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
August 31, 20192020
Commission File No.000-19860
 
SCHOLASTIC CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware13-3385513
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
557 Broadway,
New York,New York10012
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code (212) 343-6100
Title of ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.01 par valueSCHLThe NASDAQ Stock Market LLC
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐ No ☒
 
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:
Title of each classNumber of shares outstanding as of August 31, 20192020
Common Stock, $.01 par value33,052,28432,547,090
Class A Stock, $.01 par value1,656,200
schl-20200831_g1.jpg

1

SCHOLASTIC CORPORATION
 
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2019

2020

INDEX
Page
Item 1.
3
4
5
6
7
8
Item 2.
2423
Item 3.
30
Item 4.
31
Item 2.6.
32
Exhibits34
33
Signatures
35


2

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 Three months ended
August 31,August 31,August 31,
2019 2018 20202019
Revenues$232.6 $218.4Revenues$215.2 $232.6 
Operating costs and expenses:   Operating costs and expenses:  
Cost of goods sold137.1 125.3 Cost of goods sold123.2 137.1 
Selling, general and administrative expenses167.5 163.7 Selling, general and administrative expenses121.5 163.1 
Depreciation and amortization15.4 13.2 Depreciation and amortization15.5 15.4 
SeveranceSeverance12.0 4.4 
Total operating costs and expenses320.0 302.2Total operating costs and expenses272.2 320.0 
Operating income (loss)(87.4) (83.8)Operating income (loss)(57.0)(87.4)
Interest income (expense), net0.7 0.8Interest income (expense), net(1.2)0.7 
Other components of net periodic benefit (cost)(0.4) (0.4)Other components of net periodic benefit (cost)(0.2)(0.4)
Gain (loss) on sale of assets and otherGain (loss) on sale of assets and other6.6 0 
Earnings (loss) before income taxes(87.1) (83.4)Earnings (loss) before income taxes(51.8)(87.1)
Provision (benefit) for income taxes(28.6) (22.1)Provision (benefit) for income taxes(12.0)(28.6)
Net income (loss)(58.5) (61.3)Net income (loss)(39.8)(58.5)
Less: Net income (loss) attributable to noncontrolling interests(0.0) —
Less: Net income (loss) attributable to noncontrolling interestLess: Net income (loss) attributable to noncontrolling interest0.0 0.0
Net income (loss) attributable to Scholastic Corporation$(58.5) $(61.3)Net income (loss) attributable to Scholastic Corporation$(39.8)$(58.5)
Basic and diluted earnings (loss) per Share of Class A
and Common Stock
 
  
Basic and diluted earnings (loss) per Share of Class A
and Common Stock		  
Basic$(1.68) $(1.75)Basic$(1.16)$(1.68)
Diluted$(1.68) $(1.75)Diluted$(1.16)$(1.68)
See accompanying notes

3

SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED

(Dollar amounts in millions)
 Three months ended
August 31,August 31,
 20202019
Net income (loss)$(39.8)$(58.5)
Other comprehensive income (loss), net:  
   Foreign currency translation adjustments10.7 (2.0)
   Pension and postretirement adjustments (net of tax)0.1 0.2 
Total other comprehensive income (loss), net$10.8 $(1.8)
Comprehensive income (loss)$(29.0)$(60.3)
Less: Net income (loss) attributable to noncontrolling interest0.0 0.0 
Comprehensive income (loss) attributable to Scholastic Corporation$(29.0)$(60.3)
 Three months ended
 August 31,
 2019 2018
Net income (loss)$(58.5) $(61.3)
Other comprehensive income (loss), net: 
  
   Foreign currency translation adjustments(2.0) (3.1)
   Pension and postretirement adjustments (net of tax)0.2
 0.2
Total other comprehensive income (loss), net$(1.8) $(2.9)
Comprehensive income (loss)$(60.3) $(64.2)
Less: Net income (loss) attributable to noncontrolling interest(0.0) —
Comprehensive income (loss) attributable to Scholastic Corporation$(60.3) $(64.2)
See accompanying notes



4

SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(Dollar amounts in millions, except per share data)
August 31, 2019 (unaudited) May 31, 2019 (audited) August 31, 2018 (unaudited) August 31, 2020 (unaudited)May 31, 2020 (audited)August 31, 2019 (unaudited)
ASSETS 
  
  
ASSETS   
Current Assets: 
  
  
Current Assets:   
Cash and cash equivalents$199.4 $334.1 $269.8Cash and cash equivalents$355.5 $393.8 $199.4 
Accounts receivable, net226.1
 250.1
 223.7
Accounts receivable, net219.6 239.8 226.1 
Inventories, net403.6
 323.7
 402.3
Inventories, net323.2 270.6 403.6 
Income tax receivableIncome tax receivable103.2 90.0 39.4 
Prepaid expenses and other current assets109.7
 52.7
 107.6
Prepaid expenses and other current assets53.7 41.1 70.3 
Total current assets938.8
 960.6
 1,003.4
Total current assets1,055.2 1,035.3 938.8 
Noncurrent Assets:     Noncurrent Assets:
Property, plant and equipment, net579.9
 577.7
 563.5
Property, plant and equipment, net573.0 576.9 579.9 
Prepublication costs, net71.1
 70.2
 58.5
Prepublication costs, net69.7 70.6 71.1 
Operating lease right-of-use assets, net81.7
 —
 —
Operating lease right-of-use assets, net96.4 95.3 81.7 
Royalty advances, net50.0
 47.5
 47.1
Royalty advances, net42.0 39.9 50.0 
Goodwill125.0
 125.2
 119.1
Goodwill125.6 124.9 125.0 
Noncurrent deferred income taxes36.8
 37.0
 40.9
Noncurrent deferred income taxes19.1 18.6 36.8 
Other assets and deferred charges61.3
 60.3
 67.1
Other assets and deferred charges75.3 72.1 61.3 
Total noncurrent assets1,005.8
 917.9
 896.2
Total noncurrent assets1,001.1 998.3 1,005.8 
Total assets$1,944.6 $1,878.5 $1,899.6Total assets$2,056.3 $2,033.6 $1,944.6 
     
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
  
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current Liabilities: 
  
  
Current Liabilities:   
Lines of credit and current portion of long-term debt$13.0 $7.3 $15.7Lines of credit and current portion of long-term debt$19.9 $7.9 $13.0 
Accounts payable226.4
 195.3
 242.3
Accounts payable168.3 153.6 226.4 
Accrued royalties63.3
 41.9
 56.4
Accrued royalties56.2 37.8 63.3 
Deferred revenue142.3
 130.8
 130.4
Deferred revenue127.6 116.5 142.3 
Other accrued expenses155.6
 164.8
 185.9
Other accrued expenses166.6 161.5 155.6 
Accrued income taxes0.7
 1.4
 0.7
Accrued income taxes1.8 1.4 0.7 
Operating lease liabilities24.1
 —
 —
Operating lease liabilities23.1 22.8 24.1 
Total current liabilities625.4
 541.5
 631.4
Total current liabilities563.5 501.5 625.4 
Noncurrent Liabilities: 
  
  
Noncurrent Liabilities:   
Long-term debt—
 —
 —
Long-term debt200.0 210.6 0 
Operating lease liabilities61.1
 —
 —
Operating lease liabilities77.1 75.7 61.1 
Other noncurrent liabilities61.4
 64.2
 58.8
Other noncurrent liabilities68.3 65.2 61.4 
Total noncurrent liabilities122.5
 64.2
 58.8
Total noncurrent liabilities345.4 351.5 122.5 
Commitments and Contingencies (see Note 5)—
 —
 —
Commitments and Contingencies (see Note 5)0 0 0 
Stockholders’ Equity: 
  
