What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-09-23 compared with 2022-03-18 · 132 added, 196 removed, 60 unchanged (85% of the section changed)

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

the prior fiscal year quarter.

The Company also incurred higher severance expense and related charges from its restructuring programs, which increased by $1.7 million to $2.5 million compared to $0.8 million in the prior fiscal year quarter and recognized lower equity investment income, partially offset by lower branch consolidation costs in the quarter ended February 28, 2022, which decreased by $0.3 million.

Selling, general and administrative expenses for the nine months ended February 28, 2022 increased to $512.7 million, compared to $433.8 million in the prior fiscal year period.

The $78.9 million increase was primarily attributable to higher employee related costs as a result of higher headcount in the book fairs warehouses to meet the increased demand, coupled with higher labor costs across the Company due in part to the employee furlough and reduced work week programs in the first fiscal quarter of the prior fiscal year, which did not reoccur in the current fiscal year.

In addition, the Company incurred higher warehouse-related costs, as certain book fair distribution facilities were temporarily closed in the prior fiscal year period, and recognized lower subsidies from COVID-related governmental retention programs in the current period, which decreased by $15.4 million to $1.4 million as compared to $16.8 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 February 28, 2022 related to an intellectual property legal settlement accrued in fiscal 2021 and recognized lower severance expense, which included charges of $5.7 million and $18.0 million for the nine months ended February 28, 2022 and February 28, 2021, respectively, related to cost-reduction and restructuring programs, in addition to lower branch consolidation costs of $0.5 million in the nine months ended February 28, 2022.

Depreciation and amortization expenses in the three and nine months ended February 28, 2022 were $13.6 million and $43.0 million, respectively, compared to $14.7 million and $46.0 million, respectively, in the prior fiscal year period.

The decrease in depreciation and amortization expenses in the three and nine month periods was primarily attributable to a shift towards spending in cloud computing arrangements in which the amortization expense is included in Selling, general and administrative expenses.

Capital spending is lower in the current fiscal year as the Company continues to focus on 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.

Asset impairments and write downs in the three and nine months ended February 28, 2021 were $10.9 million.

In the fiscal quarter ended February 28, 2021, the Company committed to a plan to cease use of its leased office space in New York City and consolidate into the company-owned New York headquarters and permanently close 12 of its 54 U.S.

book fairs warehouses as part of a branch consolidation project.

As a result, the Company recorded an impairment of the ROU assets associated with operating leases in the amount of $9.4 million and an impairment of $1.5 million of other long-lived assets, primarily leasehold improvements, in the fiscal 2021 periods.

Net interest expense in the quarter ended February 28, 2022 was $0.4 million compared to $1.7 million in the prior fiscal year quarter.

Net interest expense in the nine months ended February 28, 2022 was $2.2 million compared to $4.1 million in the prior fiscal year period.

The decreases in net interest expense were due to the lower average debt borrowings as compared to the prior fiscal year periods.

The Company repaid the $175.0 million of borrowings during the first and second quarters of fiscal 2022, resulting in no outstanding borrowings under the U.S.

credit agreement as of February 28, 2022.

Gain (loss) on sale of assets and other in the quarter ended February 28, 2021 was $3.8 million, as the Company sold the UK distribution center located in Southam and recognized a gain on sale.

Gain (loss) on sale of assets and other in the nine months ended February 28, 2022 was $6.2 million compared to $10.4 million in the prior fiscal year period.

The Company sold the Lake Mary facility in the period ended February 28, 2022, as part of an initiative to rightsize its real estate footprint to reduce occupancy costs, which resulted in the gain on sale.

In the period ended February 28, 2021, the Company sold the facility located in Danbury, Connecticut and the UK distribution center located in Southam, recognizing a gain on sale of $6.6 million and $3.8 million, respectively.

The Company’s effective tax rate for the quarter ended February 28, 2022 was 23.7%, compared to 36.4% in the prior fiscal year quarter.

The Company's effective tax rate for the nine months ended February 28, 2022 was 19.7% compared to 29.0% in the prior fiscal year period.

The decrease in the interim effective tax rate for the nine months ended February 28, 2022 is primarily due to the release of an uncertain tax position in the current fiscal year related to an effective settlement recognized as part of an ongoing IRS audit.

Overview and Outlook

Revenues for the first quarter ended August 31, 2022 were $262.9 million, compared to $259.8 million in the prior fiscal year quarter, an increase of $3.1 million.

The Company reported net loss per diluted share of Class A and Common Stock of $1.33 in the first quarter of fiscal 2023, compared to a net loss of $0.70 in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment drove a majority of the revenue increase in the first quarter with increased book fairs redemptions of incentive program credits.

Although the trade channel experienced lower frontlist sales, backlist titles from the Company's popular series continued to drive sales and the trade channel benefited from revenue associated with the production of the animated series "Eva the Owlet," TM based on the Owl Diaries TM books, which will be released on AppleTV +® later this fiscal year.

