millions) 2021 2020 Change Change 2021 2020 Change Change

Revenues $ 92.2 $ 94.7 $ (2.5) (2.6) % $ 156.1 $ 164.0 $ (7.9) (4.8) %

2 unchanged sentences

32.5 28.3 4.2 14.8 % 62.0 55.7 6.3 11.3 %

Operating income (loss) $ (1.7) $ 4.8 $ (6.5) NM

Operating income (loss) $ 8.7 $ 17.9 $ (9.2) (51.4) % $ 7.0 $ 22.7 $ (15.7) (69.2) %

Operating margin 9.4 % 18.9 % 4.5 % 13.8 %

(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses, severance and depreciation and amortization.

NM Not meaningful

Revenues for the quarter ended August 31, 2021 decreased to $63.9 million, compared to $69.3 million in the prior fiscal year quarter.

Revenues for the quarter ended November 30, 2021 decreased to $92.2 million, compared to $94.7 million in the prior fiscal year quarter.

Local currency revenues across the Company's foreign operations decreased by $5.3 million, partially offset by favorable foreign exchange of $2.8 million.

Australia and New Zealand local currency revenues decreased $4.4 million, primarily in the trade and book clubs channels, due to restrictions from the COVID variant which were not in place in the prior fiscal year quarter.

In Asia, local currency revenues decreased $2.9 million primarily driven by lower direct-to-home sales as a result of the continued impact of the pandemic.

In Canada, local currency revenues decreased $0.9 million primarily due to lower trade channel revenues.

In the UK, local currency revenues decreased by $0.5 million primarily due to lower co-edition and specialty sales.

In addition, export channel revenues decreased $0.3 million as compared to the prior fiscal year quarter.

Cost of goods sold for the quarter ended August 31, 2021 was $36.1 million, or 56.5% of revenues, compared to $37.1 million, or 53.5% of revenues, in the prior fiscal year quarter.

The increase in cost of goods sold as a percentage of revenue was driven by higher inventory reserves recognized in Canada, primarily in the book fairs channel.

Other operating expenses for the quarter ended August 31, 2021 were $29.5 million, compared to $27.4 million in the prior fiscal year quarter.

Other operating expenses increased $2.1 million primarily driven by lower government subsidies related to COVID-related governmental retention programs in Canada, the UK, Australia and New Zealand which decreased by $4.3 million to $1.2 million as compared to $5.5 million in the prior fiscal year quarter.

This increase was partially offset by lower severance expense related to restructuring programs which decreased by $0.6 million to $0.4 million compared to $1.0 million in the prior fiscal year quarter.

In Asia, local currency revenues decreased by $7.6 million as the local markets continued to be impacted by COVID related shutdowns and recently adopted restrictive regulations in China, resulting in lower direct-to-home sales as well as trade and school channel sales.

Australia and New Zealand local currency revenues decreased by $4.7 million primarily in the school-based channels, due to additional lockdowns imposed by the COVID variant, partially offset by increased trade channel sales in Australia.

In the UK, local currency revenues decreased by $0.9 million primarily due to lower trade channel sales and book fair incentive program credits as issuances outpaced redemptions, which more than offset the increased sales in the book fairs channel resulting from increased demand as schools re-opened.

In addition, export channel revenues decreased by $0.5 million as compared to the prior fiscal year quarter.

The decrease in segment revenues was partially offset by higher local currency revenues in Canada of $8.4 million driven by increased sales across all channels, particularly in the book fairs and book clubs channels as schools re-opened.

Revenues for the six months ended November 30, 2021 decreased to $156.1 million, compared to $164.0 million in the prior fiscal year period.

Local currency revenues across the Company's foreign operations decreased by $14.3 million, partially offset by favorable foreign exchange of $6.4 million.

In Asia, local currency revenues decreased $10.5 million as the local markets continued to be impacted by COVID related shutdowns and the restrictive regulations in China, resulting in lower direct-to-home sales as well as trade and school channel sales.

Australia and New Zealand local currency revenues decreased $9.1 million across all channels, due to additional lockdowns imposed by the COVID variant.

In the UK, local currency revenues decreased by $1.4 million primarily due to lower trade channel sales and the book fair incentive program credits as issuances outpaced redemptions, which more than offset the increased sales in the book fairs channel resulting from the increased demand as schools re-opened.

In addition, export channel revenues decreased $0.8 million as compared to the prior fiscal year period.

The decrease in segment revenues was partially offset by higher local currency revenues in Canada of $7.5 million driven by increased sales across all channels, particularly in the book fairs and book clubs channels as schools re-opened.

