What changed in this filing

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Item 1. Financial Statements

2024-09-27 compared with 2024-03-22 · 269 added, 295 removed, 471 unchanged (54% of the section changed)

3 unchanged sentences

(Dollar amounts in millions, except per share data)

Three months ended Nine months ended

February 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Revenues $ 237.2 $ 228.5

3 unchanged sentences

Depreciation and amortization 15.3 13.4

Asset impairments and write downs 0.5 — 0.5 —

Total operating costs and expenses 325.7 327.6

5 unchanged sentences

Net income (loss) $ ( 62.5 ) $ ( 74.2 )

Net income (loss) attributable to noncontrolling interest — ( 0.1 ) — 0.1

Net income (loss) attributable to Scholastic Corporation $ ( 26.5 ) $ ( 19.2 ) $ ( 23.8 ) $ 10.6

Basic and diluted earnings (loss) per share of Class A and Common Stock

5 unchanged sentences

(Dollar amounts in millions)

Three months ended Nine months ended

February 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Net income (loss) $ ( 62.5 ) $ ( 74.2 )

4 unchanged sentences

Comprehensive income (loss) $ ( 54.1 ) $ ( 72.2 )

Net income (loss) attributable to noncontrolling interest — ( 0.1 ) — 0.1

Comprehensive income (loss) attributable to Scholastic Corporation $ ( 26.7 ) $ ( 20.2 ) $ ( 21.7 ) $ 2.9

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions, except per share data)

February 29, 2024 May 31, 2023 February 28, 2023

August 31, 2024 May 31, 2024 August 31, 2023

(unaudited) (audited) (unaudited)

9 unchanged sentences

Prepublication costs, net 48.4 49.5 55.0

Investment in film and television programs, net

Operating lease right-of-use assets, net 105.0 99.1 96.4

1 unchanged sentence

Goodwill 204.4 132.8 132.8

Other intangible assets, net

94.7 10.3 9.4

Noncurrent deferred income taxes 22.6 23.1 20.5

5 unchanged sentences

Lines of credit and current portion of long-term debt $ 6.1 $ 6.0 $ 5.9

Film related obligations 20.5 — —

Accounts payable 184.0 138.5 167.7

6 unchanged sentences

Noncurrent Liabilities:

Long-term debt 225.0 — —

Operating lease liabilities 90.6 89.2 83.1

Film related obligations 13.6 — —

Other noncurrent liabilities 45.1 29.2 35.9

18 unchanged sentences

( 560.9 ) ( 558.1 ) ( 479.8 )

Total stockholders’ equity of Scholastic Corporation 997.6 1,162.9 1,148.4

Noncontrolling interest — 1.6 1.5

Total stockholders’ equity 957.3 1,018.1 1,054.6

24 unchanged sentences

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

Other (noncontrolling interest) — — — — ( 0.5 ) — — — ( 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

Class A Stock Common Stock Additional Paid-in Capital Accumulated

18 unchanged sentences

— — — — — — ( 5.6 ) — ( 5.6 ) — ( 5.6 )

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

Balance at August 31, 2024 0.8 $ 0.0 27.3 $ 0.4 $ 606.3 $ ( 44.1 ) $ 955.6 $ ( 560.9 ) $ 957.3 $ — $ 957.3

Net Income (loss) — — — — — — 76.9 — 76.9 — 76.9

Foreign currency translation adjustment — — — — — 0.2 — — 0.2 — 0.2

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

— — — — — 0.1 — — 0.1 — 0.1

Stock-based compensation — — — — 4.1 — — — 4.1 — 4.1

Proceeds pursuant to stock-based compensation plans — — — — 0.6 — — — 0.6 — 0.6

Purchases of treasury stock at cost — — ( 1.4 ) — — — — ( 52.3 ) ( 52.3 ) — ( 52.3 )

Treasury stock issued pursuant to equity-based plans — — 0.3 — ( 6.6 ) — — 7.5 0.9 — 0.9

Dividends ($ 0.20 per share)

— — — — — — ( 6.0 ) — ( 6.0 ) — ( 6.0 )

Balance at November 30, 2023 1.7 $ 0.0 28.2 $ 0.4 $ 630.8 $ ( 53.5 ) $ 1,026.0 $ ( 524.6 ) $ 1,079.1 $ — $ 1,079.1

Net Income (loss) — — — — — — ( 26.5 ) — ( 26.5 ) — ( 26.5 )

Foreign currency translation adjustment — — — — — ( 0.4 ) — — ( 0.4 ) — ( 0.4 )

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

— — — — — 0.2 — — 0.2 — 0.2

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

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

Purchases of treasury stock at cost — — ( 1.4 ) — — — — ( 54.2 ) ( 54.2 ) — ( 54.2 )

Treasury stock issued pursuant to equity-based plans — — 0.1 — ( 4.0 ) — — 4.6 0.6 — 0.6

Dividends ($ 0.20 per share)

— — — — — — ( 6.0 ) — ( 6.0 ) — ( 6.0 )

Other (share conversion) ( 0.9 ) — 0.9 — ( 28.6 ) — — 28.6 — — —

Balance at February 29, 2024 0.8 $ 0.0 27.8 $ 0.4 $ 603.0 $ ( 53.7 ) $ 993.5 $ ( 545.6 ) $ 997.6 $ — $ 997.6

See accompanying notes

2 unchanged sentences

(Dollar amounts in millions)

Nine months ended

February 29, February 28,

Three months ended

August 31, August 31,

Cash flows - operating activities:

Net income (loss) attributable to Scholastic Corporation $ ( 23.8 ) $ 10.6

Net income (loss)

$ ( 62.5 ) $ ( 74.2 )

Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities:

3 unchanged sentences

Amortization of prepublication costs 5.5 6.7

Amortization of production costs 1.2 —

Depreciation and amortization 18.3 15.8

3 unchanged sentences

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

Non cash write off related to asset impairments and write downs 0.5 —

Changes in assets and liabilities, net of amounts acquired:

2 unchanged sentences

Prepaid expenses and other current assets ( 17.2 ) ( 23.4 )

Investment in film and television programs 2.0 —

Income tax receivable ( 30.3 ) ( 24.5 )

10 unchanged sentences

Additions to property, plant and equipment ( 20.0 ) ( 14.3 )

Other investment and acquisition-related payments ( 8.5 ) ( 10.7 )

Acquisitions, net of cash acquired ( 176.4 ) —

Purchase of noncontrolling interest — ( 2.1 )

Net cash provided by (used in) investing activities ( 200.8 ) ( 21.8 )

2 unchanged sentences

Repayments of lines of credit, credit agreement and revolving loan ( 0.7 ) ( 0.9 )

Borrowings under film related obligations 2.6 —

Repayments of film related obligations ( 5.0 ) —

Repayment of capital lease obligations ( 0.6 ) ( 0.6 )

15 unchanged sentences

The accompanying condensed consolidated interim financial statements (referred to as the “Financial Statements” herein) include the accounts of Scholastic Corporation (the “Corporation”) and all wholly-owned and majority-owned subsidiaries (collectively, “Scholastic” or the “Company”).

The Company reviews its relationships with other entities to identify whether it is the primary beneficiary of a variable interest entity (“VIE”).

If the determination is made that the Company is the primary beneficiary, then the entity is consolidated.

Intercompany transactions are eliminated in consolidation.

17 unchanged sentences

Education channel revenues are generally higher in the fourth quarter.

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

Trade channel and Entertainment segment revenues can vary throughout the year due to the timing of published titles' release dates and program production deliveries and distribution license period start dates.

Use of estimates

7 unchanged sentences

• The timing and amount of future income taxes and related deductions

• Inventory reserves

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

• Sales tax contingencies

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

• Inventory reserves

• 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

• Expected economic useful life of film and television program assets

• Impairment testing for goodwill, other 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

Summary of Significant Accounting Policies

In Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 the Company included a description of its significant accounting policies.

Except as set forth below, as of the date of this Quarterly Report on Form 10-Q there have been no material changes to the significant accounting policies described in the Company’s Annual Report for the fiscal year ended May 31, 2024

The below significant accounting policies relate to the Company's entertainment business, which includes the operations of 9 Story Media Group Inc.

("9 Story") and Scholastic Entertainment Inc.

Refer to Note 7, "Acquisitions" for further details regarding the acquisition of 9 Story.

Revenue recognition

The Company’s revenue recognition policies for its entertainment business include the following:

Film and TV production - Revenue is deferred during production and recognized when the film or episodes have been delivered and are available for showing or exploitation.

Production services - Revenue is recognized using the percentage-of-completion method based on the proportion of costs incurred in the current period to total expected costs.

Licensing - Revenue from the sale or granting of broadcast license rights to third parties is recognized when the licensed content is available to the customer and the customer has the contractual right to broadcast or stream the content.

Royalty income - Revenue from sales and usage-based royalties related to licenses is generally recognized when the subsequent sale or usage occurs.

Investment in film and television programs

Investments in film and television programs are stated at the lower of cost or net realizable value.

Investment in film and television programs includes all direct production and financing costs incurred during production and minimum guarantee payments made to acquire distribution rights.

Interest costs are capitalized to the cost of the film or television program until substantially all of the activities required for delivery are complete.

Investments in film and television programs are amortized using the declining-balance method with rates ranging from 50% to 90% at the time of initial episodic delivery and at rates ranging from 10% to 25% annually thereafter.

The determination of the rates is based on the expected economic useful life of the film or television program and includes factors such as rights retained by the Company, the availability of rights to renew licenses for episodic television programs in various territories, and the availability of secondary market revenue.

The Company regularly reviews the recoverability of these capitalized costs based on expected future cash flows.

Government financing and assistance

The Company has access to government programs and tax credits that are designed to assist film, television and digital media production and distribution.

Amounts received and amounts receivable which relate to the Company's film and television program assets are recorded as a reduction in the production costs of the related asset.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

New Accounting Pronouncements

There were no new accounting pronouncements issued in the first quarter of fiscal 2025 which would impact the Company.

Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU will be effective for the Company's fiscal year 2025, and interim periods starting in fiscal year 2026.

This ASU is effective for the Company's fiscal year 2025, and interim periods starting in fiscal year 2026.

Early adoption is permitted.

7 unchanged sentences

The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

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.

SCHOLASTIC CORPORATION

3 unchanged sentences

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

Three months ended Nine months ended

February 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Book Clubs - U.S.

$ 13.3 $ 27.7 $ 48.3 $ 91.6

Book Fairs - U.S.

102.7 103.5 372.1 372.6

70.0 64.8 233.5 248.9

Trade - International (2)

7.6 8.0 35.3 33.9

Total Children's Book Publishing and Distribution $ 105.4 $ 102.4

2 unchanged sentences

Total Education Solutions $ 55.7 $ 66.0

Entertainment - U.S.

