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	February ~~28, 2019~~29, 2020	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,
~~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.

Yesx☒Noo☐

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).

Yesx☒Noo☐

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 filerx	☒	Accelerated filero	☐	Non-accelerated filero	☐	Smaller reporting companyo	☐	Emerging growth companyo	☐

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. o☐

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

Yeso☐Nox☒

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

date:



Title of each class		Number of shares outstanding
~~of each class~~		as of February ~~28, 2019~~
		29, 2020
Common Stock, $.01 par value		~~33,556,817~~32,614,515
Class A Stock, $.01 par value		1,656,200

SCHOLASTIC CORPORATION

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED FEBRUARY ~~28, 2019~~29, 2020

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)	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	38

Part II - Other Information

Item 1A.	Risk Factors	39

Item 4.2.	~~Controls~~Unregistered Sales of Equity Securities and ~~Procedures~~Use of Proceeds	40

~~Part II – Other Information~~

Item 2.6.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Exhibits	41

~~Item 6.~~	~~Exhibits~~	42

Signatures		4443

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						Nine months ended						Three months ended		Nine months ended
	February 28,						February 28,						February 29,	February 28,	February 29,	February 28,
	2019			2018			2019			2018			2020	2019	2020	2019
Revenues	$	360.1		$	344.7		$	1,183.2		$	1,132.2		$373.3	$360.1	$1,203.1	$1,183.2
Operating costs and expenses:
Cost of goods sold	176.9			166.4			564.6			535.6			183.0	176.9	584.4	564.6
Selling, general and administrative expenses	190.9			186.7			584.3			573.9			194.9	190.9	574.8	584.3
Depreciation and amortization	13.7			11.0			41.3			30.0			15.4	13.7	46.2	41.3
Asset impairments	—			4.3			—			11.0
Asset impairments and write downs													40.0	—	40.0	—
Total operating costs and expenses	381.5			368.4			1,190.2			1,150.5			433.3	381.5	1,245.4	1,190.2
Operating income (loss)	(21.4		)	(23.7		)	(7.0		)	(18.3		)	(60.0)	(21.4)	(42.3)	(7.0)
Interest income (expense), net	1.0			0.2			2.3			0.5			0.3	1.0	1.0	2.3
Other components of net periodic benefit (cost)	(0.4		)	(39.8		)	(1.1		)	(55.4		)	(0.4)	(0.4)	(1.0)	(1.1)
Earnings (loss) before income taxes	(20.8		)	(63.3		)	(5.8		)	(73.2		)	(60.1)	(20.8)	(42.3)	(5.8)
Provision (benefit) for income taxes	(8.2		)	(14.1		)	(3.5		)	(17.4		)	(16.8)	(8.2)	(11.6)	(3.5)
Net income (loss)	$	(12.6	)	$	(49.2	)	$	(2.3	)	$	(55.8	)	(43.3)	(12.6)	(30.7)	(2.3)
Less: Net income attributable to noncontrolling interest													0.0	—	0.1	—
Net income (loss) attributable to Scholastic Corporation													$(43.3)	$(12.6)	$(30.8)	$(2.3)
Basic and diluted earnings (loss) per Share of Class A and Common Stock
Basic	$	(0.36	)	$	(1.41	)	$	(0.07	)	$	(1.59	)	$(1.25)	$(0.36)	$(0.89)	$(0.07)
Diluted	$	(0.36	)	$	(1.41	)	$	(0.07	)	$	(1.59	)	$(1.25)	$(0.36)	$(0.89)	$(0.07)

See accompanying notes

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED

(Dollar amounts in millions)


	Three months ended						Nine months ended						Three months ended		Nine months ended
	February 28,						February 28,						February 29,	February 28,	February 29,	February 28,
	2019			2018			2019			2018			2020	2019	2020	2019
Net income (loss)	$	(12.6	)	$	(49.2	)	$	(2.3	)	$	(55.8	)	$(43.3)	$(12.6)	$(30.7)	$(2.3)
Other comprehensive income (loss), net:
Foreign currency translation adjustments	1.7			2.2			(2.0		)	6.0			(2.3)	1.7	(0.4)	(2.0)
Pension and postretirement adjustments (net of tax)	0.2			22.2			3.1			31.7			0.3	0.2	0.7	3.1
Total other comprehensive income (loss), net	$	1.9		$	24.4		$	1.1		$	37.7		$(2.0)	$1.9	$0.3	$1.1
Comprehensive income (loss)	$	(10.7	)	$	(24.8	)	$	(1.2	)	$	(18.1	)	$(45.3)	$(10.7)	$(30.4)	$(1.2)
Less: Net income attributable to noncontrolling interest													0.0	—	0.1	—
Comprehensive income (loss) attributable to Scholastic Corporation													$(45.3)	$(10.7)	$(30.5)	$(1.2)

See accompanying notes

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollar amounts in millions, except per share data)



	February 29, 2020 (unaudited)	May 31, 2019 (audited)	February 28, 2019 (unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$263.8	$334.1	$338.1
Accounts receivable, net	281.2	250.1	317.3
Inventories, net	307.7	323.7	356.8
Prepaid expenses and other current assets	88.5	52.7	84.8
Total current assets	941.2	960.6	1,097.0
Noncurrent Assets:
Property, plant and equipment, net	579.1	577.7	574.9
Prepublication costs, net	70.8	70.2	65.3
Operating lease right-of-use assets, net	71.7	—	—
Royalty advances, net	51.1	47.5	52.3
Goodwill	125.3	125.2	119.1
Noncurrent deferred income taxes	37.1	37.0	43.6
Other assets and deferred charges	72.1	60.3	70.9
Total noncurrent assets	1,007.2	917.9	926.1
Total assets	$1,948.4	$1,878.5	$2,023.1

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Lines of credit and current portion of long-term debt	$9.7	$7.3	$11.0
Accounts payable	187.9	195.3	215.3
Accrued royalties	77.3	41.9	76.8
Deferred revenue	158.1	130.8	154.7
Other accrued expenses	170.9	164.8	236.2
Accrued income taxes	3.7	1.4	2.1
Operating lease liabilities	22.7	—	—
Total current liabilities	630.3	541.5	696.1
Noncurrent Liabilities:
Long-term debt	6.4	—	—
Operating lease liabilities	52.0	—	—
Other noncurrent liabilities	60.4	64.2	57.9
Total noncurrent liabilities	118.8	64.2	57.9
Commitments and Contingencies (see Note 6)	—	—	—
Stockholders’ Equity:
Preferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, none	—	—	—
Class A Stock, $0.01 par value: Authorized, 4.0 shares; Issued and Outstanding, 1.7 shares	0.0	0.0	0.0
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 32.6, 33.4 and 33.6 shares, respectively	0.4	0.4	0.4
Additional paid-in capital	621.9	620.8	619.4
Accumulated other comprehensive income (loss)	(59.4)	(59.7)	(54.6)
Retained earnings	966.2	1,012.6	1,000.5
Treasury stock, at cost: 10.3, 9.5 and 9.3 shares, respectively	(331.2)	(302.6)	(296.6)
Total stockholders’ equity of Scholastic Corporation	1,197.9	1,271.5	1,269.1
Noncontrolling interest	1.4	1.3	—
Total stockholders’ equity	1,199.3	1,272.8	1,269.1
Total liabilities and stockholders’ equity	$1,948.4	$1,878.5	$2,023.1

February 28,
2019 May 31,
2018 February 28,
2018
(Unaudited) (Unaudited)
ASSETS

Current Assets:

Cash and cash equivalents $ 338.1
$ 391.9
$ 362.6
Accounts receivable, net 317.3
204.9
186.0
Inventories, net 356.8
294.9
356.9
Prepaid expenses and other current assets 84.8
66.6
100.1
Total current assets 1,097.0
958.3
1,005.6
Noncurrent Assets:
Property, plant and equipment, net 574.9
555.6
530.6
Prepublication costs, net 65.3
55.3
48.8
Royalty advances, net 52.3
44.8
50.3
Goodwill 119.1
119.2
119.1
Noncurrent deferred income taxes 43.6
25.2
17.8
Other assets and deferred charges 70.9
67.0
61.5
Total noncurrent assets 926.1
867.1
828.1
Total assets $ 2,023.1
$ 1,825.4
$ 1,833.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Lines of credit and current portion of long-term debt $ 11.0
$ 7.9
$ 7.7
Accounts payable 215.3
198.9
208.4
Accrued royalties 76.8
34.6
63.2
Deferred revenue 154.7
24.7
56.5
Other accrued expenses 236.2
177.9
162.6
Accrued income taxes 2.1
1.8
1.2
Total current liabilities 696.1
445.8
499.6
Noncurrent Liabilities:

Long-term debt —
—
—
Other noncurrent liabilities 57.9
58.8
66.5
Total noncurrent liabilities 57.9
58.8
66.5

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, 4.0 shares; Issued and Outstanding, 1.7 shares 0.0
0.0
0.0
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 33.6, 33.3 and 33.1 shares, respectively 0.4
0.4
0.4
Additional paid-in capital 619.4
614.4
614.6
Accumulated other comprehensive income (loss) (54.6 ) (55.7 ) (56.5 )
Retained earnings 1,000.5
1,065.2
1,019.6
Treasury stock, at cost: 9.3, 9.6 and 9.8 shares, respectively (296.6 ) (303.5 ) (310.5 )
Total stockholders’ equity 1,269.1
1,320.8
1,267.6
Total liabilities and stockholders’ equity $ 2,023.1
$ 1,825.4
$ 1,833.7

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			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						Accumulated Other Comprehensive Income (Loss)			Shares				Treasury Stock At Cost			Amount				Shares		Amount				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
Balance at June 1, 2018	1.7	$	0.0	33.3		$	0.4	Additional Paid-in Capital			$	614.4			$	Retained Earnings	(55.7	)	$	1,065.2			Total Stockholders' Equity	$	(303.5	)	$	1,320.8	1.7		$0.0	33.3			$0.4			$614.4			$(55.7)			$1,065.2			$(303.5)		$1,320.8			$0.0	$1,320.8
Net Income (loss)	—	—		—		—		—				—				(61.3		)	—				(61.3		)	—		—	—		—		—			—			(61.3	)		—			(61.3	)		—		(61.3	)
Adoption of ASC 606 (net of tax $16.0)																(46.5		)					(46.5		)
Adoption of ASC 606 ( net of tax of $16.0)																										—		—	—		—		—			—			(46.5	)		—			(46.5	)		—		(46.5	)
Foreign currency translation adjustment	—	—		—		—		—				(3.1		)		—			—				(3.1		)	—		—	—		—		—			(3.1	)		—			—			(3.1	)		—		(3.1	)
Pension and post-retirement adjustments (net of tax of $0.0)	—	—		—		—		—				0.2				—			—				0.2			—		—	—		—		—			0.2			—			—			0.2			—		0.2
Stock-based compensation	—	—		—		—		1.5				—				—			—				1.5			—		—	—		—		1.5			—			—			—			1.5			—		1.5
Proceeds pursuant to stock-based compensation plans	—	—		—		—		2.8				—				—			—				2.8			—		—	—		—		2.8			—			—			—			2.8			—		2.8
Purchases of treasury stock at cost	—	—		—		—		—				—				—			—				—
Treasury stock issued pursuant to equity-based plans	—	—		0.1		—		(3.2		)		—				—			3.5				0.3			—		—	0.1		—		(3.2	)		—			—			3.5			0.3			—		0.3
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.3		)	—				(5.3		)	—		—	—		—		—			—			(5.3	)		—			(5.3	)		—		(5.3	)
Balance at August 31, 2018	1.7	$	0.0	33.4		$	0.4	$	615.5			$	(58.6	)		$	952.1		$	(300.0	)		$	1,209.4		1.7		$0.0	33.4		$0.4		$615.5			$(58.6)			$952.1			$(300.0)			$1,209.4			$0.0		$1,209.4
Net Income (loss)	—	—		—		—		—				—				71.6			—				71.6			—		—	—		—		—			—			71.6			—			71.6			—		71.6
Foreign currency translation adjustment	—	—		—		—		—				(0.6		)		—			—				(0.6		)	—		—	—		—		—			(0.6	)		—			—			(0.6	)		—		(0.6	)
Pension and post-retirement adjustments (net of tax of $0.8)	—	—		—		—		—				2.7				—			—				2.7			—		—	—		—		—			2.7			—			—			2.7			—		2.7
Stock-based compensation plans	—	—		—		—		3.7				—				—			—				3.7
Stock-based compensation																										—		—	—		—		3.7			—			—			—			3.7			—		3.7
Proceeds pursuant to stock-based compensation plans	—	—		—		—		2.5				—				—			—				2.5			—		—	—		—		2.5			—			—			—			2.5			—		2.5
Purchases of treasury stock at cost	—	—		—		—		—				—				—			—				—			—		—	—		—		—			—			—			—			—			—		—
Treasury stock issued pursuant to equity-based plans	—	—		0.2		—		(3.8		)		—				—			4.4				0.6			—		—	0.2		—		(3.8	)		—			—			4.4			0.6			—		0.6
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.3		)	—				(5.3		)	—		—	—		—		—			—			(5.3	)		—			(5.3	)		—		(5.3	)
Balance at November 30, 2018	1.7	$	0.0	33.6		$	0.4	$	617.9			$	(56.5	)		$	1,018.4		$	(295.6	)		$	1,284.6		1.7		$0.0	33.6		$0.4		$617.9			$(56.5)			$1,018.4			$(295.6)			$1,284.6			$0.0		$1,284.6
Net Income (loss)	—	—		—				—				—				(12.6		)	—				(12.6		)	—		—	—		—		—			—			(12.6	)		—			(12.6	)		—		(12.6	)
Foreign currency translation adjustment	—	—		—		—		—				1.7				—			—				1.7			—		—	—		—		—			1.7			—			—			1.7			—		1.7
Pension and post-retirement adjustments (net of tax of $0.0)	—	—		—		—		—				0.2				—			—				0.2			—		—	—		—		—			0.2			—			—			0.2			—		0.2
Stock-based compensation plans	—	—		—		—		1.6				—				—			—				1.6
Stock-based compensation																										—		—	—		—		1.6			—			—			—			1.6			—		1.6
Proceeds pursuant to stock-based compensation plans	—	—		—		—		0.5				—				—			—				0.5			—		—	—		—		0.5			—			—			—			0.5			—		0.5
Purchases of treasury stock at cost	—	—		(0.1	)	—		—				—				—			(2.0		)		(2.0		)	—		—	(0.1	)	—		—			—			—			(2.0	)		(2.0	)		—		(2.0	)
Treasury stock issued pursuant to equity-based plans	—	—		0.1		—		(0.6		)		—				—			1.0				0.4			—		—	0.1		—		(0.6	)		—			—			1.0			0.4			—		0.4
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.3		)	—				(5.3		)	—		—	—		—		—			—			(5.3	)		—			(5.3	)		—		(5.3	)
Balance at February 28, 2019	1.7	$	0.0	33.6		$	0.4	$	619.4			$	(54.6	)		$	1,000.5		$	(296.6	)		$	1,269.1		1.7		$0.0	33.6		$0.4		$619.4			$(54.6)			$1,000.5			$(296.6)			$1,269.1			$0.0		$1,269.1