Cost of goods sold for the quarter ended November 30, 2021 was $51.0 million, or 55.3% of revenues, compared to $48.5 million, or 51.2% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenue was driven by higher royalty costs due to the sales mix of royalty bearing products sold in the quarter and higher fulfillment costs, primarily in Australia, New Zealand and the UK, and higher freight costs across all locations due to increased inflationary pressures.

Cost of goods sold for the six months ended November 30, 2021 was $87.1 million, or 55.8% of revenues, compared to $85.6 million, or 52.2% of revenue, in the prior fiscal year period.

The increase in Cost of goods sold as a percentage of revenues was driven by higher royalty costs due to the sales mix of royalty bearing products sold in the period and higher fulfillment costs, primarily in Australia, New Zealand and the UK, in addition to higher freight costs across all locations due to increased inflationary pressures.

Other operating expenses for the quarter ended November 30, 2021 were $32.5 million, compared to $28.3 million in the prior fiscal year quarter.

Other operating expenses increased $4.2 million primarily driven by lower government subsidies related to COVID-related governmental retention programs in Canada, the UK, Australia and New Zealand, which decreased by $2.3 million to $0.5 million as compared to $2.8 million in the prior fiscal year quarter, as well as lower equity investment income.

This increase was partially offset by lower severance

SCHOLASTIC CORPORATION

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

Segment operating loss for the quarter ended August 31, 2021 was $1.7 million, compared to operating income of $4.8 million in the prior fiscal year quarter.

Total local currency operating results across the Company's foreign operations decreased $6.4 million, primarily driven by lower revenues, coupled with lower subsidies from COVID-related governmental employee retention programs.

Unallocated overhead expense for the quarter ended August 31, 2021 decreased by $14.5 million to $15.9 million, from $30.4 million in the prior fiscal year quarter.

The decrease was primarily attributable to lower severance expense related to restructuring programs, which decreased by $9.0 million to $2.0 million, compared to $11.0 million in the prior fiscal year quarter, coupled with $6.6 million of insurance recoveries received in the current fiscal year quarter related to the intellectual property legal settlement accrued in fiscal 2021.

The decrease was partially offset by higher employee-related costs as the prior fiscal year quarter benefited from employee furlough and reduced work week programs that did not reoccur in the current fiscal year quarter.

expense related to restructuring programs, which decreased by $1.1 million to $0.2 million compared to $1.3 million in the prior fiscal year quarter.

Other operating expenses for the six months ended November 30, 2021 were $62.0 million, compared to $55.7 million in the prior fiscal year period.

Other operating expenses increased $6.3 million primarily driven by lower government subsidies related to COVID-related governmental retention programs in Canada, the UK, Australia and New Zealand, which decreased by $6.5 million to $1.7 million as compared to $8.2 million in the prior fiscal year period, as well as lower equity investment income.

In addition, the Company incurred higher employee-related expenses as the prior fiscal year period benefited from employee furlough and reduced work week programs in the first quarter of that period that did not reoccur in the period ended November 30, 2021, in addition to inflationary pressures on labor costs.

This increase was partially offset by lower severance expense related to restructuring programs, which decreased by $1.7 million to $0.6 million compared to $2.3 million in the prior fiscal year quarter.

Segment operating income for the quarter ended November 30, 2021 was $8.7 million, compared to $17.9 million in the prior fiscal year quarter.

Total local currency operating results across the Company's foreign operations decreased $9.7 million for the quarter ended November 30, 2021.

Segment operating income for the six months ended November 30, 2021 was $7.0 million, compared to $22.7 million in the prior fiscal year period.

Total local currency operating results across the Company's foreign operations decreased $16.1 million for the six months ended November 30, 2021.

The decrease for the three and six months ended November 30, 2021 was primarily driven by lower revenues across all locations except Canada, coupled with higher freight costs and lower subsidies from COVID-related governmental employee retention programs.

The Company expects inflationary pressures on labor, freight, paper and printing to continue to negatively impact costs.

Unallocated overhead expense for the quarter ended November 30, 2021 increased by $11.3 million to $26.1 million, from $14.8 million in the prior fiscal year quarter.

The increase was primarily attributable to higher employee-related costs as a result of inflationary pressures on labor costs creating higher unallocated expenses, in addition to a COVID-related governmental employee retention credit that did not reoccur in the current fiscal year quarter.

This was partially offset by lower severance expense related to restructuring programs, which decreased by $3.3 million to $0.6 million compared to $3.9 million in the prior fiscal year quarter.

