What changed in this filing

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Item 1. Financial Statements

2023-09-22 compared with 2023-03-24 · 109 added, 372 removed, 472 unchanged (50% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Revenues $ 228.5 $ 262.9

7 unchanged sentences

Other components of net periodic benefit (cost) ( 0.3 ) 0.0

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

Earnings (loss) before income taxes ( 98.0 ) ( 57.9 )

10 unchanged sentences

(Dollar amounts in millions)

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Net income (loss) $ ( 74.2 ) $ ( 45.4 )

10 unchanged sentences

(Dollar amounts in millions, except per share data)

February 28, 2023 May 31, 2022 February 28, 2022

August 31, 2023 May 31, 2023 August 31, 2022

(unaudited) (audited) (unaudited)

5 unchanged sentences

Prepaid expenses and other current assets 70.4 47.0 89.4

Assets held for sale — 3.7 —

Total current assets 784.7 892.9 991.5

66 unchanged sentences

Proceeds pursuant to stock-based compensation plans — — — — 11.6 — — — 11.6 — 11.6

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

Dividends ($ 0.15 per share)

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

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 ) — — — — ( 5.1 ) ( 5.1 ) — ( 5.1 )

2 unchanged sentences

— — — — — — ( 6.9 ) — ( 6.9 ) — ( 6.9 )

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

Net Income (loss) — — — — — — ( 15.3 ) — ( 15.3 ) 0.2 ( 15.1 )

Foreign currency translation adjustment — — — — — 1.6 — — 1.6 — 1.6

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

— — — — — 0.0 — — — — —

Stock-based compensation — — — — 1.6 — — — 1.6 — 1.6

Proceeds pursuant to stock-based compensation plans — — — — 7.3 — — — 7.3 — 7.3

Purchases of treasury stock at cost — — ( 0.4 ) — — — — ( 15.4 ) ( 15.4 ) — ( 15.4 )

Treasury stock issued pursuant to equity-based plans — — 0.3 — ( 7.1 ) — — 7.6 0.5 — 0.5

Dividends ($ 0.15 per share)

— — — — — — ( 5.3 ) — ( 5.3 ) — ( 5.3 )

Other (noncontrolling interest) — — — — — — — — — 0.1 0.1

Balance at February 28, 2022 1.7 $ 0.0 32.8 $ 0.4 $ 626.9 $ ( 42.7 ) $ 929.5 $ ( 330.3 ) $ 1,183.8 $ 1.5 $ 1,185.3

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

Class A Stock Common Stock Additional Paid-in Capital Accumulated

18 unchanged sentences

— — — — — — ( 6.3 ) — ( 6.3 ) — ( 6.3 )

Other (noncontrolling interest) — — — — ( 0.5 ) 0.0 — — ( 0.5 ) ( 1.6 ) ( 2.1 )

Balance at August 31, 2023 1.7 $ 0.0 29.3 $ 0.4 $ 632.7 $ ( 53.8 ) $ 955.1 $ ( 479.8 ) $ 1,054.6 $ — $ 1,054.6

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

Net Income (loss) — — — — — ( 19.2 ) — ( 19.2 ) ( 0.1 ) ( 19.3 )

Foreign currency translation adjustment — — — — — ( 1.0 ) — — ( 1.0 ) — ( 1.0 )

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

— — — — — 0.0 — — 0.0 — 0.0

Stock-based compensation — — — — 2.3 — — — 2.3 — 2.3

Proceeds pursuant to stock-based compensation plans — — — — 3.1 — — — 3.1 — 3.1

Purchases of treasury stock at cost — — ( 1.1 ) — — — — ( 46.9 ) ( 46.9 ) — ( 46.9 )

Treasury stock issued pursuant to equity-based plans — — 0.1 — ( 3.8 ) — — 4.2 0.4 — 0.4

Dividends ($ 0.20 per share)

— — — — — — ( 6.8 ) — ( 6.8 ) — ( 6.8 )

Balance at February 28, 2023 1.7 $ 0.0 31.4 $ 0.4 $ 630.6 $ ( 53.1 ) $ 966.4 $ ( 395.9 ) $ 1,148.4 $ 1.5 $ 1,149.9

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions)

Nine months ended

February 28, February 28,

Three months ended

August 31, August 31,

Cash flows - operating activities:

10 unchanged sentences

Income from equity-method investments ( 0.2 ) ( 0.1 )

(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 ( 14.3 ) ( 11.4 )

Net proceeds from sale of assets — 10.4

Other investment and acquisition-related payments ( 2.1 ) —

7 unchanged sentences

Payment of dividends ( 6.5 ) ( 5.1 )

Other ( 0.1 ) —

Net cash provided by (used in) financing activities ( 39.3 ) 1.6

14 unchanged sentences

Noncontrolling Interest

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

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

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

On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing company, which represented a 5.0 % noncontrolling interest, increasing the Company's total ownership from 95.0 % to 100 %.

