What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-12-16 compared with 2022-09-23 · 245 added, 87 removed, 517 unchanged (39% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Revenues $ 587.9 $ 524.2 $ 850.8 $ 784.0

7 unchanged sentences

Other components of net periodic benefit (cost) 0.1 0.0 0.1 0.0

Gain (loss) on sale of assets and other — 6.2 — 6.2

Earnings (loss) before income taxes 100.9 89.1 43.0 55.8

10 unchanged sentences

(Dollar amounts in millions)

Three months ended

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Net income (loss) $ 75.4 $ 68.4 $ 30.0 $ 44.0

10 unchanged sentences

(Dollar amounts in millions, except per share data)

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

(unaudited) (audited) (unaudited)

78 unchanged sentences

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

Net Income (loss) — — — — — — 68.3 — 68.3 0.1 68.4

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

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

— — — — — 0.5 — — 0.5 — 0.5

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

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

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

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

Dividends ($ 0.15 per share)

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

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

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

Class A Stock Common Stock Additional Paid-in Capital Accumulated

19 unchanged sentences

Balance at August 31, 2022 1.7 $ 0.0 32.7 $ 0.4 $ 629.5 $ ( 55.0 ) $ 924.1 $ ( 334.2 ) $ 1,164.8 $ 1.5 $ 1,166.3

Net Income (loss) — — — — — — 75.3 — 75.3 0.1 75.4

Foreign currency translation adjustment — — — — — 3.0 — — 3.0 — 3.0

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

— — — — — ( 0.1 ) — — ( 0.1 ) — ( 0.1 )

Stock-based compensation — — — — 4.2 — — — 4.2 — 4.2

Proceeds pursuant to stock-based compensation plans — — — — 1.5 — — — 1.5 — 1.5

Purchases of treasury stock at cost — — ( 0.6 ) — — — — ( 26.0 ) ( 26.0 ) — ( 26.0 )

Treasury stock issued pursuant to equity-based plans — — 0.3 — ( 6.2 ) — — 7.0 0.8 — 0.8

Dividends ($ 0.20 per share)

— — — — — — ( 7.0 ) — ( 7.0 ) — ( 7.0 )

Balance at November 30, 2022 1.7 $ 0.0 32.4 $ 0.4 $ 629.0 $ ( 52.1 ) $ 992.4 $ ( 353.2 ) $ 1,216.5 $ 1.6 $ 1,218.1

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions)

Three months ended

August 31, August 31,

Six months ended

November 30, November 30,

Cash flows - operating activities:

10 unchanged sentences

Income from equity-method investments ( 1.3 ) ( 1.6 )

(Gain) loss on sale of assets — ( 6.2 )

Changes in assets and liabilities, net of amounts acquired:

14 unchanged sentences

Additions to property, plant and equipment ( 24.1 ) ( 18.8 )

Net proceeds from sale of assets — 10.4

Other investment and acquisition-related payments ( 10.7 ) ( 0.1 )

Net cash provided by (used in) investing activities ( 45.8 ) ( 17.2 )

6 unchanged sentences

Payment of dividends ( 12.0 ) ( 10.3 )

Other — ( 0.1 )

Net cash provided by (used in) financing activities ( 29.0 ) ( 187.9 )

50 unchanged sentences

• Allocation of transaction price to contractual performance obligations

Sale of Long-lived Assets

There were no sales of long-lived assets during the quarter ended November 30, 2022.

Refer to Note 4, Asset Write Down and Sale, for details regarding the disposition of the direct sales business in Asia completed during the first quarter of fiscal 2023.

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

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

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

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

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

New Accounting Pronouncements

There were no new accounting pronouncements issued in the first quarter of fiscal 2023 which would impact the Company.

There were no new accounting pronouncements issued in the second quarter of fiscal 2023 which would impact the Company.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2022 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.

Current Fiscal Year Adoptions:

The Company adopted ASU No.

2021-8, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" (ASU 2021-8), in the beginning of the second quarter of fiscal 2023.

The updates in this guidance seek to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following:

Recognition of an acquired contract liability and 2.

Payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendments in ASU 2021-8 improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination.

