SCHOLASTIC CORP [SCHL] Filings

10-Q 1 schl-20241130.htm 10-Q schl-20241130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended

November 30, 2024

Commission File No.

000-19860

SCHOLASTIC CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware		13-3385513
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
557 Broadway,
New York,	New York	10012
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (212) 343-6100


Title of Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	SCHL	The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:


Title of each class						Number of shares outstanding as of November 30, 2024
Common Stock, $0.01 par value						27,273,046
Class A Stock, $0.01 par value						828,100

SCHOLASTIC CORPORATION

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED November 30, 2024

INDEX



Part I - Financial Information		Page

Item 1.	Financial Statements

	Condensed Consolidated Statements of Operations (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4

	Condensed Consolidated Balance Sheets (Unaudited)	5

	Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	35

Part II - Other Information

Item 1.	Business	36

Item 1a.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 5.	Other Information	39

Item 6.	Exhibits	37

Signatures		42

PART I - FINANCIAL INFORMATION


Item 1. Financial Statements


SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED (Dollar amounts in millions, except per share data)


	Three months ended				Six months ended
	November 30,				November 30,
	2024		2023		2024		2023
Revenues	$	544.6	$	562.6	$	781.8	$	791.1
Operating costs and expenses:
Cost of goods sold		228.6		234.1		356.9		364.1
Selling, general and administrative expenses		224.9		213.1		407.0		397.3
Depreciation and amortization		16.3		14.1		31.6		27.5

Asset impairments and write downs		0.1		—		0.1		—
Total operating costs and expenses		469.9		461.3		795.6		788.9
Operating income (loss)		74.7		101.3		(13.8)		2.2
Interest income (expense), net		(4.4)		0.4		(7.4)		1.8
Other components of net periodic benefit (cost)		(0.3)		(0.2)		(0.6)		(0.5)

Earnings (loss) before income taxes		70.0		101.5		(21.8)		3.5
Provision (benefit) for income taxes		21.2		24.6		(8.1)		0.8
Net income (loss)	$	48.8	$	76.9	$	(13.7)	$	2.7


Basic and diluted earnings (loss) per share of Class A and Common Stock
Basic	$	1.73	$	2.51	$	(0.48)	$	0.09
Diluted	$	1.71	$	2.45	$	(0.48)	$	0.09

See accompanying notes


SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED (Dollar amounts in millions)


	Three months ended				Six months ended
	November 30,				November 30,
	2024		2023		2024		2023
Net income (loss)	$	48.8	$	76.9	$	(13.7)	$	2.7
Other comprehensive income (loss), net:
Foreign currency translation adjustments		(11.9)		0.2		(3.7)		2.0
Pension and postretirement adjustments (net of tax)		0.2		0.1		0.4		0.3
Total other comprehensive income (loss), net	$	(11.7)	$	0.3	$	(3.3)	$	2.3
Comprehensive income (loss)	$	37.1	$	77.2	$	(17.0)	$	5.0

See accompanying notes


SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED (Dollar amounts in millions, except per share data)


	November 30, 2024		May 31, 2024		November 30, 2023
	(unaudited)		(audited)		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	139.6	$	113.7	$	149.5
Accounts receivable, net		293.0		235.0		311.8
Inventories, net		282.0		264.2		302.3
Income tax receivable		26.0		15.2		11.6
Prepaid expenses and other current assets		70.9		48.8		65.4

Total current assets		811.5		676.9		840.6
Noncurrent Assets:
Property, plant and equipment, net		522.7		511.9		523.6
Prepublication costs, net		48.3		49.5		55.2
Investment in film and television programs, net		37.9		—		—
Operating lease right-of-use assets, net		100.4		99.1		97.3
Royalty advances, net		71.4		57.8		55.4
Goodwill		202.2		132.8		132.8
Other intangible assets, net		88.6		10.3		14.5
Noncurrent deferred income taxes		22.9		23.1		20.9
Other assets and deferred charges		130.9		109.8		93.2
Total noncurrent assets		1,225.3		994.3		992.9
Total assets	$	2,036.8	$	1,671.2	$	1,833.5