Prior to June 1, 2023, the founder and chief executive officer of MBI retained a 5.0 % noncontrolling ownership interest in MBI.

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

Interim Financial Statements

22 unchanged sentences

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

• Sales tax contingencies

• Royalty advance reserves and royalty expense accruals

• Impairment testing for goodwill, intangible and other long-lived assets and investments

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

• Sales tax contingencies

• Royalty advance reserves and royalty expense accruals

• Impairment testing for goodwill, intangible and other long-lived assets and investments

• Assets and liabilities acquired in business combinations

1 unchanged sentence

• Allocation of transaction price to contractual performance obligations

Sale of Long-lived Assets

There were no sales of long-lived assets during the second and third quarters of fiscal 2023.

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

In December 2022, ASU No.

2022-6, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date for Topic 848" was issued.

Refer to the Current Fiscal Year Adoptions section below for further details.

There were no new accounting pronouncements issued in the first quarter of fiscal 2024 which would impact the Company.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2023 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.

2020-4 and ASU No.

In March 2020, the FASB issued ASU No.

2020-4, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (ASU 2020-4), and in December 2022, the FASB issued ASU No.

2022-6, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date for Topic 848" (ASU 2022-6).

ASU 2020-4 provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

This guidance is elective and applies to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

ASU 2022-6 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

During the third quarter of fiscal 2023, the Company adopted the expedient in accounting for the amendments to the Company's Credit Agreement which were made as a result of the replacement of LIBOR as a reference rate.

Refer to Note 5, Debt, for further details regarding the interest

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

rate effected by these amendments, which will be applied prospectively.

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

Disaggregated Revenue Data

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

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Book Clubs - U.S.

$ 27.7 $ 40.5 $ 91.6 $ 99.2

Book Fairs - U.S.

103.5 76.0 372.6 268.2

64.8 77.1 248.9 266.6

Trade - International (1)

8.0 7.4 33.9 35.3

Total Children's Book Publishing and Distribution $ 102.8 $ 124.7

5 unchanged sentences

International - Other Markets (3)

9.6 17.5 33.7 47.3

Total International $ 57.2 $ 65.0

Total Revenues $ 324.9 $ 344.5 $ 1,175.7 $ 1,128.5

$ 226.0 $ 262.9

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

1 unchanged sentence

(3) Primarily includes markets in Asia.

(4) Total revenues of $ 228.5 in fiscal 2024 include rental income of $ 2.5 related to leased space in the Company's headquarters which was not allocated to a segment.

In fiscal 2023, rental income of $ 1.5 was recognized as a reduction to Selling, general and administrative expenses.

Estimated Returns

A liability for expected returns of $ 44.8 , $ 42.2 , and $ 48.8 is recorded within Other accrued expenses as of February 28, 2023, May 31, 2022, and February 28, 2022, respectively.

In addition, a return asset of $ 3.5 , $ 5.3 , and $ 4.5 is recorded within Prepaid expenses and other current assets as of February 28, 2023, May 31, 2022, and February 28, 2022, 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:

February 28, 2023 May 31, 2022 February 28, 2022

A liability for expected returns of $ 33.1 , $ 34.9 , and $ 41.5 is recorded within Other accrued expenses as of August 31, 2023, May 31, 2023, and August 31, 2022, respectively.

In addition, a return asset of $ 5.4 , $ 4.7 , and $ 7.8 is recorded within Prepaid expenses and other current assets as of August 31, 2023, May 31, 2023, and August 31, 2022, 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)

Contract Liabilities

The following table presents further detail regarding the Company's contract liabilities as of the dates indicated:

August 31, 2023 May 31, 2023 August 31, 2022

Book fairs incentive credits $ 96.1 $ 110.8 $ 84.4

5 unchanged sentences

Stored value cards 13.1 12.4 9.3

Total deferred revenue $ 203.0 $ 172.8 $ 176.8

(1) Primarily includes deferred revenue related to contracts with school districts and professional services.

(2) Primarily includes deferred revenue related to various international products and services.

