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April 1-15, 2005 Edition
Third Quarter Profits
After Last Year’s LossNEW YORK, NY/03/17/05Scholastic Corporation (NASDAQ: SCHL – News) has announced its fiscal 2005 third quarter results for the quarter ending February 28, 2005.
The company generated an operating profit of $5.8 million, compared to a loss of $2.3 million in the year-ago period. Revenues were $480.8 million, up 2% from $472.0 million a year ago. Net loss in the third quarter improved to $0.7 million or $0.02 per diluted share, compared to a net loss of $6.0 million or $0.15 per diluted share in the prior year period. The third quarter is typically Scholastic’s second smallest revenue period.
“With continued focus on margins, we achieved higher profitability in all operating segments last quarter,” commented Richard Robinson, Chairman, CEO and President of Scholastic. “Improved results in Trade drove growth in the Children’s Book Publishing and Distribution segment, while profits also rose in International and in Educational Publishing.”
Mr. Robinson added, “With Internet orders up nearly 20% this fiscal year and now representing more than 10% of Scholastic’s revenues, I’m also very excited by the recent appointment of Seth Radwell as president of e-Scholastic. Seth’s experience building new print and electronic businesses, most recently at Bookspan and Doubleday Interactive, will help us accelerate this momentum.”
For fiscal 2005, the Company continues to expect earnings of between $1.50 and $1.70 per diluted share, excluding severance charges, on revenues of approximately $2.1 billion, and is on plan to generate free cash flow of $40 to $50 million.
Third Quarter Results
Children’s Book Publishing and Distribution. Operating profits in the segment rose 56% from the prior year period to $16.5 million in the third quarter of fiscal 2005, driven by lower returns and higher gross sales in Trade Publishing. Segment revenues grew slightly to $272.3 million, reflecting the improvement in Trade as well as in School Book Fairs, where better product availability and merchandising contributed to higher revenues per fair. This was partly offset by lower Continuity revenues, which declined as a result of the Company’s strategy of focusing on more productive customers, and by a 1% decline in School Book Club revenues.
Educational Publishing. For the quarter, segment operating profits rose 25% to $4.0 million and revenues increased 14% to $79.3 million, relative to the prior year period. Higher revenues and profits reflected strong sales of educational technology, including Read 180®, and higher circulation of classroom magazines.
International. Operating profits in the segment were $3.4 million for the quarter, a $2.6 million increase from the prior year period, primarily from improved results in the Company’s Australian operations. Revenues rose $4.4 million to $92.0 million, of which $3.8 million was due to foreign exchange benefits.
Media, Licensing and Advertising. Revenues in the segment were $37.2 million, a $6.3 million decline from the prior year, principally due to lower production revenues (and corresponding expenses) in Scholastic Entertainment, which a year ago released CLIFFORD’S REALLY BIG MOVIE(TM). Operating profits in the segment rose modestly to $1.3 million, primarily from improved results in software sales. Building on its fall 2004 launch, the Company’s new media property Maya & Miguel(TM) now ranks number one among new shows on the PBS KIDS GO! programming block and number two among all PBS programming for children ages six to 11.
Other Financial Results. Operating profits in the quarter improved to 1.2% of revenues versus an operating loss of 0.5% in the year ago period, and free cash flow in the quarter was $37.3 million compared to $19.9 million. Interest expense declined slightly to $6.9 million, with net debt at the end of the quarter of $488.2 million, or $65.4 million lower than a year ago.
Results for Nine Months Ending February 28, 2005
Net income for the first nine months of fiscal 2005 was $21.7 million, or $0.54 per diluted share, compared to $35.9 million, or $0.90 per diluted share, in the prior year period. Revenues this fiscal year were $1,487.8 million versus $1,646.4 million a year ago. Free cash use in the period was $4.8 million, compared to free cash flow of $22.0 million in the prior year. These year-over-year differences primarily reflect revenue declines in Harry Potter and in Continuities, partially offset by growth in Educational Publishing and non-Harry Potter Trade Publishing.
Scholastic Corporation (NASDAQ: SCHL – News) 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, www.scholastic.com.
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