The amendments improve comparability by specifying for all acquired revenue contracts regardless of their timing of payment:

(1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities.

The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.

The Company early adopted ASU 2021-8 and applied the amendments in accounting for the acquisition of Learning Ovations, Inc.

during the second quarter of fiscal 2023, which was accounted for as a business combination under the acquisition method of accounting.

The adoption of this ASU did not have a material impact to the Company's Condensed Consolidated Financial Statements.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Disaggregated Revenue Data

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

Three months ended

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Book Clubs - U.S.

$ 57.6 $ 51.9 $ 63.9 $ 58.7

Book Fairs - U.S.

240.8 176.2 269.1 192.2

107.9 109.4 184.1 189.5

Trade - International (1)

12.0 15.0 25.9 27.9

Total Children's Book Publishing and Distribution $ 418.3 $ 352.5 $ 543.0 $ 468.3

5 unchanged sentences

International - Other Markets (3)

12.5 13.4 24.1 29.8

Total International $ 89.6 $ 92.2 $ 154.6 $ 156.1

4 unchanged sentences

Estimated Returns

A liability for expected returns of $ 41.5 , $ 42.2 , and $ 44.9 is recorded within Other accrued expenses as of August 31, 2022, May 31, 2022, and August 31, 2021, respectively.

In addition, a return asset of $ 7.8 , $ 5.3 , and $ 4.2 is recorded within Prepaid expenses and other current assets as of August 31, 2022, May 31, 2022, and August 31, 2021, respectively, for the recoverable cost of product estimated to be returned by customers.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

A liability for expected returns of $ 43.9 , $ 42.2 , and $ 50.7 is recorded within Other accrued expenses as of November 30, 2022, May 31, 2022, and November 30, 2021, respectively.

In addition, a return asset of $ 6.1 , $ 5.3 , and $ 5.0 is recorded within Prepaid expenses and other current assets as of November 30, 2022, May 31, 2022, and November 30, 2021, respectively, for the recoverable cost of product estimated to be returned by customers.

Deferred Revenue

The following table presents further detail regarding the Company's deferred revenue balance as of the dates indicated:

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

Book fairs incentive credits $ 107.6 $ 100.1 $ 77.4

10 unchanged sentences

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

The Company recognized revenue which was included in the opening Deferred revenue balance in the amount of $ 30.8 and $ 15.3 for the three months ended August 31, 2022 and August 31, 2021, respectively.

The Company recognized revenue

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

which was included in the opening Deferred revenue balance in the amount of $ 49.5 and $ 80.3 for the three and six months ended November 30, 2022, respectively, and $ 27.9 and $ 43.2 for the three and six months ended November 30, 2021, respectively.

Allowance for Credit Losses

9 unchanged sentences

Balance as of August 31, 2022 $ 17.4

Current period provision 2.8

Write-offs and other ( 2.8 )

Balance as of November 30, 2022 $ 17.4

SEGMENT INFORMATION

3 unchanged sentences

This segment is comprised of three operating segments.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

2 unchanged sentences

This segment is comprised of three operating segments.

The following table sets forth the Company's revenue and operating income (loss) by segment for the fiscal quarter ended August 31, 2022:

Three months ended

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The following table sets forth the Company's revenue and operating income (loss) by segment for the fiscal quarter ended November 30, 2022:

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Children's Book Publishing and Distribution $ 418.3 $ 352.5 $ 543.0 $ 468.3

14 unchanged sentences

The remaining assets, consisting of accounts receivable and inventory, were classified as held for sale and recorded as a current asset on the Company's Condensed Consolidated Balance Sheet as of May 31, 2022.

The Company recognized a loss of $ 15.1 in fiscal 2022 which was included in Gain (Loss) on assets held for sale within the Company's Condensed Consolidated Statement of Operations.

The Company recognized a loss of $ 15.1 in the fourth quarter of fiscal 2022 which was included in Gain (Loss) on assets held for sale within the Company's Condensed Consolidated Statement of Operations.

The impact of the impairment was a loss per basic and diluted share of Class A and Common Stock of $ 0.33 and $ 0.32 , respectively, in the twelve months ended May 31, 2022.