The Company's deferred revenue consists of contract liabilities for advance billings and payments received from customers in excess of revenue recognized and revenue allocated to outstanding book fairs incentive credits.

These liabilities are recorded within Deferred revenue on the Company's Condensed Consolidated Balance

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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 $ 45.9 and $ 126.2 for the three and nine months ended February 28, 2023, respectively, and $ 21.2 and $ 64.4 for the three and nine months ended February 28, 2022, respectively.

Total contract liabilities $ 181.7 $ 169.1 $ 182.6

(1) Primarily includes contract liabilities related to contracts with school districts and professional services.

(2) Primarily includes contract liabilities related to various international products and services.

The Company's contract liabilities consist of advance billings and payments received from customers in excess of revenue recognized and revenue allocated to outstanding book fairs incentive credits.

As of August 31, 2023, contract liabilities of $ 171.1 are recorded within Deferred revenue on the Company's Condensed Consolidated Balance Sheet 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 remaining $ 10.6 of contract liabilities as of August 31, 2023 are recorded within Other noncurrent liabilities on the Company's Condensed Consolidated Balance Sheet as the associated performance obligations are expected to be satisfied, and related revenue recognized, in excess of one year.

Contract liabilities of $ 169.1 and $ 182.6 as of May 31, 2023 and August 31, 2022, respectively, are recorded within Deferred revenue on the Company's Condensed Consolidated Balance Sheets.

The Company recognized revenue which was included in the opening Deferred revenue balance in the amount of $ 32.3 for the three months ended August 31, 2023, and $ 30.8 for the three months ended August 31, 2022.

Allowance for Credit Losses

9 unchanged sentences

Balance as of August 31, 2023 $ 17.1

Provision (benefit) 2.8

Write-offs and other ( 2.8 )

Balance as of November 30, 2022 $ 17.4

Provision (benefit) 0.5

Write-offs and other ( 0.9 )

Balance as of February 28, 2023 $ 17.0

SEGMENT INFORMATION

1 unchanged sentence

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

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

This segment is comprised of three operating segments.

• Education 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.

This segment is comprised of one operating segment.

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

This segment is comprised of three operating segments.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

United States through its school reading events business, which includes book clubs and book fairs channels, and through the trade channel.

This segment is comprised of two operating segments.

This segment is comprised of one operating segment.

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

This segment is comprised of three operating segments.

The following table sets forth the Company's revenue and operating income (loss) by segment for the periods indicated:

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Children's Book Publishing and Distribution $ 102.8 $ 124.7

1 unchanged sentence

International 57.2 65.0

Total $ 324.9 $ 344.5 $ 1,175.7 $ 1,128.5

$ 226.0 $ 262.9

Operating income (loss)

4 unchanged sentences

Total $ ( 99.1 ) $ ( 58.1 )

(1) Total revenues of $ 228.5 in fiscal 2024 include rental income of $ 2.5 related to leased space in the Company's headquarters which was not allocated to a segment.

In fiscal 2023, rental income of $ 1.5 was recognized as a reduction to Selling, general and administrative expenses.

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

ASSET WRITE DOWN AND SALE

During the first quarter of fiscal 2023, the Company completed the disposition of the direct sales business in Asia.

The Company committed to a plan to cease operations and exit the direct sales business in Asia, including the disposition of the Malaysia legal entity, during the fourth quarter of fiscal 2022.

Accordingly, the Company wrote down the related assets during fiscal 2022, which were included in the International segment and consisted of accounts receivable, inventory, other current assets and long-lived assets, to their recoverable value of $ 3.7 .

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 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:

February 28, 2023 May 31, 2022 February 28, 2022

August 31, 2023 May 31, 2023 August 31, 2022

US Revolving Credit Agreement $ — $ — $ —

Unsecured lines of credit 5.9 6.0 6.3

UK Loans — — 6.9

Total debt $ 5.9 $ 6.0 $ 6.3

1 unchanged sentence

Total long-term debt $ — $ — $ —

The Company's debt obligations as of February 28, 2023 have maturities of one year or less.

The Company's debt obligations as of August 31, 2023 have maturities of one year or less.

US Credit Agreement

9 unchanged sentences

• a Eurodollar Rate equal to SOFR (Daily Simple or Term), plus a SOFR adjustment of 0.10 % per annum and an applicable margin ranging from 1.35 % to 1.75 %, as determined by the Company’s prevailing Consolidated Leverage Ratio.

As of February 28, 2023, 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 August 31, 2023, 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 February 28, 2023, the commitment fee rate was 0.20 %.