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			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						Accumulated Other Comprehensive Income (Loss)			Shares				Treasury Stock At Cost			Amount				Shares		Amount				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
Balance at June 1, 2017	1.7	$	0.0	33.4		$	0.4	Additional Paid-in Capital			$	606.8			$	Retained Earnings	(94.2	)	$	1,091.2			Total Stockholders' Equity	$	(296.3	)	$	1,307.9
Balance at June 1, 2019																										1.7		$0.0	33.4		$0.4		$620.8			$(59.7)		$1,012.6			$(302.6)			$1,271.5		$1.3		$1,272.8
Net Income (loss)	—	—		—		—		—				—				(63.7		)	—				(63.7		)	—		—	—		—		—			—		(58.5	)		—			(58.5	)	—		(58.5	)
Foreign currency translation adjustment	—	—		—		—		—				3.7				—			—				3.7			—		—	—		—		—			(2.0	)	—			—			(2.0	)	—		(2.0	)
Pension and post-retirement adjustments (net of tax of $0.1)	—	—		—		—		—				0.5				—			—				0.5
Pension and post-retirement adjustments (net of tax of $0.0)																										—		—	—		—		—			0.2		—			—			0.2		—		0.2
Stock-based compensation																										—		—	—		—		1.5			—		—			—			1.5		—		1.5
Purchases of treasury stock at cost																										—		—	(0.3	)	—		—			—		—			(12.6	)		(12.6	)	—		(12.6	)
Treasury stock issued pursuant to equity-based plans																										—		—	0.0		—		(0.1	)		—		—			0.6			0.5		—		0.5
Dividends ($0.15 per share)																										—		—	—		—		—			—		(5.2	)		—			(5.2	)	—		(5.2	)
Noncontrolling interest in Make Believe Ideas																										—		—	—		—		—			—		—			—			—		(0.0	)	—
Balance at August 31, 2019																										1.7		$0.0	33.1		$0.4		$622.2			$(61.5)		$948.9			$(314.6)			$1,195.4		$1.3		$1,196.7
Net Income (loss)																										—		—	—		—		—			—		71.0			—			71.0		—		71.0
Foreign currency translation adjustment																										—		—	—		—		—			3.9		—			—			3.9		—		3.9
Pension and post-retirement adjustments (net of tax of $0.0)																										—		—	—		—		—			0.2		—			—			0.2		—		0.2
Stock-based compensation	—	—		—		—		1.5				—				—			—				1.5			—		—	—		—		0.9			—		—			—			0.9		—		0.9
Proceeds pursuant to stock-based compensation plans	—	—		—		—		2.8				—				—			—				2.8			—		—	—		—		0.3			—		—			—			0.3		—		0.3
Purchases of treasury stock at cost	—	—		(0.1	)	—		—				—				—			(4.7		)		(4.7		)	—		—	(0.1	)	—		—			—		—			(7.1	)		(7.1	)	—		(7.1	)
Treasury stock issued pursuant to equity-based plans	—	—		0.1		—		(2.6		)		—				—			2.9				0.3			—		—	—		—		(2.1	)		—		—			2.7			0.6		—		0.6
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.3		)	—				(5.3		)	—		—	—		—		—			—		(5.2	)		—			(5.2	)	—		(5.2	)
Balance at August 31, 2017	1.7	$	0.0	33.4		$	0.4	$	608.5			$	(90.0	)		$	1,022.2		$	(298.1	)		$	1,243.0
Noncontrolling interest in Make Believe Ideas																										—		—	—		—		—			—		—			—			—		0.0		—
Balance at November 30, 2019																										1.7		$0.0	33.0		$0.4		$621.3			$(57.4)		$1,014.7			$(319.0)			$1,260.0		$1.3		$1,261.3
Net Income (loss)	—	—		—		—		—				—				57.1			—				57.1			—		—	—				—			—		(43.3	)		—			(43.3	)	—		(43.3	)
Foreign currency translation adjustment	—	—		—		—		—				0.1				—			—				0.1			—		—	—		—		—			(2.3	)	—			—			(2.3	)	—		(2.3	)
Pension and post-retirement adjustments (net of tax of $6.3)	—	—		—		—		—				9.0				—			—				9.0
Pension and post-retirement adjustments (net of tax of $0.0)																										—		—	—		—		—			0.3		—			—			0.3		—		0.3
Stock-based compensation	—	—		—		—		6.0				—				—			—				6.0			—		—	—		—		0.7			—		—			—			0.7		—		0.7
Proceeds pursuant to stock-based compensation plans	—	—		—		—		1.1				—				—			—				1.1			—		—	—		—		0.4			—		—			—			0.4		—		0.4
Purchases of treasury stock at cost	—	—		(0.3	)	—		—				—				—			(8.6		)		(8.6		)	—		—	(0.4	)	—		—			—		—			(13.0	)		(13.0	)	—		(13.0	)
Treasury stock issued pursuant to equity-based plans	—	—		0.1		—		(3.3		)		—				—			3.5				0.2			—		—	0.0		—		(0.5	)		—		—			0.8			0.3		—		0.3
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.2		)	—				(5.2		)	—		—	—		—		—			—		(5.2	)		—			(5.2	)	—		(5.2	)
Balance at November 30, 2017	1.7	$	0.0	33.2		$	0.4	$	612.3			$	(80.9	)		$	1,074.1		$	(303.2	)		$	1,302.7
Net Income (loss)	—	—		—		—		—				—				(49.2		)	—				(49.2		)
Foreign currency translation adjustment	—	—		—		—		—				2.2				—			—				2.2
Pension and post-retirement adjustments (net of tax of $14.5)	—	—		—		—		—				22.2				—			—				22.2
Stock-based compensation	—	—		—		—		1.6				—				—			—				1.6
Proceeds pursuant to stock-based compensation plans	—	—		—		—		5.0				—				—			—				5.0
Purchases of treasury stock at cost	—	—		(0.3	)	—		—				—				—			(11.9		)		(11.9		)
Treasury stock issued pursuant to equity-based plans	—	—		0.2		—		(4.3		)		—				—			4.6				0.3
Dividends ($0.15 per share)	—	—		—		—		—				—				(5.3		)	—				(5.3		)
Balance at February 28, 2018	1.7	$	0.0	33.1		$	0.4	$	614.6			$	(56.5	)		$	1,019.6		$	(310.5	)		$	1,267.6
Noncontrolling interest in Make Believe Ideas																										—		—	—		—		—			—		—			—			—		0.1		0.1
Balance at February 29, 2020																										1.7		$0.0	32.6		$0.4		$621.9			$(59.4)		$966.2			$(331.2)			$1,197.9		$1.4		$1,199.3

See accompanying notes

SCHOLASTIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED

(Dollar amounts in millions)


	Nine months ended						Nine months ended
	February 28,						February 29,	February 28,
	2019			2018			2020	2019
Cash flows - operating activities:
Net income (loss)	$	(2.3	)	$	(55.8	)
Net income (loss) attributable to Scholastic Corporation							$(30.8)	$(2.3)
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities:
Provision for losses on accounts receivable	5.7			7.9			7.3	5.7
Provision for losses on inventory	12.2			11.5			13.7	12.2
Provision for losses on royalty advances	3.0			3.3			3.8	3.0
Amortization of prepublication and production costs	16.6			16.4			19.7	16.6
Depreciation and amortization	43.7			32.2			48.1	43.7
Pension settlement	—			55.0
Amortization of pension and postretirement actuarial gains and losses	0.5			1.8			0.7	0.5
Deferred income taxes	(2.6		)	15.5			(0.2)	(2.6)
Stock-based compensation	6.8			9.1			3.1	6.8
Income from equity investments	(5.7		)	(3.7		)	(3.6)	(5.7)
Write off related to asset impairments	—			11.0
Changes in assets and liabilities:
Non cash write off related to asset impairments and write downs							40.0	—
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable	(87.9		)	8.6			(38.9)	(87.9)
Inventories	(77.9		)	(82.0		)	(36.2)	(77.9)
Prepaid expenses and other current assets	(24.7		)	(57.8		)	(35.9)	(24.5)
Royalty advances	(10.7		)	(11.5		)	(9.1)	(10.7)
Accounts payable	29.4			63.4			(0.1)	29.4
Other accrued expenses	(9.6		)	(15.8		)
Returns liability	69.0			—
Accrued income taxes	0.4			(1.8		)	2.3	0.2
Accrued royalties	42.5			28.1			35.6	42.5
Deferred revenue	43.9			31.8			27.5	43.9
Pension and postretirement obligations	(2.0		)	(3.9		)
Other noncurrent liabilities	1.1			1.6
Other, net	9.1			0.0
Total adjustments	62.8			120.7
Other assets and liabilities							(3.0)	67.6
Net cash provided by (used in) operating activities	60.5			64.9			44.0	60.5

Cash flows - investing activities:
Prepublication and production expenditures	(32.3		)	(22.4		)	(21.5)	(32.3)
Additions to property, plant and equipment (including capitalized software)	(71.0		)	(92.4		)
Other investment and acquisition related payments	(0.5		)	(2.0		)
Additions to property, plant and equipment							(48.4)	(71.0)
Acquisition of land							(3.3)	—
Other investment and acquisition-related payments							(1.2)	(0.5)
Net cash provided by (used in) investing activities	(103.8		)	(116.8		)	(74.4)	(103.8)

Cash flows - financing activities:
Proceeds from long-term debt							6.4	—
Repayments of long-term debt							—	—
Borrowings under lines of credit							22.5	48.5
Repayments of lines of credit							(19.7)	(46.6)
Repayment of capital lease obligations							(1.5)	(1.1)
Reacquisition of common stock							(32.2)	(2.0)
Proceeds pursuant to stock-based compensation plans							0.7	5.8
Payment of dividends							(15.7)	(15.8)
Other							(0.2)	1.3
Net cash provided by (used in) financing activities							(39.7)	(9.9)
Effect of exchange rate changes on cash and cash equivalents							(0.2)	(0.6)

Net increase (decrease) in cash and cash equivalents							(70.3)	(53.8)
Cash and cash equivalents at beginning of period							334.1	391.9
Cash and cash equivalents at end of period							$263.8	$338.1

See accompanying notes

~~SCHOLASTIC CORPORATION~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED~~

~~(Dollar amounts in millions)~~

Nine months ended
February 28, February 28,
2019 2018
Cash flows - financing activities:

Borrowings under lines of credit 48.5
40.4
Repayments of lines of credit (46.6 ) (37.8 )
Repayment of capital lease obligations (1.1 ) (0.9 )
Reacquisition of common stock (2.0 ) (23.8 )
Proceeds pursuant to stock-based compensation plans 5.8
8.9
Payment of dividends (15.8 ) (15.8 )
Other 1.3
(1.2 )
Net cash provided by (used in) financing activities (9.9 ) (30.2 )
Effect of exchange rate changes on cash and cash equivalents (0.6 ) 0.6
Net increase (decrease) in cash and cash equivalents (53.8 ) (81.5 )
Cash and cash equivalents at beginning of period 391.9
444.1
Cash and cash equivalents at end of period $ 338.1
$ 362.6

~~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”). Intercompany transactions are eliminated in consolidation.

The Company’s fiscal year is not a calendar year. Accordingly, references in this document to fiscal ~~2019~~2020 relate to the twelve-month period ending May 31, ~~2019.~~

2020. Certain reclassifications have been made to conform to the current year presentation.

Interim Financial Statements

The accompanying ~~unaudited condensed consolidated interim financial statements (referred to as the “Financial Statements” herein)~~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, ~~2018~~2019. 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.

~~On August 17, 2018, the SEC issued a final rule, Release No. 33-10532,~~ ~~Disclosure Update and Simplification,~~ which amends certain of its disclosure requirements and became effective for the Company for the fiscal quarter ended February 28, 2019 and the Company has updated its Financial Statements accordingly.

Seasonality

The Company’s Children’s Book Publishing and Distributionschool-based book ~~fairs~~club and book ~~club~~fair channels and most of its Educationbusinesses 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 ~~generally~~ lower than its revenues in the other two fiscal quarters. Typically, school-based ~~channel~~channels and ~~classroom~~ magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Trade sales can vary throughout the year due to varying release dates of published titles. The Company generally experiences a loss from operations in the first and third quarters of each fiscal year.

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:

~~Variable consideration related to anticipated returns~~

Accounts receivable allowance for doubtful accounts

Pension and ~~other~~ postretirement ~~obligations~~benefit plans

Uncertain tax positions

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

Royalty advance reserves and royalty expense accruals

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

Assets and liabilities acquired in business combinations

10Variable consideration related to anticipated returns

Allocation of transaction price to performance obligations

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~Impairment testing for goodwill, intangibles~~Assets Held For Sale

The Company committed to a plan to sell the company-owned facility located in Danbury, Connecticut to relocate the book fairs warehousing and ~~other~~distribution operations conducted in Danbury to a warehouse in Allentown, Pennsylvania. This asset is included in the Overhead segment. The Company also committed to a plan to sell the UK distribution centers located in Witney and Southam to consolidate the operations into a new facility in Warwickshire which is currently under construction. These assets are included in the International segment. The Company expects the sale of these facilities to be completed within one year and to recognize a gain on sale. The long-lived assets which consist of land, building, and ~~investments~~building improvements are classified as held for sale. These assets are carried at the lower of carrying value or fair value less costs to sell and no additional depreciation is being recognized. As of February 29, 2020, the carrying amounts totaled $8.8.

~~Assets and liabilities acquired in business combinations~~

~~Revenues for book fairs which have not reported final results~~

~~Allocation of transaction price to performance obligations~~

New Accounting Pronouncements

~~Topic 606, Revenue from Contracts with Customers~~

Refer to Note 2, Revenues, for a discussion of the Company's revenue recognition accounting following the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), and related amendments, in the first quarter of fiscal 2019.

~~Forthcoming Adoptions:~~

~~ASU No. 2016-02, ASU No. 2018-10 and ASU No. 2018-11~~

In ~~February 2016,~~December 2019, the Financial Accounting Standards Board (the "FASB") issued ~~ASU~~Accounting Standards Update ("ASU") No. ~~2016-02, Leases~~2019-12, Income Taxes (Topic ~~842) which supersedes existing guidance on accounting~~740) - Simplifying the Accounting for ~~leases in ASC Topic 840, Leases.~~Income Taxes. The ~~amendments~~updates in this ~~ASU, among~~guidance remove the following exceptions: 1. Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other ~~things, require lessees~~items (for example, discontinued operations or other comprehensive income); 2. Exception to ~~account~~the requirement to recognize a deferred tax liability for ~~leases as either finance leases or operating leases and generally require all leases~~equity method investments when a foreign subsidiary becomes an equity method investment; 3. Exception to ~~be recorded on~~ the ~~balance sheet, through~~ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; 4. Exception to the ~~recognition of right-of-use assets and corresponding lease liabilities. The lease liability should be measured at~~general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the ~~present value of~~anticipated loss for the lease payments over the lease term. The right-of-use asset should be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and lessee's initial direct costs (e.g., commissions). year.

The guidance also ~~requires specific qualitative and quantitative disclosures about leasing activities.~~

~~In July 2018,~~simplifies the ~~FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provide~~accounting for income taxes by: 1. Requiring an ~~additional (and optional) transition method whereby the new lease standard~~entity recognize a franchise tax (or similar tax) that is ~~applied at the adoption date and recognized~~partially based on income as an ~~adjustment~~income-based tax and account for any incremental amount incurred as a non-income-based tax; 2. Requiring an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction; 3. Specifying an entity is not required to ~~retained earnings.~~allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; 4. Requiring an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The guidance further provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction.

The Company's assessment efforts to date have included reviewing the standard's provisions and gathering information to evaluate the landscape of its real estate, personal property, and other arrangements that may meet the definition of a lease. Based on these efforts, the Company currently anticipates that the adoption of ASU ~~2016-02 will result in a significant increase to its long-term assets and liabilities as most of its current operating lease commitments~~ will be subject to balance sheet recognition. Recognition of lease expense in the condensed consolidated statement of operations is not anticipated to significantly change. The Company anticipates it will apply certain practical expedients permitted by the standard and intended to ease transition to the standard, which include allowing the Company to carryforward its original lease classification conclusions (i.e., finance or operating) without reassessment. The Company is also evaluating which, if any, other expedients it will elect upon adoption, including the use of hindsight in assessing factors that impact determination of the lease term, such as the likelihood that any renewal or purchase options are exercised.

~~ASU No. 2016-02, ASU No. 2018-10 and ASU No. 2018-11 are~~ effective for the Company in the first quarter of fiscal ~~2020 and are required~~2022. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. An entity that elects to ~~be applied using the modified retrospective approach for all leases existing~~early adopt in an interim period should reflect any adjustments as of the ~~effective date.~~beginning of the annual period that includes that interim period and an entity that elects early adoption must adopt all the amendments in the same period. The Company is evaluating the impact of this ASU on its consolidated Financial Statements.

Current Fiscal Year Adoptions

~~2. REVENUES~~

Topic 842, Leases

~~Adoption~~Refer to Note 11, Leases, for a discussion of ~~Topic 606, Revenue from Contracts with Customers~~the Company's lease accounting following the adoption of ASU No. 2016-02, Leases (Topic 842) in the first quarter of fiscal 2020.