Unallocated overhead expense for the six months ended November 30, 2021 decreased by $3.2 million to $42.0 million, from $45.2 million in the prior fiscal year period.

The decrease was primarily attributable to lower severance expense related to restructuring programs, which decreased by $12.3 million to $2.6 million compared to $14.9 million in the prior fiscal year period, coupled with $6.6 million of insurance recoveries received in the current fiscal year period related to an intellectual property legal settlement accrued in fiscal 2021.

The decrease was partially offset by higher employee-related costs as a result of inflationary pressures on labor costs creating higher unallocated expenses.

In addition, the prior fiscal year period benefited from employee furlough and reduced work week programs in the first fiscal year quarter and a COVID-related governmental employee retention credit, none of which reoccurred in the current fiscal year period.

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;

4 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.

SCHOLASTIC CORPORATION

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

Liquidity and Capital Resources

Cash provided by operating activities was $63.6 million for the three months ended August 31, 2021, compared to cash used in operating activities of $26.0 million for the prior fiscal year period, representing an increase in cash provided by operating activities of $89.6 million.

The increase in cash provided was primarily driven by the federal income tax refund of $63.1 million and $6.6 million of insurance recoveries related to the intellectual property legal settlement, both received in the current fiscal year quarter, coupled with lower inventory purchases as a result of improved inventory management.

Cash used in investing activities was $14.5 million for the three months ended August 31, 2021, compared to cash used in investing activities of $8.9 million in the prior fiscal year period, representing an increase in cash used in investing activities of $5.6 million.

The increase in cash used was driven by the net proceeds from the sale of the Danbury facility of $12.3 million which benefited the prior fiscal year quarter, partially offset by lower capital expenditures of $5.8 million in the quarter ended August 31, 2021 as the Company continued to limit spending to strategic investments in key growth areas of the business and in technology, both internal and customer-facing, to allow it to operate with greater efficiency.

Cash used in financing activities was $105.6 million for the three months ended August 31, 2021, compared to cash used in financing activities of $5.3 million for the prior fiscal year period, representing an increase in cash used in financing activities of $100.3 million.

The increase in cash used is primarily related to a repayment of borrowings under the U.S.

loan agreement of $100.0 million during the quarter ended August 31, 2021.

Cash provided by operating activities was $141.6 million for the six months ended November 30, 2021, compared to $20.1 million for the prior fiscal year period, representing an increase in cash provided by operating activities of $121.5 million.

The increase in cash provided was primarily driven by the increase in revenues resulting in higher cash collections, in addition to the federal income tax refund of $63.1 million and insurance recoveries of $6.6 million related to the intellectual property legal settlement, both received in the first fiscal year quarter.

This was partially offset by the $20.0 million payment for the intellectual property legal settlement accrued in fiscal 2021, in addition to higher employee related costs due to inflationary pressures.

Cash used in investing activities was $17.2 million for the six months ended November 30, 2021, compared to cash used in investing activities of $24.1 million in the prior fiscal year period, representing a decrease in cash used in investing activities of $6.9 million.

The decrease in cash used was driven by lower capital expenditures of $7.4 million as the Company continued to limit spending to strategic investments in key growth areas of the business and in technology, both internal and customer-facing, to allow it to operate with greater efficiency.

This was partially offset by lower net proceeds from the sale of the Lake Mary facility of $10.4 million in the period ended November 30, 2021 compared to the net proceeds from the sale of the Danbury facility of $12.3 million which benefited the prior fiscal year period.

Cash used in financing activities was $187.9 million for the six months ended November 30, 2021, compared to cash used in financing activities of $36.2 million for the prior fiscal year period, representing an increase in cash used in financing activities of $151.7 million.

The increase in cash used is primarily related to repayments of borrowings under the U.S.

credit agreement of $175.0 million during the six months ended November 30, 2021, which resulted in no outstanding borrowings as of November 30, 2021.

In addition, the Company reacquired $4.2 million of common stock with no such repurchases in the prior fiscal year period during which the repurchase program was suspended.

The increase in cash used was partially offset by net proceeds pursuant to stock option exercises of $3.0 million in the current fiscal year period.

Cash Position

The Company’s cash and cash equivalents totaled $308.6 million at August 31, 2021, $366.5 million at May 31, 2021 and $355.5 million at August 31, 2020.

The Company’s cash and cash equivalents totaled $300.7 million at November 30, 2021, $366.5 million at May 31, 2021 and $356.6 million at November 30, 2020.

Cash and cash equivalents held by the Company’s U.S.

operations totaled $271.9 million at August 31, 2021, $318.0 million at May 31, 2020 and $323.7 million at August 31, 2020.