As of August 31, 2023, 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 February 28, 2023, the Company had no outstanding borrowings under the Credit Agreement.

As of August 31, 2023, 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 Company or its business.

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

At February 28, 2023, 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

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

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

As of February 28, 2022, 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 February 28, 2022, the Company had $ 2.7 outstanding on the loan.

At August 31, 2023, the Company had open standby letters of credit totaling $ 3.8 issued under certain credit lines, including $ 0.4 under the Credit Agreement and $ 3.4 under the domestic credit lines discussed below.

Lines of Credit

As of February 28, 2023, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $ 10.0 .

There were no outstanding borrowings under these credit lines as of February 28, 2023, May 31, 2022 and February 28, 2022.

As of February 28, 2023, availability under these unsecured money market bid rate credit lines totaled $ 6.3 .

As of August 31, 2023, 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, 2023, May 31, 2023 and August 31, 2022.

As of August 31, 2023, availability under these unsecured money market bid rate credit lines totaled $ 6.6 , excluding commitments of $ 3.4 .

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

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

As of February 28, 2023, the Company had various local currency international credit lines totaling $ 24.3 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 5.2 at February 28, 2023 at a weighted average interest rate of 5.0 %, $ 6.5 at May 31, 2022 at a weighted average interest rate of 5.4 %, and $ 6.8 at February 28, 2022 at a weighted average interest rate of 5.1 %.

As of February 28, 2023, the amounts available under these facilities totaled $ 19.1 .

As of August 31, 2023, the Company had various local currency international credit lines totaling $ 24.7 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 5.9 at August 31, 2023 at a weighted average interest rate of 4.4 %, compared to outstanding borrowings of $ 6.0 at May 31, 2023 at a weighted average interest rate of 4.9 %, and $ 6.3 at August 31, 2022 at a weighted average interest rate of 5.8 %.

As of August 31, 2023, the amounts available under these facilities totaled $ 18.8 .

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.

6 unchanged sentences

The Company does not expect, in the case of those various claims and lawsuits arising in the normal course of business where a loss is considered probable or reasonably possible, that the reasonably possible losses from such claims and lawsuits (either individually or in the aggregate) would have a material adverse effect on the Company’s consolidated financial position or results of operations.

During the third quarter of fiscal 2023, the Company received $ 5.0 in recoveries from its insurance programs related to photo litigation settlements accrued and paid in prior periods.

The recoveries were recognized as an offset to the legal settlements and reflected in Selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations for the quarter ended February 28, 2023.

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 February 28, 2022.

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)

The Company expects to receive additional recoveries from its insurance programs related to an intellectual property legal settlement accrued during fiscal 2021, however, it is premature to determine with any level of probability or accuracy the amount of those recoveries at this time.

EARNINGS (LOSS) PER SHARE

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

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Net income (loss) attributable to Class A and Common Stockholders $ ( 74.2 ) $ ( 45.5 )

6 unchanged sentences

Anti-dilutive shares pursuant to stock-based compensation plans

0.7 0.8 0.6 1.8

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

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

February 28, 2023 February 28, 2022

August 31, 2023 August 31, 2022

Options outstanding pursuant to stock-based compensation plans (in millions) 3.0 3.3

As of February 28, 2023, $ 28.2 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, and Note 20, Subsequent Events, 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 had a fair value of $ 0.1 and have been substantially collected as of February 28, 2023.

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.

As of August 31, 2023, $ 85.7 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 12, Treasury Stock, for a more complete description of the Company’s share buy-back program.

SCHOLASTIC CORPORATION

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(Dollar amounts in millions, except per share data)

On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited, a UK-based children's book publishing company for $ 2.1 , increasing the Company's total ownership from 95.0 % to 100 %.

The acquisition was accounted for as an equity transaction as there was no change in control.

The carrying value of the noncontrolling interest at the acquisition date was $ 1.6 .

The difference between the fair value of consideration paid and the carrying value was recognized as an adjustment to Additional paid-in capital of $ 0.5 .

GOODWILL AND OTHER INTANGIBLES

2 unchanged sentences

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

February 28, 2023 May 31, 2022 February 28, 2022

August 31, 2023 May 31, 2023 August 31, 2022

Gross beginning balance $ 132.7 $ 164.9 $ 164.9

4 unchanged sentences

Ending balance $ 132.8 $ 132.7 $ 124.7

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.

