April 1 – 15, 2004 Financial

April 1, 2004
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Financial News

April 1-15, 2004 Edition FINANCIAL NEWS Scholastic Reports

9 Percent Increase

in Third Quarter Revenue

NEW YORK, NY/03/16/04—Scholastic Corporation (NASDAQ: SCHL – News) has announced a 9 percent increase in revenues for the third fiscal quarter ended February 29, 2004. Income increased to $472.0 million from $433.7 million for the previous year.

The Company showed an operating loss of $2.3 million for the quarter, substantially improving its year-ago losses of $3.9 million. Net loss for the quarter was $6.0 million, or $0.15 per diluted share, compared to a net loss of $0.5 million, or $0.01 per diluted share, in the year-ago period.

Richard Robinson, Chairman, President and CEO, said greater than anticipated challenges in Direct-to-Home Continuity and Trade businesses caused lower results in the third quarter, particularly in February, and have caused the company to reevaluate its forecast for this fiscal year. Federal “Do Not Call” legislation resulted in lower direct-to-home response rates and margins for the first full quarter.

In the Trade division, continuing tough domestic retail environment—resulting in lower backlist orders and increased returns— pushed sales down and offset strong revenue and profit growth in other segments, including the School Book Clubs, Education Publishing and International sales.

Third Fiscal Quarter Segment Results

Children’s Book Publishing & Distribution revenue increased 1% over the year-ago quarter to $271.5 million, as growth in Clubs and Fairs was largely offset by declines in Trade and Continuities. Operating profit was $11.4 million, compared to $23.0 million in the year-ago period. Club revenue grew 18% on more orders, helped in part by the July 2003 acquisition of selected assets of Troll Book Clubs. Fair revenue advanced 4% on higher revenue per fair. Trade revenue declined $11 million, due primarily to lower backlist sales and higher than expected February returns. Continuity revenue declined 8%, reflecting the lower response to Direct-to-Home telemarketing, which increased the amortization of related promotional costs.

Educational Publishing income increased 7% to $69.4 million, generating profits of $3.3 million, versus a year-ago loss of $2.9 million. Results benefited from a more than 50% increase in sales of the READ 180® intervention program and a more than 15% increase in sales of classroom libraries and Teaching Resources.

International revenue increased 25% to $87.6 million, with operating profit increasing to $1.3 million, as compared to $0.8 million in the year-ago quarter.

Media, Licensing & Advertising revenue increased 49% to $43.5 million, due to the addition of the Back to Basics Toys® catalog business as well as the Warner Bros. release in February of Clifford’s Really Big Movie(TM) to theaters in five metropolitan areas. Operating loss was reduced to $1.1 million from $1.6 million in the prior year period.

Scholastic is currently scheduled to present at the Smith Barney Small and Mid-Cap Conference in Las Vegas on May 6, 2004. Further details will be posted in the Investor Relations section of www.scholastic.com when available.

About Scholastic

Scholastic is the world’s largest publisher and distributor of children’s books. Scholastic creates quality educational and entertaining materials and products for use in school and at home, including children’s books, magazines, technology-based products, teacher materials, television programming, film, videos and toys. The Company distributes its products and services through a variety of channels, including proprietary school-based book clubs, school-based book fairs, and school-based and direct-to-home continuity programs; retail stores, schools, libraries and television networks; and the Company’s Internet site, www.scholastic.com.

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