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

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

US Revolving Credit Agreement $ — $ — $ —

4 unchanged sentences

Total long-term debt $ — $ — $ —

The Company's debt obligations as of August 31, 2022 have maturities of one year or less.

The Company's debt obligations as of November 30, 2022 have maturities of one year or less.

US Credit Agreement

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

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

The arrangement was accounted for as a debt modification.

11 unchanged sentences

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

As of August 31, 2022, the applicable margin on Base Rate Advances was 0.35 % and the applicable margin on Eurodollar Advances was 1.35 %, both based on the Company’s prevailing Consolidated Leverage Ratio.

As of November 30, 2022, the applicable margin on Base Rate Advances was 0.35 % and the applicable margin on Eurodollar Advances was 1.35 %, both based on the Company’s prevailing Consolidated Leverage Ratio.

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

As of August 31, 2022, the commitment fee rate was 0.20 %.

As of November 30, 2022, the commitment fee rate was 0.20 %.

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

1 unchanged sentence

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

As of August 31, 2022, the Company had no outstanding borrowings under the Credit Agreement.

As of November 30, 2022, the Company had no outstanding borrowings under the Credit Agreement.

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

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

At August 31, 2022, the Company had open standby letters of credit totaling $ 4.1 issued under certain credit lines, including $ 0.4 under the Credit Agreement and $ 3.7 under the domestic credit lines discussed below.

At November 30, 2022, the Company had open standby letters of credit totaling $ 4.1 issued under certain credit lines, including $ 0.4 under the Credit Agreement and $ 3.7 under the domestic credit lines discussed below.

UK Loan Agreements

1 unchanged sentence

The term loan facility was repaid and closed on March 31, 2022.

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

As of November 30, 2021, the Company had $ 4.2 outstanding on the loan.

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

The loan agreement was repaid and closed on May 12, 2022.

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

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

Lines of Credit

As of August 31, 2022, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $ 10.0 .

There were no outstanding borrowings under these credit lines as of August 31, 2022, May 31, 2022 and August 31, 2021.

As of August 31, 2022, availability under these unsecured money market bid rate credit lines totaled $ 6.3 .

As of November 30, 2022, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $ 10.0 .

There were no outstanding borrowings under these credit lines as of November 30, 2022, May 31, 2022 and November 30, 2021.

As of November 30, 2022, availability under these unsecured money market bid rate credit lines totaled $ 6.3 .

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

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

As of August 31, 2022, the Company had various local currency international credit lines totaling $ 26.4 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 6.3 at August 31, 2022 at a weighted average interest rate of 5.8 %, $ 6.5 at May 31, 2022 at a weighted average interest rate of 5.4 %, and $ 7.4 at August 31, 2021 at a weighted average interest rate of 4.8 %.

As of August 31, 2022, the amounts available under these facilities totaled $ 20.1 .

As of November 30, 2022, the Company had various local currency international credit lines totaling $ 30.5 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 4.8 at November 30, 2022 at a weighted average interest rate of 5.4 %, $ 6.5 at May 31, 2022 at a weighted average interest rate of 5.4 %, and $ 7.5 at November 30, 2021 at a weighted average interest rate of 4.7 %.

As of November 30, 2022, the amounts available under these facilities totaled $ 25.7 .

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

7 unchanged sentences

During the first quarter of fiscal 2022, the Company received $ 6.6 in recoveries from its insurance programs related to an intellectual property legal settlement, which was accrued in fiscal 2021.

The recoveries were recognized as an offset to the legal settlement and reflected in Selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations for the quarter ended August 31, 2021.

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

EARNINGS (LOSS) PER SHARE

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

Three months ended

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Net income (loss) attributable to Class A and Common Stockholders $ 74.8 $ 68.0 $ 29.6 $ 43.9

5 unchanged sentences

Diluted $ 2.12 $ 1.91 $ 0.84 $ 1.24

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

The Company experienced a loss for the three month periods ended August 31, 2022 and August 31, 2021 and therefore did not allocate any loss to certain participating restricted stock units.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

August 31, 2022 August 31, 2021

November 30, 2022 November 30, 2021

Options outstanding pursuant to stock-based compensation plans (in millions) 3.4 4.9

There are no potentially anti-dilutive shares pursuant to stock-based compensation plans as of August 31, 2022.