  
Stockholders’ Equity:   
Preferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, none—
 —
 —
Preferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, NaNPreferred Stock, $1.00 par value: Authorized, 2.0 shares; Issued and Outstanding, NaN$0 $0 $0 
Class A Stock, $0.01 par value: Authorized, 4.0 shares; Issued and Outstanding, 1.7 shares0.0
 0.0
 0.0
Class A Stock, $0.01 par value: Authorized, 4.0 shares; Issued and Outstanding, 1.7 shares0.0 0.0 0.0 
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 33.1, 33.4 and 33.4 shares, respectively0.4
 0.4
 0.4
Common Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 32.5, 32.5, and 33.1 shares, respectivelyCommon Stock, $0.01 par value: Authorized, 70.0 shares; Issued, 42.9 shares; Outstanding, 32.5, 32.5, and 33.1 shares, respectively0.4 0.4 0.4 
Additional paid-in capital622.2
 620.8
 615.5
Additional paid-in capital622.8 622.4 622.2 
Accumulated other comprehensive income (loss)(61.5) (59.7) (58.6)Accumulated other comprehensive income (loss)(47.5)(58.3)(61.5)
Retained earnings948.9
 1,012.6
 952.1
Retained earnings903.1 948.0 948.9 
Treasury stock, at cost: 9.8, 9.5 and 9.5 shares, respectively(314.6) (302.6) (300.0)
Treasury stock, at cost: 10.4, 10.4 and 9.8 shares, respectivelyTreasury stock, at cost: 10.4, 10.4 and 9.8 shares, respectively(332.8)(333.3)(314.6)
Total stockholders’ equity of Scholastic Corporation1,195.4
 1,271.5
 1,209.4
Total stockholders’ equity of Scholastic Corporation1,146.0 1,179.2 1,195.4 
Noncontrolling interest1.3
 1.3
 —
 Noncontrolling interest1.4 1.4 1.3 
Total stockholders’ equity1,196.7
 1,272.8
 1,209.4
Total stockholders’ equity1,147.4 1,180.6 1,196.7 
Total liabilities and stockholders’ equity$1,944.6 $1,878.5 $1,899.6Total liabilities and stockholders’ equity$2,056.3 $2,033.6 $1,944.6 
See accompanying notes

5


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

 Class A StockCommon StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Treasury Stock
At Cost		Total
Stockholders'
Equity of Scholastic Corporation		Noncontrolling InterestTotal
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at June 1, 20191.7$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)— — — — — — (58.5)— (58.5)0.0 (58.5)
Foreign currency translation adjustment— — — — — (2.0)— — (2.0)— (2.0)
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)
Balance at August 31, 20191.7 $0.0 33.1 $0.4 $622.2 $(61.5)$948.9 $(314.6)$1,195.4 $1.3 $1,196.7 

 Class A StockCommon StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Treasury Stock
At Cost		Total
Stockholders'
Equity of Scholastic Corporation		 Noncontrolling interest Total
Stockholders'
Equity
 Shares AmountShares Amount
Balance at June 1, 20181.7
 $0.033.3
 $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)
Adoption of ASC 606 ( net of tax $16.0)—
 —
—
 —
 —
 —
 (46.5) —
 (46.5) —
 (46.5)
Foreign currency translation adjustment—
 —
—
 —
 —
 (3.1) —
 —
 (3.1) —
 (3.1)
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
Proceeds pursuant to stock-based compensation plans—
 —
—
 —
 2.8
 —
 —
 —
 2.8
 —
 2.8
Treasury stock issued pursuant to equity-based plans—
 —
0.1
 —
 (3.2) —
 —
 3.5
 0.3
 —
 0.3
Dividends ($0.15 per share)—
 —
—
 —
 —
 —
 (5.3) —
 (5.3) —
 (5.3)
Balance at August 31, 20181.7
 $0.033.4
 $0.4 $615.5 $(58.6) $952.1 $(300.0) $1,209.4 $0.0 $1,209.4

Class A StockCommon StockAdditional 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		 Class A StockCommon StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Treasury Stock
At Cost		Total
Stockholders'
Equity of Scholastic Corporation		Noncontrolling InterestTotal
Stockholders'
Equity
Shares AmountShares Amount SharesAmountSharesAmount
Balance at June 1, 20191.7
 $0.033.4
 $0.4 $620.8 $(59.7) $1,012.6 $(302.6) $1,271.5 $1.3 $1,272.8
Balance at June 1, 2020Balance at June 1, 20201.7 $0.0 32.5 $0.4 $622.4 $(58.3)$948.0 $(333.3)$1,179.2 $1.4 $1,180.6 
Net Income (loss)—
 —
—
 —
 —
 —
 (58.5) —
 (58.5) —
 (58.5)Net Income (loss)— — — — — — (39.8)— (39.8)0.0 (39.8)
Foreign currency translation adjustment—
 —
—
 —
 —
 (2.0) —
 —
 (2.0) —
 (2.0)Foreign currency translation adjustment— — — — — 10.7 — — 10.7 — 10.7 
Pension and post-retirement adjustments (net of tax of $0.0)—
 —
—
 —
 —
 0.2
 —
 —
 0.2
 —
 0.2
Pension and post-retirement adjustments (net of tax of $0.0)— — — — — 0.1 — — 0.1 — 0.1 
Stock-based compensation—
 —
—
 —
 1.5
 —
 —
 —
 1.5
 —
 1.5
Stock-based compensation— — — — 0.6 — — — 0.6 — 0.6 
Purchases of treasury stock at cost—
 —
(0.3) —
 —
 —
 —
 (12.6) (12.6) —
 (12.6)Purchases of treasury stock at cost— — 0 — — — — 0 0 — 0 
Treasury stock issued pursuant to equity-based plans—
 —
0.0
 —
 (0.1) —
 —
 0.6
 0.5
 —
 0.5
Treasury stock issued pursuant to equity-based plans— — 0.0 — (0.2)— — 0.5 0.3 — 0.3 
Dividends ($0.15 per share)—
 —
—
 —
 —
 —
 (5.2) —
 (5.2) —
 (5.2)Dividends ($0.15 per share)— — — — — — (5.1)— (5.1)— (5.1)
Noncontrolling interest in Make Believe Ideas—
 —
—
 —
 —
 —
 —
 —
 —
 (0.0) —
Balance at August 31, 20191.7
 $0.033.1
 $0.4 $622.2 $(61.5) $948.9 $(314.6) $1,195.4 $1.3 $1,196.7
Balance at August 31, 2020Balance at August 31, 20201.7 $0.0 32.5 $0.4 $622.8 $(47.5)$903.1 $(332.8)$1,146.0 $1.4 $1,147.4 
See accompanying notes