Within the Education Solutions segment, the New Worlds Reading Initiative shipped over 800,000 books to students in the program during June and July as the first year of the program concluded.

As expected, segment revenues decreased due to the timing of sales of instructional products and programs in the first quarter.

In the International segment, Australia and Canada drove increased revenues from their respective book fairs and trade channels, while the Asia markets had lower sales, primarily due to the disposition of the direct sales business.

Operating loss was $58.1 million for the quarter ended August 31, 2022, which was consistent with the Company's expectations and seasonality of the business.

The increase over the prior year period was due to increased product costs, which were impacted by higher freight and printing costs due to the continued inflationary pressures, coupled with the timing of revenues in the Education Solutions segment.

The Company is expecting increased sales from the Children’s Book Publishing and Distribution segment, with book fairs anticipated to reach its goal of 85% of pre-pandemic fair count levels and the trade channel expected to benefit from multiple new releases from bestselling authors, including the fourth Cat Kid Comic Club ® in Dav Pilkey’s latest series.

The Education Solutions segment will focus on the integration of the Learning Ovations TM acquisition and continue to assess capital allocations to enhance literacy offerings.

Due to the seasonality of the education selling cycle, any benefits from state and federal funding for literacy initiatives would occur toward the end of the fiscal year, primarily in the fourth fiscal quarter.

Internationally, the Company expects to benefit from the recovery in Canada, Australia and New Zealand, while the UK continues to be negatively impacted by inflationary pressures.

Operating income is expected to improve from higher revenues in Australia and the disposition of the low margin direct sales business in Asia which generated losses in the prior fiscal year.

Margin improvement is expected to be partially offset by the lack of government subsidies in certain markets, the slow recovery in Asia and the impact of foreign currency translation due to the strong U.S.

The Company continues to monitor and control discretionary spending which is expected to favorably impact unallocated overhead costs except to the extent offset by headwinds from inflationary pressures, primarily higher freight costs that are still expected to impact the cost of product.

Results of Operations

Revenues for the quarter ended August 31, 2022 increased by $3.1 million to $262.9 million, compared to $259.8 million in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment revenues increased by $8.9 million, primarily driven by higher book fairs channel revenues resulting from increased redemptions of book fair incentive program credits, partially offset by lower trade channel revenues.

In the Education Solutions segment, revenues decreased by $6.9 million, primarily driven by lower sales of instructional products and programs due to the timing of shipments as compared to the prior fiscal year quarter, as well as lower professional learning services and sales of teaching resources products, partially offset by revenues from the New Worlds Reading Initiative .

In local currency, the International segment revenues increased by $5.8 million, primarily driven by increased sales in the book fairs and trade channels within the Australia and Canada markets, partially offset by decreased revenues as a result of the disposition of the direct sales business in Asia.

International segment revenues were impacted by unfavorable foreign exchange of $4.7 million in the quarter ended August 31, 2022.

SCHOLASTIC CORPORATION Item 2.

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

Net loss attributable to Scholastic Corporation for the quarter ended February 28, 2022 increased by $1.4 million to $15.3 million, compared to $13.9 million in the prior fiscal year quarter.

Loss per basic and diluted share of Class A and Common Stock was $0.44 and $0.44, respectively, for the fiscal quarter ended February 28, 2022, compared to loss per basic and diluted share of Class A and Common Stock of $0.41 and $0.41, respectively, in the prior fiscal year quarter.

Net income attributable to Scholastic Corporation for the nine months ended February 28, 2022 increased by $47.4 million to $28.8 million, compared to a net loss of $18.6 million in the prior fiscal year period.

Earnings per basic and diluted share of Class A and Common Stock was $0.83 and $0.80, respectively, for the nine months ended February 28, 2022, compared to loss per basic and diluted share of Class A and Common Stock of $0.54 and $0.54, respectively, in the prior fiscal year period.

Net income attributable to noncontrolling interest for the quarter ended February 28, 2022 was $0.2 million compared to Net loss attributable to noncontrolling interest of $0.1 million in the prior fiscal year quarter.

Net income attributable to noncontrolling interest for the nine months ended February 28, 2022 was $0.1 million compared to less than $0.1 million in the prior fiscal year period.

Components of Cost of goods sold for the three months ended August 31, 2022 and August 31, 2021 are as follows:

Three months ended

August 31, August 31,

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

Product, service and production costs and inventory reserves $ 82.4 31.4 % $ 76.3 29.4 %

Royalty costs 27.4 10.4 % 27.8 10.7 %

Prepublication amortization 6.4 2.4 % 6.9 2.7 %

Postage, freight, shipping, fulfillment and other 28.3 10.8 % 22.3 8.5 %

Total $ 144.5 55.0 % $ 133.3 51.3 %

Cost of goods sold for the quarter ended August 31, 2022 was $144.5 million, or 55.0% of revenues, compared to $133.3 million, or 51.3% of revenues, in the prior fiscal year quarter.

Cost of goods sold was impacted by higher inbound freight and printing costs resulting in an increase in product costs, as well as higher postage, freight and shipping costs.