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

These dividends are payable and non-forfeitable to the employees upon vesting of the RSUs.

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

As of August 31, 2022, $ 28.8 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date.

There are 0.7 million potentially anti-dilutive shares pursuant to stock-based compensation plans as of November 30, 2022.

As of November 30, 2022, $ 26.2 remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date.

See Note 13, Treasury Stock, for a more complete description of the Company’s share buy-back program.

On September 1, 2022, the Company acquired 100 % of the share capital of Learning Ovations, Inc., a U.S.-based education technology business and developer of a literacy assessment and instructional system, for $ 11.1 , net of cash acquired.

The Company accounted for the acquisition as a business combination under the acquisition method of accounting.

Fair values were assigned to the assets and liabilities acquired, including cash, receivables, and technology/know-how.

The receivables acquired have a fair value of $ 0.1 and have been determined to be collectible.

The Company utilized internally-developed discounted cash flow forecasts to determine the fair value of the technology/know-how using a discount rate of 17.5 % to account for the relative risks of the estimated future cash flows.

The Company classified this as a Level 3 fair value measurement due to the use of these significant unobservable inputs.

The fair values of the net assets were $ 4.2 which included $ 4.1 of amortizable intangible assets attributable to the technology/know-how.

This acquisition resulted in $ 7.0 of goodwill that was assigned to the Company's Education Solutions segment and is not deductible for tax purposes.

The results of operations of this business subsequent to the acquisition are included in the Education Solutions segment.

The transaction was not determined to be material to the Company's results and therefore pro forma financial information is not presented.

GOODWILL AND OTHER INTANGIBLES

1 unchanged sentence

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

Gross beginning balance $ 164.9 $ 165.9 $ 165.9

1 unchanged sentence

Beginning balance $ 125.3 $ 126.3 $ 126.3

Additions 7.0 — —

Foreign currency translation ( 0.3 ) ( 1.0 ) ( 0.6 )

Ending balance $ 132.0 $ 125.3 $ 125.7

In the second quarter of fiscal 2023, the Company acquired Learning Ovations, Inc, a U.S.-based education technology business, which resulted in the recognition of $ 7.0 of Goodwill included in the Education Solutions segment.

Refer to Note 8, Acquisitions, for further details regarding the acquisition.

There were no impairment charges related to Goodwill in any of the periods presented.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

Beginning balance - Other intangibles subject to amortization $ 6.0 $ 8.4 $ 8.4

Additions 4.1 — —

Amortization expense ( 1.1 ) ( 2.0 ) ( 1.0 )

4 unchanged sentences

Total other intangibles $ 11.0 $ 8.1 $ 9.2

There were no additions to intangible assets within the three months ended August 31, 2022 and August 31, 2021.

In the second quarter of fiscal 2023, the Company acquired Learning Ovations, Inc., a U.S.-based education technology business, which resulted in the recognition of $ 4.1 of amortizable intangible assets.

These intangible assets will be amortized over the estimated useful life of 7 years.

Refer to Note 8, Acquisitions, for further details regarding the acquisition.

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

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

5 unchanged sentences

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

August 31, 2022 May 31, 2022 August 31, 2021 Segment

November 30, 2022 May 31, 2022 November 30, 2021 Segment

Equity method investments $ 31.0 $ 31.0 $ 33.7 International

6 unchanged sentences

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

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 1.2 and $ 0.5 for the three months ended November 30, 2022 and November 30, 2021, respectively, and $ 1.3 and $ 1.6 for the six months ended November 30, 2022 and November 30, 2021, respectively.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 0.1 and $ 1.1 for the three months ended August 31, 2022 and August 31, 2021, respectively .