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Lines of credit and current portion of long-term debt	$	6.2	$	6.0	$	6.3
Film related obligations		8.3		—		—
Accounts payable		157.2		138.5		159.5
Accrued royalties		67.3		48.5		57.5
Deferred revenue		225.0		161.1		225.0
Other accrued expenses		163.2		156.3		162.5
Accrued income taxes		2.6		1.9		2.5
Operating lease liabilities		26.0		22.4		23.4
Total current liabilities		655.8		534.7		636.7
Noncurrent Liabilities:
Long-term debt		250.0		—		—
Operating lease liabilities		85.6		89.2		84.1
Film related obligations		13.3		—		—
Other noncurrent liabilities		46.1		29.2		33.6
Total noncurrent liabilities		395.0		118.4		117.7
Commitments and Contingencies (see Note 5)		—		—		—
Stockholders’ Equity:
Preferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, none	$	—	$	—	$	—
Class A Stock, $0.01 par value: Authorized, 3.2, 3.2, and 4.0 shares, respectively; Issued and Outstanding, 0.8, 0.8, and 1.7 shares, respectively		0.0		0.0		0.0
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 27.3, 27.4, and 28.2 shares, respectively		0.4		0.4		0.4
Additional paid-in capital		603.5		604.6		630.8
Accumulated other comprehensive income (loss)		(55.8)		(52.5)		(53.5)
Retained earnings		998.7		1,023.7		1,026.0
Treasury stock, at cost: 15.6, 15.5 and 14.7 shares, respectively		(560.8)		(558.1)		(524.6)



Total stockholders’ equity		986.0		1,018.1		1,079.1
Total liabilities and stockholders’ equity	$	2,036.8	$	1,671.2	$	1,833.5

See accompanying notes


SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED (Dollar amounts in millions, except per share data)


	Class A Stock			Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Stock At Cost			Total Stockholders' Equity of Scholastic Corporation			Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at June 1, 2023	1.7	$	0.0	30.0	$	0.4		$	632.2		$	(55.8)	$	1,035.6		$	(449.5)		$	1,162.9	$	1.6	$	1,164.5
Net Income (loss)	—	—		—	—			—			—		(74.2)			—			(74.2)		—		(74.2)
Foreign currency translation adjustment	—	—		—	—			—			1.8		—			—			1.8		—		1.8
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	—	—		—	—			3.0			—		—			—			3.0		—		3.0
Purchases of treasury stock at cost	—	—		(0.8)	—			—			—		—			(36.2)			(36.2)		—		(36.2)
Treasury stock issued pursuant to equity-based plans	—	—		0.1	—			(4.3)			—		—			5.9			1.6		—		1.6
Dividends ($0.20 per share)	—	—		—	—			—			—		(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)	—	—		—	—			—			—		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



	Class A Stock			Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Stock At Cost			Total Stockholders' Equity of Scholastic Corporation			Noncontrolling Interest		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at June 1, 2024	0.8	$	0.0	27.4	$	0.4		$	604.6		$	(52.5)	$	1,023.7		$	(558.1)		$	1,018.1	$	—	$	1,018.1
Net Income (loss)	—	—		—	—			—			—		(62.5)			—			(62.5)		—		(62.5)
Foreign currency translation adjustment	—	—		—	—			—			8.2		—			—			8.2		—		8.2
Pension and post-retirement adjustments (net of tax of $0.1)	—	—		—	—			—			0.2		—			—			0.2		—		0.2
Stock-based compensation	—	—		—	—			2.2			—		—			—			2.2		—		2.2
Proceeds pursuant to stock-based compensation plans	—	—		—	—			0.1			—		—			—			0.1		—		0.1
Purchases of treasury stock at cost	—	—		(0.2)	—			—			—		—			(5.0)			(5.0)		—		(5.0)
Treasury stock issued pursuant to equity-based plans	—	—		0.1	—			(0.6)			—		—			2.2			1.6		—		1.6
Dividends ($0.20 per share)	—	—		—	—			—			—		(5.6)			—			(5.6)		—		(5.6)

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)	—	—		—	—			—			—		48.8			—			48.8		—		48.8
Foreign currency translation adjustment	—	—		—	—			—			(11.9)		—			—			(11.9)		—		(11.9)
Pension and post-retirement adjustments (net of tax of $0.0)	—	—		—	—			—			0.2		—			—			0.2		—		0.2
Stock-based compensation	—	—		—	—			2.1			—		—			—			2.1		—		2.1
Proceeds pursuant to stock-based compensation plans	—	—		—	—			(0.5)			—		—			—			(0.5)		—		(0.5)
Purchases of treasury stock at cost	—	—		(0.1)	—			—			—		—			(5.0)			(5.0)		—		(5.0)
Treasury stock issued pursuant to equity-based plans	—	—		0.1	—			(4.4)			—		—			5.1			0.7		—		0.7
Dividends ($0.20 per share)	—	—		—	—			—			—		(5.7)			—			(5.7)		—		(5.7)

Balance at November 30, 2024	0.8	$	0.0	27.3	$	0.4		$	603.5		$	(55.8)	$	998.7		$	(560.8)		$	986.0	$	—	$	986.0