ASU No. 2018-15

In ~~May 2014,~~August 2018, the FASB issued ASU No. ~~2014-09, Revenue from Contracts with Customers (Topic 606) ("Topic 606"). ASU No. 2014-09, along with various amendments~~2018-15, Intangibles- Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that ~~comprise Topic 606, provide~~is a single accounting model for revenue from contracts with customers and supersedes the previous revenue recognition guidance, including certain industry-specific and transaction-specific guidance. The core principle of Topic 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.

Service Contract. The Company adopted ~~Topic 606 on June 1, 2018 and elected to apply Topic 606~~ASU No. 2018-15 as of the beginning of the first quarter of fiscal 2020 using the ~~modified~~prospective approach. In the third fiscal quarter, the Company capitalized approximately $9.5 of cloud computing costs which have not yet been placed into service. This amount is included within Other assets and deferred charges within the Company's Condensed Consolidated Balance Sheets and within the operating activities section of the Company's Condensed Consolidated Statement of Cash Flows.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

~~retrospective method.~~ASU No. 2018-02

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The Company ~~determined that~~adopted ASU No. 2018-02 as of the ~~adoption~~beginning of ~~Topic 606 had~~ the ~~following impact: (i) a deferral~~first quarter of ~~certain revenue associated with~~fiscal 2020 which resulted in no impact to the Company's book fairs incentive program (reflected in Deferred revenue), (ii) recognition of a refund liability (recorded as an increase to Other accrued expenses) and a return asset (recorded as an increase to Prepaid expenses and other current assets) for the right to recover products from customers upon settling the refund liability based on expected returns and (iii) recognition of previously capitalized direct response advertising costs as incurred, primarily related to the magazines business.financial statements.

~~Updates to Significant Accounting Policies~~

2. REVENUES

Disaggregated Revenue Data

The ~~Company updated its significant accounting policies as a result of~~following table presents the ~~adoption of Topic 606 as follows:~~Company’s disaggregated revenues by region and domestic channel:

~~Revenue Recognition~~



	Three months ended		Nine months ended
	February 29,	February 28,	February 29,	February 28,
	2020	2019	2020	2019
U.S. Book Clubs	$43.4	$55.0	$137.3	$165.4
U.S. Book Fairs	100.1	97.4	351.7	343.3
U.S. Trade	70.4	65.6	231.6	222.9
U.S. Education	74.3	60.3	192.5	179.7
Non-U.S. Major Markets⁽¹⁾	59.2	54.0	210.1	192.2
Non-U.S. Other Markets⁽²⁾	25.9	27.8	79.9	79.7
Total Revenues	$373.3	$360.1	$1,203.1	$1,183.2

(1) - ~~School-Based Book Fairs~~Includes Canada, UK, Australia and New Zealand.

Revenues associated with school-based book fairs relate to the sale of children's books and other products to book fair sponsors. In addition, the Company employs an incentive program to encourage the sponsorship of book fairs and increase the number of fairs held each school year. The Company identifies two performance obligations within its school-based book fair contracts which include the fulfillment of book fairs product and the fulfillment of product upon the redemption of incentive program credits by customers. The Company allocates the transaction price to each performance obligation and recognizes revenue at a point(2) - Primarily includes markets in time. The Company utilizes certain estimates based on historical experience and future expectations related to the participation in the incentive program as well as redemption patterns to determine the relative fair value of each performance obligation when allocating the transaction price. Changes in these estimates could impact the timing of the recognition of revenue. Revenues allocated to the book fair product will be recognized at the point at which product is delivered to the customer and control is transferred. The revenue allocated to the incentive program credits is recognized upon redemption of incentive credits and the transfer of control of the redeemed product. Incentive credits are generally redeemed within 12 months of issuance. Payment for school-based book fairs product is due at the completion of a customer's fair. The sale of school-based book fair product contains a right of return.Asia.

Estimated Returns

~~For sales that include a right~~A liability for expected returns of ~~return, which primarily include the trade~~$40.6, $34.5, and school-based book fair channels, the Company will estimate the transaction price and record revenues as variable consideration based on the amounts the Company expects to ultimately be entitled. In order to determine estimated returns, the Company utilizes historical return rates, sales patterns, types of products and expectations and recognizes a corresponding reduction to Revenues and Cost of goods sold. In addition, a refund liability$97.3 is recorded within Other accrued expenses ~~for the consideration to which the Company believes it will not ultimately be entitled~~as of February 29, 2020, May 31, 2019, and February 28, 2019, respectively. In addition, a return asset of $2.5, $1.6, and $13.2 is recorded within Prepaid expenses and other current assets ~~for the expected inventory to be returned.~~

The Company has elected to present sales and other related taxes on a net basis, excluded from revenues, and as such, these are included within Other accrued expenses until remitted to taxing authorities. Shipping and handling costs that are billed to customers are included in Revenues, with costs recorded in Cost of goods sold.

~~Transition~~

~~The Company applied Topic 606 to all contracts~~ as of ~~the date of initial adoption, June 1, 2018. The cumulative effect of adopting Topic 606 was a $46.5 decrease to the opening balance of Retained earnings as of June 1, 2018.~~

~~The cumulative effect of the changes made to the Company’s condensed consolidated balance sheet at June 1, 2018 are as follows:~~

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

As reported - May 31, 2018 Adjustments due to adoption June 1, 2018
Accounts receivable, net $ 204.9
$ 31.1
⁽¹⁾
$ 236.0
Inventories, net 294.9
(1.9 )
⁽²⁾
293.0
Prepaid expenses and other current assets 66.6
(4.3 )
⁽²⁾⁽³⁾
62.3
Noncurrent deferred income taxes 25.2
16.0
⁽⁴⁾
41.2
Deferred revenue 24.7
86.3
⁽⁵⁾
111.0
Other accrued expenses 177.9
1.1
⁽⁶⁾
179.0
Retained earnings 1,065.2
(46.5 ) 1,018.7

~~(1) - Primarily represents the reclassification of the Company’s accounting for estimated returns from a reduction to Accounts receivable, net, to a current liability within Other accrued expenses.~~

~~(2) - Represents the reclassification of a return asset from Inventory to Prepaid expenses~~February 29, 2020, May 31, 2019, and ~~other current assets.~~

~~(3) - Primarily represents the adjustment for previously capitalized direct response advertising costs.~~

~~(4) - Represents the income tax impact of Topic 606 adjustments.~~

~~(5) - Represents the deferred revenue related to outstanding book fairs incentive credits as of June 1, 2018.~~

(6) - Represents a reduction to Other accrued expenses of $27.2 for outstanding book fair incentive credits as of June 1, 2018. This decrease was offset by a $28.3 increase for estimated returns recorded to Other accrued expenses.

~~Application of Topic 606 to the Current Fiscal Year~~

The comparative prior fiscal period information continues to be reported under the accounting standards in effect during those fiscal periods. The following table illustrates the amounts by which each summarized income statement line item was affected by the adoption of Topic 606:

As reported Adjustments Without adoption of Topic 606
Three months ended February 28, 2019
Revenues $ 360.1
$ (9.4 )
⁽¹⁾
$ 350.7
Cost of goods sold 176.9
(2.0 )
⁽¹⁾
174.9
Selling, general and administrative expenses 190.9
0.1
⁽²⁾
191.0
Depreciation and amortization 13.7
—
13.7
Operating income (loss) (21.4 ) (7.5 ) (28.9 )
Interest income (expense), net 1.0
—
1.0
Other components of net periodic benefit (cost) (0.4 ) —
(0.4 )
Provision (benefit) for income taxes (8.2 ) (2.0 )
⁽³⁾
(10.2 )
Net income (loss) $ (12.6 ) $ (5.5 ) $ (18.1 )
Basic earnings (loss) per share: $ (0.36 ) $ (0.16 ) $ (0.52 )
Diluted earnings (loss) per share: $ (0.36 ) $ (0.16 ) $ (0.52 )

Nine months ended February 28, 2019
Revenues $ 1,183.2
$ (11.1 )
⁽¹⁾
$ 1,172.1
Cost of goods sold 564.6
(3.5 )
⁽¹⁾
561.1
Selling, general and administrative expenses 584.3
(0.5 )
⁽²⁾
583.8
Depreciation and amortization 41.3
—
41.3
Operating income (loss) (7.0 ) (7.1 ) (14.1 )
Interest income (expense), net 2.3
—
2.3
Other components of net periodic benefit (cost) (1.1 ) —
(1.1 )
Provision (benefit) for income taxes (3.5 ) (1.9 )
⁽³⁾
(5.4 )
Net income (loss) $ (2.3 ) $ (5.2 ) $ (7.5 )
Basic earnings (loss) per share: $ (0.07 ) $ (0.15 ) $ (0.22 )
Diluted earnings (loss) per share: $ (0.07 ) $ (0.15 ) $ (0.22 )

(1) - Represents incremental revenue and cost of goods sold related to the redemption of book fairs incentive program credits, partially offset by additional deferred revenue on incentive credits awarded during the period.

~~(2) - Represents direct response advertising costs being expensed as incurred.~~

~~(3) - Represents the income tax impact of Topic 606 adjustments.~~

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

~~Estimated Returns~~

~~As of~~ February 28, 2019, a liability for expected returns of $97.3 is recorded within Other accrued expenses on the Company's condensed consolidated balance sheets. In addition, as of February 28, 2019, a return asset of $13.2 is recorded within Prepaid expenses and other current assetsrespectively, for the recoverable cost of product estimated to be returned by customers.

Deferred Revenue

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. These liabilities are recorded within Deferred revenue on the Company's ~~condensed consolidated balance sheets~~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 Company recognized revenue which was included in the opening deferred revenue balance in the amount of ~~revenue recognized in~~$33.0 and $28.3 for the three months ended February 29, 2020 and February 28, 2019, respectively, and $107.0 and $91.0 for the nine months ended February 29, 2020 and February 28, 2019, ~~included within the opening Deferred revenue balance was $28.3 and $91.0,~~ respectively.

~~Disaggregated Revenue Data~~

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

Three months ended February 28, 2019 2018
  Book Clubs $ 55.0
$ 57.7
  Book Fairs 97.4
91.5
  Trade 65.6
52.4
Total Children's Book Publishing & Distribution 218.0
201.6

Education 60.3
59.5

   Major Markets⁽¹⁾
54.5
55.3
   Other Markets⁽²⁾
27.3
28.3
Total International 81.8
83.6
Total Revenues $ 360.1
$ 344.7

Nine months ended February 28, 2019 2018
  Book Clubs $ 165.4
$ 165.6
  Book Fairs 343.3
334.6
  Trade 222.9
184.0
Total Children's Book Publishing & Distribution 731.6
684.2

Education 179.7
171.4

   Major Markets⁽¹⁾
192.7
195.6
   Other Markets⁽²⁾
79.2
81.0
Total International 271.9
276.6
Total Revenues $ 1,183.2
$ 1,132.2

~~(1) - Includes Canada, UK, Australia and New Zealand.~~

~~(2) - Primarily includes markets in Asia.~~

3. SEGMENT INFORMATION

The Company categorizes its businesses into ~~three~~3 reportable segments: Children’s Book Publishing and Distribution, ~~and~~Education ~~whichcomprise the Company's domestic operations~~; 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 in the United States through its book clubs and book fairs in its school channels and through the trade channel. This segment is comprised of 3 operating segments.


•	Education 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 on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States. This segment is comprised of 3 operating segments.

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)


•	Internationalincludes the publication and distribution of products and services outside the United States by the Company’s international operations, and its export and foreign rights businesses. This segment is comprised of 3 operating segments.

~~Children’s Book Publishing~~The following table sets forth information for the Company's segments for the fiscal quarters ended February 29, 2020 and ~~Distribution~~ operates as an integrated business which includes the publication and distribution of children’s books, ebooks, media and interactive products in the United States through its book clubs and book fairs in its school channels and through the trade channel. This segment is comprised of ~~three~~ ~~operating segments.~~

~~Education~~ 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 on-line reference and non-fiction products for grades pre-kindergarten to 12 in the United States. This segment is comprised of ~~two~~ ~~operating segments.~~

~~International~~includes the publication and distribution of products and services outside the United States by the Company’s international operations, and its export and foreign rights businesses. This segment is comprised of ~~three~~ ~~operating segments.~~

February 28, 2019:


	Children’s Book Publishing & Distribution			Education			Overhead ⁽¹⁾			Total Domestic			International			Total			Children’s Book Publishing & Distribution	Education	Overhead ⁽¹⁾	Total Domestic	International	Total
Three months ended February 29, 2020
Revenues																			$220.2	$74.3	—	$294.5	$78.8	$373.3
Bad debt expense																			1.2	0.7	—	1.9	1.1	3.0
Depreciation and amortization ⁽²⁾																			6.7	3.3	10.8	20.8	1.9	22.7
Asset impairments and write downs																			—	—	40.0	40.0	—	40.0
Segment operating income (loss)																			2.2	9.8	(68.3)	(56.3)	(3.7)	(60.0)
Expenditures for other noncurrent assets⁽³⁾																			11.5	5.4	19.4	36.3	5.4	41.7
Three months ended February 28, 2019
Revenues	$	218.0		$	60.3		$	—		$	278.3		$	81.8		$	360.1		$218.0	$60.3	—	$278.3	$81.8	$360.1
Bad debt expense	0.8			0.5			—			1.3			0.3			1.6			0.8	0.5	—	1.3	0.3	1.6
Depreciation and amortization ⁽²⁾	5.9			2.6			10.4			18.9			1.6			20.5			5.9	2.6	10.4	18.9	1.6	20.5
Asset impairments	—			—			—			—			—			—
Asset impairments and write downs																			—	—	—	—	—	—
Segment operating income (loss)	4.4			0.3			(23.1		)	(18.4		)	(3.0		)	(21.4		)	4.4	0.3	(23.1)	(18.4)	(3.0)	(21.4)
Expenditures for other noncurrent assets⁽⁴⁾	17.3			5.5			15.3			38.1			2.7			40.8
Three months ended February 28, 2018
Revenues	$	201.6		$	59.5		$	—		$	261.1		$	83.6		$	344.7
Bad debt expense	0.7			0.4			—			1.1			0.6			1.7
Depreciation and amortization ⁽²⁾	5.8			1.9			7.5			15.2			1.8			17.0
Asset impairments ⁽³⁾	—			—			4.3			4.3			—			4.3
Segment operating income (loss)	(1.0		)	(0.1		)	(23.3		)	(24.4		)	0.7			(23.7		)
Expenditures for other noncurrent assets ⁽⁴⁾	17.7			4.5			29.7			51.9			5.7			57.6
Expenditures for other noncurrent assets ⁽³⁾																			17.3	5.5	15.3	38.1	2.7	40.8

15The following table sets forth information for the Company's segments for the fiscal periods ended February 29, 2020 and February 28, 2019:

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)