In fiscal 2023, the Company acquired Learning Ovations, Inc, a U.S.-based education technology business, which resulted in the recognition of $ 7.6 of Goodwill included in the Education Solutions segment.

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

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

February 28, 2023 May 31, 2022 February 28, 2022

August 31, 2023 May 31, 2023 August 31, 2022

Beginning balance - Other intangibles subject to amortization $ 7.8 $ 6.0 $ 6.0

6 unchanged sentences

Total other intangibles $ 9.4 $ 9.9 $ 7.4

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.

In 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 are amortized over the estimated useful life of 7 years.

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

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

February 28, 2023 May 31, 2022 February 28, 2022 Segment

August 31, 2023 May 31, 2023 August 31, 2022 Segment

Equity method investments $ 32.3 $ 31.6 $ 28.7 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 $ 0.2 and less than $ 0.1 for the three months ended February 28, 2023 and February 28, 2022, respectively, and $ 1.5 and $ 1.6 for the nine months ended February 28, 2023 and February 28, 2022, respectively.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $ 0.2 and $ 0.1 for the three months ended August 31, 2023 and August 31, 2022, respectively.

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

February 28, February 28,

2023 2022 2023 2022

Components of net periodic benefit cost:

Interest cost $ 0.3 $ 0.2 $ 0.1 $ 0.0

Expected return on assets ( 0.4 ) ( 0.3 ) — —

Amortization of prior service (credit) loss 0.0 0.0 ( 0.3 ) ( 0.2 )

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

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

UK Pension Plan US Postretirement Benefits

Nine months ended Nine months ended

February 28, February 28,

August 31, August 31,

2023 2022 2023 2022

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

For the nine months ended February 28, 2023, the Company contributed $ 0.9 to the UK Pension Plan.

For the three months ended August 31, 2023, the Company contributed $ 0.3 to the UK Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately $ 1.2 to the UK Pension Plan for the fiscal year ending May 31, 2024.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

STOCK-BASED COMPENSATION

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

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

Stock option expense $ 0.6 $ 0.6

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

Three months ended Nine months ended

February 28, February 28,

2023 2022 2023 2022

Three months ended

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

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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

Authorization Amount

March 2020 50.0

December 2022 48.8

Total current Board authorizations $ 150.0

Less repurchases made under these authorizations $ ( 64.3 )

Remaining Board authorization at February 28, 2023 $ 28.2

Remaining Board authorization at February 28, 2023 represents the amount remaining under the current $ 48.8 Board authorization for Common share repurchases announced on December 14, 2022, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions.

See Note 20, Subsequent Events, for additional Board authorization for Common share repurchases.

Pursuant to a 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 $ 46.9 and $ 78.0 during the three and nine months ended February 28, 2023, respectively, which included shares repurchased through the modified Dutch auction tender offer.

Remaining Board authorization at August 31, 2023 $ 85.7

Remaining Board authorization at August 31, 2023 represents the amount remaining under the current $ 100.0 Board authorization for Common share repurchases announced on July 19, 2023, 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 $ 36.2 , including excise tax on share repurchases of $ 0.3 , during the three months ende d August 31, 2023.

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

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Three months ended February 28, 2023

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at December 1, 2022 $ ( 51.2 ) $ ( 0.9 ) $ ( 52.1 )

Other comprehensive income (loss) before reclassifications ( 1.0 ) — ( 1.0 )

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 $ 0.1 )

— ( 0.2 ) ( 0.2 )

Other comprehensive income (loss) ( 1.0 ) 0.0 ( 1.0 )

Ending balance at February 28, 2023 $ ( 52.2 ) $ ( 0.9 ) $ ( 53.1 )

Three months ended February 28, 2022

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at December 1, 2021 $ ( 40.3 ) $ ( 4.0 ) $ ( 44.3 )

Other comprehensive income (loss) before reclassifications (net of tax of $ 0.0 )

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) 1.6 0.0 1.6

Ending balance at February 28, 2022 $ ( 38.7 ) $ ( 4.0 ) $ ( 42.7 )

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

Nine months ended February 28, 2023

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, 2023

Foreign currency translation adjustments Retirement benefit plans Total

2 unchanged sentences

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

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

Amortization of net actuarial 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) 1.8 0.2 2.0

Ending balance at February 28, 2023 $ ( 52.2 ) $ ( 0.9 ) $ ( 53.1 )

Nine months ended February 28, 2022

Ending balance at August 31, 2023 $ ( 48.2 ) $ ( 5.6 ) $ ( 53.8 )