6


SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
(Dollar amounts in millions)
 Three months ended
August 31,August 31,
 20202019
Cash flows - operating activities:  
Net income (loss) attributable to Scholastic Corporation$(39.8)$(58.5)
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities:  
   Provision for losses on accounts receivable1.4 1.6 
   Provision for losses on inventory2.9 4.1 
   Provision for losses on royalty advances1.3 1.1 
   Amortization of prepublication costs6.3 6.4 
   Depreciation and amortization16.4 16.1 
   Amortization of pension and postretirement actuarial gains and losses0.1 0.2 
   Deferred income taxes0.1 0.1 
��  Stock-based compensation0.6 1.5 
   Income from equity-method investments(0.8)(1.0)
   (Gain) loss on sale of assets(6.6)0 
Changes in assets and liabilities, net of amounts acquired:  
   Accounts receivable23.3 21.5 
   Inventories(50.0)(85.3)
   Prepaid expenses and other current assets(12.0)(28.1)
   Income tax receivable(13.0)(29.1)
   Royalty advances(2.8)(3.8)
   Accounts payable13.9 32.2 
   Accrued income taxes0.3 (0.8)
   Accrued royalties17.5 21.7 
   Deferred revenue10.1 11.8 
   Other assets and liabilities4.8 (9.3)
Net cash provided by (used in) operating activities(26.0)(97.6)
Cash flows - investing activities:  
Prepublication expenditures(5.2)(7.4)
Additions to property, plant and equipment(16.0)(13.5)
Net proceeds from sale of assets12.3 0 
Acquisition of land0 (3.3)
Other investment and acquisition-related payments0 (0.1)
Net cash provided by (used in) investing activities(8.9)(24.3)
Cash flows - financing activities:  
Borrowings under lines of credit, credit agreement and revolving loan2.2 8.1 
Repayments of lines of credit, credit agreement and revolving loan(3.8)(1.9)
Repayment of capital lease obligations(0.5)(0.4)
Reacquisition of common stock0 (12.6)
Payment of dividends(5.1)(5.3)
Other1.9 (0.2)
Net cash provided by (used in) financing activities(5.3)(12.3)
Effect of exchange rate changes on cash and cash equivalents1.9 (0.5)
Net increase (decrease) in cash and cash equivalents(38.3)(134.7)
Cash and cash equivalents at beginning of period393.8 334.1 
Cash and cash equivalents at end of period$355.5 $199.4 
 Three months ended
 August 31,
 2019 2018
Cash flows - operating activities: 
  
Net income (loss)$(58.5) $(61.3)
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities: 
  
   Provision for losses on accounts receivable1.6
 1.4
   Provision for losses on inventory4.1
 3.0
   Provision for losses on royalty advances1.1
 1.0
   Amortization of prepublication and production costs6.4
 5.2
   Depreciation and amortization16.1
 14.0
   Amortization of pension and postretirement actuarial gains and losses0.2
 0.2
   Deferred income taxes0.1
 —
   Stock-based compensation1.5
 1.5
   Income from equity investments(1.0) (2.0)
Changes in assets and liabilities, net of amounts acquired: 
  
   Accounts receivable21.5
 9.2
   Inventories(85.3) (114.6)
   Prepaid expenses and other current assets(28.1) (23.7)
   Income tax receivable(29.1) (22.1)
   Royalty advances(3.8) (3.5)
   Accounts payable32.2
 50.5
   Accrued income taxes(0.8) (1.0)
   Accrued royalties21.7
 22.2
   Deferred revenue11.8
 19.7
   Other assets and liabilities(9.3) 11.3
Net cash provided by (used in) operating activities(97.6) (89.0)
    
Cash flows - investing activities: 
  
Prepublication and production expenditures(7.4) (8.8)
Additions to property, plant and equipment(13.5) (28.1)
Acquisition of land(3.3) —
Other investment and acquisition-related payments(0.1) (0.5)
Net cash provided by (used in) investing activities(24.3) (37.4)
    
Cash flows - financing activities: 
  
Borrowings under lines of credit8.1
 11.6
Repayments of lines of credit(1.9) (3.6)
Repayment of capital lease obligations(0.4) (0.3)
Reacquisition of common stock(12.6) —
Proceeds pursuant to stock-based compensation plans—
 2.7
Payment of dividends(5.3) (5.2)
Other(0.2) —
Net cash provided by (used in) financing activities(12.3) 5.2
    
Effect of exchange rate changes on cash and cash equivalents(0.5) (0.9)
    
Net increase (decrease) in cash and cash equivalents(134.7) (122.1)
Cash and cash equivalents at beginning of period334.1
 391.9
Cash and cash equivalents at end of period$199.4 $269.8
See accompanying notes

7
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 20202021 relate to the twelve-month period ending May 31, 2020.2021. Certain reclassificationsprior period amounts have been madereclassified to conform towith the current year presentation.

Interim Financial Statements

The accompanying Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019.2020. The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the Financial Statements for the periods presented. 

Seasonality
 
The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education businesses operate on a school-year basis; therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Trade sales can vary throughout the year due to varying release dates of published titles. TheWhile the Company generally experiences a loss from operations in the first and third quarters of each fiscal year.year, the second quarter of fiscal 2021, ending November 30, 2020, which is traditionally an income quarter, is expected to be negatively impacted by the COVID-19 pandemic. Presently, there are many uncertainties concerning the timing of, and any patterns which may emerge from, school re-openings for the new school year, and the nature and continuing magnitude of the negative impact of COVID-19 into and beyond the second quarter of fiscal 2021 will depend on the actual timing and emerging patterns of such re-openings throughout the United States.

Use of estimates
 
The preparation of these Financial Statements involves the use of estimates and assumptions by management, which affects the amounts reported in the Financial Statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions believed to be reasonable under the circumstances, all of which are necessary, in order to form a basis for determining the carrying values of certain assets and liabilities. Actual results may differ from those estimates and assumptions. On an on-going basis, the Company evaluates the adequacy of its reserves and the estimates used in these calculations, including, but not limited to:
•Accounts receivable allowance for doubtful accounts
•Pension and postretirement 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
8
Variable 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)


•Assets and liabilities acquired in business combinations
•Variable consideration related to anticipated returns
•Allocation of transaction price to performance obligations

Sale of Long-lived Assets

During the first quarter of fiscal 2021, the Company sold the company-owned facility located in Danbury, Connecticut and relocated the book fairs warehousing and distribution operations conducted in Danbury to a warehouse in Allentown, Pennsylvania. The long-lived assets related to the Danbury facility, which consisted of land, building, and building improvements, were included in the Overhead segment. These assets had a carrying value of $5.7 and were classified as held for sale for the fiscal year ended May 31, 2020. The net proceeds from the sale were $12.3 and the Company recognized a gain on sale of $6.6. This amount is included within Gain (loss) on sale of assets and other within the Company's Condensed Consolidated Statements of Operations.

Assets Held For Sale

The Company 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 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 August 31, 2020, the carrying amounts totaled $3.3 which are included in Property, plant and equipment, net within the Company's Condensed Consolidated Balance Sheets.

New Accounting Pronouncements

Current Fiscal Quarter Adoption:Adoptions:

ASU No. 2016-02, ASU No. 2018-10 and ASU No. 2018-112016-13
In FebruaryJune 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in ASC Topic 840, Leases. The amendments in this ASU require lessees to account for leases as either finance leases or operating leases and generally require all leases to be recorded on the balance sheet, through the recognition of right-of-use (ROU) assets and corresponding lease liabilities. The lease liability should be measured at the present value of the lease payments over the lease term. The ROU 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). The guidance also requires specific qualitative and quantitative disclosures about leasing activities. In addition, in July 2018, the FASB issued ASU No. 2018-10, Codification Improvements2016-13, "Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). ASU 2016-13, which was further updated and clarified by the FASB through the issuance of additional related ASUs, amends the guidance surrounding measurement and recognition of credit losses on financial assets measured at amortized cost, including trade receivables and debt securities, by requiring recognition of an allowance for credit losses expected to Topic 842, Leasesbe incurred over an asset's lifetime based on relevant information about past events, current conditions, and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements,supportable forecasts impacting its ultimate collectability. This "expected loss" model may result in earlier recognition of credit losses than the current "as incurred" model, under which providelosses were recognized only upon an additional (and optional) transition method wherebyoccurrence of an event that gave rise to the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings.

incurrence of a probable loss. The Company adopted ASU No. 2016-022016-13 as of the beginning of the first quarter of fiscal 2020 using2021 which did not have a material impact on the modified retrospective approach with no restatement of prior year amounts. In connection with the adoption of this standard, the Company applied the package of practical expedients intended to ease transition for existing leases by not requiring the Company to reassess 1) its initial lease classification conclusions for existing or expired leases; 2) whether an existing or expired contract is a lease or contains an embedded lease; 3) the capitalization of initial direct costs for existing or expired leases. Upon adoption of ASU No. 2016-02, the Company recognized initial ROU assets and lease liabilities consistent with the range previously disclosed in the Company's Annual Report on Form 10-K for the year ended May 31, 2019 with no adjustment to retained earnings.Company’s Consolidated Financial Statements. Refer to Note 10, Leases,2, Revenues, for further discussion of the Company's lease accounting policy and disclosures related disclosures.to the allowance for credit losses.