	Children’s Book Publishing & Distribution		Education			Overhead ⁽¹⁾			Total Domestic			International		Total			Children’s Book Publishing & Distribution	Education		Overhead ⁽¹⁾		Total Domestic		International	Total
Nine months ended February 29, 2020
Revenues																	$743.4	$192.6		—		$936.0		$267.1	$1,203.1
Bad debt expense																	2.8	1.5		—		4.3		3.0	7.3
Depreciation and amortization ⁽²⁾																	19.9	9.8		32.7		62.4		5.4	67.8
Asset impairments and write downs																	—	—		40.0		40.0		—	40.0
Segment operating income (loss)																	70.1	2.6		(119.3	)	(46.6	)	4.3	(42.3	)
Segment assets at February 29, 2020																	594.1	208.5		853.9		1,656.5		291.9	1,948.4
Goodwill at February 29, 2020																	47.1	68.2		—		115.3		10.0	125.3
Expenditures for other noncurrent assets⁽³⁾																	40.2	15.0		37.6		92.8		18.1	110.9
Other noncurrent assets at February 29, 2020 ⁽³⁾																	$183.0	$123.1		$499.1		$805.2		$76.6	$881.8
Nine months ended February 28, 2019
Revenues	$	731.6	$	179.7		$	—		$	911.3		$	271.9	$	1,183.2		$731.6	$179.7		—		$911.3		$271.9	$1,183.2
Bad debt expense	3.2		1.2			—			4.4			1.3		5.7			3.2	1.2		—		4.4		1.3	5.7
Depreciation and amortization ⁽²⁾	17.5		6.7			31.1			55.3			5.0		60.3			17.5	6.7		31.1		55.3		5.0	60.3
Asset impairments	—		—			—			—			—		—
Asset impairments and write downs																	—	—		—		—		—	—
Segment operating income (loss)	64.7		(6.3		)	(73.4		)	(15.0		)	8.0		(7.0		)	64.7	(6.3	)	(73.4	)	(15.0	)	8.0	(7.0	)
Segment assets at February 28, 2019	585.2		173.6			977.9			1,736.7			286.4		2,023.1			585.2	173.6		977.9		1,736.7		286.4	2,023.1
Goodwill at February 28, 2019	40.9		68.2			—			109.1			10.0		119.1			40.9	68.2		—		109.1		10.0	119.1
Expenditures for other noncurrent assets⁽⁴⁾	48.3		15.6			55.9			119.8			10.1		129.9
Other noncurrent assets at February 28, 2019 ⁽⁴⁾	170.4		112.3			502.8			785.5			80.3		865.8
Nine months ended February 28, 2018
Revenues	$	684.2	$	171.4		$	—		$	855.6		$	276.6	$	1,132.2
Bad debt expense	3.4		1.4			—			4.8			3.1		7.9
Depreciation and amortization ⁽²⁾	17.0		5.4			20.7			43.1			5.2		48.3
Asset impairments ⁽³⁾	—		—			11.0			11.0			—		11.0
Segment operating income (loss)	55.1		(8.7		)	(77.3		)	(30.9		)	12.6		(18.3		)
Segment assets at February 28, 2018	503.7		170.2			886.1			1,560.0			273.7		1,833.7
Goodwill at February 28, 2018	40.9		68.2			—			109.1			10.0		119.1
Expenditures for other noncurrent assets ⁽⁴⁾	45.9		11.5			78.4			135.8			10.7		146.5
Other noncurrent assets at February 28, 2018 ⁽⁴⁾	155.2		96.5			466.5			718.2			75.5		793.7
Expenditures for other noncurrent assets ⁽³⁾																	48.3	15.6		55.9		119.8		10.1	129.9
Other noncurrent assets at February 28, 2019 ⁽³⁾																	$170.4	$112.3		$502.8		$785.5		$80.3	$865.8

~~A Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus~~ ~~0.50%~~ ~~or (iii) the Eurodollar Rate for a one month interest period plus~~ 1% ~~plus, in each case, an applicable spread ranging from~~ ~~0.175%~~ to ~~0.60%, as determined by the Company’s prevailing consolidated debt to total capital ratio.~~


•	A Base Rate equal to the higher of (i) the prime rate, (ii) the prevailing Federal Funds rate plus 0.50% or (iii) the Eurodollar Rate for a one month interest period plus 1% plus, in each case, an applicable spread ranging from 0.175% to 0.60%, as determined by the Company’s prevailing consolidated debt to total capital ratio.

- or -

~~A Eurodollar Rate equal to the London interbank offered rate (LIBOR) plus an applicable spread ranging from~~ ~~1.175%~~ to ~~1.60%, as determined by the Company’s prevailing consolidated debt to total capital ratio.~~

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)


•	A Eurodollar Rate equal to the London interbank offered rate (LIBOR) plus an applicable spread ranging from 1.175% to 1.60%, as determined by the Company’s prevailing consolidated debt to total capital ratio.

As of February ~~28, 2019,~~29, 2020, the indicated spread on Base Rate Advances was 0.175% and the indicated spread on Eurodollar Advances was 1.175%, both based on the Company’s prevailing consolidated debt to total capital ratio.

The Loan Agreement also provides for the payment of a facility fee in respect of the aggregate amount of revolving credit commitments ranging from 0.20% to 0.40% per annum based upon the Company’s prevailing consolidated debt to total capital ratio. At February ~~28, 2019,~~29, 2020, the facility 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 Loan 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 ~~28, 2019,~~29, 2020, the Company had no outstanding borrowings under the Loan Agreement. At February ~~28, 2019,~~29, 2020, the Company had open standby letters of credit totaling $5.3 issued under certain credit lines, including $0.4 under the Loan Agreement and $4.9 under the domestic credit lines discussed below.

The Loan Agreement contains certain covenants, including interest coverage and leverage ratio tests and certain limitations on the amount of dividends and other ~~distributions. The~~distributions and the Company was in compliance with these covenants for all periods presented.

Lines of Credit

As of February ~~28, 2019,~~29, 2020, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $25.0. There were no outstanding borrowings under these credit lines as of February ~~28, 2019,~~29, 2020, May 31, ~~2018 or~~2019 and February 28, ~~2018.~~2019. As of February ~~28, 2019,~~29, 2020, availability under these unsecured money market bid rate credit lines totaled $20.1.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 ~~28, 2019,~~29, 2020, the Company had various local currency credit lines totaling ~~$24.1~~$25.5 underwritten by banks primarily in the United States, Canada and the United Kingdom. Outstanding borrowings under these facilities were $9.7 at February 29, 2020 at a weighted average interest rate of 4.6%, $7.3 at May 31, 2019 at a weighted average interest rate of 4.1%, and $11.0 at February 28, 2019 at a weighted average interest rate of 4.3%~~, $7.9 at May 31, 2018 at a weighted average interest rate of 2.9% and $7.7 at February 28, 2018 at a weighted average interest rate of 3.7%~~. As of February ~~28, 2019,~~29, 2020, the amounts available under these facilities totaled ~~$13.1.~~$15.8. 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.

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

5.6. COMMITMENTS AND CONTINGENCIES

Legal Matters

Various claims and lawsuits arising in the normal course of business are pending against the Company. The Company accrues a liability for such matters when it is probable that a liability exists and the amount of such liability can be reasonably estimated. When only a range can be estimated, the most probable amount in the range is accrued unless no amount within the range is a better estimate than any other amount, in which case the minimum amount in the range is accrued. Legal costs associated with litigation ~~loss contingencies~~ are expensed in the period in which they are incurred. 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.

In the third quarter, the Company entered into settlement agreements related to photo copyright infringement cases. The Company recognized $2.4 in total, of which $1.4 remained accrued as of February 29, 2020.

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

In the first quarter, based on the status of negotiations, an alleged patent infringement claim settlement became probable and estimable. As such, an accrual of $1.5 was recognized in the Financial Statements in the first quarter of fiscal 2020. The settlement was subsequently concluded in the second quarter of fiscal 2020.

Sales Tax Matters

On June 21, 2018, the U.S. Supreme Court issued its opinion in South Dakota v. Wayfair, Inc. et. al., reversing prior precedent, in particular Quill Corp. v. North Dakota (1992), which held that states could not constitutionally require retailers to collect and remit sales or use taxes in respect to mail order or internet sales made to residents of a state in the absence of the retailer having a physical presence in the taxing state. As a result, the Company ~~will~~ now ~~have~~has an obligation, at least on a go forward basis, based on each state's enforcement date, to collect and remit sales and use taxes, primarily in respect to sales made through its school book club channel, as well as certain sales made through its ecommerce internet sites, to residents in states that the Company ~~has~~had not previously remitted sales or use taxes based on having no physical presence in such states. In the majority opinion, several factors were discussed in support of the Court’s reasoning that the collection of sales and use taxes from out-of-state retailers did not constitute an undue burden on interstate commerce, including the fact that South Dakota did not require retroactive application of its statute. However, the question of retroactive application, as well as certain other factors noted in the opinion, ~~will be~~are subject to how the states, on a state-by-state basis, interpret and apply the Court’s decision in their implementation of their respective state laws or regulations addressing the collection of sales and use taxes from out-of-state retailers. As a result, ~~how~~the effect of the decision ~~will affect~~on the Company ~~will depend~~depends on the positions taken by the states, on a state-by-state basis, relating to the retroactive application of the obligation to collect such taxes, as well as other factors noted in the opinion.

The Company continues to monitor its compliance based on anticipated enforcement dates and an assumption as to each state's likely interpretation and application of the Court's decision. As the Company continues to monitor each state, the staggered enforcement dates, and the progress towards compliance, expenses will be incurred by the Company.

As of February ~~28, 2019,~~29, 2020, the Company’s school book club channel remits sales taxes in 3844 states and the District of Columbia compared to ~~nine~~38 states and the District of Columbia in the prior fiscal year ~~and, as a result, the Company has incurred additional costs for the three and nine months~~quarter ended February 28, ~~2019 related to~~2019. The Company remits sales tax ~~on the associated revenue.~~to all required states. Any on-going or future litigation with states relating to sales and use taxes could be impacted favorably or unfavorably by legislative action in future fiscal periods.

COVID-19

During and subsequent to the third quarter of the current fiscal year, the novel coronavirus strain, known as COVID-19, continues to spread across the globe at an increasing rate. Measures taken by governmental authorities and private actors to limit the spread of this virus may interfere with the ability of the Company's employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of the business which may cause a material curtailment to certain business operations. Moreover, as a large part of the Company's business involves sales of books and other products in schools and school facilities, as well as through school districts, if COVID-19 related measures result in widespread and lengthy school closings, the Company's consolidated results of operations and financial condition will be adversely impacted. In particular, in the context of the book fair channel, such closings may lead to cancellation of a significant number of book fairs which are not rebooked or cannot be held during the current school year and, in the context of the book clubs channel, such closings could result in a significant decrease in the participation by teacher sponsors in scheduled book club offerings. In the case of the Education segment, the last quarter of the fiscal year, currently ending May 31, 2020, is normally a significant quarter as school administrators and other educational personnel, prior to breaking for the summer, order products for immediate shipment in preparation for the following academic school year. These orders could be significantly impacted by the absence from the schools of such administrators and other educational personnel resulting from school closings. The International segment is also subject to the same risks, due to the temporary closing of English language learning centers in China, as well as disruption in the direct sales business in other parts of Southeast Asia, resulting from measures imposed to combat the spread of COVID-19.

The Company is not currently aware of any loss contingencies related to this matter that would require recognition in the third quarter of fiscal 2020.

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

7. 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,
	2020	2019	2020	2019
Net income (loss) attributable to Class A and Common Stockholders	$(43.3)	$(12.6)	$(30.8)	$(2.3)
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)	34.5	35.3	34.8	35.2
Dilutive effect of Class A Stock and 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)	34.5	35.3	34.8	35.2
Earnings (loss) per share of Class A Stock and Common Stock:
Basic	$(1.25)	$(0.36)	$(0.89)	$(0.07)
Diluted	$(1.25)	$(0.36)	$(0.89)	$(0.07)

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

Three months ended February 28, Nine months ended February 28,
2019 2018 2019 2018
Net income (loss) attributable to Class A and Common Shares $ (12.6 ) $ (49.2 ) $ (2.3 ) $ (55.8 )
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions) 35.3
34.9
35.2
35.1
Dilutive effect of Class A Stock and 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) 35.3
34.9
35.2
35.1
Earnings (loss) per share of Class A Stock and Common Stock:

Basic $ (0.36 ) $ (1.41 ) $ (0.07 ) $ (1.59 )
Diluted $ (0.36 ) $ (1.41 ) $ (0.07 ) $ (1.59 )

* The Company experienced a ~~Net~~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, 2020	February 28, 2019
Options outstanding pursuant to stock-based compensation plans (in millions)	3.0	2.9

February 28, 2019 February 28, 2018
Options outstanding pursuant to stock-based compensation plans (in millions) 2.9
3.1

~~There were 0.7 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of February 28, 2019.~~

A portion of the Company’s Restricted Stock Units ("RSUs") which are granted to employees participate in earnings through cumulative dividends which are payable and non-forfeitable to the employees upon vesting of the RSUs. Accordingly, the Company measures earnings per share based upon the lower of the Two-class method or the Treasury Stock method.

For the three and nine ~~month periods~~months ended February 29, 2020 and February 28, 2019, ~~and February 28, 2018,~~respectively, the Company experienced a ~~Net~~net loss for all periods presented and did not allocate any losses to the participating ~~RSUs.~~securities.

There were 2.2 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of February 29, 2020.

As of February ~~28, 2019, $59.4~~29, 2020, $20.1 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 ~~11,~~13, Treasury Stock, for a more complete description of the Company’s share buy-back program.

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

7.8. GOODWILL AND OTHER INTANGIBLES

The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually or more frequently if ~~impairment~~ indicators ~~are such that the goodwill is more likely than not impaired.~~arise. The Company ~~continues to monitor~~monitors impairment indicators in light of changes in market conditions, near and long-term demand for the Company’s products and other relevant factors.

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

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

Nine months ended February 28, Twelve months ended May 31, Nine months ended February 28,
2019 2018 2018
Gross beginning balance $ 158.8
$ 158.5
$ 158.5
Accumulated impairment (39.6 ) (39.6 ) (39.6 )
Beginning balance $ 119.2
$ 118.9
$ 118.9
Foreign currency translation (0.1 ) 0.2
0.2
Other —
0.1
—
Ending balance $ 119.1
$ 119.2
$ 119.1

~~Accumulated goodwill impairment totaled $39.6 as~~



	February 29, 2020		May 31, 2019		February 28, 2019
Gross beginning balance	$164.8		$158.8		$158.8
Accumulated impairment	(39.6	)	(39.6	)	(39.6	)
Beginning balance	$125.2		$119.2		$119.2
Additions	—		6.3		—
Foreign currency translation	0.1		(0.3	)	(0.1	)
Ending balance	$125.3		$125.2		$119.1

In the fourth quarter of ~~February 28,~~fiscal 2019, ~~May 31, 2018~~the Company completed the purchase of a majority-ownership position in Make Believe Ideas Limited, a UK-based children's book publishing business, resulting in the recognition of $6.3 of Goodwill in the Children’s Book Publishing and ~~February 28, 2018.~~ Distribution segment.

There were no ~~goodwill~~ impairment ~~losses during~~charges related to Goodwill in any of the ~~nine months ended~~ ~~February 28, 2019 and February 28, 2018.~~periods presented.

The following table summarizes the activity in other intangibles included in Other assets and deferred charges on the Company’s ~~condensed consolidated balance sheets~~Financial Statements for the periods indicated:



	February 29, 2020		May 31, 2019		February 28, 2019
Beginning balance other intangibles subject to amortization	$12.2		$10.1		$10.1
Additions	1.6		4.5		0.6
Amortization expense	(2.4	)	(2.8	)	(2.0	)
Foreign currency translation	0.1		(0.2	)	0.0
Other	—		0.6		—
Total other intangibles subject to amortization, net of accumulated amortization of $29.3, $26.9 and $26.1, respectively	11.5		12.2		8.7
Total other intangibles not subject to amortization	2.1		2.1		2.1
Total other intangibles	$13.6		$14.3		$10.8

Nine months ended February 28, Twelve months ended May 31, Nine months ended February 28,
2019 2018 2018
Beginning balance other intangibles subject to amortization $ 10.1
$ 9.0
$ 9.0
Additions 0.6
3.3
1.5
Amortization expense (2.0 ) (2.1 ) (1.6 )
Foreign currency translation 0.0
(0.1 ) 0.1
Total other intangibles subject to amortization, net of accumulated amortization of $26.1, $24.1 and $23.6, respectively $ 8.7
$ 10.1
$ 9.0
Total other intangibles not subject to amortization $ 2.1
$ 2.1
$ 2.1
Total other intangibles $ 10.8
$ 12.2
$ 11.1

In the third quarter of fiscal 2020, the Company acquired a U.S.-based book fair business resulting in the recognition of $1.6 of amortizable intangible assets.

In the fourth quarter of fiscal 2019, the Company completed the purchase of a majority interest in Make Believe Ideas Limited, included within the Children's Book Publishing and Distribution segment, which resulted in $3.9 of amortizable intangible assets. In the first quarter of fiscal 2019, the Company also purchased a UK-based book club business and a U.S.-based book fair business resulting in the recognition of $0.6 of ~~definite-lived~~amortizable intangible assets. ~~The results of operations of these businesses are included within the~~ ~~International~~ ~~and~~ ~~Children's Book Publishing & Distribution~~ ~~segments, respectively.~~

Intangible assets with definite lives consist principally of customer lists and intellectual property rights. Intangible assets with definite lives are amortized over their estimated useful lives. The weighted-average remaining useful life of all definite-lived intangible assets is approximately ~~3.5~~5.2 years. Intangible assets with indefinite lives consist principally of trademarks.