Three months ended August 31, 2022

Foreign currency translation adjustments Retirement benefit plans Total

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

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

( 8.6 ) 0.5 ( 8.1 )

Other comprehensive income (loss) before reclassifications ( 9.6 ) — ( 9.6 )

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

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

Amortization of net actuarial 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) ( 9.6 ) 0.0 ( 9.6 )

Ending balance at February 28, 2022 $ ( 38.7 ) $ ( 4.0 ) $ ( 42.7 )

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

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

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

February 28, February 28, February 28, February 28,

2023 2022 2023 2022

Three months ended Condensed Consolidated Statements of Operations line item

August 31, August 31,

Employee benefit plans:

8 unchanged sentences

• Level 2 Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.

• Level 3 Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

• Level 3 Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions.

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

12 unchanged sentences

See Note 9, 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.

INCOME TAXES AND OTHER TAXES

Tax Legislation Updates

In response to the COVID-19 pandemic, the U.S.

government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which, among other things, included provisions related to the carry back of net operating losses and the Employee Retention Credit.

The Company applied these provisions as applicable.

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

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

and the related receivable was $ 9.3 as of February 28, 2023.

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses.

2 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 and nine month periods ended February 28, 2023 was 26.3 % and 36.3 %, respectively, compared to 23.7 % and 19.7 %, respectively, for the prior fiscal year period.

The interim effective tax rate for the nine months ended February 28, 2023 varied from the prior fiscal year period primarily due to a GILTI inclusion in the period ended February 28, 2023 and the release of reserves related to the IRS examination recognized in the prior period.

The interim effective tax rate for the nine months ended February 28, 2023 varied from the statutory rate due to tax shortfalls related to vested option cancellations in the first quarter of fiscal 2023.

The Company's interim effective tax rate, inclusive of discrete items, for the three month period ended August 31, 2023 was 24.3 %, compared to 21.6 %, for the prior fiscal year period.

The increase in the interim effective tax rate was primarily due to an excess tax benefit related to vested option exercises in the three months ended August 31, 2023.

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

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

Also, certain subsidiaries of the Company file income tax

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

The Company is routinely audited by various tax authorities.

The Company was previously under audit for the fiscal 2015 through fiscal 2020 tax years and the examination was completed in fiscal 2023 with no impact to the financial results.

The fiscal 2021 and fiscal 2022 tax years remain subject to audit.

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

returns in foreign jurisdictions.

The Company is routinely audited by various tax authorities.

The Company was previously under audit for the fiscal 2015 through fiscal 2020 tax years and the examination was completed in the second quarter of fiscal 2023 with no impact to the financial results.

During the third quarter of fiscal 2023, the Company received a federal tax refund of $ 9.8 , inclusive of interest, which was released due to the completion of the IRS examination.

As of February 28, 2023, there was approximately $ 11.9 in receivables from the IRS related to the years previously under audit included in Income tax receivable in the Company’s Condensed Consolidated Balance Sheet as of that date.

Non-income Taxes

3 unchanged sentences

Where a sales tax liability with respect to a jurisdiction is probable and can be reliably estimated for such jurisdiction, the Company has made accruals for these matters which are reflected in the Company’s Condensed Consolidated Financial Statements.

These amounts are included in the Financial Statements in Selling, general and administrative expenses.

These amounts are included in Selling, general and administrative expenses.

Future developments relating to the foregoing could result in adjustments being made to these accruals.

During the third quarter of fiscal 2023, the Company recognized a benefit of $ 1.8 related to a favorable settlement of certain legacy sales tax matters.

DERIVATIVES AND HEDGING

2 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 February 28, 2023 and February 28, 2022 were $ 22.8 and $ 21.9 , respectively.

A net unrealized gain of $ 0.6 and $ 0.3 were recognized for the nine months ended February 28, 2023 and February 28, 2022, respectively.

The notional values of the contracts as of August 31, 2023 and August 31, 2022 were

$ 22.8 and $ 21.3 , respectively.

A net unrealized gain of $ 0.4 and $ 0.6 was recognized for the three months ended August 31, 2023 and August 31, 2022, respectively.

OTHER ACCRUED EXPENSES

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

February 28, 2023 May 31, 2022 February 28, 2022

August 31, 2023 May 31, 2023 August 31, 2022

Accrued payroll, payroll taxes and benefits $ 34.5 $ 29.2 $ 36.8

5 unchanged sentences

Total accrued expenses $ 145.9 $ 168.9 $ 162.6

RELATED PARTY TRANSACTIONS

On January 12, 2022, the Company entered into a share repurchase agreement to purchase shares of its common stock from the Estate of M.