ASU No. 2018-152017-04
In August 2018,January 2017, the FASB issued ASU No. 2018-15,2017-04, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)Other (Topic 350): Customer’s AccountingSimplifying the Test for Implementation Costs Incurred inGoodwill Impairment, which removes step two from the goodwill impairment test (comparison of implied fair value of goodwill with the carrying amount of that goodwill for a Cloud Computing Arrangement that isreporting unit). Instead, an entity will measure its goodwill impairment by the amount the carrying value exceeds the fair value of a Service Contract, which reduces the complexity in accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether it conveys a license of the hosted software. ASU No. 2018-15 aligns the following requirements for capitalizing implementation costs: (1) those incurred in a hosting arrangement that is a service contract and (2) those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

reporting unit. The Company adopted ASU No. 2018-152017-04 as of the beginning of the first quarter of fiscal 2020 using the prospective approach. In the first fiscal quarter, the Company capitalized approximately $2.7 of cloud computing costs in the first quarter of fiscal 2020 which have not yet been placed into service. In addition, this amount is included within Other assets and deferred charges within the Company's Condensed Consolidated Balance Sheets and within the operating section of the Company's Condensed Consolidated Statement of Cash Flows.

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 amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amendments in this update affect any entity that is required to apply the provisions of Topic 220, Income Statement-Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by U.S. GAAP. The Company adopted ASU No. 2018-02 as of the beginning of the first quarter of fiscal 20202021 which resulted in no impact to the Company's financial statements.Consolidated Financial Statements.

2. REVENUES

9
Disaggregated Revenue Data

SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)


2. REVENUES

Disaggregated Revenue Data

The following table presents the Company’s disaggregated revenues disaggregated by region and domestic channel:
Three months ended August 31,20192018
  U.S. Book Clubs$8.0$9.1
  U.S. Book Fairs27.5
25.2
  U.S. Trade67.7
61.4
  U.S. Education48.4
47.9
  Non-U.S. Major Markets(1)
56.3
50.3
  Non-U.S. Other Markets(2)
24.7
24.5
Total Revenues$232.6$218.4

Three months ended
August 31,August 31,
20202019
U.S. Book Clubs$5.8 $8.0 
U.S. Book Fairs13.2 27.5 
U.S. Trade65.8 67.7 
U.S. Education53.5 48.4 
Non-U.S. Major Markets(1)
56.6 56.3 
Non-U.S. Other Markets(2)
20.3 24.7 
Total Revenues$215.2 $232.6 
(1) - Includes Canada, UK, Australia and New Zealand.
(2) - Primarily includes markets in Asia.

Estimated Returns

A liability for expected returns of $35.5, $34.5,$43.1, $43.5, and $45.4$35.5 is recorded within Other accrued expenses on the Company's Condensed Consolidated Balance Sheets as of August 31, 2019,2020, May 31, 2019,2020, and August 31, 2018,2019, respectively. In addition, a return asset of $1.8, $1.6,$4.1, $2.7, and $3.5$1.8 is recorded within Prepaid expenses and other current assets as of August 31, 2019,2020, May 31, 2019,2020, and August 31, 2018,2019, respectively, for the recoverable cost of product estimated to be returned by customers.

Deferred Revenue

The Company's contract liabilities consist of 1) advance billings and payments received from customers in excess of revenue recognized and 2) revenue allocated to outstanding book fairs incentive credits. These liabilities are recorded within Deferred revenue on the Company's Condensed Consolidated Balance Sheets and are classified as short term, as substantially all of the associated performance obligations are expected to be satisfied, and related revenue recognized, within one year. ForThe Company recognized revenue which was included in the opening deferred revenue balance in the amount of $16.9 and $18.8 for the three months ended August 31, 2020 and August 31, 2019, respectively.

Allowance for CreditLosses

The Company recognizes an allowance for credit losses on trade receivables that are expected to be incurred over the lifetime of the receivable. Reserves for estimated credit losses are established at the time of sale and are based on relevant information about past events, current conditions, and supportable forecasts impacting its ultimate collectability, including specific reserves on a customer-by-customer basis, creditworthiness of the Company’s customers and prior collection experience. At the time the Company recognized $18.8 of revenuedetermines that a receivable balance, or any portion thereof, is deemed to be permanently uncollectible, the balance is then written off.

The following table presents the change in the allowance for credit losses, which was included withinis presented net in Accounts Receivable on the June 1, 2019 deferred revenue balance.Condensed Consolidated Balance Sheets:


Allowance for Credit Losses
Balance as of June 1, 2020$19.9
Current period provision1.4
Write-offs and other(0.4)
Balance as of August 31, 2020$20.9

10
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

3. SEGMENT INFORMATION

The Company categorizes its businesses into 3 reportable segments: Children’s Book Publishing and Distribution, Education 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.

•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 3 operating segments.

11
•
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.

•
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.


SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)




The following table sets forth information for the Company's segments for the fiscal quarters ended August 31, 2020 and August 31, 2019:
 Children’s
Book
Publishing &
Distribution		Education
Overhead (1)
Total
Domestic		InternationalTotal
Three months ended
August 31, 2020		      
Revenues$90.9 $53.6 $0 $144.5 $70.7 $215.2 
Bad debt expense0.2 0.1 0 0.3 1.1 1.4 
Depreciation and amortization (2)
6.6 3.1 11.5 21.2 1.5 22.7 
Segment operating income (loss)(29.2)(2.2)(30.8)(62.2)5.2 (57.0)
Segment assets at August 31, 2020555.4 215.6 985.8 1,756.8 299.5 2,056.3 
Goodwill at August 31, 202047.4 68.2 0 115.6 10.0 125.6 
Expenditures for other noncurrent assets (3)

12.1 3.1 10.8 26.0 3.5 29.5 
Other non-current assets at August 31, 2020 (3)
172.6 123.9 491.1 787.6 81.5 869.1 
Three months ended
August 31, 2019		      
Revenues$109.6 $48.4 $0 $158.0 $74.6 $232.6 
Bad debt expense0.5 0.0 0 0.5 1.1 1.6 
Depreciation and amortization (2)
6.7 3.1 11.0 20.8 1.7 22.5 
Segment operating income (loss)(41.7)(13.4)(28.6)(83.7)(3.7)(87.4)
Segment assets at August 31, 2019651.9 198.7 808.4 1,659.0 285.6 1,944.6 
Goodwill at August 31, 201946.8 68.2 0 115.0 10.0 125.0 
Expenditures for other noncurrent assets (3)
14.0 4.6 7.6 26.2 6.9 33.1 
Other non-current assets at August 31, 2019 (3)
219.2 120.0 520.0 859.2 93.0 952.2 

(1)    Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets. Unallocated assets are principally comprised of deferred income taxes and property, plant and equipment related to the Company’s headquarters in the metropolitan New York area, its fulfillment and distribution facilities located in Missouri, and certain technology assets.
(2)    Includes depreciation of property, plant and equipment and amortization of intangible assets, prepublication costs and cloud computing costs.
(3)    Other noncurrent assets include property, plant and equipment, prepublication assets, cloud computing costs, royalty advances, goodwill, intangible assets and investments. Expenditures for other noncurrent assets for the International segment include expenditures for long-lived assets of $2.0 and $5.7 for the three months ended August 31, 2020 and August 31, 2019, respectively. Other noncurrent assets for the International segment include long-lived assets of $46.7 and 2018:
 Children’s
Book
Publishing &
Distribution		 Education 
Overhead (1)
 Total
Domestic		 International Total
Three months ended 
 August 31, 2019		 
  