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

8.9. INVESTMENTS

~~Included~~Investments are included in Other assets and deferred charges on the Condensed Consolidated Balance Sheets. The following table summarizes the Company’s ~~condensed consolidated balance sheets were~~ investments as of ~~$36.7, $31.1 and $33.1 at February 28, 2019, May 31, 2018 and February 28, 2018, respectively.~~

~~The Company's 48.5% equity interest in Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing company, is accounted for using~~ the ~~equity method of accounting. The purchase agreement provides~~dates indicated:

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

that, subject to its provisions, the Company will purchase the remaining outstanding shares in MBI following the completion of MBI's accounts for the calendar year 2018 and subject to the provisions of the purchase agreement. The net carrying value of this investment was $13.0, $10.6 and $11.2 at February 28, 2019, May 31, 2018 and February 28, 2018, respectively. Equity method income from this investment is reported in the ~~International~~ ~~segment.~~



	February 29, 2020	May 31, 2019	February 28, 2019	Segment
Equity method investments	$26.4	$23.4	$36.7	International
Other equity investments	6.0	6.0	—	Children's Book Publishing & Distribution
Total Investments	$32.4	$29.4	$36.7

The Company’s 26.2% non-controlling interest in a separate children’s book publishing business located in the UK is accounted for using the equity method of accounting. The net carrying value of this investment was $23.7, $20.5 and $21.8 at February 28, 2019, May 31, 2018 and February 28, 2018, respectively. Equity method income from this investment is reported in the ~~International~~ ~~segment.~~

~~The Company has other equity and cost method investments that had a net carrying value of less than $0.1 at February 28, 2019 and May 31, 2018, and $0.1~~at~~February 28, 2018~~.

Income from equity investments is reported in Selling, general and administrative expenses in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and totaled ~~$1.2~~$0.6 and ~~$1.0~~$1.2 for the three months ended February ~~28, 2019~~29, 2020 and February 28, ~~2018,~~2019, respectively, and ~~$5.7~~$3.6 and ~~$3.7~~$5.7 for the nine months ended February ~~28, 2019~~29, 2020 and February 28, ~~2018,~~2019, respectively.

Equity method investments

Make Believe Ideas Limited

On March 27, 2019, the Company completed the purchase of a majority-ownership position in Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing business, by acquiring an additional 46.5% equity interest in MBI to bring the Company's total ownership interest to 95.0%. Prior to March 27, 2019, the Company accounted for its 48.5% equity interest under the equity method of accounting and income from this investment was reported in the International segment.

Other equity investments

In the fourth quarter of fiscal 2019, the Company acquired 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. In the current fiscal quarter there have been no impairments or adjustments to the carrying value of this investment.

9.10. EMPLOYEE BENEFIT PLANS

The following table sets forth the components of net periodic benefit ~~(cost)~~cost for the periods indicated under the Company’s ~~terminated cash balance retirement plan for its United States employees meeting certain eligibility requirements (the “U.S. Pension Plan”) and the~~ defined benefit pension plan of Scholastic Ltd., an indirect subsidiary of Scholastic Corporation located in the United Kingdom (the “UK Pension Plan”) and ~~together with~~ the ~~U.S. Pension Plan, the “Pension Plans”). Also included are~~ postretirement benefits plan, consisting of certain healthcare and life insurance benefits provided by the Company to its eligible retired United States-based employees (the “Postretirement Benefits”)., for the periods indicated:



	UK Pension Plan				Postretirement Benefits
	Three months ended				Three months ended
	February 29,		February 28,		February 29,	February 28,
	2020		2019		2020	2019
Components of net periodic benefit cost:
Service cost	—		—		—	—
Interest cost	0.2		0.3		0.2	0.2
Expected return on assets	(0.3	)	(0.3	)	—	—
Net amortization of prior service (credit) cost	0.0		—		0.0	0.0
Amortization of (gains) losses	0.3		0.2		—	—
Total	$0.2		$0.2		$0.2	$0.2

U.S. Pension Plan UK Pension Plan Postretirement Benefits
Three months ended February 28, Three months ended February 28, Three months ended February 28,
2019 2018 2019 2018 2019 2018
Components of net periodic (benefit) cost:
Service cost $ —
$ —
$ —
$ —
$ 0.0
$ 0.0
Interest cost —
0.5
0.3
0.3
0.2
0.2
Expected return on assets —
(1.1 ) (0.3 ) (0.3 ) —
—
Net amortization of prior service credit —
—
—
—
0.0
—
Benefit cost of settlement event —
39.6
—
—
—
—
Amortization of (gains) losses —
0.3
0.2
0.3
—
0.0
Net periodic (benefit) cost $ —
$ 39.3
$ 0.2
$ 0.3
$ 0.2
$ 0.2

SCHOLASTIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)


	U.S. Pension Plan					UK Pension Plan						Postretirement Benefits					UK Pension Plan		Postretirement Benefits
	Nine months ended February 28,					Nine months ended February 28,						Nine months ended February 28,					Nine months ended		Nine months ended
	2019		2018			2019			2018			2019			2018		February 29,	February 28,	February 29,	February 28,
Components of net periodic (benefit) cost:
																	2020	2019	2020	2019
Components of net periodic benefit cost:
Service cost	$	—	$	—		$	—		$	—		$	0.0		$	0.0	—	—	—	$0.0
Interest cost	—		1.9			0.8			0.8			0.6			0.7		0.6	0.8	0.5	0.6
Expected return on assets	—		(4.0		)	(0.8		)	(0.8		)	—			—		(0.8)	(0.8)	—	—
Net amortization of prior service credit	—		—			—			—			(0.1		)	—
Benefit cost of settlement event	—		55.0			—			—			—			—
Net amortization of prior service (credit) cost																	0.0	—	(0.1)	(0.1)
Amortization of (gains) losses	—		0.9			0.6			0.9			—			0.0		0.8	0.6	—	—
Net periodic (benefit) cost	$	—	$	53.8		$	0.6		$	0.9		$	0.5		$	0.7
Total																	$0.6	$0.6	$0.4	$0.5

~~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 2Observable 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.

~~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. Cash and cash equivalents are comprised of bank deposits and short-term investments, such as money market funds, the fair value of which is based on quoted market prices, a Level 1 fair value measure. The Company employs Level 2 fair value measurements for the disclosure of the fair value of its various lines of ~~credit.~~credit and long term debt. The fair value of the Company's debt 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. See Note ~~15,~~17, Derivatives and Hedging, for a more complete description of the fair value measurements employed.

Non-financial assets ~~and liabilities~~ for which the Company employs fair value measures on a non-recurring basis include:

Long-lived assets

Investments

Assets ~~and liabilities~~ acquired in a business combination

Impairment assessment of Goodwill and ~~definite and indefinite-lived~~ intangible assets

Long-lived assets held for sale

Level 2 and level 3 inputs are employed by the Company in the fair value measurement of these ~~assets and liabilities. For the fair value measurements employed by the Company for goodwill and other intangible assets see Note 7, Goodwill and Other Intangibles.~~assets. For the fair value measurements employed by the Company for certain property, plant and equipment, production assets, investments and prepublication assets, the Company ~~assesses~~assessed future expected cash flows attributable to these assets.

~~14.~~16. INCOME TAXES AND OTHER TAXES

Income Taxes

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in enacted tax laws or rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. 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.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law resulting in a significant change in the framework for U.S. corporate taxes. The Act reduced the U.S. federal corporate tax rate from 35% to 21%, required companies to calculate a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings.

The Act also imposes a new minimum tax on Global Intangible Low-Taxed Income ("GILTI") earned by foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity may make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

In accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which was also included in ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“SAB 118”), which was adopted by the Company upon issuance, any adjustments of the Company's provisional tax expense are recorded as a change in estimate. Despite the completion of the Company’s accounting for the Tax Act under SAB 118, many aspects of the law remain unclear and the Company expects ongoing guidance to be issued at both the federal and state levels and it will continue to monitor and assess the impact of any new developments.

In the period ended February 28, 2019, the Company finalized its calculations resulting in no transition tax and recorded a $0.5 adjustment to the Company’s previously recorded provisional tax expense. In addition, in the prior fiscal year quarter, the Company elected to recognize any potential tax on GILTI as a period expense in the period the tax is incurred.

~~The Company’s annual effective tax rate, exclusive of discrete items, is expected to be approximately 30.0%. The~~ interim effective tax rate, inclusive of discrete items, was ~~39.4%~~28.0% for the three month period ended February ~~28, 2019~~29, 2020 and ~~60.3%~~27.4% for the nine month period ended February 28, 2019. The rate differential between the interim effective tax rate, inclusive of discrete items, for the three and nine month periods ended February 28, 2019, compared to the expected annual effective tax rate is primarily due to the calculated tax provision as applied to the seasonal pre-tax loss for the periods presented.29, 2020.

The Company, including its domestic subsidiaries, files a consolidated U.S. income tax return, and also files tax returns in various states and other local jurisdictions. Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions. The Company is routinely audited by various tax authorities.

Non-income Taxes

The Company is subject to tax examinations for sales-based taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from taxing authorities. The Company assesses sales tax contingencies for each jurisdiction in which it operates, considering all relevant ~~factors~~facts including statutes, regulations, case law and experience. Where a sales tax liability inwith respect to a jurisdiction is probable and can

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

be ~~reasonably~~reliably estimated for such jurisdiction, the Company has made accruals for these matters which are reflected in the Company’s Condensed Consolidated Financial Statements. These amounts are included in the Financial Statements in Selling, general and administrative expenses. Future developments relating to the foregoing could result in adjustments being made to these accruals.

~~The State~~On June 21, 2018, the U.S. Supreme Court issued its opinion in South Dakota v. Wayfair, Inc. et. al., reversing prior precedent, in particular Quill Corp. v. North Dakota (1992), which held that states could not constitutionally require retailers to collect and remit sales or use taxes in respect to mail order or internet sales made to residents of ~~Wisconsin has assessed Scholastic Book Fairs, Inc. (“SBF”),~~ a ~~wholly owned subsidiary~~state in the absence of the ~~Company, $5.4, exclusive of penalties and interest, for sales tax in fiscal years 2003 through 2014. Based upon the facts and circumstances and the relevant laws~~retailer having a physical presence in the ~~State of Wisconsin,~~taxing state. As a result, the Company ~~does not believe these assessments are merited~~now has an obligation, at least on a going forward basis, to collect and ~~believes it could prevail~~remit sales and use taxes, primarily in ~~litigating this matter. However,~~respect to sales made through its school book club channel, as well as certain sales made through its ecommerce internet sites, to residents in states that the Company has ~~engaged~~not previously remitted sales or use taxes based on its having no physical presence in ~~discussions~~such states. As of February 29, 2020, the Company’s school book club channel was remitting sales taxes in 44 states and the District of Columbia. Any on-going or future litigation with states relating to sales and use taxes could be impacted favorably or unfavorably by the ~~state to resolve this matter and has recorded a charge~~Court’s decision in ~~the second~~future fiscal ~~quarter of the current fiscal related to the proposed settlement of this assessment.~~periods.

~~15.~~17. DERIVATIVES AND HEDGING

The Company enters into foreign currency derivative contracts to economically hedge the exposure to foreign currency fluctuations associated with the forecasted purchase of inventory, ~~and~~ the foreign exchange risk associated with certain receivables denominated in foreign currencies and certain future commitments for foreign expenditures. These derivative contracts are economic hedges and are not designated as cash flow hedges.

The Company marks-to-market these instruments and records the changes in the fair value of these items in Selling, general and administrative expenses ~~in the Condensed consolidated statement of operations,~~ and it recognizes the unrealized gain or loss in ~~other~~Other current assets or Other current liabilities. The notional values of the ~~open~~ contracts as of February ~~28, 2019~~29, 2020 and February 28, ~~2018~~2019 were ~~$30.0~~$26.0 and ~~$27.5,~~$30.0, respectively. Unrealized gains of ~~$0.3~~$0.7 and ~~unrealized losses of~~ $0.3 were recognized for the nine ~~month periods~~months ended February 29, 2020 and February 28, 2019, ~~and February 28, 2018,~~ respectively.

~~SCHOLASTIC CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED~~

~~(Dollar amounts in millions, except per share data)~~

~~16.~~18. OTHER ACCRUED EXPENSES

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



	February 29, 2020	May 31, 2019	February 28, 2019
Accrued payroll, payroll taxes and benefits	$39.6	$41.2	$45.2
Accrued bonus and commissions	18.2	13.7	13.0
Returns liability	40.6	34.5	97.3
Accrued other taxes	24.6	29.3	23.5
Accrued advertising and promotions	11.0	9.6	10.2
Other accrued expenses	36.9	36.5	47.0
Total accrued expenses	$170.9	$164.8	$236.2

February 28, 2019 May 31, 2018 February 28, 2018
Accrued payroll, payroll taxes and benefits $ 45.2
$ 47.1
$ 44.8
Accrued bonus and commissions 13.0
22.4
19.9
Returns liability⁽¹⁾
97.3
—
—
Accrued other taxes 23.5
25.7
23.4
Accrued advertising and promotions⁽¹⁾
10.2
35.8
35.8
Accrued insurance 8.5
7.8
8.1
Other accrued expenses 38.5
39.1
30.6
Total accrued expenses $ 236.2
$ 177.9
$ 162.6

⁽¹⁾~~Refer to Note 2,~~ ~~Revenues, for additional details regarding the impact of ASC 606 on Returns liability and Accrued advertising and promotions.~~

~~17.~~19. SUBSEQUENT EVENTS

The Board declared a quarterly cash dividend of $0.15 per share on the Company’s Class A and Common Stock for the fourth quarter of fiscal ~~2019.~~2020. The dividend is payable on June ~~17, 2019~~15, 2020 to shareholders of record as of the close of business on April 30, ~~2019.~~2020.

On March 18, 2020, the Board authorized an additional $50.0 for repurchases of common stock under the Company’s stock repurchase program. Under this program, which will continue to be funded with available cash, the Company may purchase shares, from time to time as conditions allow, on the open market or in negotiated private transactions. This authorization increases the aggregate amount of shares, in dollar terms, which may be repurchased to $67.3 as of March 18, 2020, after giving effect to the remaining amounts available for share repurchases under previous authorizations.

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)

During and subsequent to the third quarter of the current fiscal year, the novel coronavirus strain, known as COVID-19, continues to spread across the globe at an increasing rate. The Company has been, and will continue to be, affected by coronavirus-related school closings mandated by states and districts, which impact all school related businesses and more directly the book clubs and book fairs channels. See Note 6, Commitments and Contingencies, and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), specifically the Overview and Outlook and Liquidity sections, for further discussion.

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview and Outlook

Revenues for the quarter ended February ~~28, 2019~~29, 2020 were ~~$360.1~~$373.3 million, compared to ~~$344.7~~$360.1 million in the prior fiscal year quarter, an increase of ~~$15.4~~$13.2 million. The Company reported a net loss per diluted share of Class A and Common Stock of ~~$0.36~~$1.25 in the third quarter of fiscal ~~2019,~~2020, compared to a net loss per diluted share of ~~$1.41~~$0.36 in the prior fiscal year quarter.

InDuring the ~~third~~ fiscal quarter ~~the Company's~~ ~~Children's Book Publishing and Distribution~~ended February 29, 2020, revenues increased ~~with strong performance in~~3.7% primarily driven by sales from the trade channel which continued to have titles at the top of ~~frontlist titles including~~ ~~Fantastic Beasts~~^TM~~: The Crimes of Grindelwald, series publishing such as Wings of Fire, The Baby-Sitters Club graphic novels,~~bestsellers lists. In addition, revenues increased in the Education operating segment driven by growth in classroom books, professional learning, core instruction and ~~Dav Pilkey's Dog Man, as well as titles by Aaron Blabey~~classroom magazines. In the book fairs channel, data-informed right-sizing and the 20^th~~anniversary publishing for Harry Potter, in addition to increased media sales~~scheduling of ~~Scholastic's evergreen library of Clifford~~^® ~~programming. Trade publishing also performed well in~~ ~~International, though the strong U.S. dollar~~fairs continued to ~~affect revenues. In~~ ~~Education, revenues~~improve revenue per fair. Operating costs were ~~ahead~~adversely impacted by an inventory related write down of $40.0 million recognized in the ~~prior year with higher sales of~~ ~~Scholastic Edge~~ ~~and other core instruction programs,~~fiscal quarter as ~~well as supplemental print products and dealer trade sales of~~changes were made to the Company's ~~teaching resources line of products.~~

~~The Company continues to be subjected to~~North American purchasing protocols, product offerings and inventory retention policies reducing the ~~costs of implementing sales tax collections for Book Clubs, resulting from~~anticipated inventory requirements in the ~~Supreme Court's~~ ~~Wayfair~~ ~~decision, higher~~Company's school channels. This excess inventory write down will result in more efficient asset utilization, lower obsolescence expense and reduced warehouse labor costs in ~~fulfillment, higher costs for paper~~future periods.