Entertainment - International (3)

Total Entertainment (1)

International - Major Markets (4)

1 unchanged sentence

International - Other Markets (5)

11.1 9.6 31.6 33.7

Total International $ 56.8 $ 57.2

$ 321.2 $ 324.9 $ 1,107.5 $ 1,175.7

Total Overhead $ 2.7 $ 2.5

Total $ 237.2 $ 228.5

(1) The newly formed Entertainment segment includes the operations of SEI, which were included in the Children’s Book Publishing and Distribution segment in prior periods, and 9 Story.

The financial results for SEI for the three months ended August 31, 2023 have been reclassified to Entertainment to reflect this change.

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

(3) Primarily includes production, distribution and licensing revenues in Canada, Ireland and Indonesia.

(4) Includes Canada, UK, Australia and New Zealand.

(5) Primarily includes markets in Asia.

(4) Total revenues of $ 323.7 and $ 1,114.8 for the three and nine months ended February 29, 2024, respectively, included rental income of $ 2.5 and $ 7.3 , respectively, related to leased space in the Company's headquarters which was not allocated to a segment.

Rental income of $ 1.5 and $ 4.6 for the three and nine months ended February 28, 2023, respectively, was recognized as a reduction to Selling, general and administrative expenses.

(6) Overhead includes rental income related to leased space in the Company's headquarters.

Estimated Returns

A liability for expected returns of $ 38.3 , $ 34.9 , and $ 44.8 is recorded within Other accrued expenses as of February 29, 2024, May 31, 2023, and February 28, 2023, respectively.

In addition, a return asset of $ 4.4 , $ 4.7 , and $ 3.5 is recorded within Prepaid expenses and other current assets as of February 29, 2024, May 31, 2023, and February 28, 2023, respectively, for the recoverable cost of product estimated to be returned by customers.

A liability for expected returns of $ 30.7 , $ 33.1 , and $ 33.1 is recorded within Other accrued expenses as of August 31, 2024, May 31, 2024, and August 31, 2023, respectively.

In addition, a return asset of $ 3.9 , $ 4.2 , and $ 5.4 is recorded within Prepaid expenses and other current assets as of August 31, 2024, May 31, 2024, and August 31, 2023, 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:

February 29, 2024 May 31, 2023 February 28, 2023

August 31, 2024 May 31, 2024 August 31, 2023

Book fairs incentive credits $ 99.4 $ 114.2 $ 96.1

4 unchanged sentences

Media-related 6.8 0.0 0.0

Stored value programs

20.1 12.4 14.8

Stored value cards 17.3 16.7 13.1

Total contract liabilities $ 180.2 $ 167.6 $ 181.7

2 unchanged sentences

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 February 29, 2024, contract liabilities of $ 193.8 are recorded within Deferred revenue on the Company's Condensed

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

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 $ 6.3 of contract liabilities as of February 29, 2024 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 $ 203.0 as of May 31, 2023 and February 28, 2023, 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 $ 33.0 and $ 113.7 for the three and nine months ended February 29, 2024, respectively, and $ 45.9 and $ 126.2 for the three and nine months ended February 28, 2023, respectively.

Contract liabilities of $ 173.9 , $ 161.1 and $ 171.1 as of August 31, 2024, May 31, 2024 and August 31, 2023, respectively, 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 remaining $ 6.3 , $ 6.5 and $ 10.6 of contract liabilities as of August 31, 2024, May 31, 2024 and August 31, 2023, respectively, 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.

The Company recognized revenue which was included in the opening Deferred revenue balance in the amount of $ 29.2 and $ 32.3 for the three months ended August 31, 2024, and August 31, 2023, respectively.

Allowance for Credit Losses

9 unchanged sentences

Balance as of August 31, 2024 $ 15.4

Provision (benefit) 2.5

Write-offs and other ( 3.4 )

Balance as of November 30, 2023 $ 16.2

Provision (benefit) 0.9

Write-offs and other ( 1.5 )

Balance as of February 29, 2024 $ 15.6

SEGMENT INFORMATION

The Company categorizes its businesses into four reportable segments:

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

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

SEGMENT INFORMATION

The Company categorizes its businesses into three reportable segments:

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

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

This segment is comprised of two operating segments.

1 unchanged sentence

This segment is comprised of one operating segment.

• Entertainment includes the development, production, distribution and licensing of children and family film and television content.

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.

1 unchanged sentence

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 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Children's Book Publishing and Distribution (1)

$ 105.4 $ 102.4

Education Solutions 55.7 66.0

Entertainment (1)

International 56.8 57.2

$ 321.2 $ 324.9 $ 1,107.5 $ 1,175.7

Total $ 237.2 $ 228.5

Operating income (loss)

Children's Book Publishing and Distribution (1)

$ ( 36.6 ) $ ( 41.0 )

Education Solutions ( 17.0 ) ( 18.7 )

Entertainment (1)

( 0.5 ) ( 0.5 )

International ( 8.3 ) ( 8.2 )

1 unchanged sentence

Total $ ( 88.5 ) $ ( 99.1 )

(1) Total revenues of $ 323.7 and $ 1,114.8 for the three and nine months ended February 29, 2024, respectively, included rental income of $ 2.5 and $ 7.3 , respectively, related to leased space in the Company's headquarters which was not allocated to a segment.

Rental income of $ 1.5 and $ 4.6 for the three and nine months ended February 28, 2023, respectively, 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.