  
  
  
  
Revenues$109.6 $48.4 $0.0 $158.0 $74.6 $232.6
Bad debt expense0.5
 0.0
 —
 0.5
 1.1
 1.6
Depreciation and amortization (2)
6.7
 3.1
 11.0
 20.8
 1.7
 22.5
Segment operating income (loss)(41.7) (13.4) (28.6) (83.7) (3.7) (87.4)
Segment assets at August 31, 2019651.9
 198.7
 808.4
 1,659.0
 285.6
 1,944.6
Goodwill at August 31, 201946.8
 68.2
 —
 115.0
 10.0
 125.0
Expenditures for other noncurrent assets (3)

14.0
 4.6
 6.9
 25.5
 7.6
 33.1
Other noncurrent assets at
August 31, 2019 (3)
219.2
 120.0
 520.0
 859.2
 93.0
 952.2
Three months ended 
 August 31, 2018		 
  
  
  
  
  
Revenues$95.7 $47.9 $0.0 $143.6 $74.8 $218.4
Bad debt expense0.8
 0.0
 —
 0.8
 0.6
 1.4
Depreciation and amortization (2)
5.7
 2.0
 9.9
 17.6
 1.6
 19.2
Segment operating income (loss)(46.0) (14.9) (20.9) (81.8) (2.0) (83.8)
Segment assets at
August 31, 2018		554.6
 182.9
 884.2
 1,621.7
 277.9
 1,899.6
Goodwill at August 31, 201840.9
 68.2
 —
 109.1
 10.0
 119.1
Expenditures for other noncurrent assets (3)
10.8
 5.1
 25.5
 41.4
 4.3
 45.7
Other noncurrent assets at
August 31, 2018 (3)
151.5
 106.9
 499.7
 758.1
 76.2
 834.3
$64.5 as of August 31, 2020 and August 31, 2019, respectively.
(1)Overhead includes all domestic corporate amounts not allocated to segments, including expenses and costs related to the management of corporate assets. Unallocated assets are principally comprised of deferred income taxes and property, plant and equipment related to the Company’s headquarters in the metropolitan New York area, its fulfillment and distribution facilities located in Missouri, its facility located in Connecticut and certain technology assets.
(2)Includes depreciation of property, plant and equipment and amortization of intangible assets and prepublication and production costs.
(3)Other noncurrent assets include property, plant and equipment, prepublication assets, production assets, royalty advances, goodwill, intangible assets and investments. Expenditures for other noncurrent assets for the International reportable segment include expenditures for long-lived assets of $5.7 and $2.8 for the three months ended August 31, 2019 and August 31, 2018, respectively. Other noncurrent assets for the International reportable segment include long-lived assets of $64.5 and $37.0 as of August 31, 2019 and August 31, 2018, respectively.


12
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

4. DEBT

The following table summarizes the carrying value of the Company's debt as of the dates indicated:
 August 31, 2019 May 31, 2019 August 31, 2018
Revolving Loan—
 —
 —
Unsecured lines of credit (weighted average interest rates of 4.1%, 4.1% and 3.6%, respectively)13.0
 7.3
 15.7
Total debt$13.0 $7.3 $15.7
 August 31, 2020May 31, 2020August 31, 2019
US Revolving Loan$200.0 $200.0 $0 
Unsecured lines of credit (weighted average interest rates of 4.2%, 4.6% and 4.1%, respectively)8.5 7.9 13.0 
UK Loan11.4 10.6 0 
Total debt$219.9 $218.5 $13.0 
Less lines of credit, short-term debt and current portion of long-term debt(19.9)(7.9)(13.0)
Total long-term debt$200.0 $210.6 $0 


The Company'sfollowing table sets forth the maturities of the carrying values of the Company’s debt obligations have maturitiesas of one year or less.August 31, 2020 for the twelve-month periods ended August 31:

2021$19.9 
2022200.0 
20230 
20240 
20250 
Thereafter0 
Total debt$219.9 

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



On January 5, 2017, Scholastic Corporation and Scholastic Inc. (each, a “Borrower” and together, the “Borrowers”) entered into a 5-year credit facility with certain banks (the “Loan Agreement”). The Loan Agreement replaced the Company's then existing loan agreement and has substantially similar terms, except that:
•
the borrowing limit was reduced to $375.0 from $425.0;
•the borrowing limit was reduced to $375.0 from $425.0;
•the “starter” basket for permitted payments of dividends and other payments in respect of capital stock
was increased to $275.0 from $75.0; and
•the maturity date was extended to January 5, 20222022.
.
The prior loan agreement, which was originally entered into in 2007 and had a maturity date of December 5, 2017, was terminated on January 5, 2017 in connection with the entry into the new Loan Agreement and was treated as a debt modification.
The Loan Agreement allows the Company to borrow, repay or prepay and reborrow at any time prior to the January 5, 2022 maturity date. Under the Loan Agreement, interest on amounts borrowed thereunder is due and payable in arrears on the last day of the interest period (defined as the period commencing on the date of the advance and ending on the last day of the period selected by the Borrower at the time each advance is made). The interest pricing under the Loan Agreement is dependent upon the Borrower’s election of a rate that is either:
•
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%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 1.00% 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.

13
•
A Eurodollar Rate equal to the London interbank offered rate (LIBOR) plus an applicable spread ranging from SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)1.175% to 1.60%, as determined by the Company’s prevailing consolidated debt to total capital ratio.

As of August 31, 2019,2020, 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 August 31, 2019,2020, 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 August 31, 2019,2020, the Company had no outstanding borrowings of $200.0 under the Loan Agreement. The Company incurred this obligation in the fourth quarter of fiscal 2020 as a precautionary measure due to the uncertainty resulting from the COVID-19 pandemic. While this obligation is not due until the January 5, 2022 maturity date, the Company may, from time to time, make payments to reduce this obligation when cash from operations becomes available for this purpose. No borrowings were outstanding under the Loan Agreement as of August 31, 2019.

At August 31, 2019,2020, the Company had open standby letters of credit totaling $5.3$4.3 issued under certain credit lines, including $0.4 under the Loan Agreement and $4.9$3.9 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 and at August 31, 2020, the Company was in compliance with these covenants for all periods presented.covenants.

UK Loan Agreement

On September 23, 2019, Scholastic Limited UK entered into a term loan agreement to borrow £2.0 to fund a land purchase in connection with the construction of a new UK facility. The loan has a maturity date of July 31, 2021. Under the agreement, the principal balance is due in full in a single payment on the last day of the term and interest on the amount borrowed is due and payable quarterly. The interest is charged at 1.77% per annum over the Base Rate. The Base Rate is currently equal to 0.10% per annum and is subject to change. As of August 31, 2020, the Company had $2.7 outstanding on the loan.

On January 24, 2020, Scholastic Limited UK entered into a term loan facility with a borrowing limit of £6.6 to fund the construction of the new UK facility. The loan has a maturity date of July 31, 2021. Under the agreement, the principal balance is due in full in a single payment on the last day of the term and interest on the amount borrowed is due and payable quarterly. The interest is charged at 1.77% per annum over the Base Rate. The Base Rate is currently equal to 0.10% per annum and is subject to change. As of August 31, 2020, the Company had $8.7 outstanding on the loan and no remaining available credit under this facility.