The Company will be affected, in the fourth fiscal quarter, by coronavirus-related school closings mandated by states and ~~from printers and~~districts, which will impact school-based businesses directly. Revenues will therefore be materially lower in the ~~effect~~seasonally important fourth fiscal quarter. As a result, the Company is taking certain actions that are intended to reduce the adverse impact of the ~~stronger U.S. dollar~~loss of revenues on profitability and cash flow, such as a freeze on travel and entertainment and other discretionary expenditures, reduced inventory purchasing, the curtailment of non-essential business activities, staffing cost reductions, and temporary branch closures in ~~International. Although revenues will not be recognized until the first quarter of fiscal 2020, Education began customer presentations of~~ ~~Scholastic Literacy, a comprehensive core reading curriculum, and the market has responded positively to the program which has successfully competed in several reading adoptions.~~highly impacted regions.

Results of Operations – Consolidated

Revenues for the quarter ended February 29, 2020 increased to $373.3 million, compared to $360.1 million in the prior fiscal year. The Children's Book Publishing and Distribution segment revenues increased by $2.2 million, primarily due to increased trade channel revenue, driven by the completion of the acquisition of a majority interest in MBI and its full consolidation in the financial statements and by sales of the Company's best-selling titles and series, coupled with higher revenues in the book fairs channel, partially offset by lower revenues in the book club channel due to a lower number of events and lower revenue per event. In the ~~current~~Education segment, revenues increased by $14.0 million, primarily driven by classroom book collections and core instruction products due to a large school district sale. In local currency, the International segment revenues decreased by $2.5 million, primarily driven by lower revenues in Canada's school-based channels, due to a decline in sponsorship and an on-going teacher labor action in Ontario, and in the Asia markets which are being impacted by the local actions taken to curtail the spread of the coronavirus, partially offset by higher revenues in the Company's international trade channel in all major markets. International segment revenues were impacted by unfavorable foreign exchange of $0.5 million.

Revenues for the nine months ended February 29, 2020 increased to $1,203.1 million, compared to $1,183.2 million in the prior fiscal year period. The Children's Book Publishing and Distribution segment revenue increased $11.8 million, driven by higher trade revenue of $31.5 million resulting from the ~~Company adopted a new accounting pronouncement,~~ ~~Topic 606 - Revenue from Contracts with Customers~~ (~~Topic 606). See Note 2 of Notes to condensed consolidated financial statements - "unaudited" in Item 1, “Financial Statements" for further details. The Company applied~~ ~~Topic 606~~ ~~on a modified retrospective basis; therefore, prior fiscal quarter results are not comparable. The table below provides a summary~~completion of the ~~impact~~acquisition of the ~~adoption had on~~majority interest in MBI and the ~~three~~continued success of the Company's best-selling titles and ~~nine month periods ended February 28, 2019 for comparison~~series, as well as higher revenues in the book fairs channel of $8.4 million, partially offset by a decrease in book clubs revenues of $28.1 million. In the Education segment, revenues increased $12.9 million primarily driven by classroom book collections and core instruction products due to ~~prior periods:~~a large school district sale. In local currency, the International segment revenues increased by $0.2 million, primarily driven by higher revenues in the Company's international trade channel in all major markets, partially offset by lower revenues in Canada and the direct sales channel in Asia. International segment revenues were impacted by unfavorable foreign exchange of $5.0 million.

Three months ended February 28,
($ amounts in millions) 2019
Accounting Adoption ⁽¹⁾
Adjusted 2019 ⁽²⁾
2018 $ change % change
Revenues $ 360.1
$ (9.4 ) $ 350.7
$ 344.7
$ 6.0
1.7 %
Cost of goods sold 176.9
(2.0 ) 174.9
166.4
8.5
5.1 %
Selling, general and administrative expenses 190.9
0.1
191.0
186.7
4.3
2.3 %
Depreciation and amortization 13.7
—
13.7
11.0
2.7
24.5 %
Asset impairments —
—
—
4.3
4.3
— %
Operating income (loss) (21.4 ) (7.5 ) (28.9 ) (23.7 ) (5.2 ) (21.9 )%
Interest income (expense), net 1.0
—
1.0
0.2
0.8
*
Other components of net periodic benefit (cost) (0.4 ) —
(0.4 ) (39.8 ) 39.4
99.0 %
Provision (benefit) for income taxes (8.2 ) (2.0 ) (10.2 ) (14.1 ) 3.9
27.7 %
Net income (loss) $ (12.6 ) $ (5.5 ) $ (18.1 ) $ (49.2 ) $ 31.1
63.2 %
Basic earnings (loss) per share: $ (0.36 ) $ (0.16 ) $ (0.52 ) $ (1.41 ) $ 0.89
*
Diluted earnings (loss) per share: $ (0.36 ) $ (0.16 ) $ (0.52 ) $ (1.41 ) $ 0.89
*

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Nine months ended February 28,
($ amounts in millions) 2019
Accounting Adoption ⁽¹⁾
Adjusted 2019 ⁽²⁾
2018 $ change % change
Revenues $ 1,183.2
$ (11.1 ) $ 1,172.1
$ 1,132.2
$ 39.9
3.5 %
Cost of goods sold 564.6
(3.5 ) 561.1
535.6
25.5
4.8 %
Selling, general and administrative expenses 584.3
(0.5 ) 583.8
573.9
9.9
1.7 %
Depreciation and amortization 41.3
—
41.3
30.0
11.3
37.7 %
Asset impairments —
—
—
11.0
(11.0 ) — %
Operating income (loss) (7.0 ) (7.1 ) (14.1 ) (18.3 ) 4.2
23.0 %
Interest income (expense), net 2.3
—
2.3
0.5
1.8
*
Other components of net periodic benefit (cost) (1.1 ) —
(1.1 ) (55.4 ) 54.3
98.0 %
Provision (benefit) for income taxes (3.5 ) (1.9 ) (5.4 ) (17.4 ) 12.0
69.0 %
Net income (loss) $ (2.3 ) $ (5.2 ) $ (7.5 ) $ (55.8 ) $ 48.3
86.6 %
Basic earnings (loss) per share: $ (0.07 ) $ (0.15 ) $ (0.22 ) $ (1.59 ) $ 1.37
*
Diluted earnings (loss) per share: $ (0.07 ) $ (0.15 ) $ (0.22 ) $ (1.59 ) $ 1.37
*

* Not meaningful

(1) In the first quarter of fiscal 2019, the Company adopted Topic 606, the application of which resulted in the deferral of revenue for incentive credits earned from the holding of school book fairs until such credits are redeemed. In addition, Topic 606 eliminated the deferral of certain advertising costs in the case of the magazine business. Accordingly, for the three and nine month periods ended February 28, 2019, direct response advertising costs were expensed as incurred within Selling, general and administrative expenses.

~~(2) Under the modified retrospective method of adoption for~~ ~~Topic 606~~, prior period amounts are not restated to reflect the new accounting treatment. Therefore, the Company has included an Adjusted 2019 column to exclude the impact of Topic 606 and provide a comparable period-over-period variance.

~~Management's Discussion and Analysis of Financial Condition and Results of Operations (adjusted amounts exclude the impact of Topic 606 for comparability purposes)~~

~~Adjusted Revenues for the quarter ended February 28, 2019 increased to $350.7 million, compared to $344.7 million in the prior fiscal year quarter. The~~ ~~Children's Book Publishing and Distribution~~ segment adjusted revenues increased $8.2 million, driven by higher trade channel revenue of $13.2 million, partially offset by lower book fairs channel revenue of $2.3 million and lower book club channel revenue of $2.7 million. The ~~Education~~ ~~segment revenues increased $0.8 million, primarily driven by higher revenue from sales of~~ ~~Scholastic Edge~~ ~~and other core instruction programs, as well as supplemental print products and dealer trade sales of the Company's teaching resources line of products. The~~ ~~International~~ segment adjusted revenues decreased $3.0 million, reflecting an increase of $1.5 million in local currency revenues primarily driven by higher trade channel revenue, which was more than offset by an unfavorable impact of foreign currency translation of $4.5 million.

~~Adjusted Revenues for the nine months ended February 28, 2019 increased to $1,172.1 million, compared to $1,132.2 million in the prior fiscal year period. The~~ ~~Children's Book Publishing and Distribution~~ segment adjusted revenues increased $35.7 million, driven by higher trade channel revenue of $38.9 million, partially offset by lower book fairs channel revenue of $3.0 million and book club channel revenue of $0.2 million. The ~~Education~~ ~~segment revenue increased $8.3 million, primarily driven by higher sales of~~ ~~Scholastic Edge~~ ~~and classroom collections and higher revenue from custom publishing programs. The~~ ~~International~~ segment adjusted revenue decreased $4.1 million, reflecting an increase of $6.7 million in local currency revenues, primarily driven by higher trade channel revenue, which was more than offset by the unfavorable impact of foreign currency translation of $10.8 million.

Components of Cost of goods sold for the three and nine months ended February ~~28, 2019~~29, 2020 and February 28, ~~2018~~2019 are as follows:



	Three months ended						Nine months ended
	February 29,			February 28,			February 29,			February 28,
	2020			2019			2020			2019
($ amounts in millions)	$	% of Revenue		$	% of Revenue		$	% of Revenue		$	% of Revenue
Product, service and production costs	$99.6	26.7	%	$95.4	26.5	%	$320.3	26.6	%	$304.0	25.7	%
Royalty costs	28.5	7.6		24.5	6.8		91.3	7.6		87.7	7.4
Prepublication and production amortization	6.9	1.8		6.2	1.7		20.6	1.7		17.2	1.4
Postage, freight, shipping, fulfillment and other	48.0	12.9		50.8	14.1		152.2	12.7		155.7	13.2
Total	$183.0	49.0	%	$176.9	49.1	%	$584.4	48.6	%	$564.6	47.7	%

Cost of goods sold for the quarter ended February 29, 2020 was $183.0 million, or 49.0% of revenues, compared to $176.9 million, or 49.1% of revenues, in the prior fiscal year quarter. Cost of goods sold as a percentage of revenues remained primarily flat due to the increase in education channel revenues which carried a lower cost of product, and product mix in the book club channel resulting in favorable postage, freight and shipping costs, offset by higher tariffs and the completion of the acquisition of a majority interest in MBI and its full consolidation in the financial statements. MBI specialty products have a higher cost of product as a percentage of revenue due to higher manufacturing costs.

Cost of goods sold for the nine months ended February 29, 2020 was $584.4 million, or 48.6% of revenues, compared $564.6 million, or 47.7% of revenues, in the prior fiscal year period. The increase in Cost of goods sold as a percentage of revenues was primarily due to the completion of the acquisition of the majority interest in MBI and its full consolidation in the financial statements. MBI manufacturing costs associated with specialty products represented a portion of the increase in Cost of goods sold as a percentage of revenues. In addition, the Company recognized higher costs relating to tariffs and higher prepublication amortization costs, partially offset by the increase in education channel revenues which carried a lower cost of product. The Company continues to monitor and employ strategies to offset increased costs associated with higher tariffs. Tariffs will impact the cost of goods sold in the remaining fiscal year, especially in the domestic school-based channels.

Selling, general and administrative expenses in the quarter ended February 29, 2020 increased to $194.9 million, compared to $190.9 million in the prior fiscal year quarter. The increase was primarily related to higher employee related expenses which included increased severance expense of $1.3 million and lower equity method investment income due to the consolidation of MBI, partially offset by lower marketing expenses and a decrease in net sales tax expense in the book club channel.

Selling, general and administrative expenses in the nine months ended February 29, 2020 decreased to $574.8 million, compared to $584.3 million in the prior fiscal year period. The decrease was primarily related to lower marketing expenses in the book club and education channels, lower labor related expenses and a decrease in net sales tax expense in the book club channel and lower operating expenses in the book fair channel as a result of business process improvements, coupled with the absence of a prior period pretax charge related to a legacy sales tax assessment, partially offset by increased severance expense of $3.8 million and lower equity method investment income due to the consolidation of MBI. The Company may potentially experience increases in bad debt expenses in the fourth fiscal quarter as a result of measures, including mandated requirements, taken to limit the spread of coronavirus.

Depreciation and amortization expenses in the quarter ended February 29, 2020 increased to $15.4 million, compared to $13.7 million in the prior fiscal year quarter. The increase was primarily attributable to upgraded point-of-sale machines placed into service in the book fair channel and assets placed in service for capitalized strategic technology investments.

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Three months ended February 28, Nine months ended February 28,

Adjusted 2019 ⁽¹⁾
2018
Adjusted 2019 ⁽¹⁾
2018
($ amounts in millions) $ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue
Product, service and production costs $ 93.4
26.6 % $ 86.1
25.0 % $ 300.5
25.6 % $ 283.2
25.0 %
Royalty costs 24.5
7.0 % 22.4
6.5 % 87.7
7.5 % 77.6
6.9 %
Prepublication and production amortization 6.2
1.8 % 5.5
1.6 % 17.2
1.5 % 16.3
1.4 %
Postage, freight, shipping, fulfillment and other 50.8
14.5 % 52.4
15.2 % 155.7
13.3 % 158.5
14.0 %
Total $ 174.9
49.9 % $ 166.4
48.3 % $ 561.1
47.9 % $ 535.6
47.3 %

~~(1) Under the modified retrospective method of adoption for~~ ~~Topic 606~~, prior period amounts are not restated to reflect the new accounting treatment. Therefore, the Adjusted 2019 amounts are used to exclude the impact of Topic 606 and provide a comparable period-over-period variance.

Adjusted Cost of goods sold for the quarter ended February 28, 2019 was $174.9 million, or 49.9% of adjusted Revenues, compared to $166.4 million, or 48.3% of revenues, in the prior fiscal year quarter. The increase in adjusted Cost of goods sold as a percentage of revenues was due to higher royalty costs in the trade channel, as certain bestselling book series command higher royalty rates, higher paper and printing costs and higher product costs as a result of product mix.

Adjusted Cost of goods sold for the nine months ended February 28, 2019 was $561.1 million, or 47.9% of adjusted revenues, compared $535.6 million, or 47.3% of revenues, in the prior fiscal year period. The increase in adjusted Cost of goods sold as a percentage of revenues was due to higher royalty costs in the trade channel, as certain bestselling book series command higher royalty rates and higher paper and printing costs, partially offset by the favorable impact higher revenues had on fixed costs.

Adjusted Selling, general and administrative expenses in the quarter ended February 28, 2019 increased to $191.0 million, compared to $186.7 million in the prior fiscal year quarter. The increase primarily related to higher employee-related expenses, as well as higher costs being incurred in the book club channel to achieve compliance with new state sales tax collection rules and higher sales tax expense.

Adjusted Selling, general and administrative expenses in the nine months ended February 28, 2019 increased to $583.8 million, compared to $573.9 million in the prior fiscal year period. The increase primarily related to higher employee-related expenses, as well as higher costs being incurred in the book club channel to achieve compliance with new state sales tax collection rules and higher sales tax expense including a charge related to a proposed settlement of an outstanding sales tax assessment from prior fiscal years by the State of Wisconsin, partially offset by lower bad debt expense.

Depreciation and amortization expenses in the quarter ended February 28, 2019 increased to $13.7 million, compared to $11.0 million in the prior fiscal year quarter. The increase was primarily attributable to assets placed in service for capitalized strategic technology investments and assets related to the redesign and upgrade of the Company's headquarters in New York City.

Depreciation and amortization expenses in the nine months ended February ~~28, 2019~~29, 2020 increased to ~~$41.3~~$46.2 million, compared to ~~$30.0~~$41.3 million in the prior fiscal year period. The increase was primarily attributable to upgraded point-of-sale machines placed into service in the book fair channel and assets placed in service for capitalized strategic technology ~~investments and assets related to the redesign and upgrade of the Company's headquarters in New York City.~~investments.