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

February 29, 2024 May 31, 2023 February 28, 2023

(1) The newly formed Entertainment segment includes the operations of SEI, which were included in the Children’s Book Publishing and Distribution segment in prior periods, and 9 Story.

The financial results for SEI for the three months ended August 31, 2023 have been reclassified to Entertainment to reflect this change.

(2) Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets and rental income related to leased space in the Company's headquarters.

The following table summarizes the carrying value of the Company's debt, excluding film related obligations, as of the dates indicated:

August 31, 2024 May 31, 2024 August 31, 2023

US Revolving Credit Agreement $ 225.0 $ — $ —

3 unchanged sentences

Total long-term debt $ 225.0 $ — $ —

The Company's debt obligations as of February 29, 2024 have maturities of one year or less.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

US Credit Agreement

The following table sets forth the maturities of the carrying values of the Company's debt obligations, excluding film related obligations, as of August 31, 2024 for the twelve month periods ended August 31:

Total Debt $ 231.1

US Revolving 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 and Truist Bank and Wells Fargo Bank, National Association, as co-syndication agents (the “Credit Agreement”).

6 unchanged sentences

• a Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus 0.50 % or (iii) the Term SOFR Rate plus 1.00 % plus, in each case, an applicable margin ranging from 0.35 % to 0.75 %, as determined by the Company’s prevailing Consolidated Leverage Ratio (as defined in the Credit Agreement);

• a SOFR rate (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 29, 2024, the applicable margin on Base Rate Advances was 0.35 % and the applicable margin on SOFR Advances was 1.35 %, both based on the Company’s prevailing Consolidated Leverage Ratio.

• a 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 August 31, 2024, the applicable margin on Base Rate Advances was 0.35 % and the applicable margin on SOFR 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 29, 2024, the commitment fee rate was 0.20 %.

As of August 31, 2024, 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 29, 2024, outstanding borrowings under the Credit Agreement were $ 25.0 at an all-in borrowing rate of 6.77 %.

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

As of August 31, 2024, the Company had outstanding borrowings of $ 225.0 under the Credit Agreement at a weighted average interest rate of 6.8 %.

While this obligation is not due until the October 27, 2026 maturity date, the Company may, from time to time, make payments to reduce this obligation when cash from operations becomes available for this purpose.

No borrowings were outstanding under the Credit Agreement as of August 31, 2023.

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 29, 2024, 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.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Lines of Credit

As of February 29, 2024, 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 29, 2024, May 31, 2023 and February 28, 2023.

As of February 29, 2024, availability under these unsecured money market bid rate credit lines totaled $ 6.6 , excluding commitments of $ 3.4 .

At August 31, 2024, the Company had open standby letters of credit totaling $ 4.0 issued under certain credit lines, including $ 0.4 under the Credit Agreement and $ 3.6 under the domestic credit lines discussed below.

Unsecured Lines of Credit

As of August 31, 2024, 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, 2024, May 31, 2024 and August 31, 2023.

As of August 31, 2024, availability under these unsecured money market bid rate credit lines totaled $ 6.4 , excluding commitments of $ 3.6 .

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 29, 2024, the Company had various local currency international credit lines totaling $ 23.6 underwritten by banks primarily in the United States, Canada and the United Kingdom.

Outstanding borrowings under these facilities were $ 6.5 at February 29, 2024 at a weighted average interest rate of 3.8 %, compared to outstanding borrowings of $ 6.0 at May 31, 2023 at a weighted average interest rate of 4.9 %, and $ 5.2 at February 28, 2023 at a weighted average interest rate of 5.0 %.

As of February 29, 2024, the amounts available under these facilities totaled $ 17.1 .

As of August 31, 2024, the Company had various local currency international credit lines totaling $ 14.0 underwritten by banks primarily in the United States and the United Kingdom.

Outstanding borrowings under these facilities were $ 6.1 at August 31, 2024 at a weighted average interest rate of 4.3 %, compared to outstanding borrowings of $ 6.0 at May 31, 2024 at a weighted average interest rate of 4.5 %, and $ 5.9 at August 31, 2023 at a weighted average interest rate of 4.4 %.

As of August 31, 2024, the amounts available under these facilities totaled $ 7.9 .

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.

Film Related Obligations

The Company's entertainment business enters into credit facilities to obtain interim financing for certain productions.

The interim production credit facilities are secured by an assignment and direction of specific production financing including tax credits and license contract receivables and have varying maturity dates between September 9, 2024 and July 31, 2026.

Interest is charged at rates ranging from the bank prime rate plus 0.75 % for Canadian dollar loans, SOFR plus 3.0 % or U.S.

base rate plus 0.75 % for U.S.

dollar loans and Euribor plus 2.0 % for Euro loans.

As of August 31, 2024, outstanding borrowings under these facilities were $ 34.1 at a weighted average interest rate of 7.8 %, of which $ 20.5 were classified as current obligations.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

COMMITMENTS AND CONTINGENCIES

5 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.

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.

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 Nine months ended

February 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Net income (loss) attributable to Class A and Common Stockholders $ ( 62.5 ) $ ( 74.2 )

Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions) 28.3 31.6

Dilutive effect of Class A Stock and Common Stock potentially issuable pursuant to stock-based compensation plans (in millions) — — — 0.9

Dilutive effect of Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)* — —

Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings (loss) per share (in millions) 28.3 31.6

3 unchanged sentences

Anti-dilutive shares pursuant to stock-based compensation plans

1.1 0.7 0.7 0.6

* 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 29, 2024 February 28, 2023

August 31, 2024 August 31, 2023

Options outstanding pursuant to stock-based compensation plans (in millions) 2.9 3.0

As of February 29, 2024, $ 46.0 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 and Note 18, "Subsequent Events", for additional Board authorization for Common share repurchases.