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

August 31, August 31,

November 30, November 30,

2022 2021 2022 2021

5 unchanged sentences

Total $ 0.0 $ 0.2 $ ( 0.1 ) $ ( 0.2 )

UK Pension Plan US Postretirement Benefits

Six months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Components of net periodic benefit cost:

Interest cost $ 0.5 $ 0.5 $ 0.2 $ 0.1

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

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

Amortization of net actuarial (gain) loss 0.2 0.4 — —

Total $ 0.1 $ 0.3 $ ( 0.2 ) $ ( 0.3 )

Actuarial gains and losses are amortized using a corridor approach.

2 unchanged sentences

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

For the three months ended August 31, 2022, the Company contributed $ 0.3 to the UK Pension Plan.

For the six months ended November 30, 2022, the Company contributed $ 0.6 to the UK Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately $ 1.1 to the UK Pension Plan for the fiscal year ending May 31, 2023.

1 unchanged sentence

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

Three months ended

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Stock option expense $ 2.4 $ 1.8 $ 3.0 $ 2.5

3 unchanged sentences

Total stock-based compensation expense $ 4.2 $ 3.0 $ 5.9 $ 4.5

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

Three months ended

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

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

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

Three months ended Six months ended

November 30, November 30,

2022 2021 2022 2021

Common Stock issued pursuant to stock-based compensation plans (in millions) 0.3 0.2 0.6 0.3

TREASURY STOCK

5 unchanged sentences

Less repurchases made under this authorization $ ( 23.8 )

Remaining Board authorization at August 31, 2022 $ 28.8

Remaining Board authorization at August 31, 2022 represents the amount remaining under the current $ 50.0 Board authorization for Common share repurchases announced on March 18, 2020, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions.

Repurchases of the Company's Common Stock were $ 5.1 during the three months ended August 31, 2022.

Remaining Board authorization at November 30, 2022 $ 26.2

Remaining Board authorization at November 30, 2022 represents the amount remaining under the current $ 50.0 Board authorization for Common share repurchases announced on March 18, 2020, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions.

Pursuant to a subsequent Board authorization on October 19, 2022, the Company commenced a modified Dutch auction tender offer on October 25, 2022, which expired on November 22, 2022.

Pursuant to this offer, the Company purchased 533,793 of its common shares at a price of $ 40.00 per share for a total cost of $ 23.3 , including related fees and expenses.

The common shares purchased represented approximately 1.6 % of the common shares outstanding as of November 21, 2022.

The Company funded the purchase of the shares in the tender offer using cash on hand.

Repurchases of the Company's Common Stock were $ 26.0 and $ 31.1 during the three and six months ended November 30, 2022, respectively, which included shares repurchased through the modified Dutch auction tender offer.

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Three months ended August 31, 2022

Three months ended November 30, 2022

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at June 1, 2022 $ ( 44.6 ) $ ( 0.8 ) $ ( 45.4 )

Beginning balance at September 1, 2022 $ ( 54.2 ) $ ( 0.8 ) $ ( 55.0 )

Other comprehensive income (loss) before reclassifications 3.0 — 3.0

4 unchanged sentences

Other comprehensive income (loss) 3.0 ( 0.1 ) 2.9

Ending balance at August 31, 2022 $ ( 54.2 ) $ ( 0.8 ) $ ( 55.0 )

Three months ended August 31, 2021

Ending balance at November 30, 2022 $ ( 51.2 ) $ ( 0.9 ) $ ( 52.1 )

Three months ended November 30, 2021

Foreign currency translation adjustments Retirement benefit plans Total

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

Other comprehensive income (loss) before reclassifications (net of tax of $( 0.1 ))

( 4.4 ) 0.5 ( 3.9 )

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

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

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

— ( 0.2 ) ( 0.2 )

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

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

Six months ended November 30, 2022

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at June 1, 2022 $ ( 44.6 ) $ ( 0.8 ) $ ( 45.4 )

1 unchanged sentence

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

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

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

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

1 unchanged sentence

Other comprehensive income (loss) ( 6.6 ) ( 0.1 ) ( 6.7 )

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

Ending balance at November 30, 2022 $ ( 51.2 ) $ ( 0.9 ) $ ( 52.1 )

Six months ended November 30, 2021

Foreign currency translation adjustments Retirement benefit plans Total

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

Other comprehensive income (loss) before reclassifications (net of tax of $( 0.1 ))

( 10.2 ) 0.5 ( 9.7 )

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

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

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

— ( 0.3 ) ( 0.3 )

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

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

SCHOLASTIC CORPORATION

2 unchanged sentences

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

Three months ended Condensed Consolidated Statements of Operations line item

August 31, August 31,

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

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

2022 2021 2022 2021

Employee benefit plans:

23 unchanged sentences

See Note 10, Investments, for a more complete description of the fair value measurements employed.