~~There were no~~ Asset impairments ~~for~~and write downs in the three and nine months ended February ~~28, 2019. Asset impairments for~~29, 2020 were $40.0 million. In the ~~three~~fiscal quarter ended February 29, 2020, changes were made to the Company's North American purchasing protocols, product offerings and inventory retention policies reducing the anticipated inventory requirements in the Company's school channels. The changes will result in lower inventory requirements, more efficient asset utilization, lower obsolescence expense and reduced warehouse labor costs in future periods. As a result of the foregoing, the Company recorded a write down of inventory of $37.6 million. Capitalized prepublication and author advances costs, related to the inventory, of $0.8 million and $1.6 million, respectively, were written down as well.

Net interest income in the quarter ended February 29, 2020 was $0.3 million compared to Net interest income of $1.0 million in the prior fiscal year quarter. The decrease in Net interest income is primarily due to lower U.S. interest rates and lower short-term investment balances driven, in part, by higher common stock repurchases.

Net interest income in the nine months ended February ~~28, 2018 were $4.3~~29, 2020 was $1.0 million, ~~and $11.0~~compared to Net interest income of $2.3 million ~~respectively,~~in the prior fiscal year period. The decrease in Net interest income is primarily due to ~~impairment charges related~~lower U.S. interest rates and lower short-term investment balances driven, in part, by higher common stock repurchases. The Company expects a continued decrease in Net interest income in future periods.

The Company’s effective tax rate for the quarter ended February 29, 2020 was 28.0%, compared to 39.4% in the ~~abandonment~~prior fiscal year quarter. The Company’s effective tax rate for the nine month period ended February 29, 2020 was 27.4%, compared to 60.3% in the prior fiscal year period.

Net loss for the quarter ended February 29, 2020 increased by $30.7 million to $43.3 million, compared to Net loss of ~~legacy building improvements~~$12.6 million in ~~connection with~~ the ~~Company's renovation~~prior fiscal year quarter. Loss per basic and diluted share of ~~its headquarters~~Class A and Common Stock was $1.25 and $1.25, respectively, for the fiscal quarter ended February 29, 2020, compared to a net loss per basic and diluted share of Class A and Common Stock of $0.36 and $0.36, respectively, in ~~New York City.~~the prior fiscal year quarter.

Net loss for the nine months ended February 29, 2020 increased by $28.4 million to $30.7 million, compared to Net loss of $2.3 million in the prior fiscal year period. Loss per basic and diluted share of Class A and Common Stock was $0.89 and $0.89, respectively, in the nine month period ended February 29, 2020, compared to a net loss per basic and diluted share of Class A Stock and Common Stock of $0.07 and $0.07, respectively, in the prior fiscal year period.

Results of Operations

Children’s Book Publishing and Distribution



	Three months ended										Nine months ended
	February 29,			February 28,			$		%		February 29,		February 28,		$		%
($ amounts in millions)	2020			2019			change		change		2020		2019		change		change
Revenues	$220.2			$218.0			$2.2		1.0	%	$743.4		$731.6		$11.8		1.6	%
Cost of goods sold	106.1			101.4			4.7		4.6		343.1		325.6		17.5		5.4
Other operating expenses ⁽¹⁾	111.9			112.2			(0.3	)	(0.3	)	330.2		341.3		(11.1	)	(3.3	)
Operating income (loss)	$2.2			$4.4			$(2.2)		(50.0	)%	$70.1		$64.7		$5.4		8.3	%
Operating margin		1.0	%		2.0	%					9.4	%	8.8	%

(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses and depreciation and amortization.

Revenues for the quarter ended February 29, 2020 increased by $2.2 million to $220.2 million, compared to $218.0 million in the prior fiscal year quarter. Trade channel revenues increased by $11.1 million, primarily driven by the completion of the acquisition of a majority interest in MBI and its full consolidation in the financial

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

~~Net interest income in~~statements, as well as higher revenues from Dav Pilkey's Dog Man titles, especially Dog Man: Fetch 22, Hunger Games backlist titles as the ~~quarter ended February 28, 2019 was $1.0~~series' new release is planned for later this spring, and Scholastic Early Learners line of Wipe Clean Workbooks. Book fair channel revenue increased $2.7 million compared to ~~Net interest income of $0.2 million in~~ the prior year fiscal ~~year quarter. The $0.8 million increase was~~quarter, primarily driven by higher interest rates applied to the Company's cash and cash equivalents balances, while interest expense remained relatively flat due to the absence of long-term debt and comparable short-term debt balances.

~~Net interest income~~an increase in ~~the nine months ended February 28, 2019 was $2.3 million, compared to Net interest income of $0.5 million in the prior fiscal year period. The $1.8 million increase was primarily driven by higher~~

~~interest rates applied Company's cash and cash equivalents balances, while interest expense remained relatively flat due to the absence of long-term debt and comparable short term debt balances.~~

For the three and nine months ended February 28, 2018, the Company recognized settlement charges of $39.6 million and $55.0 million, respectively, related to the settlement of the U.S Pension Plan and the related purchase of insurance company group annuity contracts.

The Company’s effective tax rate, as adjusted, for the third quarter of fiscal 2019 was 36.0%, compared to 22.3% in the prior fiscal year quarter. The Company's effective tax rate, as adjusted, for the nine month period ended February 28, 2019 was 41.9%, compared to 23.8% in the prior fiscal year period. For the full fiscal year, the Company expects an effective tax rate, exclusive of discrete items, of approximately 30.0%.

~~Adjusted Net loss for the quarter ended February 28, 2019 decreased by $31.1 million to $18.1 million, compared to a Net loss of $49.2 million in the prior fiscal year quarter. Adjusted Loss~~revenue per basic and diluted share of Class A and Common Stock was $0.52 for the fiscal quarter ended February 28, 2019, compared to a Loss per basic and diluted share of Class A Stock and Common Stock of $1.41 in the prior fiscal year quarter.

Adjusted Net loss for the nine months ended February 28, 2019 decreased by $48.3 million to $7.5 million, compared to a Net loss of $55.8 million in the prior fiscal year period. Adjusted Loss per basic and diluted share of Class A and Common Stock was $0.22 in the nine month period ended February 28, 2019, compared to a Loss per basic and diluted share of Class A Stock and Common Stock of $1.59 in the prior fiscal year period.

~~Results of Operations~~

~~Children’s~~fair. Book ~~Publishing and Distribution~~

Three months ended February 28,
($ amounts in millions) 2019
Accounting Adoption ⁽¹⁾
Adjusted 2019 ⁽²⁾
2018
$
change

%
change
Revenues $ 218.0 $ (8.2 ) $ 209.8 $ 201.6 $ 8.2
4.1 %
Cost of goods sold 101.4 (1.7 ) 99.7 92.1 7.6
8.3 %
Other operating expenses ⁽³⁾
112.2 —
112.2 110.5 1.7
1.5 %
Operating income (loss) $ 4.4 $ (6.5 ) $ (2.1 ) $ (1.0 ) $ (1.1 ) 110.0 %
Operating margin 2.0 % — % — %

Nine months ended February 28,
($ amounts in millions) 2019
Accounting Adoption ⁽¹⁾
Adjusted 2019 ⁽²⁾
2018
$
change

%
change
Revenues $ 731.6 (11.7 ) $ 719.9 $ 684.2 $ 35.7
5.2 %
Cost of goods sold 325.6 (3.4 ) 322.2 296.8 25.4
8.6 %
Other operating expenses ⁽³⁾
341.3 —
341.3 332.3 9.0
2.7 %
Operating income (loss) $ 64.7 $ (8.3 ) $ 56.4 $ 55.1 $ 1.3
2.4 %
Operating margin 8.8 % 7.8 % 8.1 %

~~SCHOLASTIC CORPORATION~~
~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)~~

~~(3) Other operating expenses include selling, general and administrative expenses, bad debt expenses and depreciation and amortization.~~

Adjusted Revenues for the quarter ended February 28, 2019 increased $8.2 million to $209.8 million, compared to $201.6 million in the prior fiscal year quarter, with continued growth in the trade channel of $13.2 million driven by frontlist bestsellers as well as increased media sales of the Company's evergreen library of Clifford^® ~~programming. Key titles in the current period included Dav Pilkey's~~ ~~Dog Man: Brawl of the Wild~~, ~~Wings of Fire #12~~ ~~by Tui T. Sutherland,~~ ~~Kristy's Big Day~~ ~~(The Baby-Sitters Club Graphic Novel #6),~~ ~~Eva and Baby Mo: A Branches Book~~ ~~(Owl Diaries #10) and~~ ~~I Need a Hug, the new award winning book from author-illustrator Aaron Blabey. This increase was partially offset by lower book~~ club channel ~~revenue of $2.7~~sales decreased $11.6 million ~~due to a decrease in the number of events and lower book fairs channel revenue of $2.3 million primarily~~ due to a lower number of ~~fairs, partially offset by an increase in~~events and lower revenue per ~~fair.~~event compared to the prior fiscal year quarter.

~~Adjusted~~ Revenues for the nine months ended February ~~28, 2019~~29, 2020 increased ~~$35.7~~by $11.8 million to ~~$719.9~~$743.4 million, compared to ~~$684.2~~$731.6 million in the prior fiscal year period, primarily related to higher trade channel revenues of ~~$38.9~~$31.5 million, driven by the ~~success of Dav Pilkey's~~ ~~Dog Man: Lord~~additional revenues from the completion of the ~~Fleas~~ ~~and~~ ~~Dog Man: Brawl~~acquisition of a majority interest in MBI and its full consolidation in the ~~Wild~~,financial statements and increased media and entertainment sales, as well as ~~J.K. Rowling's~~ strong sales of core titles, including Dav Pilkey's Dog Man Series, Guts by Raina Telgemeier, The Wonky Donkey and The Dinky Donkey titles, the Wings of Fireseries and the Hunger Games novels by Suzanne Collins leading up to the series' new release later this spring, partially offset by lower Harry Potter related sales due to the prior fiscal year release of Fantastic ~~Beasts:~~Beasts™: The Crimes of Grindelwald ~~- The Original Screenplay~~, and the Brian Selznick cover editions of Harry ~~Potter: The Illustrated Collection~~, ~~The Wonky Donkey~~, ~~Wings of Fire: The Hive Queen, Wings of Fire: The Lost Continent~~ ~~and higher sales of backlist series such as Dog Man, Harry Potter, The Baby-Sitters Club~~^® ~~graphic novels and graphic novels by Raina Telgemeier, including the titles~~ ~~Drama~~, ~~Smile~~, ~~Sisters~~ ~~and~~ ~~Ghosts~~.Potter. Book ~~fairs~~fair channel revenues ~~decreased $3.0~~increased $8.4 million on lower fair count, primarily driven by revenue associated with higher net redemptions of incentive credits as ~~a result of a lower number of fairs, partially offset by~~well as an increase in revenue per ~~fair. Book~~fair when compared to the prior fiscal year period resulting from improved fair quality and selection and the introduction of an e-Wallet digital payment option at more fairs. Partially offsetting the higher segment revenues were lower book club channel ~~revenues decreased $0.2~~sales of $28.1 million compared to the prior fiscal year period, due to lower sponsorship as well as a lower number of events and lower revenue per event ~~partially offset by an increase in number of events.~~compared to the prior fiscal year period.

~~Adjusted~~ Cost of goods sold for the quarter ended February ~~28, 2019~~29, 2020 was ~~$99.7~~$106.1 million, or ~~47.5%~~48.2% of ~~adjusted~~ revenues, compared to ~~$92.1~~$101.4 million, or ~~45.7%~~46.5% of revenues, in the prior fiscal year quarter. The increase in Cost of goods sold as a ~~percent~~percentage of revenues was primarily due to the completion of the acquisition of the majority interest in MBI and its full consolidation in the financial statements. MBI manufacturing costs associated with specialty products represented a portion of the increase in Cost of goods sold as a percentage of revenues coupled with higher ~~royalty~~tariff costs ~~as certain bestselling~~recognized in the quarter ended February 29, 2020, partially offset by product mix in the book ~~series command higher royalty rates, higher paper~~club channel resulting in favorable postage, freight and ~~printing costs and higher fulfillment~~shipping costs.

~~Adjusted~~ Cost of goods sold for the nine months ended February ~~28, 2019~~29, 2020 was ~~$322.2~~$343.1 million, or ~~44.8%~~46.2% of ~~adjusted~~ revenues, compared to ~~$296.8~~$325.6 million, or ~~43.4%~~44.5% of revenues, in the prior fiscal year period. The increase in Cost of goods sold as a percent of revenues was primarily due to the completion of the acquisition of the majority interest in MBI and its full consolidation in the financial statements. MBI manufacturing costs associated with specialty products represented a portion of the increase in Cost of goods sold as a percentage of revenues coupled with higher ~~royalty~~tariff costs ~~as certain bestselling book series command~~recognized in the fiscal period ended February 29, 2020. The Company continues to monitor and employ strategies to offset increased costs associated with higher ~~royalty rates, higher paper and printing costs partially offset by~~tariffs. Tariffs will continue to impact the ~~favorable impact higher revenues had on fixed costs.~~cost of goods sold in the course of the remaining fiscal year, especially in the domestic school-based channels.

Other operating expenses for the quarter ended February ~~28, 2019 increased~~29, 2020 decreased to ~~$112.2~~$111.9 million compared to ~~$110.5~~$112.2 million in the prior fiscal year quarter. The ~~increase~~decrease was ~~primarily~~ driven by ~~higher employee-related~~lower marketing expenses ~~higher marketing~~and net sales tax expense in the ~~trade~~book club channel, ~~and additional costs being incurred~~partially offset by increased commissions in the book ~~clubs~~fair channel due to ~~achieve compliance with new state sales tax collection rules and higher sales tax expense.~~improved revenue per fair.

Other operating expenses for the nine months ended February ~~28, 2019 increased~~29, 2020 decreased to ~~$341.3~~$330.2 million, compared to ~~$332.3~~$341.3 million in the prior fiscal year period. The ~~increase~~decrease was primarily driven by ~~higher operating expenses~~business process improvements in the book ~~fairs channel, as well as increased employee-related expenses, higher depreciation expense in the~~club and book fair ~~channel~~channels and ~~additional costs being incurred in book clubs to achieve compliance with new state~~lower net sales tax ~~collection rules and higher sales tax expense, partially offset by lower marketing~~ expense in the book club channel.

~~As adjusted, segment~~Segment operating ~~loss~~income for the quarter ended February ~~28, 2019~~29, 2020 was ~~$2.1~~$2.2 million, compared to an operating ~~loss~~income of ~~$1.0~~$4.4 million in the prior fiscal year quarter. ~~The $1.1~~Despite the lower sales in the book club channel and the absence of a prior period media sale of Scholastic's evergreen library of Clifford^® programming, the segment operating income was limited to a decrease of $2.2 million ~~increase was primarily driven by higher employee-related expenses, sales tax accruals~~as a result of cost reduction strategies adopted in the book club and ~~additional costs being incurred in~~ book ~~clubs related to achieving compliance with the new state sales tax collection rules and higher~~fair channels, lower net sales tax expense ~~partially offset by~~in the book club channel and higher revenues driving profitability in the trade ~~channel revenues.~~channel.

~~As adjusted, segment~~Segment operating income for the nine months ended February ~~28, 2019~~29, 2020 was ~~$56.4~~$70.1 million, compared to ~~operating income of $55.1~~$64.7 million in the prior fiscal year period. ~~The $1.3 million increase was~~Despite the lower sales in the book club channel, the segment operating

SCHOLASTIC CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

~~primarily driven~~income increased by $5.4 million as a result of cost reduction strategies adopted in the ~~higher trade channel revenues, partially offset by higher employee-related expenses~~book club and ~~additional costs being incurred in~~ book ~~clubs related to achieving compliance with the new state~~fair channels, lower net sales tax ~~collection rules~~expense in the book club channel and ~~higher sales tax expense.~~continued growth in the trade channel.