Richard Robinson, Jr.

in a privately negotiated transaction.

Pursuant to the repurchase agreement, the Company purchased 300,000 shares of common stock on January 19, 2022 at a price of $ 40.65 per share, representing an aggregate purchase price of $ 12.2 .

The price per share paid represented a 4.2 % discount to the closing price of the stock, $ 42.43 , on the date of execution of the repurchase agreement.

The repurchase was made pursuant to the Company’s share repurchase program as previously approved by the Board.

The aforementioned transaction was approved by the Board upon the recommendation of the Audit Committee.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

SUBSEQUENT EVENTS

On March 22, 2023, the Board declared a quarterly cash dividend of $ 0.20 per share on the Company’s Class A and Common Stock for the fourth quarter of fiscal 2023.

The dividend is payable on June 15, 2023 to shareholders of record as of the close of business on April 28, 2023.

On March 22, 2023, the Board also authorized an increase of $ 50.0 for Common share repurchases under the Company's share buy-back program, resulting in a current Board authorization of $ 75.2 , which includes $ 28.2 remaining from the previous Board authorization less share repurchases of $ 3.0 subsequent to February 28, 2023.

SCHOLASTIC CORPORATION

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

Overview and Outlook

Revenues for the third quarter ended February 28, 2023 were $324.9 million, compared to $344.5 million in the prior fiscal year quarter, a decrease of $19.6 million or 6%.

The Company reported net loss per diluted share of Class A and Common Stock of $0.57 in the third quarter of fiscal 2023, compared to a net loss per diluted share of $0.44 in the prior fiscal year quarter.

During the third quarter of fiscal 2023, the Company's trade channel continued to be impacted by the softening retail demand for children’s books in the U.S.

and major international markets.

Despite the foregoing, the Children’s Book Publishing and Distribution segment revenues grew in the quarter with continued strong performance in the book fairs channel reflecting investments in innovation and improved fair experiences since the pandemic, as well as Scholastic’s unique and trusted position in schools.

Ongoing delays in school and school districts’ purchasing of instructional materials as they focus on managing staffing shortages and changes to the methods for literacy instruction contributed to lower revenues in Education Solutions .

The International segment experienced trends similar to the U.S.

markets with lower revenues in the trade channels partially offset by improvements in book fairs sales.

Operating loss increased $8.2 million, or 42%, from the prior fiscal year quarter primarily driven by the lower revenues and the continued impact of inflationary pressures on costs, in addition to decreased profit contribution from the Education Solutions segment, which included increased spending on long-term strategic investments.

The Company expects continued improvement in the book fairs businesses around the world, most notably in the U.S.

which continues to outperform fiscal 2022 with higher fair count and improved revenue-per-fair.

The trade channel will continue to release new titles from bestselling authors, including Dog Man ® #11:

Twenty Thousand Fleas Under the Sea by Dav Pilkey to be released at the end of March 2023, but expects unfavorable economic trends in the retail book markets to continue to negatively impact the channel both domestically and internationally.

The Education Solutions segment will continue to focus on integration efforts related to the Learning Ovations acquisition as well as the upcoming launch of Ready4Reading TM , a new K-3 phonics program.

The segment is preparing for the seasonally important fiscal fourth quarter, although the softness in the education instructional materials market could continue.

Internationally, margins are expected to continue to benefit from the disposition of the direct sales business in Asia, which generated losses in the prior period, despite unfavorable economic conditions in the UK and Canada which are expected to continue to impact revenue growth and operating income, together with 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 February 28, 2023 decreased by $19.6 million to $324.9 million, compared to $344.5 million in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment revenues increased by $3.0 million, driven by higher book fairs channel revenues resulting from increased fair count and higher revenue per fair, substantially offset by lower trade channel revenues due to the industry-wide decline in the retail market for children's books and lower book clubs channel sales due to the timing of revenues in the prior year and a continued decline in order volumes.

In the Education Solutions segment, revenues decreased by $7.2 million primarily due to lower sales of instructional products and programs as a result of purchasing delays by school and district administrators and changes to the methods for literacy instruction.

In local currency, the International segment revenues decreased by $11.9 million, primarily driven by lower sales in Asia as a result of the disposition of the direct sales business, coupled with lower trade channel sales, largely in Canada, as a result of the industry-wide decline in retail sales as well as lower book clubs channel revenues in Australia and New Zealand.