SCHOLASTIC CORPORATION

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

Due to the seasonal nature of its business as discussed under “Seasonality” above, the Company usually experiences negative cash flows in the June through October time period.

operations totaled $268.7 million at November 30, 2021, $318.0 million at May 31, 2020 and $309.4 million at November 30, 2020.

Due to the seasonal nature of its business as discussed under “Seasonality”, the Company usually experiences negative cash flows in the June through October time period.

As a result of the Company’s business cycle, borrowings have historically increased during June, July and August, have generally peaked in September or October, and have been at their lowest point in May.

As a precautionary measure in the context of the COVID-19 pandemic, the Company accessed its committed bank credit facility in the fourth quarter of fiscal 2020 by taking a U.S.

As a precautionary measure in the context of the COVID-19 pandemic, the Company had accessed its committed bank credit facility in the fourth quarter of fiscal 2020 by taking a U.S.

dollar LIBOR-based advance for $200.0 million.

During fiscal 2021, the Company paid down $25.0 million of the borrowing and, during the first quarter of fiscal 2022, the Company paid down $100.0 million of the borrowing, resulting in $75.0 million outstanding as of August 31, 2021, which is classified as current.

There is no immediate working capital requirement, but the Company will continue to evaluate the borrowing position during the fiscal year.

On December 16, 2020, the U.S.

loan agreement was amended, which, among other things, included adjustments to certain covenant thresholds and reduced the borrowing limit from $375.0 million to $250.0 million.

See Note 4 of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements" for more information concerning the amended U.S.

loan agreement.

The Company has repaid these borrowings.

The final remaining $75.0 million outstanding balance was paid during the second quarter of fiscal 2022, resulting in no outstanding borrowings as of November 30, 2021.

On October 27, 2021, the U.S.

credit agreement was amended and restated, which, among other things, increased the borrowing limit from $250.0 million to $300.0 million and extended the maturity to October 27, 2026.

See Note 4 of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information concerning the U.S.

credit agreement.

The Company’s operating philosophy is to use cash provided by operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses or acquiring other strategic assets, as well as engaging in shareholder enhancement initiatives, such as share repurchases or dividend declarations.

The Company has lifted the temporary suspension of its open-market buy-back program under which $67.3 million remained available for future purchases of common shares as of August 31, 2021.

The Company has lifted the temporary suspension of its open-market buy-back program under which $63.1 million remained available for future purchases of common shares as of November 30, 2021.

During the six months ended November 30, 2021, the Company repurchased $4.2 million of common stock.

SCHOLASTIC CORPORATION

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

The Company has maintained, and expects to maintain for the foreseeable future, sufficient liquidity to fund ongoing operations, including working capital requirements, pension contributions, postretirement benefits, debt service, planned capital expenditures and other investments, as well as dividends and share repurchases as appropriate in the context of COVID-19 considerations.

As of August 31, 2021, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $308.6 million, cash from operations and the Company's loan agreements in the U.S.

As of November 30, 2021, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $300.7 million, cash from operations, the Company's U.S.

credit agreement and UK loan agreements.

As indicated above, the U.S.

loan agreement was amended on December 16, 2020, which reduced the borrowing limit from $375.0 million to $250.0 million.

The Company expects the amended U.S.

loan agreement to provide it with an appropriate level of flexibility to strategically manage the business operations.

The Company's amended U.S.

loan agreement and its loan agreements in the UK total $261.8 million, less borrowings of $82.1 million and commitments of $0.4 million, resulting in $179.3 million of availability.

Additionally, the Company has short-term credit facilities of $37.9 million, less current borrowings of $7.4 million and commitments of $3.9 million, resulting in $26.6 million of current availability at August 31, 2021.

credit agreement was amended and restated on October 27, 2021, which increased the borrowing limit from $250.0 million to $300.0 million.

The Company expects the U.S.

credit agreement to provide it with an appropriate level of flexibility to strategically manage its business operations.

The Company's U.S.

credit agreement and its loan agreements in the UK total $306.8 million, less borrowings of $6.8 million and commitments of $0.4 million, resulting in $299.6 million of availability.

Additionally, the Company has short-term credit facilities of $44.2 million, less current borrowings of $7.5 million and commitments of $3.9 million, resulting in $32.8 million of current availability under these facilities at November 30, 2021.

Accordingly, the Company believes these sources of liquidity are sufficient to finance its currently anticipated ongoing operating needs, as well as its financing and investing activities, taking COVID-19 into consideration.