See accompanying notes


SCHOLASTIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED (Dollar amounts in millions)


	Six months ended
	November 30,		November 30,
	2024		2023
Cash flows - operating activities:
Net income (loss)	$	(13.7)	$	2.7
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities:
Provision for losses on accounts receivable		3.0		3.1
Provision for losses on inventory		9.6		11.8
Provision for losses on royalty advances		1.6		1.5
Amortization of prepublication costs		11.0		13.3
Amortization of production costs		6.4		—
Depreciation and amortization		37.9		32.1
Amortization of pension and postretirement plans		0.3		0.2
Deferred income taxes		0.2		0.3
Stock-based compensation		4.3		6.4
Income from equity-method investments		(0.8)		(0.3)


Changes in assets and liabilities, net of amounts acquired:
Accounts receivable		(46.3)		(36.3)
Inventories		(28.3)		21.2
Prepaid expenses and other current assets		(15.1)		(18.3)
Investment in film and television programs		(5.8)		—
Income tax receivable		(10.3)		(2.7)
Royalty advances		(15.4)		0.0
Accounts payable		16.6		(11.3)
Accrued income taxes		0.7		(10.8)
Accrued royalties		12.4		4.6
Deferred revenue		53.4		55.8
Other accrued expenses		(4.2)		(9.3)
Other, net		11.8		7.6
Net cash provided by (used in) operating activities		29.3		71.6

Cash flows - investing activities:
Prepublication expenditures		(10.1)		(11.7)
Additions to property, plant and equipment		(30.9)		(29.1)


Acquisitions, net of cash acquired		(176.2)		(6.2)
Purchase of noncontrolling interest		—		(2.1)
Net cash provided by (used in) investing activities		(217.2)		(49.1)

Cash flows - financing activities:
Borrowings under lines of credit, credit agreement and revolving loan		251.5		27.1
Repayments of lines of credit, credit agreement and revolving loan		(1.3)		(26.8)
Borrowings under film related obligations		8.7		—
Repayments of film related obligations		(23.3)		—
Repayment of capital lease obligations		(0.9)		(1.2)
Reacquisition of common stock		(10.0)		(90.2)
Proceeds pursuant to stock-based compensation plans		1.1		6.1
Payment of dividends		(11.3)		(12.8)

Net cash provided by (used in) financing activities		214.5		(97.8)

Effect of exchange rate changes on cash and cash equivalents		(0.7)		0.3

Net increase (decrease) in cash and cash equivalents		25.9		(75.0)
Cash and cash equivalents at beginning of period		113.7		224.5
Cash and cash equivalents at end of period	$	139.6	$	149.5

See accompanying notes


SCHOLASTIC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (Dollar amounts in millions, except per share data)

1. BASIS OF PRESENTATION

Principles of consolidation

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.

The Company’s fiscal year is not a calendar year. Accordingly, references in this document to fiscal 2025 relate to the twelve-month period ending May 31, 2025.

Noncontrolling Interest

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

The accompanying Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024. The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the Financial Statements for the periods presented.

Seasonality

The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions businesses operate on a school-year basis; therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Education channel revenues are generally higher in the fourth quarter. 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 the start dates of distribution license agreements.

Use of estimates

The preparation of these Financial Statements involves the use of estimates and assumptions by management, which affects the amounts reported in the Financial Statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions believed to be reasonable under the circumstances, all of which are necessary, in order to form a basis for determining the carrying values of certain assets and liabilities. Actual results may differ from those estimates and assumptions. On an on-going basis, the Company evaluates the adequacy of its reserves and the estimates used in these calculations, including, but not limited to:

•Accounts receivable allowance for credit losses

•Pension and postretirement benefit plans

•Uncertain tax positions

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


SCHOLASTIC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (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

•Expected economic useful life of film and television program assets

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

•Assets and liabilities acquired in business combinations

•Variable consideration related to anticipated returns

•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. ("SEI"). 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

In November 2024, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses." This ASU improves financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU is effective for the Company's fiscal year 2028, and interim periods starting in fiscal year 2029. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)." The amendments in this update enhance the transparency and decision usefulness of income tax disclosures to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this ASU require more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for the Company's fiscal year 2026. Early adoption is permitted. The amendments are to be applied prospectively, but may be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.

In November 2023, the FASB issued 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 is effective for the Company's fiscal year 2025, and interim periods starting in fiscal year 2026. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements. 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, 2024 for more information on current applicable authoritative guidance and its impact on the Company's financial statements.


SCHOLASTIC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (Dollar amounts in millions, except per share data)

2. REVENUES

Disaggregated Revenue Data

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


	Three months ended				Six months ended
	November 30,				November 30,
	2024		2023		2024		2023
Book Clubs - U.S.	$	33.2	$	32.4	$	35.9	$	35.0
Book Fairs - U.S.		231.0		242.1		259.8		269.4
Trade - U.S. (1)		91.0		100.6		149.2		162.7
Trade - International (2)		11.8		17.3		27.5		27.7
Total Children's Book Publishing and Distribution	$	367.0	$	392.4	$	472.4	$	494.8

Education Solutions - U.S.	$	71.2	$	81.0	$	126.9	$	147.0
Total Education Solutions	$	71.2	$	81.0	$	126.9	$	147.0

Entertainment - U.S.	$	1.3	$	0.4	$	2.9	$	0.8
Entertainment - International (3)		15.5		—		30.5		—
Total Entertainment (1)	$	16.8	$	0.4	$	33.4	$	0.8

International - Major Markets (4)	$	75.6	$	75.4	$	123.7	$	123.2
International - Other Markets (5)		11.1		11.1		19.8		20.5
Total International	$	86.7	$	86.5	$	143.5	$	143.7

Overhead (6)	$	2.9	$	2.3	$	5.6	$	4.8
Total Overhead	$	2.9	$	2.3	$	5.6	$	4.8

Total	$	544.6	$	562.6	$	781.8	$	791.1

(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 and six months ended November 30, 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.

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

Estimated Returns

A liability for expected returns of $34.8, $33.1, and $37.7 is recorded within Other accrued expenses as of November 30, 2024, May 31, 2024, and November 30, 2023, respectively. In addition, a return asset of $4.0, $4.2, and $5.4 is recorded within Prepaid expenses and other current assets as of November 30, 2024, May 31, 2024, and November 30, 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:


	November 30, 2024		May 31, 2024		November 30, 2023
Book fairs incentive credits	$	120.8	$	114.2	$	114.1
Magazines+ subscriptions		48.3		4.6		53.3
U.S. digital subscriptions		17.9		15.6		24.6
U.S. education-related (1)		9.5		10.1		10.6
Media-related		7.7		0.0		0.2
Stored value cards		21.0		16.7		24.1
Other (2)		5.7		6.4		7.6
Total contract liabilities	$	230.9	$	167.6	$	234.5

(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. Contract liabilities of $225.0, $161.1 and $225.0 as of November 30, 2024, May 31, 2024 and November 30, 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 $5.9, $6.5 and $9.5 of contract liabilities as of November 30, 2024, May 31, 2024 and November 30, 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 $41.9 and $71.1 for the three and six months ended November 30, 2024, respectively, and $48.4 and $80.7 for the three and six months ended November 30, 2023, respectively.

Allowance for Credit Losses

The Company recognizes an allowance for credit losses on customer receivables that are expected to be incurred over the lifetime of the receivable. Reserves for estimated credit losses are established at the time of sale and are based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability, including specific reserves on a customer-by-customer basis, creditworthiness of the Company’s customers and prior collection experience. The Company reviews new information as it becomes available and makes adjustments to the reserves accordingly. At the time the Company determines that a receivable balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is then written off.

The following table presents the change in the allowance for credit losses, which is included in Accounts Receivable, net on the Condensed Consolidated Balance Sheets:


	Allowance for Credit Losses
Balance as of June 1, 2024	$	14.9
Provision (benefit)		0.9
Write-offs and other		(0.4)
Balance as of August 31, 2024	$	15.4
Provision (benefit)		2.1
Write-offs and other		(2.6)
Balance as of November 30, 2024	$	14.9


SCHOLASTIC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (Dollar amounts in millions, except per share data)

3. SEGMENT INFORMATION

The Company categorizes its businesses into four reportable segments: Children’s Book Publishing and Distribution, Education Solutions, Entertainment 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. This segment is comprised of two 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 pre-kindergarten to 12 in the United States. 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. 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				Six months ended
	November 30,				November 30,
	2024		2023		2024		2023
Revenues
Children's Book Publishing and Distribution (1)	$	367.0	$	392.4	$	472.4	$	494.8
Education Solutions		71.2		81.0		126.9		147.0
Entertainment (1)		16.8		0.4		33.4		0.8
International		86.7		86.5		143.5		143.7
Overhead (2)		2.9		2.3		5.6		4.8
Total	$	544.6	$	562.6	$	781.8	$	791.1

Operating income (loss)
Children's Book Publishing and Distribution (1)	$	102.1	$	111.6	$	65.5	$	70.6
Education Solutions		(0.5)		5.8		(17.5)		(12.9)
Entertainment (1)		(4.7)		(0.8)		(5.2)		(1.3)
International		5.7		8.0		(2.6)		(0.2)
Overhead (2)		(27.9)		(23.3)		(54.0)		(54.0)
Total	$	74.7	$	101.3	$	(13.8)	$	2.2

(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.

4. DEBT

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



	November 30, 2024		May 31, 2024		November 30, 2023
US Revolving Credit Agreement	$	250.0	$	—	$	—
Unsecured lines of credit		6.2		6.0		6.3
Total debt	$	256.2	$	6.0	$	6.3
Less lines of credit, short-term debt and current portion of long-term debt		(6.2)		(6.0)		(6.3)
Total long-term debt	$	250.0	$	—	$	—

The following table sets forth the maturities of the carrying values of the Company's debt obligations, excluding film related obligations, as of November 30, 2024 for the twelve month periods ended November 30:


2025	$	6.2
2026	—
2027	—
2028	—
2029	250.0
Thereafter	—
Total Debt	$	256.2

US Revolving Credit Agreement

On November 26, 2024, Scholastic Corporation and its principal operating subsidiary, Scholastic Inc., entered into a Third Amendment to Amended and Restated Credit Agreement (the “Amendment”) 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 (as amended by the Third Amendment, the “Credit Agreement”). The arrangement was accounted for as a debt modification. The revised terms of the amended Credit Agreement include the following:

•an increase in borrowing limits to $400.0 from $300.0, as amended on October 27, 2021;

•an increase in the interest pricing margins for SOFR loans to a range of 1.625% to 1.875% from a range of 1.35% to 1.75% and for Base Rate loans to a range of 0.625% to 0.875% from a range of 0.35% to 0.75%;

•the elimination of the credit spread adjustment of 0.10% applicable to Term SOFR loans; and

•the extension of the maturity date to November 26, 2029.

The Credit Agreement provides for a $400.0 unsecured revolving credit facility and allows the Company to borrow, repay or prepay and reborrow at any time prior to the November 26, 2029 maturity date. The Credit Agreement also provides an unlimited basket for permitted payments of dividends and other distributions in respect of capital stock so long as the Corporation’s pro forma Consolidated Net Leverage Ratio, as defined, is not in excess of 2.75:1.

Under the Credit Agreement, interest on (i) Base Rate Advances (as defined in the Credit Agreement) is due and payable in arrears quarterly on the last day of each February, May, August and November, and (ii) Term SOFR Advances (as defined in the Credit Agreement) is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrowers at the time each advance is made). The interest pricing under the Credit Agreement is dependent upon the Company’s election of a rate that is either:

•a Base Rate Advance 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 0.625% to 0.875%, as determined by the Company’s prevailing Consolidated Net Leverage Ratio (as defined in the Credit Agreement);

- or -

•a Term SOFR Advance equal to the Term SOFR rate plus an applicable margin ranging from 1.625% to 1.875%, as determined by the Company’s prevailing Consolidated Net Leverage Ratio.

As of November 30, 2024, the applicable margin on Base Rate Advances was 0.625% and the applicable margin on SOFR Advances was 1.625%.

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% to 0.30% per annum based upon the Corporation’s then prevailing Consolidated Net Leverage Ratio. As of November 30, 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. In addition, a portion of the revolving credit facility, up to a maximum of $15.0, is available for swingline loans. 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 November 30, 2024, the Company had outstanding borrowings of $250.0 under the Credit Agreement at a weighted average interest rate of 6.8%. While this obligation is not due until the November 26, 2029 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 November 30, 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 November 30, 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 November 30, 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 November 30, 2024, May 31, 2024 and November 30, 2023. As of November 30, 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 November 30, 2024, the Company had various local currency international credit lines totaling $16.9 underwritten by banks primarily in the United States and the United Kingdom. Outstanding borrowings under these facilities were $6.2 at November 30, 2024 at a weighted average interest rate of 4.2%, compared to outstanding borrowings of $6.0 at May 31, 2024 at a weighted average interest rate of 4.5%, and $6.3 at November 30, 2023 at a weighted average interest rate of 3.9%. As of November 30, 2024, the amounts available under these facilities totaled $10.7. These credit lines are typically available for overdraft borrowings or loans up to 364 days and may be renewed, if requested by the Company, at the sole option of the lender.

Film Related Obligations

The Company's entertainment business enters into credit facilities with third-party banks 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 December 31, 2024 and June 30, 2028. 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 November 30, 2024, outstanding borrowings under these facilities were $21.6 at a weighted average interest rate of 6.9%, of which $8.3 were classified as current obligations.

5. COMMITMENTS AND CONTINGENCIES