These cost increases were due to continued inflationary pressures, which are expected to continue to negatively impact costs during the remainder of fiscal 2023.

Selling, general and administrative expenses for the quarter ended August 31, 2022 increased to $162.8 million, compared to $143.6 million in the prior fiscal year quarter.

The $19.2 million increase was primarily attributable to increased strategic spending and higher labor costs, primarily in the book fairs channel as the Company prepares for the anticipated increase in fair count, in addition to the discontinuation of government subsidies related to the COVID-related governmental retention program in Canada.

The increase was also driven by the $6.6 million of insurance recoveries received in the quarter ended August 31, 2021 related to the intellectual property legal settlement accrued in fiscal 2021 that did not reoccur in the current quarter, higher marketing costs associated with the New Worlds Reading Initiative and lower equity investment income.

Partially offsetting this increase, the Company incurred lower severance expense from its restructuring programs of $2.4 million.

Depreciation and amortization expenses in the three months ended August 31, 2022 were $13.7 million compared to $14.9 million in the prior fiscal year quarter.

The $1.2 million decrease was primarily attributable to a shift towards spending on cloud computing arrangements in which the amortization expense is included in Selling, general and administrative expenses rather than Depreciation and amortization.

Amortization related to cloud computing arrangements increased $1.0 million when compared to the prior fiscal year quarter which substantially offset the decrease in Depreciation and amortization as there were no significant assets placed into service during the first quarter of fiscal 2023.

Management expects this trend to continue as more cloud-based software tools are utilized by the Company.

Net interest income in the quarter ended August 31, 2022 was $0.2 million compared to net interest expense of $1.3 million in the prior fiscal year quarter.

The Company had lower average debt borrowings as compared to the prior fiscal year quarter as the outstanding borrowings on the U.S credit agreement were paid down during fiscal 2022, resulting in no outstanding borrowings as of August 31, 2022.

The Company’s effective tax rate for the quarter ended August 31, 2022 was 21.6%, compared to 26.7% in the prior fiscal year quarter.

The decrease in the interim effective tax rate was primarily due to tax shortfalls related to vested option cancellations in the fiscal year quarter ended August 31, 2022.

Net loss attributable to Scholastic Corporation for the quarter ended August 31, 2022 increased by $21.3 million to $45.5 million, compared to $24.2 million in the prior fiscal year quarter.

Loss per basic and diluted share of Class A and Common Stock was $1.33 and $1.33, respectively, for the fiscal quarter ended August 31, 2022, compared to loss per basic and diluted share of Class A and Common Stock of $0.70 and $0.70, respectively, in the prior fiscal year quarter.

Net income attributable to noncontrolling interest for the quarter ended August 31, 2022 was $0.1 million compared to Net loss attributable to noncontrolling interest of $0.2 million in the prior fiscal year quarter.

SCHOLASTIC CORPORATION

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

Children’s Book Publishing and Distribution

Three months ended February 28, Nine months ended February 28,

Three months ended

August 31, August 31, $ %

($ amounts in millions)

2022 2021 Change Change 2022 2021 Change Change

2022 2021 Change Change

Revenues $ 124.7 $ 115.8 $ 8.9 7.7 %

2 unchanged sentences

77.7 71.4 6.3 8.8 %

Asset impairments — 2.4 (2.4) NM — 2.4 (2.4) NM

Operating income (loss) $ 5.0 $ (7.6) $ 12.6 165.8 % $ 68.5 $ (1.2) $ 69.7 NM

Operating income (loss) $ (30.1) $ (21.7) $ (8.4) (38.7) %

Operating margin — % — %

(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 February 28, 2022 increased by $58.1 million to $201.0 million, compared to $142.9 million in the prior fiscal year quarter.

The increase in segment revenues was primarily driven by higher book fairs channel revenues of $49.0 million resulting from increased fair count and higher revenue per fair as schools reopened and resumed in-person learning.

Book clubs channel revenues increased $5.4 million as a result of the Company's focus on clearing the backlog that arose during the second quarter.

In the trade channel, revenues increased $3.7 million primarily due to increased sales of backlist titles and box sets from best-selling series, coupled with new releases from the Company's popular series, including Cat Kid Comic Club ® , Wings of Fire TM , The Baby-sitters Club ® Graphix TM , Baby-sitters Little Sisters ® Graphix TM , and Five Nights at Freddy’s TM .

Revenues for the nine months ended February 28, 2022 increased by $190.1 million to $669.3 million, compared to $479.2 million in the prior fiscal year period.

The increase in segment revenues was primarily driven by higher book fairs channel revenues of $180.3 million resulting from increased fair count and higher revenue per fair as schools reopened and resumed in-person learning, particularly in the second and third quarters.

Trade channel revenues increased $18.5 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 February 28, 2022 included J.K.

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

Perspectives , and Tui T.

Sutherland’s Wings of Fire TM :

The Brightest Night (Graphic Novel #5) , 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 and third quarters.

The revenue increase was partially offset by lower book clubs channel revenues of $8.7 million due to industry-wide labor shortages in the second quarter and a systems issue in the Company's fulfillment operations.

Cost of goods sold for the quarter ended February 28, 2022 was $102.5 million, or 51.0% of revenues, compared to $78.6 million, or 55.0% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the nine months

SCHOLASTIC CORPORATION

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

ended February 28, 2022 was $325.4 million, or 48.6% of revenues, compared to $256.3 million, or 53.5% of revenues, in the prior fiscal year period.

The decrease in Cost of goods sold as a percentage of revenue for the three and nine months ended February 28, 2022 was primarily driven by lower royalty costs due to the increased book fairs channel revenues which have a higher mix of non-royalty bearing titles, partially offset by the increases in paper, printing and freight costs.

Other operating expenses for the quarter ended February 28, 2022 increased to $93.5 million, compared to $69.5 million in the prior fiscal year quarter.

The $24.0 million increase was primarily attributable to higher employee-related costs, largely in the book fairs channel, as the Company increased headcount at the warehouses to meet the increased demand, coupled with higher costs due to labor shortages.

In addition, the Company incurred higher warehouse-related costs, as certain book fair distribution facilities were temporarily closed in the prior fiscal year quarter, and recognized lower subsidies from COVID-related governmental retention programs in the quarter ended February 28, 2022.

Other operating expenses for the nine months ended February 28, 2022 increased to $275.4 million, compared to $221.7 million in the prior fiscal year period.

The $53.7 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, coupled with higher labor costs due to increased headcount at the warehouses to meet the increased demand and higher costs due to labor shortages.

Asset impairments for the three and nine months ended February 28, 2021 were $2.4 million.

In the prior fiscal year quarter, the Company committed to a plan to permanently close 12 of its 54 book fairs warehouses in the U.S.

as part of the branch consolidation project, as a result of which the Company recognized an impairment expense of $2.4 million in the third quarter of fiscal 2021, primarily related to the ROU assets associated with these warehouse operating leases.

Segment operating income for the quarter ended February 28, 2022 was $5.0 million, compared to operating loss of $7.6 million in the prior fiscal year quarter.

The $12.6 million improvement was primarily driven by the increased revenues in the book fairs channel as schools reopened, partially offset by increased costs related to labor, freight, paper and printing.

Segment operating income for the nine months ended February 28, 2022 was $68.5 million, compared to operating loss of $1.2 million in the prior fiscal year period.

The $69.7 million improvement was primarily driven by the increased revenues in the book fairs channel as schools have reopened, coupled with increased trade channel revenues.

The prior year's cost saving initiatives were partially offset by increased costs related to labor, freight, paper and printing, which the Company expects to continue to negatively impact the business.

Revenues for the quarter ended August 31, 2022 increased by $8.9 million to $124.7 million, compared to $115.8 million in the prior fiscal year quarter.

The increase in segment revenues was primarily driven by higher book fairs channel revenues of $12.3 million resulting from increased redemptions of book fair incentive program credits, which are common in the summer months, but were not significant in the prior fiscal year quarter as the book fair business had not yet begun to recover from the pandemic-related shutdowns.

Decreased trade channel sales of $2.9 million partially offset book fairs revenues on lower sales of frontlist titles, due in part to the prior fiscal year quarter release of the limited edition foil covers for Dog Man ® , which did not repeat in the current quarter.

The trade channel benefited from increased sales of backlist titles, with continued strong sales from the Company's popular series, including Five Nights at Freddy's TM , The Baby-sitters Club ® Graphix TM , Heartstopper TM , Wings of Fire TM , The Bad Guys TM , Cat Kid Comic Club ® and I Survived .

The trade channel also benefited from an increase in media revenue as the Company delivered certain episodes associated with the production of the animated series "Eva the Owlet," TM based on the Owl Diaries TM books, which will be released on AppleTV +® later this fiscal year.

Book clubs channel revenues remained relatively consistent with the prior fiscal year quarter, decreasing $0.5 million, as this channel is seasonally quiet during the summer months.

Cost of goods sold for the quarter ended August 31, 2022 was $77.1 million, or 61.8% of revenues, compared to $66.1 million, or 57.1% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenue was primarily driven by increased product and freight costs due to continued inflationary pressures, predominantly in the trade channel.

Other operating expenses for the quarter ended August 31, 2022 increased to $77.7 million, compared to $71.4 million in the prior fiscal year quarter.

The $6.3 million increase was primarily attributable to higher labor costs, largely in the book fairs channel as the Company prepares for the anticipated increase in fair count during fiscal 2023.

Labor costs were also impacted by inflationary pressures.

Segment operating loss for the quarter ended August 31, 2022 was $30.1 million, compared to $21.7 million in the prior fiscal year quarter.

The $8.4 million increase in the operating loss was primarily driven by increased cost of goods sold and selling, general, and administrative costs, both due to inflationary pressures on freight and labor costs.

Education Solutions

Three months ended February 28, Nine months ended February 28,

($ amounts in millions) 2022 2021 Change Change 2022 2021 Change Change

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2022 2021 Change Change

Revenues $ 73.2 $ 80.1 $ (6.9) (8.6) %

2 unchanged sentences

47.1 40.0 7.1 17.8 %

Operating income (loss) $ 13.1 $ 9.7 $ 3.4 35.1 % $ 36.0 $ 17.6 $ 18.4 104.5 %

Operating income (loss) $ (4.3) $ 7.3 $ (11.6) NM

Operating margin — % 9.1 %

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

Revenues for the quarter ended February 28, 2022 increased to $77.2 million, compared to $66.3 million in the prior fiscal year quarter, resulting in an increase of $10.9 million.

The increase in segment revenues was primarily driven by revenues from the newly launched New Worlds Reading Initiative with University of Florida’s Lastinger Center for Learning of $5.7 million.

In addition, increased revenues were driven by higher sales of instructional products and programs, primarily Scholastic Bookroom, and professional learning services, coupled with increased circulation revenue from the Magazines+ business.

The revenue increase was partially offset by lower

SCHOLASTIC CORPORATION

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

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.

Revenues for the nine months ended February 28, 2022 increased to $236.8 million, compared to $187.4 million in the prior fiscal year period, resulting in an increase of $49.4 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 , Scholastic Bookroom , the Company's summer learning product offerings, and Scholastic Literacy .

Increased revenues were also driven by the Company’s new Rising Voices Library offering, which meets the increasing demand for culturally responsive content and instruction, and the newly launched New Worlds Reading Initiative with University of Florida’s Lastinger Center for Learning.

In addition, increased circulation revenue from the Magazines+ business and increased sales of professional learning services and the Company's digital products, primarily Scholastic Literacy Pro ® and Scholastic F.I.R.S.T.

® , contributed to the increase in segment revenues.

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, and lower revenues from the custom publishing business which was phased out in the prior fiscal year.

Cost of goods sold for the quarter ended February 28, 2022 was $26.1 million, or 33.8% of revenues, compared to $21.0 million, or 31.7% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenues in the third quarter was primarily attributable to the higher product cost associated with Scholastic Bookroom products and delivery of professional learning services, which have increased sales in the current quarter, coupled with increased paper, printing and freight costs.

Cost of goods sold for the nine months ended February 28, 2022 was $86.4 million, or 36.5% of revenues, compared to $65.3 million, or 34.8% of revenues, in the prior fiscal year period.

The increase in Cost of goods sold as a percentage of revenues in the period was primarily attributable to the higher product cost associated with Scholastic Bookroom products and delivery of professional learning services, which have increased sales in the period, coupled with increased paper, printing and freight costs.

In addition, higher royalty costs associated with Scholastic Literacy Pro digital products and the Company's summer learning product offerings contributed to the increase, partially offset by the benefit from higher revenue per unit shipped.

Other operating expenses for the quarter ended February 28, 2022 were $38.0 million, compared to $35.6 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 nine months ended February 28, 2022 increased to $114.4 million, compared to $104.5 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 February 28, 2022, in addition to inflationary pressures on labor costs.

Segment operating income for the quarter ended February 28, 2022 was $13.1 million, compared to $9.7 million in the prior fiscal year quarter.

The $3.4 million improvement was primarily driven by increased revenues from the newly launched New Worlds Reading Initiative in Florida, coupled with higher sales of instructional products and programs and professional learning services, as well as increased circulation revenue from the Magazines+ business.

The revenue increase was partially offset by increased costs related to labor, freight, paper and printing, which the Company expects to continue to impact the business.

Segment operating income for the nine months ended February 28, 2022 was $36.0 million, compared to $17.6 million in the prior fiscal year period.

The $18.4 million improvement was primarily driven by higher revenues as a result of increased sales of instructional products and programs, professional learning services and digital products, as well as higher circulation revenue from the Magazines+ business.

In addition, increased revenues were driven by the Company's new Rising Voices Library offering and the newly launched New Worlds Reading Initiative in Florida.

The revenue increase was partially offset by increased costs related to labor, freight, paper and printing, which the Company expects to continue to impact the business.

NM Not meaningful

Revenues for the quarter ended August 31, 2022 decreased by $6.9 million to $73.2 million, compared to $80.1 million in the prior fiscal year quarter.

The decrease in segment revenues was largely driven by lower sales of instructional products and programs, primarily early childhood programs and summer learning product

SCHOLASTIC CORPORATION

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

offerings, as the prior fiscal year quarter benefited from shipments, which primarily consisted of summer learning products, that shifted in from the fourth quarter of fiscal 2021 due to supply chain constraints at that time.

During the fourth quarter of fiscal 2022, orders were shipped more timely with fewer sales shifted into the first quarter of fiscal 2023.

In addition, the segment had lower revenues in the first quarter from professional learning services and teaching resource products.

The overall decrease was partially offset by revenues of $9.2 million from the New Worlds Reading Initiative , which did not commence shipping until the third quarter of the prior fiscal year.

Cost of goods sold for the quarter ended August 31, 2022 was $30.4 million, or 41.5% of revenues, compared to $32.8 million, or 40.9% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenues was primarily attributable to increased postage and freight costs driven by inflationary pressures, in addition to moderately higher royalty costs driven by the mix of products sold in the first quarter of fiscal 2023.

Other operating expenses for the quarter ended August 31, 2022 were $47.1 million, compared to $40.0 million in the prior fiscal year quarter.

The $7.1 million increase in Other operating expenses was primarily related to increased marketing costs associated with the New Worlds Reading Initiative as well as higher employee-related costs.

Segment operating loss for the quarter ended August 31, 2022 was $4.3 million, compared to income of $7.3 million in the prior fiscal year quarter.

The $11.6 million change was driven by the lower revenues in the first quarter of fiscal 2023, coupled with increased cost of goods sold due to higher freight and royalty costs, marketing costs associated with the New Worlds Reading Initiative and employee-related costs.

International

Three months ended February 28, Nine months ended February 28,

($ amounts in millions) 2022 2021 Change Change 2022 2021 Change Change

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2022 2021 Change Change

Revenues $ 65.0 $ 63.9 $ 1.1 1.7 %

5 unchanged sentences

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

Revenues for the quarter ended February 28, 2022 decreased to $66.3 million, compared to $68.3 million in the prior fiscal year quarter.

Local currency revenues across the Company's foreign operations decreased by $0.4 million, coupled with an unfavorable foreign exchange impact of $1.6 million.

The decrease in segment revenues was primarily driven by lower local currency revenues in Asia of $3.7 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 lower trade and school channel sales.

In addition, export channel revenues decreased by $0.4 million as compared to the prior fiscal year quarter.

The decrease in segment revenues was partially offset by higher revenues in Canada, the UK and Australia and New Zealand.

In Canada, local currency revenues increased $3.0 million driven by increased sales across all channels as it continues to recover from the pandemic.

In the UK, local currency revenues increased by $0.4 million primarily driven by the pandemic recovery in the book fairs channel.

Australia and New Zealand local currency revenues increased by $0.3 million primarily in the Australian book fairs channel as additional lockdowns imposed by the COVID variant began to lift.

Revenues for the nine months ended February 28, 2022 decreased to $222.4 million, compared to $232.3 million in the prior fiscal year period.

Local currency revenues across the Company's foreign operations decreased by $14.7 million, partially offset by a favorable foreign exchange impact of $4.8 million.

In Asia, local currency revenues decreased $14.2 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 lower trade and school channel sales.

Australia and New Zealand local currency revenues decreased $8.9 million across all channels, due to additional lockdowns imposed by the COVID variant in the current fiscal year which began to be lifted during the third quarter.

In the UK, local currency revenues decreased by $0.9 million primarily due to lower trade and book clubs channel sales and increased 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 reopened.

In addition, export channel revenues decreased $1.2 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 $10.5 million driven by increased sales across all channels, particularly in the book fairs and book clubs channels as schools reopened.

Cost of goods sold for the quarter ended February 28, 2022 was $38.3 million, or 57.8% of revenues, compared to $38.0 million, or 55.6% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the nine months ended February 28, 2022 was $125.4 million, or 56.4% of revenues, compared to $123.6 million, or 53.2% of revenue, in the prior fiscal year period.

The increase in Cost of goods sold as a percentage of revenue in the three and nine months ended February 28, 2022 was driven by higher fulfillment costs, primarily in Australia, New Zealand and the UK, coupled with higher freight costs across all locations.

Other operating expenses for the quarter ended February 28, 2022 were $33.0 million, compared to $31.3 million in the prior fiscal year quarter.

Other operating expenses increased $1.7 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 $2.4 million as compared to the prior fiscal year quarter, as well as lower equity investment income.

In addition, the UK recognized branch consolidation costs of $0.3 million in the quarter ended February 28, 2022.

Other operating expenses for the nine months ended February 28, 2022 were $95.0 million, compared to $87.0 million in the prior fiscal year period.

Other operating expenses increased $8.0 million primarily driven by lower government subsidies related to COVID-related governmental retention programs in Canada, the UK, Australia

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Revenues for the quarter ended August 31, 2022 increased to $65.0 million, compared to $63.9 million in the prior fiscal year quarter.

Local currency revenues across the Company's foreign operations increased by $5.8 million, offset by an unfavorable foreign exchange impact of $4.7 million.

The increase in segment revenues was primarily driven by higher revenues in Australia, New Zealand and Canada.

Australia and New Zealand local currency revenues increased by $6.1 million as a result of increased sales in the book fairs and trade channels as the additional lockdowns imposed by the COVID variant, which had occurred later than in other markets, have continued to be lifted.

In Canada, local currency revenues increased $4.0 million driven by higher trade channel sales of best-selling titles including Heartstoppers TM , coupled with increased sales in the book fairs and education channels.

The increase in segment revenues was partially offset by lower local currency revenues in Asia of $3.8 million primarily attributable to the disposition of the direct sales business, coupled with lower sales within the Asia export channel.

In addition, local currency revenues in the UK decreased by $0.1 million primarily due to lower sales in the trade and education channels, partially offset by increased sales in the book fairs channel, driven by higher fair count.

Export channel revenues also decreased by $0.4 million as compared to the prior fiscal year quarter.

Cost of goods sold for the quarter ended August 31, 2022 was $39.5 million, or 60.8% of revenues, compared to $36.1 million, or 56.5% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenue was driven by an overall increase in freight costs across all channels due to inflationary pressures as well as increased paper and printing costs in the UK and increased variable fulfillment costs in Australia due to increased labor costs.

SCHOLASTIC CORPORATION

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

and New Zealand, which decreased by $8.9 million to $1.4 million as compared to $10.3 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 February 28, 2022.

This increase was partially offset by lower severance expense related to restructuring programs, which decreased by $1.8 million to $0.7 million, compared to $2.5 million in the prior fiscal year quarter.

Segment operating loss for the quarter ended February 28, 2022 was $5.0 million, compared to $1.0 million in the prior fiscal year quarter.

The decrease was primarily driven by lower revenues in Asia, coupled with lower subsidies from COVID-related governmental employee retention programs and higher freight costs.

Segment operating income for the nine months ended February 28, 2022 was $2.0 million, compared to $21.7 million in the prior fiscal year period.

The decreases 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 increased costs related to labor, freight, paper and printing to continue to negatively impact the business.

Unallocated overhead expense for the quarter ended February 28, 2022 increased by $7.3 million to $32.6 million, from $25.3 million in the prior fiscal year quarter.

The increase was primarily attributable to higher unallocated employee-related expenses at the Company’s Jefferson City, Missouri distribution facility, in addition to higher severance expense and related charges from the Company's restructuring programs, which increased by $1.8 million to $2.4 million compared to $0.6 million in the prior fiscal year quarter.

This was partially offset by the $8.5 million asset impairment related to the leased office space in New York City in connection with the consolidation into the company-owned New York City headquarters that occurred in the prior fiscal year quarter.

Unallocated overhead expense for the nine months ended February 28, 2022 increased by $4.1 million to $74.6 million, from $70.5 million in the prior fiscal year period.

The increase was primarily attributable to higher employee-related expenses due to unallocated expenses at the Company’s Jefferson City, Missouri distribution facility as well as the prior fiscal year employee furlough and reduced work week programs and the COVID-related governmental employee retention credit, which resulted in lower employee-related expenses and did not reoccur in the period ended February 28, 2022.

The increase was partially offset by lower severance expense and related charges from the Company's restructuring programs, which decreased by $10.5 million to $5.0 million compared to $15.5 million in the prior fiscal year period, coupled with $6.6 million of insurance recoveries received in the period ended February 28, 2022 related to an intellectual property legal settlement accrued in fiscal 2021.

The prior fiscal year quarter also included the $8.5 million asset impairment related to the leased office space in New York City in connection with the consolidation into the company-owned New York headquarters.

Other operating expenses for the quarter ended August 31, 2022 were $29.0 million, compared to $29.5 million in the prior fiscal year quarter.

Other operating expenses decreased $0.5 million impacted by a favorable foreign exchange impact of $1.8 million, resulting in a local currency increase of $1.3 million.

This increase was primarily driven by lower equity investment income and increased employee-related expenses as a result of the discontinuation of government subsidies related to COVID-related governmental retention programs, partially offset by lower severance expense related to restructuring programs.

Segment operating loss for the quarter ended August 31, 2022 was $3.5 million, compared to a loss of $1.7 million in the prior fiscal year quarter.

The increased loss was primarily driven by increased product costs related to freight, paper and printing.

Unallocated overhead expense for the quarter ended August 31, 2022 increased by $4.3 million to $20.2 million, from $15.9 million in the prior fiscal year quarter.

The increase was primarily attributable to $6.6 million of insurance recoveries received and recognized in the quarter ended August 31, 2021 related to the intellectual property legal settlement accrued in fiscal 2021, partially offset by lower severance expense from the Company's restructuring programs of $2.0 million.

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;

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

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

Education channel revenues are generally higher in the fourth quarter.

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 fourth 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 $178.5 million for the nine months ended February 28, 2022, compared to $36.5 million for the prior fiscal year period, representing an increase in cash provided by operating activities of $142.0 million.

The increase in cash provided was primarily driven by the increase in revenues, primarily in the book fairs channel and the Education Solutions segment, 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, higher employee related costs due to inflationary pressures, and higher inventory purchases.

Due to supply chain difficulties, the Company is currently ordering inventory in advance of anticipated demands, allowing for longer manufacturing and transportation lead times.

Cash used in investing activities was $30.5 million for the nine months ended February 28, 2022, compared to cash used in investing activities of $34.9 million in the prior fiscal year period, representing a decrease in cash used in investing activities of $4.4 million.