SCHOLASTIC CORPORATION

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

The Company is party to the U.S.

loan agreement, the UK loan agreements and certain credit lines with various banks as described in Note 4 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements." The Company had $75.0 million in outstanding borrowings under the U.S.

loan agreement as of August 31, 2021, which are classified as current.

As indicated above, on December 16, 2020, the Company entered into the Amendment to the U.S.

loan agreement which included temporary covenant relief and a reduction in the maximum commitments.

credit agreement, the UK loan agreements and certain credit lines with various banks as described in Note 4 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements." The Company had no outstanding borrowings under the U.S.

credit agreement as of November 30, 2021.

As indicated above, on October 27, 2021, the Company amended and restated the U.S.

credit agreement, which included an increase in the maximum commitments and extension of the maturity date.

On September 23, 2019, Scholastic Limited UK entered into a term loan agreement to borrow £2.0 million 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, 2022.

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

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

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

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 million.

The loan has a maturity date of July 31, 2022.

As of August 31, 2021, the Company had $4.3 million outstanding on the loan.

As of November 30, 2021, the Company had $4.2 million outstanding on the loan and no remaining available credit under this facility.

The Company is party to loan agreements, notes or other documents or instruments which reference the London Interbank Offered Rate, or LIBOR, as the benchmark interest rate index used to set the borrowing rate on certain short-term and variable-rate loans or advances.

The ICE Benchmark Administration (IBA) will cease the publication of 1-week and 2-month USD LIBORs effective December 31, 2021 and overnight, 1-month, 3-month, 6-month and 12-month LIBORs effective June 30, 2023.

The Company is working with its financial institutions to replace USD LIBOR with alternative reference rates in financial contracts as they mature, or as the Company requires.

The markets have provided several replacements for USD LIBOR, including the Bloomberg Short-Term Bank Yield Index (BSBY) and the ARRC’s Secured Overnight Financing Rate (SOFR), either of which will be made available to the Company by is agent banks as a substitute for USD LIBOR.

The Company does not believe that the change in reference rates will have any material effect on its ability to access the credit markets under its existing financing agreements, or its ability to modify or amend financial contracts, if required.

SCHOLASTIC CORPORATION

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

Certain Human Capital Information

As of May 31, 2021, the Company had approximately 6,800 employees, of which 4,670 were located in the United States and 2,130 outside the United States.

The table below represents the approximate number of employees by business channel and function.

Full-time Part-time Seasonal Total

Central Functions 1

Warehouse 970 140 30 1,140

Book Fairs Warehouses 730 230 620 1,580

Book Fairs 210 10 320 540

Book Clubs 60 — — 60

Trade 210 10 — 220

Education Solutions 430 100 10 540

International 1,400 50 50 1,500

International Warehouses 300 80 250 630

Total 4,890 630 1,280 6,800

1 Includes functions such as finance, accounting, executive, information technology, human resources, legal, and inventory demand planning.

New Accounting Pronouncements

5 unchanged sentences

Additional written and oral forward-looking statements may be made by the Company from time to time in Securities and Exchange Commission ("SEC") filings and otherwise.

The Company cautions readers that results or expectations expressed by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects and strategic plans, ecommerce and digital initiatives, new product introductions, strategies, new education standards, goals, revenues, improved efficiencies, general costs, manufacturing costs, medical costs, potential cost savings, merit pay, operating margins, working capital, liquidity, capital needs, the cost and timing of capital projects, interest costs, cash flows and income, are subject to risks and uncertainties, including, in particular, how the foregoing may be affected by developments in the context of the current COVID-19 pandemic and measures or responses of governmental authorities, school administrators, business suppliers or customers, which may have an impact on the Company's operations and could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors including those noted in the Annual Report and this Quarterly Report and other risks and factors identified from time to time in the Company’s filings with the SEC.

The Company cautions readers that results or expectations expressed by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects and strategic plans, ecommerce and digital initiatives, new product introductions, strategies, new education standards, goals, revenues, improved efficiencies, general operating costs, including transportation and labor costs, manufacturing costs, medical costs, potential cost savings, merit pay, operating margins, working capital, liquidity, capital needs, the cost and timing of capital projects, interest costs, cash flows and income, are subject to risks and uncertainties, including, in particular, how the foregoing may be affected by developments in the context of the current COVID-19 pandemic and measures or responses of governmental authorities, school administrators, business suppliers or customers, which may have an impact on the Company's operations and could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors including those noted in the Annual Report and this Quarterly Report and other risks and factors identified from time to time in the Company’s filings with the SEC.

The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis