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Scholastic Reports Positive Second Quarter Results for Fiscal 2007

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December 21- December 28, 2006 Edition

Scholastic Reports

Positive Second Quarter

Results For Fiscal 2007

NEW YORK, NY/12/19/06—Scholastic Corporation (NASDAQ: SCHL) reported an increase of 6% in revenues for the second quarter of fiscal 2007 to $735.5 million from the $696.7 from a year ago. The period ended November 30, 2006. Net income was $75.1 million, up 12% from $66.9 million, and earnings per diluted share were $1.75 versus $1.58 for the same period last year.

"Scholastic had a positive second quarter, led by revenue growth and improved margins in the children’s book business. School Book Club profits rose significantly as a result of strong sales in core clubs and reduced promotion spending, while higher revenue per fair drove solid results in our Fairs business," commented Richard Robinson, Chief Executive Officer, President and Chairman. "Technology sales continued to grow in the Educational Publishing segment, offset by modestly lower print revenue amid a soft market for supplemental materials. Revenue and profit were also up significantly in the International segment. We are pleased with our execution year-to-date and are on plan to meet our fiscal 2007 goals, including our cost savings targets."

Scholastic continues to expect fiscal 2007 revenue of $2.1 to $2.2 billion, earnings per diluted share of $1.55 to $1.85 and free cash flow of $75 to $85 million.

Second Quarter Results

Children’s Book Publishing and Distribution. Segment revenue in the second quarter rose 4% to $442.7 million from $424.2 million in the prior year period. School Book Club revenue exceeded expectations, declining 1%. Significantly higher sales and orders in core clubs nearly offset the revenue loss associated with the previously announced elimination of the Troll(R) and Trumpet(R) clubs, which represented 15% of revenues in the prior year period. School Book Fair revenue rose 8% from higher revenue per fair and increased fair count. Continuities revenue grew 21% from continued investment in customer acquisition, especially through on-line channels. Trade revenue declined 4%, reflecting higher Harry Potter sales in the prior year period, partially offset by strong sales of other titles in the second quarter, including Mommy? and Owen & Mzee, as well as Paper Airplanes from Klutz. Overall segment operating income rose to $99.6 million from $88.6 million a year ago and margins increased, reflecting improved promotion and fulfillment efficiencies in School Book Clubs and higher sales in Fairs.

Educational Publishing. Segment revenue in the second quarter was $97.2 million compared to $99.2 million in the prior year period. Educational technology revenues rose 7% driven by strong sales of READ 180(R), as well as FASTT Math(R) and Scholastic Reading Inventory(TM). This was more than offset by lower revenue in Paperbacks, Library Publishing and classroom magazines, reflecting lower school spending on supplemental curriculum materials, as well as a large sale in the prior year period. Operating income for the segment was $17.1 million compared to $21.6 million in the prior year period, primarily reflecting lower results in Paperbacks.

International. Segment revenue in the second quarter rose 14% (9% in local currencies) to $139.0 million from $121.4 million in the prior year period, and operating income for the segment was $19.8 million in the quarter, up from $12.8 million, reflecting higher revenue and profit in Canada, Australia and Southeast Asia.

Media, Licensing and Advertising. Segment revenue increased to $56.6 million in the second quarter, compared to $51.9 million in the prior year period, reflecting higher advertising and software sales, partially offset by lower production revenue from fewer planned deliveries of television episodes in the quarter. Operating income for the segment improved to $9.2 million from $7.7 million in the year ago period.

First Half Results

Net income for the first half of fiscal 2007 was $28.2 million or $0.66 per diluted share, compared to $45.7 million or $1.08 per diluted share in the first half of fiscal 2006. Revenues were $1,070.4 million versus $1,195.1 million in the prior year period. The year over year difference in revenue and profitability primarily reflects higher Harry Potter revenues in the prior year, partially offset by lower costs in Clubs in the current year period.

About Scholastic

Scholastic Corporation (NASDAQ: SCHL) is the world’s largest publisher and distributor of children’s books and a leader in educational technology. 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, scholastic.com.