For the fair value measurements employed by the Company for certain acquired intangible assets, the Company utilized internally-developed discounted cash flow forecasts.

See Note 8, Acquisitions, for further details regarding the acquired assets and fair value measurements employed.

SCHOLASTIC CORPORATION

7 unchanged sentences

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

and the related receivable was $ 12.1 as of August 31, 2022.

and the related receivable was $ 10.1 as of November 30, 2022.

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

3 unchanged sentences

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

The Company's interim effective tax rate, inclusive of discrete items, for the three months ended August 31, 2022 was 21.6 % compared to 26.7 % for the prior fiscal year period.

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

The Company's interim effective tax rate, inclusive of discrete items, for the three and six months period ended November 30, 2022 was 25.3 % and 30.2 %, respectively, compared to 23.2 % and 21.1 %, respectively, for the prior fiscal year period.

The interim effective tax rate for the six months ended November 30, 2022 varied from the prior fiscal year period primarily due to tax shortfalls related to vested option cancellations in the current year period.

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

2 unchanged sentences

The Company is routinely audited by various tax authorities.

The IRS is substantially complete with the examination of the U.S.

The IRS has completed the examination of the U.S.

income tax returns for the fiscal 2015 through fiscal 2020 tax years.

The examination is expected to be finalized in the third quarter of fiscal 2023 and the Company does not expect any additional impact to the financial results.

As of August 31, 2022, there was approximately $ 20.0 in receivables from the IRS related to the years under audit included in Income tax receivable in the Company’s Condensed Consolidated Balance Sheet for that period.

There was no additional impact to the financial results.

As of November 30, 2022, there was approximately $ 20.0 in receivables from the IRS related to the years under audit included in Income tax receivable in the Company’s Condensed Consolidated Balance Sheet for that period.

Non-income Taxes

9 unchanged sentences

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

The notional values of the contracts as of August 31, 2022 and August 31, 2021 were

The notional values of the contracts as of November 30, 2022 and November 30, 2021

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

$ 21.3 and $ 26.8 , respectively.

A net unrealized gain of $ 0.6 and a net unrealized loss of less than $ 0.1 were recognized for the three months ended August 31, 2022 and August 31, 2021, respectively.

were $ 22.8 and $ 27.3 , respectively.

A net unrealized gain of $ 0.8 and $ 0.6 were recognized for the six months ended November 30, 2022 and November 30, 2021, respectively.

OTHER ACCRUED EXPENSES

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

August 31, 2022 May 31, 2022 August 31, 2021

November 30, 2022 May 31, 2022 November 30, 2021

Accrued payroll, payroll taxes and benefits $ 34.7 $ 32.2 $ 35.1

6 unchanged sentences

SUBSEQUENT EVENTS

On September 1, 2022, the Company acquired 100 % of the share capital of Learning Ovations Inc., a U.S.-based education technology business and developer of a literacy assessment and instructional system, for a base purchase price of $ 11.0 , subject to purchase price adjustments.

The results of operations of this business subsequent to the acquisition will be included in the Education Solutions segment.

The Board declared a quarterly cash dividend of $ 0.20 per share on the Company’s Class A and Common Stock for the second quarter of fiscal 2023.

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

On December 14, 2022, the Board declared a quarterly cash dividend of $ 0.20 per share on the Company’s Class A and Common Stock for the third quarter of fiscal 2023.

The dividend is payable on March 15, 2023 to shareholders of record as of the close of business on January 31, 2023.