As of August 31, 2024, $ 81.6 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.

9 Story Acquisition

On June 20, 2024, the Company completed the acquisition of 100 % of the economic interests in the form of non-voting shares and 25 % of the voting shares of 9 Story Media Group Inc.

("9 Story"), a leading independent creator, producer and distributor of premium children’s content based in Toronto, Canada, with studios or

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

offices in New York, United States, Dublin, Ireland and Bali, Indonesia.

The aggregate purchase price was $ 193.9 , subject to further adjustment based on the final determination of purchase price adjustments, and was funded through borrowings under the U.S.

credit agreement incurred during the first quarter of fiscal 2025.

The acquisition of 9 Story further enhances the Company's development, production and licensing interests, expanding opportunities to leverage its brand and best-selling publishing and global children's franchises across print, screen and merchandising.

Pursuant to ASC Topic 810, Consolidation , 9 Story was determined to be a variable interest entity (VIE) and the Company was determined to be its primary beneficiary and therefore obtained control over 9 Story.

Accordingly, 9 Story has been consolidated into the Company's financial results.

9 Story met the definition of a business pursuant to ASC 805, Business Combinations , and the acquisition was accounted for as a business combination under the acquisition method of accounting.

The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on currently available information.

As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period.

The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents $ 17.5

Accounts receivable 15.9

Investment in film and television programs 42.9

Property, plant and equipment (1)

Operating lease right-of-use assets 5.8

Other Intangible assets:

Existing content/IP 16.0

Customer contracts/relationships 51.5

Tradenames 16.5

Internally developed software 1.3

Other assets (2)

Total assets acquired 209.3

Accounts payable 2.3

Other accrued expenses 16.4

Deferred revenue 10.9

Film related obligations

Operating lease liabilities 7.8

Other liabilities 13.2

Total liabilities assumed 85.5

Preliminary fair value of net assets acquired 123.8

Goodwill 70.1

Preliminary purchase price consideration $ 193.9

(1) Includes a preliminary step-up adjustment of $ 1.8 .

(2) Includes $ 31.9 of receivables related to government tax incentives.

The intangible assets acquired include intellectual property related to 9 Story's existing and recognized program titles, customer contracts/relationships related to licensing, distribution and service arrangements, the trade names associated with 9 Story and Brown Bag Films, its animation studio, and internally developed software.

The intellectual property and customer contracts/relationships were valued using the multi-period excess earnings valuation method and are being amortized over 10 years, with the exception of contracts/relationships for service arrangements which are being amortized over 5 years.

The trade names were valued using the relief-from-royalty valuation method and are being amortized over 10 years.

The internally developed software was valued using the replacement cost method and is being amortized over 3 years.

The Company classified these fair value measurements as Level 3 due to the significant unobservable inputs used in the analyses, such as internally-developed discounted cash flow forecasts.

The difference between the purchase price over the net identifiable tangible and intangible assets acquired was allocated to goodwill, which is not deductible for tax purposes.

The goodwill balance is primarily attributable to the expected synergies from the business

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

combination and acquired workforce.

The goodwill and intangible assets acquired were allocated to the Entertainment segment.

The financial results of 9 Story, since the date of acquisition, were included in the Company's Condensed Consolidated Financial Statements as of August 31, 2024.

9 Story contributed total revenue of $ 16.0 and net income of $ 0.1 from the date of acquisition on June 20, 2024 through August 31, 2024.

The operations of 9 Story are reported in the Entertainment segment.

The following table summarizes the unaudited pro-forma consolidated results of operations for the three months ended August 31, 2024 and 2023 as if the acquisition had occurred on June 1, 2023, the beginning of fiscal 2024:

Three months ended

Revenues $ 242.9 $

Net income (loss) ( 64.3 ) ( 78.9 )

The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and 9 Story and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal 2024 and are not indicative of the future operating results of the combined entities.

The financial information for 9 Story prior to the acquisition includes certain adjustments to 9 Story's historical consolidated financial statements to align with U.S.

GAAP and the Company's accounting policies.

The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired, fair value adjustments relating to leases and fixed assets, and the related tax effects assuming that the business combination occurred on June 1, 2023.

The Company incurred acquisition‑related costs of $ 1.7 which were included in Selling, general and administrative costs in the Condensed Consolidated Statement of Operations for the three months ended August 31, 2024.

Purchase of Noncontrolling Interest

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 %.

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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 .

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 were collected as of the end of the first quarter of fiscal 2024.

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 $ 3.6 , which included $ 4.1 of amortizable intangible assets attributable to the technology/know-how and a $ 0.6 deferred tax liability.

This acquisition resulted in $ 7.6 of goodwill that was assigned to the Company's Education Solutions segment and was 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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

determined to be material to the Company's results and therefore pro forma financial information has not been presented.

GOODWILL AND OTHER INTANGIBLES

2 unchanged sentences

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

February 29, 2024 May 31, 2023 February 28, 2023

August 31, 2024 May 31, 2024 August 31, 2023

Gross beginning balance $ 172.4 $ 172.3 $ 172.3

4 unchanged sentences

Ending balance $ 204.4 $ 132.8 $ 132.8

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.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $ 70.1 of Goodwill included in the Entertainment segment.

Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

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 29, 2024 May 31, 2023 February 28, 2023

The following table summarizes the activity in Other intangible assets for the periods indicated:

August 31, 2024 May 31, 2024 August 31, 2023

Beginning balance - Other intangibles subject to amortization $ 8.2 $ 7.8 $ 7.8

2 unchanged sentences

Foreign currency translation 1.5 0.1 0.0

Impairments — ( 3.1 ) —

Total other intangibles subject to amortization, net of accumulated amortization of $ 41.5 , $ 39.1 and $ 37.0 , respectively

1 unchanged sentence

Total other intangibles not subject to amortization $ 2.1 $ 2.1 $ 2.1

Total other intangibles $ 14.0 $ 9.9 $ 10.4

During the second quarter of fiscal 2024, the Company acquired certain amortizable intangible assets related to educational programs for $ 5.8 .

These intangible assets are amortized over the estimated useful life of 8 years.

During the third quarter of fiscal 2024, the Company acquired $ 0.2 of certain amortizable intangible assets of a U.S.- based children's book publishing business.

These intangible assets are amortized over the estimated useful life of 5 years.

Total other intangible assets, net

$ 94.7 $ 10.3 $ 9.4

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $ 85.3 of amortizable intangible assets.

Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

In fiscal 2024, the Company acquired certain amortizable intangible assets related to educational programs for $ 5.8 and certain amortizable intangible assets of a U.S.- based children's book publishing business for $ 0.2 .

These intangible assets are amortized over the estimated useful life of 8 years and 5 years, respectively.

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 trade name rights.

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

During fiscal 2024, the Company assessed the recoverability of these assets as impacted by the shift to the science of reading based approach to literacy instruction within the education market.

An asset impairment of $ 3.1 was recognized in fiscal 2024.

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

Other intangible assets with definite lives consist principally of customer lists, customer contracts/relationships, intellectual property, tradenames and internally developed software.

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

The weighted-average remaining useful lives of all amortizable intangible assets is approximately 9.0 years.

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

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

There were no impairment charges related to Other intangible assets in the three months ended August 31, 2024 and August 31, 2023.

Investments are included in Other assets and deferred charges on the Condensed Consolidated Balance Sheets.

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

February 29, 2024 May 31, 2023 February 28, 2023 Segment

August 31, 2024 May 31, 2024 August 31, 2023 Segment

Equity method investments $ 32.5 $ 31.5 $ 32.3 International

Other equity investments 6.0 6.0 6.0 Children's Book Publishing & Distribution

Other equity investments 7.0 6.0 6.0 Entertainment

Total Investments $ 39.5 $ 37.5 $ 38.3

1 unchanged sentence

Equity method income from this investment is reported in the International segment.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

The Company has a 4.6 % ownership interest in a financing and production company that makes film, television, and digital programming designed for the youth market.

This equity investment does not have a readily determinable fair value and the Company has elected to apply the measurement alternative and report this investment at cost, less impairment on the Company's Condensed Consolidated Balance Sheets.

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

Income (loss) from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled a loss of $ 0.2 and income of $ 0.1 for the three and nine months ended February 29, 2024, respectively, and income of $ 0.2 and $ 1.5 for the three and nine months ended February 28, 2023, respectively.

The Company received dividends of $ 1.3 in the three and nine month period ended February 29, 2024.

The Company did not receive any dividends in the three and nine month period ended February 28, 2023.

This equity investment does not have a readily determinable fair value and the Company has elected to apply the measurement alternative and report the investment at cost, less impairment on the Company's Condensed Consolidated Balance Sheets.

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

This investment is included in the Entertainment segment.

The Company acquired investments of $ 1.0 as part of the 9 Story acquisition which are included in the Entertainment segment.

Included in these acquired investments, the Company acquired a 50 % ownership interest in certain animated television production companies.

These joint venture investments are accounted for using the equity method of accounting.

The Company also acquired a 12 % ownership interest in a children's book publishing business located in the UK.

This investment is accounted for at cost, less impairment on the Company's Condensed Consolidated Balance Sheets.

There have been no impairments or adjustment to the carrying value of the 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 $ 0.2 for the three months ended August 31, 2024 and August 31, 2023, respectively.

EMPLOYEE BENEFIT PLANS

2 unchanged sentences

Three months ended Three months ended

February 29, February 28, February 29, February 28,

2024 2023 2024 2023

Components of net periodic benefit cost:

Interest cost $ 0.3 $ 0.3 $ 0.1 $ 0.1

Expected return on assets ( 0.2 ) ( 0.4 ) — —

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

Amortization of net actuarial (gain) loss 0.4 0.2 0.0 —

Total $ 0.5 $ 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 29, February 28, February 29, February 28,

August 31, August 31,

2024 2023 2024 2023

9 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 nine months ended February 29, 2024, the Company contributed $ 0.9 to the UK Pension Plan.

For the three months ended August 31, 2024, the Company contributed $ 0.3 to the UK Pension Plan.

The Company expects, based on actuarial calculations, to contribute cash of approximately $ 1.3 to the UK Pension Plan for the fiscal year ending May 31, 2025.