Education


																					Three months ended									Nine months ended
	Three months ended February 28,																				February 29,			February 28,			$	%		February 29,		February 28,		$	%
($ amounts in millions)	2019				Accounting Adoption ⁽¹⁾			Adjusted 2019 ⁽²⁾				2018				$ change			% change		2020			2019			change	change		2020		2019		change	change
Revenues	$	60.3			$	—		$	60.3			$	59.5			$	0.8		1.3	%	$74.3			$60.3			$14.0	23.2	%	$192.6		$179.7		$12.9	7.2	%
Cost of goods sold	20.6				—			20.6				19.0				1.6			8.4	%	23.9			20.6			3.3	16.0		68.0		62.5		5.5	8.8
Other operating expenses ⁽³⁾	39.4				0.1			39.5				40.6				(1.1		)	(2.7	)%
Other operating expenses ⁽¹⁾																					40.6			39.4			1.2	3.0		122.0		123.5		(1.5)	(1.2	)
Operating income (loss)	$	0.3			$	(0.1	)	$	0.2			$	(0.1		)	$	0.3		*		$9.8			$0.3			$9.5	*		$2.6		$(6.3)		$8.9	*
Operating margin			0.5	%						0.3	%			—	%							13.2	%		0.5	%				1.3	%	—	%

SCHOLASTIC CORPORATION

Item 4. Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Corporation, after conducting an evaluation, together with other members of the Company’s management, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of February ~~28, 2019,~~29, 2020, have concluded that the Corporation’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Corporation in its reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and accumulated and communicated to members of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in the Corporation’s internal control over financial reporting that occurred during the quarter ended February ~~28, 2019~~29, 2020 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

SCHOLASTIC CORPORATION

Item 1A. Risk Factors

In Item 1A (Risk Factors) in Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019, the Company described material risk factors which could affect its business. 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 risk factors described in the Company’s Annual Report for the fiscal year ended May 31, 2019. Any of the risks identified in such Annual Report, in this Quarterly Report on Form 10-Q or in other reports the Company files with the SEC, and other risks the Company has not anticipated or discussed, could have a material adverse impact on the Company’s business, financial condition or results of operations.

Our business, results of operations and financial condition may be adversely affected by pandemic infectious diseases, particularly the novel coronavirus strain known as COVID-19.

Pandemic infectious diseases, such as the current COVID-19 strain, may adversely impact our business, consolidated results of operations and financial condition. COVID-19, as well as measures taken by governmental authorities and private actors to limit the spread of this virus, may interfere with the ability of our employees, suppliers, and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of our business which may cause us to materially curtail certain of our business operations. Moreover, as a large part of our business involves sales of books and other products in schools and school facilities, as well as through school districts, if COVID-19 related measures were to result in widespread and lengthy school closings, our business consolidated results of operations and financial condition may be materially adversely impacted. In particular, in the context of our book fair channel, such closings may lead to cancellation of a significant number of book fairs which are not rebooked or cannot be held during the current school year and, in the context of our book clubs channel, such closings could result in a significant decrease in the participation by teacher sponsors in our scheduled book club offerings. In the case of the Education segment, the last quarter of our fiscal year, currently ending May 31, 2020, is normally a significant quarter as school administrators and other educational personnel, prior to breaking for the summer, order products for immediate shipment in preparation for the following academic school year, orders which could be significantly impacted by the absence from the schools of such administrators and other educational personnel resulting from school closings. Finally, our International segment is subject to the same risks, due to the temporary closing of our franchised English language learning centers in China, as well as disruption in our direct sales business in other parts of Southeast Asia, resulting from measures imposed to combat the spread of COVID-19.

SCHOLASTIC CORPORATION

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

The following table provides information with respect to repurchases of shares of Common Stock by the Corporation during the three months ended February ~~28, 2019:~~29, 2020:

Issuer Purchases of Equity Securities

(Dollars in millions, except per share amounts)

Period
Total number of
shares purchased

Average
price paid
per share

Total number of shares
purchased as part of publicly
announced plans or
programs

Maximum number of shares (or
approximate dollar value) that may yet be purchased under the plans or programs ⁽ⁱ⁾

December 1, 2018 through December 31, 2018 49,527
38.41
49,527
59.5

January 1, 2019 through January 31, 2019 1,300
39.92
1,300
59.4

February 1, 2019 through February 28, 2019 —
—
—
59.4

Total 50,827
38.45
50,827
$ 59.4



Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares (or approximate dollar value) that may yet be purchased under the plans or programs ⁽ⁱ⁾
December 1 through December 31, 2019	31,306	37.64	31,306	$32.0
January 1 through January 31, 2020	211,540	35.50	211,540	24.5
February 1 through February 29, 2020	130,122	33.32	130,122	20.1
Total	372,968		372,968	$20.1

(i) Represents the amount remaining at February ~~28, 2019~~29, 2020 under ~~the $50.0 million Board authorization for Common share repurchases announced on July 22, 2015 and~~ the $50.0 Board authorization for Common share repurchases announced on March 21, 2018, which is available for further repurchases, from time to time as conditions allow, on the open market or through negotiated private transactions. See Note 1113 and Note 19 of Notes to ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements,” for a description of the Company’s share buy-back program and additional share repurchase ~~authorizations.~~authorization made on March 18, 2020.

SCHOLASTIC CORPORATION

Item 6. Exhibits

Exhibits:



31.1	Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101
~~101.INS~~	~~XBRL Instance Document~~ Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended February 29, 2020 formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.

~~101.SCH~~104	~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definitions Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Labels Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Document~~




	Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.

SCHOLASTIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q, DATED February ~~28, 2019~~29, 2020

Exhibits Index




Exhibit Number	Description of Document
31.1	Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.INS~~101	XBRL Instance Document *Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended February 29, 2020 formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.

~~101.SCH~~104	XBRL Taxonomy Extension Schema Document *

~~101.CAL~~	XBRL Taxonomy Extension Calculation Document *

~~101.DEF~~	XBRL Taxonomy Extension Definitions Document *

~~101.LAB~~	XBRL Taxonomy Extension Labels Document *

~~101.PRE~~	XBRL Taxonomy Extension Presentation Document *
	Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.

* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

SCHOLASTIC CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		SCHOLASTIC CORPORATION
		(Registrant)

Date: March ~~22, 2019~~20, 2020	By:	/s/ Richard Robinson


		Richard Robinson
		Chairman of the Board, President and Chief Executive Officer

Date: March ~~22, 2019~~20, 2020	By:	/s/ Kenneth J. Cleary


		Kenneth J. Cleary
		Chief Financial Officer (Principal Financial Officer)

4443



	February 29, 2020	Location within Condensed Consolidated Balance Sheet
Operating leases	$71.7	Operating lease right-of-use assets, net
Finance leases	11.4	Property, plant and equipment, net
Total lease assets	$83.1

Operating leases :
Current portion	22.7	Current portion of operating lease liabilities
Non-current portion	52.0	Long-term operating lease liabilities
Total operating lease liabilities	$74.7

Finance leases :
Current portion	2.1	Other accrued expenses
Non-current portion	10.0	Other noncurrent liabilities
Total finance lease liabilities	$12.1
Total lease liabilities	$86.8



	Three Months Ended February 29, 2020	Nine Months Ended February 29, 2020	Location within Condensed Consolidated Statements of Operations
	Three Months Ended February 29, 2020	Nine Months Ended February 29, 2020
Operating lease expense	$7.1	$21.3	Selling, general and administrative expenses
Finance lease costs :
Depreciation of leased assets	0.6	1.5	Selling, general and administrative expenses
Accretion of lease liabilities	0.1	0.3	Interest income (expense), net
Total lease expense	$7.8	$23.1



	Nine Months Ended February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$3.0
Operating cash flows from finance leases	0.3
Financing cash flows from finance leases	1.5



	Operating	Finance
	Leases	Leases
Remainder of Fiscal 2020 ⁽¹⁾	$7.1	$0.6
Fiscal 2021	23.6	2.5
Fiscal 2022	19.1	2.4
Fiscal 2023	13.0	2.3
Fiscal 2024	7.2	2.1
Fiscal 2025 and thereafter	11.4	3.7
Total lease payments	81.4	13.6
Less: interest	(6.7)	(1.5)
Total lease liabilities	$74.7	$12.1



Authorizations	Amount
July 2015	$50.0
March 2018	50.0
Total current Board authorizations at June 1, 2019	$100.0
Less repurchases made under these authorizations	(79.9)
Remaining Board authorization at February 29, 2020	$20.1



	February 28, 2019			May 31, 2018			February 28, 2018
	(Unaudited)						(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	338.1		$	391.9		$	362.6
Accounts receivable, net	317.3			204.9			186.0
Inventories, net	356.8			294.9			356.9
Prepaid expenses and other current assets	84.8			66.6			100.1
Total current assets	1,097.0			958.3			1,005.6
Noncurrent Assets:
Property, plant and equipment, net	574.9			555.6			530.6
Prepublication costs, net	65.3			55.3			48.8
Royalty advances, net	52.3			44.8			50.3
Goodwill	119.1			119.2			119.1
Noncurrent deferred income taxes	43.6			25.2			17.8
Other assets and deferred charges	70.9			67.0			61.5
Total noncurrent assets	926.1			867.1			828.1
Total assets	$	2,023.1		$	1,825.4		$	1,833.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Lines of credit and current portion of long-term debt	$	11.0		$	7.9		$	7.7
Accounts payable	215.3			198.9			208.4
Accrued royalties	76.8			34.6			63.2
Deferred revenue	154.7			24.7			56.5
Other accrued expenses	236.2			177.9			162.6
Accrued income taxes	2.1			1.8			1.2
Total current liabilities	696.1			445.8			499.6
Noncurrent Liabilities:
Long-term debt	—			—			—
Other noncurrent liabilities	57.9			58.8			66.5
Total noncurrent liabilities	57.9			58.8			66.5

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, 4.0 shares; Issued and Outstanding, 1.7 shares	0.0			0.0			0.0
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 33.6, 33.3 and 33.1 shares, respectively	0.4			0.4			0.4
Additional paid-in capital	619.4			614.4			614.6
Accumulated other comprehensive income (loss)	(54.6		)	(55.7		)	(56.5		)
Retained earnings	1,000.5			1,065.2			1,019.6
Treasury stock, at cost: 9.3, 9.6 and 9.8 shares, respectively	(296.6		)	(303.5		)	(310.5		)
Total stockholders’ equity	1,269.1			1,320.8			1,267.6
Total liabilities and stockholders’ equity	$	2,023.1		$	1,825.4		$	1,833.7



	As reported - May 31, 2018		Adjustments due to adoption				June 1, 2018
Accounts receivable, net	$	204.9	$	31.1		⁽¹⁾	$	236.0
Inventories, net	294.9		(1.9		)	⁽²⁾	293.0
Prepaid expenses and other current assets	66.6		(4.3		)	⁽²⁾⁽³⁾	62.3
Noncurrent deferred income taxes	25.2		16.0			⁽⁴⁾	41.2
Deferred revenue	24.7		86.3			⁽⁵⁾	111.0
Other accrued expenses	177.9		1.1			⁽⁶⁾	179.0
Retained earnings	1,065.2		(46.5		)		1,018.7



	As reported			Adjustments				Without adoption of Topic 606
Three months ended February 28, 2019
Revenues	$	360.1		$	(9.4	)	⁽¹⁾	$	350.7
Cost of goods sold	176.9			(2.0		)	⁽¹⁾	174.9
Selling, general and administrative expenses	190.9			0.1			⁽²⁾	191.0
Depreciation and amortization	13.7			—				13.7
Operating income (loss)	(21.4		)	(7.5		)		(28.9		)
Interest income (expense), net	1.0			—				1.0
Other components of net periodic benefit (cost)	(0.4		)	—				(0.4		)
Provision (benefit) for income taxes	(8.2		)	(2.0		)	⁽³⁾	(10.2		)
Net income (loss)	$	(12.6	)	$	(5.5	)		$	(18.1	)
Basic earnings (loss) per share:	$	(0.36	)	$	(0.16	)		$	(0.52	)
Diluted earnings (loss) per share:	$	(0.36	)	$	(0.16	)		$	(0.52	)

Nine months ended February 28, 2019
Revenues	$	1,183.2		$	(11.1	)	⁽¹⁾	$	1,172.1
Cost of goods sold	564.6			(3.5		)	⁽¹⁾	561.1
Selling, general and administrative expenses	584.3			(0.5		)	⁽²⁾	583.8
Depreciation and amortization	41.3			—				41.3
Operating income (loss)	(7.0		)	(7.1		)		(14.1		)
Interest income (expense), net	2.3			—				2.3
Other components of net periodic benefit (cost)	(1.1		)	—				(1.1		)
Provision (benefit) for income taxes	(3.5		)	(1.9		)	⁽³⁾	(5.4		)
Net income (loss)	$	(2.3	)	$	(5.2	)		$	(7.5	)
Basic earnings (loss) per share:	$	(0.07	)	$	(0.15	)		$	(0.22	)
Diluted earnings (loss) per share:	$	(0.07	)	$	(0.15	)		$	(0.22	)


(2)	Includes depreciation of property, plant and equipment and amortization of intangible assets and prepublication and production costs.


(3)	Impairment charges of $4.3 and $11.0 for the three and nine months ended February 28, 2018, respectively, relate to the prior fiscal year abandonment of legacy building improvements in connection with the Company's renovation of its headquarters in New York City.



	February 28, 2019		May 31, 2018		February 28, 2018
Revolving Loan	$	—	$	—	$	—
Unsecured lines of credit (weighted average interest rates of 4.3%, 2.9% and 3.7%, respectively)	11.0		7.9		7.7
Total debt	$	11.0	$	7.9	$	7.7



	Nine months ended February 28,			Twelve months ended May 31,			Nine months ended February 28,
	2019			2018			2018
Gross beginning balance	$	158.8		$	158.5		$	158.5
Accumulated impairment	(39.6		)	(39.6		)	(39.6		)
Beginning balance	$	119.2		$	118.9		$	118.9
Foreign currency translation	(0.1		)	0.2			0.2
Other	—			0.1			—
Ending balance	$	119.1		$	119.2		$	119.1



	Three months ended February 29, 2020
	Foreign currency translation adjustments		Retirement benefit plans	Total
Beginning balance at December 1, 2019	$(45.2)		$(12.2)	$(57.4)
Other comprehensive income (loss) before reclassifications	(2.3	)	—	(2.3	)
Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of gains and losses (net of tax of $0.0)	—		0.3	0.3
Amortization of prior service credit (net of tax of $0.0)	—		0.0	0.0
Other comprehensive income (loss)	(2.3	)	0.3	(2.0	)
Ending balance at February 29, 2020	$(47.5)		$(11.9)	$(59.4)

	Three months ended February 28, 2019
	Foreign currency translation adjustments		Retirement benefit plans	Total
Beginning balance at December 1, 2018	$(45.6)		$(10.9)	$(56.5)
Other comprehensive income (loss) before reclassifications	1.7		—	1.7
Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of gains and losses (net of tax of $0.0)	—		0.2	0.2
Amortization of prior service credit (net of tax of $0.0)	—		0.0	0.0
Other comprehensive income (loss)	1.7		0.2	1.9
Ending balance at February 28, 2019	$(43.9)		$(10.7)	$(54.6)


•	Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.



	Three months ended February 28,								Nine months ended February 28,
	Adjusted 2019 ⁽¹⁾				2018				Adjusted 2019 ⁽¹⁾				2018
($ amounts in millions)	$		% of Revenue		$		% of Revenue		$		% of Revenue		$		% of Revenue
Product, service and production costs	$	93.4	26.6	%	$	86.1	25.0	%	$	300.5	25.6	%	$	283.2	25.0	%
Royalty costs	24.5		7.0	%	22.4		6.5	%	87.7		7.5	%	77.6		6.9	%
Prepublication and production amortization	6.2		1.8	%	5.5		1.6	%	17.2		1.5	%	16.3		1.4	%
Postage, freight, shipping, fulfillment and other	50.8		14.5	%	52.4		15.2	%	155.7		13.3	%	158.5		14.0	%
Total	$	174.9	49.9	%	$	166.4	48.3	%	$	561.1	47.9	%	$	535.6	47.3	%


($ amounts in millions)	Fiscal Year Maturity																	Fiscal Year Maturity
	2019 ⁽¹⁾			2020		2021		2022		2023		Thereafter		Total		Fair Value @ 2/28/2019		2020⁽¹⁾		2021	2022		2023	2024	Thereafter	Total	Fair Value @ 2/29/2020
Debt Obligations
Lines of Credit and current portion of long-term debt	$	11.0		$	—	$	—	$	—	$	—	$	—	$	11.0	$	11.0	$9.7		$0.0	$0.0		$0.0	$0.0	$0.0	$9.7	$9.7
Average interest rate	4.3		%	—		—		—		—		—		—				4.6	%	—	—		—	—	—
Long-term debt																		$0.0		$0.0	$6.4		$0.0	$0.0	$0.0	$6.4	$6.4
Average interest rate																		—		—	2.5	%	—	—	—