Lines of Credit

As of August 31, 2019,2020, the Company’s domestic credit lines available under unsecured money market bid rate credit lines totaled $25.0. There were no0 outstanding borrowings under these credit lines as of August 31, 2019,2020, May 31, 2019 or2020 and August 31, 2018.2019. As of August 31, 2019,2020, availability under these unsecured money market bid rate credit lines totaled $20.1.$21.1. 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 August 31, 2019,2020, the Company had various local currency credit lines totaling $24.3$30.2 underwritten by banks primarily in the United States, Canada and the United Kingdom. Outstanding borrowings under these facilities were $8.5 at August 31, 2020 at a weighted average interest rate of 4.2%, $7.9 at May 31, 2020 at a weighted average interest rate of 4.6%, and $13.0 at August 31, 2019 at a weighted average interest rate of 4.1%, $7.3 at May 31, 2019 at a weighted average interest rate of 4.1%, and $15.7 at August 31, 2018 at a weighted average interest rate of 3.6%. As of August 31, 2019,2020, the amounts available under these facilities totaled $11.3.$21.7. These credit lines are typically
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)



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.
14
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)


5. COMMITMENTS AND CONTINGENCIES
COVID-19
The COVID-19 pandemic and actions taken, or which may be taken in the future following any easing of current restrictions based on the future course of the pandemic, by governments, businesses and individuals to limit the spread of the virus may continue to have an adverse effect on the Company’s results of operations and financial condition.

The Company is not currently aware of any loss contingencies related to the foregoing that would require recognition in the first quarter of fiscal 2021.

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 existshas occurred 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 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 current fiscal year 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. The settlement is expected to be finalized in the second fiscal year quarter.

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 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 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 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 decision will affect the Company will depend 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 August 31, 2019, the Company’s school book club channel remits sales taxes in 43 states compared to 11 states in the prior fiscal year quarter ended August 31, 2018, and, as a result, the Company has incurred additional costs for the three months ended August 31, 2019 related to sales tax on the associated revenue. 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.

6. 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:
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
 Three months ended
 August 31,August 31,
20202019
Net income (loss) attributable to Class A and Common Stockholders$(39.8)$(58.5)
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)34.3 34.9 
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)**
Earnings (loss) per share of Class A Stock and Common Stock:  
Basic$(1.16)$(1.68)
Diluted$(1.16)$(1.68)
(Dollar amounts in millions, except per share data)



 Three months ended August 31,
 2019 2018
Net income (loss) attributable to Class A and Common Shares$(58.5) $(61.3)
Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)34.9
 35.0
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)*
 *
Earnings (loss) per share of Class A Stock and Common Stock: 
  
Basic$(1.68) $(1.75)
Diluted$(1.68) $(1.75)


* For the three month periods ended August 31, 2019 and August 31, 2018, theThe Company experienced a net loss from operationsfor all periods presented and therefore there is nodid not report any dilutive share impact.

The following table sets forth options outstanding pursuant to stock-based compensation plans as of the dates indicated: 
 August 31, 2020August 31, 2019
Options outstanding pursuant to stock-based compensation plans (in millions)3.0 3.0 
 August 31, 2019 August 31, 2018
Options outstanding pursuant to stock-based compensation plans (in millions)3.0
 2.7


There were 1.83.0 million of potentially anti-dilutive shares pursuant to stock-based compensation plans as of August 31, 2019.2020.

15
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

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 month periods ended August 31, 20192020 and August 31, 2018,2019, the Company experienced a Net loss and did not allocate any losses to the participating RSUs.securities.

As of August 31, 2019, $40.22020, $67.3 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 12,11, 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. GOODWILL AND OTHER INTANGIBLES

The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually or more frequently if indicators arise. The Company 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: 
August 31, 2020May 31, 2020August 31, 2019
Gross beginning balance$164.5 $164.8 $164.8 
Accumulated impairment(39.6)(39.6)(39.6)
Beginning balance$124.9 $125.2 $125.2 
Additions0 0 0 
Foreign currency translation0.7 (0.3)(0.2)
Ending balance$125.6 $124.9 $125.0 
 August 31, 2019 May 31, 2019 August 31, 2018
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(0.2) (0.3) (0.1)
Ending balance$125.0 $125.2 $119.1


In fiscal 2019, 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.

There were no0 impairment charges related to Goodwill in any of the 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 SheetsFinancial Statements for the periods indicated:
August 31, 2020May 31, 2020August 31, 2019
August 31, 2019 May 31, 2019 August 31, 2018
Beginning balance other intangibles subject to amortization$12.2 $10.1 $10.1Beginning balance other intangibles subject to amortization$10.5 $12.2 $12.2 
Additions—
 4.5
 0.5
Additions0 1.6 0 
Amortization expense(0.8) (2.8) (0.7)Amortization expense(0.6)(3.2)(0.8)
Foreign currency translation(0.2) (0.2) 0.0
Foreign currency translation0.3 (0.1)(0.2)
Other—
 0.6
 —
Total other intangibles subject to amortization, net of accumulated amortization of $27.7, $26.9 and $24.8, respectively$11.2 $12.2 $9.9
Total other intangibles subject to amortization, net of accumulated amortization of $30.7, $30.1 and $27.7, respectivelyTotal other intangibles subject to amortization, net of accumulated amortization of $30.7, $30.1 and $27.7, respectively$10.2 $10.5 $11.2 
Total other intangibles not subject to amortization$2.1 $2.1 $2.1Total other intangibles not subject to amortization$2.1 $2.1 $2.1 
Total other intangibles$13.3 $14.3 $12.0Total other intangibles$12.3 $12.6 $13.3 


In the first quarter of fiscal 2021, there were no additions to intangible assets.

In fiscal 2019,2020, the Company completed the purchase of a majority interest in a Make Believe Ideas Limited, included within the Children's Book Publishing & Distribution segment, which resulted in $3.9 of amortizable intangible assets. In addition, the Company also purchased a UK-based book club business and a U.S.-based book fair business resulting in the recognition$1.6 of $0.6amortizable intangible assets.

Intangible assets with indefinite lives consist principally of definite-lived intangible assets. The results of operations of these businesses are included within the Internationaltrademark and Children's Book Publishing & Distribution segments, respectively.

tradename rights. Intangible assets with definite lives consist principally of customer lists, and intellectual property, rights.tradenames and other agreements. Intangible assets with definite lives are amortized over their estimated useful lives. The weighted-average remaining useful lifelives of all definite-livedamortizable intangible assets is approximately 5.45.8 years. Intangible assets with indefinite lives consist principally of trademarks.

There were no0 impairment charges related to Intangible assets in any of the periods presented.

16
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

8. INVESTMENTS

Investments are included in Other assets and deferred charges on the Company’s Condensed Consolidated Balance Sheets. The following table summarizes the Company’s investments as of the dates indicated:
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
August 31, 2020May 31, 2020August 31, 2019Segment
Equity method investments$27.9 $25.0 $22.5 International
Other equity investments6.0 6.0 6.0 Children's Book Publishing & Distribution
Total Investments$33.9 $31.0 $28.5 
(Dollar amounts in millions, except per share data)



 August 31, 2019 May 31, 2019 August 31, 2018 Segment
Equity method investments$22.5 $23.4 $32.3 International
Other equity investments6.0
 6.0
 —
 Children's Book Publishing & Distribution
Total Investments$28.5 $29.4 $32.3  


Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $1.0 and $2.0 for the three months ended August 31, 2019 and August 31, 2018, respectively.

Equity method investments
Make Believe Ideas Limited
On March 27, 2019, the Company completed the acquisition of a majority ownership interest in Make Believe Ideas Limited ("MBI"), a UK-based children's book publishing company, by acquiring an additional 46.5% ofThe Company’s 26.2% equity interest in MBI to bringa children’s book publishing business located in the Company's total ownership interest to 95.0%. Prior to March 27, 2019, the CompanyUK is accounted for its 48.5% equity interest underusing the equity method of accounting andaccounting. Equity method income from this investment wasis reported in the International segment.