On December 14, 2022, the Board authorized an increase of $ 48.8 for Common share repurchases, resulting in a current Board authorization of $ 75.0 , which includes $ 26.2 remaining from the previous Board authorization.

SCHOLASTIC CORPORATION

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

Overview and Outlook

Revenues for the second quarter ended November 30, 2022 were $587.9 million, compared to $524.2 million in the prior fiscal year quarter, an increase of $63.7 million or 12%.

The Company reported net income per diluted share of Class A and Common Stock of $2.12 in the second quarter of fiscal 2023, compared to $1.91 in the prior fiscal year quarter.

Revenues in the Company's Children's Book Publishing and Distribution segment rose by 19% in the quarter ended November 30, 2022, led by strong performance in the book fairs business which benefited from higher fair count, as well as increased revenue per fair compared to the prior year period.

In the U.S., fair count continued to trend at 85% pre-pandemic levels.

Within the Education Solutions segment, revenues held consistent with the prior fiscal year quarter and integration efforts related to the recently acquired A2i™ literacy assessment and instruction system have begun.

Internationally, in addition to the recovery of the book fairs channel, the trade channel in Australia, New Zealand and the UK performed well on the success of the Company’s best-selling series titles while Canada trade channel sales decreased as a result of overall softness in the retail market.

Operating income improved $16.7 million, or 20.0%, from the prior fiscal year quarter primarily driven by the higher revenue and profit contribution from the Children’s Book Publishing and Distribution segment, mainly from the book fairs channel, as well as the Company’s efforts to address inflationary pressures with cost containment and pricing related initiatives, partially offset by increased spending on long-term strategic investments in the Education Solutions segment.

The Company is expecting the U.S.

book fairs business to continue to outperform fiscal 2022 with higher fair count and improved revenue-per-fair.

The trade channel is expected to benefit from new releases from best-selling authors, including a new title from Dav Pilkey's Dog Man ® series.

The Education Solutions segment will continue to focus on strategic investments, including the integration of the recently acquired A2i™ literacy assessment.

The Company expects to incur approximately $3 million of additional costs before this assessment will become integrated into the Company's comprehensive digital literacy platform.

In addition, the Company is preparing for the seasonally important fiscal fourth quarter within the education channel.

Internationally, unfavorable economic conditions in the UK and Canada are expected to impact revenue growth and operating income.

However, the international margins are expected to benefit from the disposition of the direct sales business in Asia, which generated losses in the prior period.

The Company expects international operations to be impacted by unfavorable foreign currency translation as the U.S.

dollar remains strong.

The Company continues to monitor and control discretionary spending which is expected to continue to help mitigate the impact of inflationary pressures on freight and product costs.

Results of Operations

Revenues for the quarter ended November 30, 2022 increased by $63.7 million to $587.9 million, compared to $524.2 million in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment revenues increased by $65.8 million, primarily driven by higher book fairs channel revenues resulting from increased fair count, which continues to trend at 85% of pre-pandemic levels compared to 70% in the prior fiscal year period, coupled with higher revenue per fair.

In the Education Solutions segment, revenues were relatively consistent with the prior fiscal year quarter as revenues from sponsored programs offset lower sales as a result of the timing of the Rising Voices Library ® product launch in the prior period.

In local currency, the International segment revenues increased by $7.5 million, primarily driven by the recovery of the book fairs channel across the Major Markets (Canada, UK, Australia and New Zealand), partially offset by a decrease in book clubs channel revenues on lower than anticipated teacher participation, in addition to lower sales from the trade channel in Canada due to unfavorable economic condition and from Asia as a result of the disposition of the direct sales business.

International segment revenues were impacted by unfavorable foreign exchange of $10.1 million in the quarter ended November 30, 2022.

Revenues for the six months ended November 30, 2022 increased by $66.8 million to $850.8 million, compared to $784.0 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues increased by $74.7 million primarily driven by higher book fairs channel revenues resulting from increased fair count, which continued to trend at 85% of pre-pandemic levels compared to 70% in the prior fiscal year period, coupled with higher revenue per fair and increased redemptions of book fair incentive

SCHOLASTIC CORPORATION

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

What changed 10-Q

Item 1. Financial Statements