International segment revenues were impacted by unfavorable foreign exchange of $3.5 million in the quarter ended February 28, 2023.

Revenues for the nine months ended February 28, 2023 increased by $47.2 million to $1,175.7 million, compared to $1,128.5 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues increased by $77.7 million primarily driven by higher book fairs channel revenues resulting from increased fair count, higher revenue per fair and increased redemptions of book fair incentive program credits, partially offset by lower trade channel revenues due to the industry-wide decline in the retail market for

SCHOLASTIC CORPORATION

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

children's books and lower book clubs channel sales due to the multi-year trend of lower sponsor participation.

In the Education Solutions segment, revenues decreased by $13.6 million primarily driven by lower sales of instructional products and programs due to purchasing delays by school and district administrators and changes to the methods for literacy instruction as well as the shifting of revenues from the fourth quarter of fiscal 2021 due to supply chain constraints at that time into the first quarter of fiscal 2022.

In addition, the segment had lower sales of Rising Voices Library ® products.

This was partially offset by revenues from sponsored programs and increased revenues from traditional classroom book collections.

In local currency, the International segment revenues increased by $1.4 million primarily driven by increased revenues in the Company's Major Markets (Canada, UK, Australia and New Zealand) as a result of the continued recovery of the book fairs channel, partially offset by lower revenues in Asia as a result of the disposition of the direct sales business.

International segment revenues were impacted by unfavorable foreign exchange of $18.3 million in the nine months ended February 28, 2023.

Components of Cost of goods sold for the three and nine months ended February 28, 2023 and February 28, 2022 are as follows:

Three months ended Nine months ended

February 28, February 28, February 28, February 28,

2023 2022 2023 2022

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

Product, service and production costs and inventory reserves $ 96.2 29.6 % $ 93.8 27.2 % $ 337.2 28.7 % $ 306.6 27.2 %

Royalty costs 24.8 7.6 % 30.0 8.7 % 97.6 8.3 % 102.8 9.1 %

Prepublication amortization 6.3 2.0 % 6.8 2.0 % 19.1 1.6 % 20.6 1.8 %

Postage, freight, shipping, fulfillment and other 33.8 10.4 % 39.0 11.3 % 112.1 9.5 % 110.9 9.8 %

Total $ 161.1 49.6 % $ 169.6 49.2 % $ 566.0 48.1 % $ 540.9 47.9 %

Cost of goods sold for the quarter ended February 28, 2023 was $161.1 million, or 49.6% of revenues, compared to $169.6 million, or 49.2% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the nine months ended February 28, 2023 was $566.0 million, or 48.1% of revenues, compared to $540.9 million, or 47.9% of revenues, in the prior fiscal year period.

Cost of goods sold continued to be impacted by inflationary pressures which resulted in increased product costs due to higher print and inbound freight costs, substantially offset by lower royalty costs driven by the increased sales volume in the book fairs channel, which traditionally has a higher mix of non-royalty bearing titles.

In addition, the Education Solutions segment recognized higher inventory reserves due to lower utilization of aged inventory.

Favorable postage, freight, shipping and fulfillment costs as a percentage of revenue were driven by improved efficiencies at the Company's centralized distribution facility in Missouri which resulted in more units per shipment and fewer shipments to fulfill orders.

During fiscal 2023, the Company purchased a substantial amount of inventory at higher costs to mitigate long lead times and these higher costs will be reflected in Cost of goods sold and impact margins in the fourth quarter of fiscal 2023.

Selling, general and administrative expenses for the quarter ended February 28, 2023 decreased to $178.0 million, compared to $180.8 million in the prior fiscal year quarter.

The $2.8 million decrease was primarily attributable to overall lower costs in Asia as a result of the disposition of the direct sales business, a COVID-related governmental employee retention credit recognized in the book fairs channel in the quarter ended February 28, 2023 and lower severance expense from the Company's restructuring programs of $2.5 million.

In addition, the Company received and recognized insurance recoveries of $5.0 million in the quarter ended February 28, 2023 related to photo litigation settlements paid in prior periods and also recognized a benefit related to the favorable settlement of certain legacy sales tax matters.

The decrease was partially offset by increased labor costs, largely in the book fairs channel to support the increased fair count and in connection with the digital literacy platform integration efforts related to the Learning Ovations acquisition and the upcoming launch of Ready4Reading, in addition to increased marketing expenses in the book fairs channel associated with the increased fair count.

On September 20, 2023, 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 2024.

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

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