Other equity investments
In April 2019, theThe Company acquiredhas a 4.6% ownership interest in a financing and production company that will makemakes 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. Inimpairment on the current fiscal quarter thereCompany's Consolidated Balance Sheets. There have been no0 impairments or adjustments to the carrying value of this investment.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled $0.8 and $1.0 for the three months ended August 31, 2020 and August 31, 2019, respectively.

9. EMPLOYEE BENEFIT PLANS

The following table sets forth the components of net periodic benefit (cost)cost for the periods indicated under the Company’s defined benefit pension plan of Scholastic Ltd., an indirect subsidiary of Scholastic Corporation located in the United Kingdom (the “UK Pension Plan”) and the 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“US Postretirement Benefits”)., for the periods indicated:
 UK Pension Plan Postretirement Benefits
 Three months ended August 31, Three months ended August 31,
 2019 2018 2019 2018
Components of net periodic (benefit) cost:       
Service cost$0.0 $0.0 $0.0 $0.0
Interest cost0.2
 0.2
 0.2
 0.2
Expected return on assets(0.2) (0.2) —
 —
Net amortization of prior service credit—
 —
 0.0
 —
Amortization of (gains) losses0.2
 0.2
 —
 —
Net periodic (benefit) cost$0.2 $0.2 $0.2 $0.2

 UK Pension PlanUS Postretirement Benefits
Three months endedThree months ended
August 31,August 31,August 31,August 31,
 2020201920202019
Components of net periodic benefit cost:  
Interest cost$0.2 $0.2 $0.1 $0.2 
Expected return on assets(0.2)(0.2)0 0 
Net amortization of prior service (credit) cost0.0 0 0.0 0.0 
Amortization of (gains) losses0.1 0.2 0 0 
Total$0.1 $0.2 $0.1 $0.2 

The Company’s funding practice with respect to the UK Pension Plan is to contribute on an annual basis at least the minimum amounts required by applicable law. For the three months ended August 31, 2019,2020, the Company contributed $0.3 to the UK Pension Plan. The Company expects, based on actuarial calculations, to contribute cash of approximately $1.1$1.0 to the UK Pension Plan for the fiscal year ending May 31, 2020.2021.
In the second quarter of fiscal 2019, the Company announced a change in benefits for certain postretirement benefit plan participants. Beginning January 1, 2019, the plan established Health Reimbursement Accounts (HRAs) to provide these participants with additional flexibility to choose healthcare options based on individual needs. As a result of this change, the Company remeasured its Postretirement Benefits obligation as of November 30, 2018, and recognized a reduction of $2.7 to its benefit obligation and a reduction to its
17
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)



accumulated comprehensive loss of $2.7 in the second quarter of fiscal 2019. The related prior service credit will be amortized as a Component of net periodic benefit (cost) over the average future working lifetime for active plan participants of approximately 3.2 years.

10. LEASES

The Company's lease arrangements primarily relate to corporate offices and warehouse facilities, and to a lesser extent, certain equipment and other assets. The Company's leases generally have initial terms ranging from 3 to 10 years and certain leases include renewal or early-termination options, rent escalation clauses, and/or lease incentives. Lease renewal rent payment terms generally reflect adjustments for market rates prevailing at the time of renewal. The Company's leases require fixed minimum rent payments and also often require the payment of certain other costs that do not relate specifically to its right to use an underlying leased asset, but are associated with the asset such as real estate taxes, insurance, common area maintenance fees and/or certain other costs (referred to collectively herein as "non-lease components"), which may be fixed or variable in amount, depending on the terms of the respective lease agreement. The Company's leases do not contain significant residual value guarantees or restrictive covenants.
The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, its related term is assessed based on the date in which the underlying asset is made available for the Company's use by the lessor. The Company's assessment of the lease term reflects the non-cancellable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options for which the Company is reasonably certain of not exercising, as well as periods covered by renewal options for which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the Condensed Consolidated Statements of Operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company's Condensed Consolidated Balance Sheet at lease commencement reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding ROU asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. The Company includes fixed payment obligations related to non-lease components in the measurement of ROU assets and lease liabilities, as it elects to account for lease and non-lease components together as a single lease component. ROU assets associated with finance leases are presented separate from operating leases ROU assets and are included within Property, plant and equipment, net on the Company's Condensed Consolidated Balance Sheet. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the associated lease.
For operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For finance leases, the initial ROU asset is depreciated on a straight-line basis over the lease term, along with recognition of interest expense associated with accretion of the lease liability, which is ultimately reduced by the related fixed payments. For leases with a term of 12 months or less (referred to as a "short-term lease"), any fixed lease payments are recognized on a straight-line basis over the lease term, and are not recognized on the Condensed Consolidated balance sheet. Variable lease costs for both operating and finance leases, if any, are recognized as incurred.
The following table summarizes right-of-use assets and lease liabilities recorded on the Company's Condensed Consolidated Balance Sheet as of August 31, 2019:
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)



August 31, 2019Location within Condensed Consolidated Balance Sheet
Operating leases$81.7Operating lease right-of-use assets, net
Finance leases10.5
Property, plant and equipment, net
Total lease assets$92.2
Operating leases :
Current portion24.1
Current portion of operating lease liabilities
Non-current portion61.1
Long-term operating lease liabilities
Total operating lease liabilities$85.2
Finance leases :
Current portion1.8
Other accrued expenses
Non-current portion9.3
Other noncurrent liabilities
Total finance lease liabilities$11.1
Total lease liabilities$96.3


The following table summarizes the activity as a result of the adoption of ASC 842 for the three months ended August 31, 2019: 
Three Months Ended August 31, 2019
Location within Condensed Consolidated Statement of Operations
Operating lease expense$7.1
Selling, general and administrative expenses

Finance lease costs :
Depreciation of leased assets0.4
Selling, general and administrative expenses
Accretion of lease liabilities0.1
Interest income (expense), net
Total lease expense$7.6

The following table summarizes certain cash flows information related to the Company's leases for the three months ended August 31, 2019:
Three Months Ended August 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases6.9
Operating cash flows from finance leases0.1
Financing cash flows from finance leases0.4


The following table provides a maturity analysis summary of the Company's lease liabilities recorded on the Company's Condensed Consolidated Balance Sheet as of August 31, 2019:
 Operating Finance
 Leases Leases
Remainder of Fiscal 2020$20.8 $1.7
Fiscal 202122.1
 2.2
Fiscal 202218.1
 2.1
Fiscal 202312.1
 1.9
Fiscal 20247.0
 1.8
Fiscal 2025 and thereafter10.8
 2.9
Total lease payments90.9
 12.6
Less: interest(5.7) (1.5)
Total lease liabilities$85.2 $11.1


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



The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates related to the Company's operating leases recorded on the Company's Condensed Consolidated Balance Sheet as of August 31, 2019:
 Operating Finance
 Leases Leases
Weighted-average remaining lease term (years)4.3 6.3
Weighted-average discount rate4.0% 3.9%


11.10. STOCK-BASED COMPENSATION
 
The following table summarizes stock-based compensation expense included in Selling, general and administrative expenses for the periods indicated: 
 Three months ended
August 31,August 31,
 20202019
Stock option expense$0.3 $0.6 
Restricted stock unit expense0.2 0.8 
Management stock purchase plan0 0.0 
Employee stock purchase plan0.1 0.1 
Total stock-based compensation expense$0.6 $1.5 
 Three months ended August 31,
 2019 2018
Stock option expense$0.6 $0.8
Restricted stock unit expense0.8
 0.6
Management stock purchase plan0.0
 0.0
Employee stock purchase plan0.1
 0.1
Total stock-based compensation expense$1.5 $1.5


The following table sets forth Common Stock issued pursuant to stock-based compensation plans for the periods indicated:
 Three months ended
August 31,August 31,
 20202019
Common Stock issued pursuant to stock-based compensation plans (in millions)0.00.0
 Three months ended August 31, 
 2019 2018 
Common Stock issued pursuant to stock-based compensation plans (in millions)0.0
 0.1
 


12.11. TREASURY STOCK
 
The Board has authorized the Company to repurchase Common Stock, from time to time as conditions allow, on the open market or through negotiated private transactions.