The decrease in cash used was driven by lower capital expenditures of $9.1 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 net proceeds from the sale of the Lake Mary facility of $10.4 million in the period ended February 28, 2022 which were lower than the aggregate net proceeds from the sales of the Danbury and Southam facilities of $17.4 million which benefited the prior fiscal year period.

Cash used in financing activities was $202.9 million for the nine months ended February 28, 2022, compared to cash used in financing activities of $46.2 million for the prior fiscal year period, representing an increase in cash used in financing activities of $156.7 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 nine months ended February 28, 2022, which resulted in no outstanding borrowings as of February 28, 2022.

In addition, the Company reacquired $19.5 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 from stock option exercises of $9.6 million in the current fiscal year period.

Cash used by operating activities was $60.3 million for the three months ended August 31, 2022, compared to cash provided by operating activities of $63.6 million for the prior fiscal year period, representing an increase in cash used by operating activities of $123.9 million.

The increase in cash used was primarily driven by increased inventory purchases of $77.3 million to offset long lead times and meet expected demand, primarily related to the book fairs and trade channels.

The increase in cash used was also impacted by the $63.1 million federal income tax refund and $6.6 million of insurance recoveries received in the prior period which was partially offset by $39.6 million in higher customer remittances in the current period.

Cash used in investing activities was $16.2 million for the three months ended August 31, 2022, compared to $14.5 million in the prior fiscal year period, representing an increase in cash used in investing activities of $1.7 million.

The increase in cash used was driven by higher capital expenditures of $1.2 million, primarily for new equipment to meet the expected demand in the book fairs channel, coupled with increased prepublication spending of $0.5 million related to digital products.

Cash provided by financing activities was $1.6 million for the three months ended August 31, 2022, compared to cash used in financing activities of $105.6 million for the prior fiscal year period, representing a decrease in cash used in financing activities of $107.2 million.

The decrease in cash used was primarily related to repayments of borrowings under the U.S.

credit agreement of $100.0 million during the prior period, coupled with an increase in net proceeds from stock option exercises of $11.6 million in the first quarter of fiscal 2023.

Partially offsetting this decrease, the Company reacquired $4.7 million of common stock with no such repurchases in the prior fiscal year period during which the repurchase program was suspended.

Cash Position

The Company’s cash and cash equivalents totaled $308.9 million at February 28, 2022, $366.5 million at May 31, 2021 and $353.2 million at February 28, 2021.

The Company’s cash and cash equivalents totaled $239.7 million at August 31, 2022, $316.6 million at May 31, 2022 and $308.6 million at August 31, 2021.

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

operations totaled $266.5 million at February 28, 2022, $318.0 million at May 31, 2021 and $305.9 million at February 28, 2021.

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 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.

The Company has repaid these borrowings and there are no outstanding borrowings under the U.S.

credit agreement as of February 28, 2022.

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 5 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 $47.7 million remained available for future purchases of common shares as of February 28, 2022.

During the nine months ended February 28, 2022, the Company repurchased $19.5 million of common stock, which includes a privately negotiated transaction with a related

operations totaled $202.2 million at August 31, 2022, $275.5 million at May 31, 2022 and $271.9 million at August 31, 2021.

SCHOLASTIC CORPORATION

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

party for 300,000 shares at a discount to market price.

See Note 18 of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information concerning the related party transaction.

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 February 28, 2022, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $308.9 million, cash from operations and the Company's U.S.

credit agreement and UK loan agreements.

As indicated above, the U.S.

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

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

The Company has lifted the temporary suspension of its open-market buy-back program under which $28.8 million remained available for future purchases of common shares as of August 31, 2022.

During the three months ended August 31, 2022, the Company repurchased $4.7 million of its common stock.

As of August 31, 2022, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $239.7 million, cash from operations and the Company's U.S.

credit agreement.

The Company expects the U.S.

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The Company's U.S.

credit agreement and its loan agreements in the UK total $306.9 million, less borrowings of $6.9 million and commitments of $0.4 million, resulting in $299.6 million of availability.

Additionally, the Company has short-term credit facilities of $37.7 million, less current borrowings of $6.8 million and commitments of $3.9 million, resulting in $27.0 million of current availability under these facilities at February 28, 2022.

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.

credit agreement, less commitments of $0.4 million, has $299.6 million of availability.

Additionally, the Company has short-term credit facilities of $36.4 million, less current borrowings of $6.3 million and commitments of $3.7 million, resulting in $26.4 million of current availability under these facilities at August 31, 2022.

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.

The Company is party to the U.S.

credit agreement, the UK loan agreements and certain credit lines with various banks as described in Note 5 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 February 28, 2022.

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 February 28, 2022, the Company had $2.7 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 February 28, 2022 the borrowing limit was £3.2 million.

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

As of February 28, 2022, the Company had $4.2 million outstanding on the loan and no remaining available credit under this facility.

credit agreement and certain credit lines with various banks as described in Note 5 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 August 31, 2022.

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.

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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 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 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 and the extent such costs are impacted by inflationary pressures, 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, 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.

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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