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 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

Stock option expense $ 0.6 $ 0.6

4 unchanged sentences

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 29, February 28, February 29, February 28,

2024 2023 2024 2023

Three months ended

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

1 unchanged sentence

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:

1 unchanged sentence

December 2023 66.2

March 2024 54.6

Total current Board authorizations $ 120.8

Less repurchases made under these authorizations ( 39.2 )

Remaining Board authorization at February 29, 2024 $ 46.0

Remaining Board authorization at February 29, 2024 represents the amount remaining under the current $ 66.2 Board authorization for Common share repurchases announced on December 13, 2023, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions.

See Note 18, "Subsequent Events", for additional Board authorization for Common share repurchases.

Repurchases of the Company's Common Stock were $ 54.2 and $ 142.7 , including excise tax on share repurchases of $ 0.2 and $ 0.9 , during the three and nine months ended February 29, 2024, respectively.

Remaining Board authorization at August 31, 2024 $ 81.6

Remaining Board authorization at August 31, 2024 represents the amount remaining under the Board authorization for Common share repurchases announced on December 13, 2023 and the additional $ 54.6 Board authorization for Common share repurchases announced on March 20, 2024, 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 $ 5.0 during the three months ende d August 31, 2024.

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 29, 2024

Foreign currency translation adjustments Retirement benefit plans Total

Beginning balance at December 1, 2023 $ ( 48.0 ) $ ( 5.5 ) $ ( 53.5 )

Other comprehensive income (loss) before reclassifications ( 0.4 ) — ( 0.4 )

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) ( 0.4 ) 0.2 ( 0.2 )

Ending balance at February 29, 2024 $ ( 48.4 ) $ ( 5.3 ) $ ( 53.7 )

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 )

SCHOLASTIC CORPORATION

1 unchanged sentence

(Dollar amounts in millions, except per share data)

Nine months ended February 29, 2024

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, 2024

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) 8.2 0.2 8.4

Ending balance at February 29, 2024 $ ( 48.4 ) $ ( 5.3 ) $ ( 53.7 )

Nine months ended February 28, 2023

Ending balance at August 31, 2024 $ ( 38.7 ) $ ( 5.4 ) $ ( 44.1 )

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 )

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

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 29, February 28, February 29, February 28,

2024 2023 2024 2023

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.

1 unchanged sentence

The Company employs Level 2 fair value measurements for the disclosure of the fair value of its various lines of credit and long term debt.

The fair value of the Company's debt approximates the carrying value for all periods presented.

The fair value of the Company's debt, including film related obligations, approximates the carrying value for all periods presented.

The fair values of foreign currency forward contracts, used by the Company to manage the impact of foreign exchange rate changes, are based on quotations from financial institutions, a Level 2 fair value measure.

3 unchanged sentences

• Investments

• Assets acquired in a business combination

• Impairment assessment of goodwill and intangible assets

• Assets and liabilities acquired in a business combination

• Impairment assessment of goodwill and other intangible assets

Level 2 and Level 3 inputs are employed by the Company in the fair value measurement of these assets.

For the fair value measurements employed by the Company for certain property, plant and equipment, investments and prepublication assets, the Company assessed future expected cash flows attributable to these assets.

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 7, Acquisitions, for further details regarding the acquired assets and fair value measurements employed.

For the fair value measurements employed by the Company for certain property, plant and equipment, investments, prepublication assets and investment in film and television programs, the Company assessed future expected cash flows attributable to these assets.

See Note 9, "Investments", for a more detailed description of the fair value measurements employed.

See Note 7, "Acquisitions", for a more detailed description of the assets acquired and fair value measurements employed related to the 9 Story acquisition.

INCOME TAXES AND OTHER TAXES

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 and nine month periods ended February 29, 2024 was 23.4 % and 23.5 %, respectively, compared to 26.3 % and 36.3 %, respectively, for the prior fiscal year period.

The interim effective tax rate for the nine months ended February 29, 2024 varies from the statutory rate primarily due to state & local income tax.

The Company's interim effective tax rate, inclusive of discrete items, for the three month period ended August 31, 2024 was 31.9 %, compared to 24.3 %, for the prior fiscal year period.

The interim effective tax rate for the three months ended August 31, 2024 varies from the statutory rate primarily due to expected state and local income tax and non-deductible compensation for covered executive employees.

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

2 unchanged sentences

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.

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.

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

The fiscal 2021 through 2024 tax years remain subject to audit.

The Organization for Economic Cooperation and Development (“OECD”) has implemented the global minimum tax rate of at least 15% for large multinational companies as of 2024 (“Pillar Two”).

Under Pillar Two, a top-up tax will be required for any jurisdiction who has enacted Pillar Two and whose effective tax rate falls below the 15% global minimum rate.

Additionally, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax.

Under the safe harbor, companies would be excluded from Pillar Two requirements provided certain criteria are met.

The enactment of Pillar Two legislation does not have a material effect on the Company’s financial position.

The Company will continue to monitor and reflect the impact of such legislative changes in future periods, as appropriate.

SCHOLASTIC CORPORATION

12 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 29, 2024 and February 28, 2023 were $ 22.8 and $ 22.8 , respectively.

A net unrealized gain of $ 0.2 and $ 0.6 was recognized for the nine months ended February 29, 2024 and February 28, 2023, respectively.

The notional values of the contracts were $ 22.8 as of August 31, 2024 and August 31, 2023.

A net unrealized loss of $ 0.3 and a net unrealized gain of $ 0.4 was recognized for the three months ended August 31, 2024 and August 31, 2023, respectively.

OTHER ACCRUED EXPENSES

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

February 29, 2024 May 31, 2023 February 28, 2023

August 31, 2024 May 31, 2024 August 31, 2023

Accrued payroll, payroll taxes and benefits $ 30.5 $ 32.9 $ 34.5

6 unchanged sentences

SUBSEQUENT EVENTS

On March 11, 2024, the Company signed a definitive agreement to invest in 9 Story Media Group ("9 Story"), a leading creator, producer and distributor of premium animated and live-action children's content.

Under the terms of the definitive agreement with 9 Story, Scholastic will acquire 100 % of the economic interests and a minority of voting rights in 9 Story for approximately $ 186 million, subject to customary purchase price adjustments.

The investment has been approved by both companies' boards of directors and the shareholders of 9 Story.

Subject to receipt of a satisfactory opinion by the Minister of Canadian Heritage and other customary closing conditions, the transaction is expected to close in the first quarter of fiscal 2025.

On March 20, 2024, 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 2024.

The dividend is payable on June 17, 2024 to shareholders of record as of the close of business on April 30, 2024.

The Board also authorized an increase of $ 54.6 for Common share repurchases under the Company's share buy-back program, resulting in a current Board authorization of $ 100.0 , which includes $ 46.0 remaining from the previous Board authorization less share repurchases of $ 0.6 subsequent to February 29, 2024.

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 29, 2024 were $323.7 million, compared to $324.9 million in the prior fiscal year quarter, a decrease of $1.2 million.

The Company reported net loss per diluted share of Class A and Common Stock of $0.91 in the third quarter of fiscal 2024, compared to net loss per diluted share of $0.57 in the prior fiscal year quarter.

During the third fiscal quarter, trade channel revenues benefited from multiple new releases, which expanded the Company's presence on bestseller lists, including Heroes:

A Novel of Pearl Harbor by Alan Gratz and the latest titles in our popular graphic novel series Heartstopper TM by Alice Oseman, Wings of Fire TM by Tui Sutherland, Amulet by Kazi Kibuishi and The Baby-Sitters Club ® by Ann Martin.

Looking ahead, the next title in Dav Pilkey’s Dog Man ® series went on sale on March 19th.

Following the success of the Goosebumps ® TV series which debuted last fall, Disney announced it has greenlit a second season of the hit series for Disney+ ® .

On March 11th, the Company signed a definitive agreement to invest in 9 Story Media Group ("9 Story").

This strategic combination with a leading creator, producer and distributor of premium animated and live-action children’s content will significantly grow the Company's footprint in children’s media as well as opportunities to build and monetize Scholastic’s trusted global brand, best-selling publishing and unique distribution channels, reaching kids where they are and creating more value for our shareholders.

On a consolidated basis, the Company experienced modest revenue declines and higher expected losses in the seasonally small third quarter, in-line with expectations, reflecting the continued impact of the currently complex environment in U.S.

schools on the School Reading Events and Education divisions.

The Company remains committed to executing on a long-term strategy, investing in content and capabilities to drive growth, maintaining a strong and efficient balance sheet, and returning capital to shareholders.

Results of Operations

Revenues for the quarter ended February 29, 2024 decreased by $1.2 million to $323.7 million, compared to $324.9 million in the prior fiscal year quarter.

The Children's Book Publishing and Distribution segment revenues decreased by $10.4 million, primarily driven by lower book clubs channel sales, reflecting a planned reduction in unprofitable offers, as the business implements new customer-centric strategies and is integrated into the school reading events business, as well as lower media revenues compared to the the prior year which benefited from the release of the " Eva the Owlet" TM TV series, based on the Owl Diaries TM book series.

These decreases were offset by increased trade publishing revenues driven by higher sales in both backlist and frontlist titles from book series, including Heartstopper , Wings of Fire , Amulet , and The Baby-Sitters Club .

In the Education Solutions segment, revenues were relatively consistent with the prior period, down $1.5 million, as the third fiscal quarter is a lower volume period due to the seasonality of the school markets.

In local currency, International segment revenues increased by $8.2 million, primarily reflecting higher trade channel sales in the UK and Canada as well as higher book fairs revenues in Canada.

The net foreign exchange impact on the International segment revenues was not significant in the quarter ended February 29, 2024.

Revenues for the nine months ended February 29, 2024 decreased by $60.9 million to $1,114.8 million, compared to $1,175.7 million in the prior fiscal year period.

The Children's Book Publishing and Distribution segment revenues decreased by $57.8 million, primarily driven by lower book clubs channel revenues reflecting a planned reduction in unprofitable offers, coupled with lower trade channel revenues resulting from the softness in the retail book market in the first half of the fiscal year and lower media revenues due to the prior period release of the " Eva the Owlet" TV series, based on the Owl Diaries book series.

In the Education Solutions segment, revenues decreased by $7.7 million primarily due to the timing of revenues from summer learning product offerings as the Company continues to experience a shift in sales from the first fiscal quarter into the fourth fiscal quarter, coupled with sales declines in supplemental instructional materials, largely related to shifting approaches to literacy instruction.

In local currency, the International segment revenues decreased by $2.0 million, primarily due to lower sales in Australia, primarily from the trade channel which continued to be impacted by the softness in the retail markets, partially offset by higher revenues in Canada driven by improved book fair performance and increased revenues in the U.K.

primarily driven by the trade channel.

International segment revenues were also impacted by unfavorable foreign exchange of $0.7 million in the period ended February 29, 2024.

On September 18, 2024, 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 2025.

The dividend is payable on December 16, 2024 to shareholders of record as of the close of business on October 31, 2024.

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