The table below represents the Board authorizations at the dates indicated:
AuthorizationsAmount
July 2015March 2018$50.0
March 2018202050.0
50.0
Total current Board authorizations at June 1, 20192020$100.0
Less repurchases made under these authorizations$(59.8)(32.7)
Remaining Board authorization at August 31, 20192020$40.267.3


Remaining Board authorization at August 31, 2020 represents the amount remaining under the Board authorization for Common share repurchases on March 21, 2018 and the current $50.0 Board authorization for Common share repurchases announced on March 18, 2020, which is available for further repurchases, from time to time as conditions allow, on the open market or through negotiated private transactions.
Repurchases
There were 0 repurchases of the Company's Common Stock were $12.6 duringfor the three months ended August 31, 2019.2020. The Company’s repurchase program may beis suspended at anythis time without prior notice.due to COVID-19 uncertainties.

13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

18
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)



12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the activity in Accumulated other comprehensive income (loss), net of tax, by component, for the periods indicated:
 August 31, 2019
 Foreign currency translation adjustments Retirement benefit plans Total
Beginning balance at June 1, 2019$(47.1) $(12.6) $(59.7)
Other comprehensive income (loss) before reclassifications(2.0) —
 (2.0)
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 $0.0)—
 0.0
 0.0
Other comprehensive income (loss)(2.0) 0.2
 (1.8)
Ending balance at August 31, 2019$(49.1) $(12.4) $(61.5)
      

August 31, 2018

Foreign currency translation adjustments Retirement benefit plans Total
Beginning balance at June 1, 2018$(41.9) $(13.8) $(55.7)
Other comprehensive income (loss) before reclassifications(3.1) —
 (3.1)
Less amount reclassified from Accumulated other comprehensive income (loss):    

Amortization of gains and losses (net of tax of $0.0)—
 0.2
 0.2
Other comprehensive income (loss)(3.1) 0.2
 (2.9)
Ending balance at August 31, 2018$(45.0) $(13.6) $(58.6)

Three months ended August 31, 2020
Foreign currency translation adjustmentsRetirement benefit plansTotal
Beginning balance at June 1, 2020$(50.0)$(8.3)$(58.3)
Other comprehensive income (loss) before reclassifications10.7 0 10.7 
Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of gains and losses (net of tax of $0.0)0 0.1 0.1 
Amortization of prior service credit (net of tax of $0.0)0 0.0 0.0 
Other comprehensive income (loss)10.7 0.1 10.8 
Ending balance at August 31, 2020$(39.3)$(8.2)$(47.5)
Three months ended August 31, 2019
Foreign currency translation adjustmentsRetirement benefit plansTotal
Beginning balance at June 1, 2019$(47.1)$(12.6)$(59.7)
Other comprehensive income (loss) before reclassifications(2.0)0 (2.0)
Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of gains and losses (net of tax of $0.0)0 0.2 0.2 
Amortization of prior service credit (net of tax of $0.0)0 0.0 0.0 
Other comprehensive income (loss)(2.0)0.2 (1.8)
Ending balance at August 31, 2019$(49.1)$(12.4)$(61.5)
Three months ended August 31, 2019

The following table presents the impact on earnings of reclassifications out of Accumulated other comprehensive income (loss) for the periods indicated:
Three months endedCondensed Consolidated Statements of Operations line item
August 31,August 31,
20202019
Employee benefit plans:
Amortization of unrecognized (gain) loss$0.1 $0.2 Other components of net periodic benefit (cost)
Amortization of prior service credit0.0 0.0 Other components of net periodic benefit (cost)
Less: Tax effect0.0 0.0 Provision (benefit) for income taxes
Total cost, net of tax$0.1 $0.2 

Three months ended August 31, Condensed Consolidated Statements of Operations line item

2019
2018
Employee benefit plans:




Amortization of unrecognized (gain) loss$0.2 $0.2 Other components of net periodic benefit (cost)
Amortization of prior service credit0.0
 —
 Other components of net periodic benefit (cost)
Less: Tax effect0.0
 —
 Provision (benefit) for income taxes
Total cost, net of tax$0.2 $0.2 


14.13. FAIR VALUE MEASUREMENTS
 
The Company determines the appropriate level in the fair value hierarchy for each fair value measurement of assets and liabilities carried at fair value on a recurring basis in the Company’s financial statements. The fair value hierarchy prioritizes the inputs, which refer to assumptions that market participants would use in pricing an asset or liability, based upon the highest and best use, into three levels as follows:
 
•Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.


19
•
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•
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,
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)



•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 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.

 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. For a more complete description of fair value measurements employed, see Note 4, Debt. 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 16,15, Derivatives and Hedging, for a more complete description of the fair value measurements employed.

Non-financial assets for which the Company employs fair value measures on a non-recurring basis include:
•Long-lived assets
•Investments
•Assets acquired in a business combination
•Impairment assessment of Goodwill and 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. For the fair value measurements employed by the Company for certain property, plant and equipment, production assets, investments and prepublication assets, the Company assessed future expected cash flows attributable to these assets. See Note 8, Investments, for a more complete description of the fair value measurements employed.

15.14. INCOME TAXES AND OTHER TAXES

Tax Legislation Updates

In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws as well as providing direct government assistance through grants and forgivable loans. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company expects to benefit from certain provisions in the CARES Act, including the provision to carry back net operating losses generated in the U.S. to previous periods which were taxed at the higher 35% federal corporate tax rate.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax Cuts and Jobs Act, among other things, reduced the U.S. federal corporate tax rate from 35% to 21% and imposed a new minimum tax on Global Intangible Low-Taxed Income ("GILTI") earned by foreign subsidiaries. On July 20, 2020, final regulations were issued for GILTI which include a high-tax exception for income earned by foreign subsidiaries if the foreign tax rate is in excess of 90% of the U.S. tax rate of 21%. The Company is evaluating the potential impact of these regulations. While the Company does not anticipate a material impact on the overall income tax provision, the regulations may reduce taxable income.




20
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

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.

The Company’s annual effective tax rate, exclusive of discrete items, is expected to be approximately 32.7%. TheCompany's interim effective tax rate, inclusive of discrete items, was 32.8%23.2% for the three month period ended August 31, 2019.2020.

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.authorities and the fiscal 2015 through fiscal 2019 tax years remain open. The Company has been notified by the IRS that there will be an examination of the income tax return for fiscal 2015, however the audit had not yet started as of August 31, 2020.

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 facts including statutes, regulations, case law and experience. Where a sales tax liability with respect to a jurisdiction is probable and can be 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
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)



Statements in Selling, general and administrative expenses. Future developments relating to the foregoing could result in adjustments being made to these accruals.

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 now has an obligation, at least on a going forward basis, 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 not previously remitted sales or use taxes based on its having no physical presence in such states. As of August 31, 2019, the Company’s school book club channel was remitting sales taxes in 43 states. Any on-going or future litigation with states relating to sales and use taxes could be impacted favorably or unfavorably by the Court’s decision in future fiscal periods.

16.15. 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, 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 and it recognizes the unrealized gain or loss in otherOther current assets or otherOther current liabilities. The notional values of the contracts as of August 31, 20192020 and August 31, 20182019 were $25.5 and $28.0, respectively. A net unrealized loss of $1.0 and $30.0, respectively. Net gains ofa net unrealized gain $0.5 and $0.7 were recognized for the three months ended August 31, 20192020 and August 31, 2018,2019, respectively.


16. OTHER ACCRUED EXPENSES
Other accrued expenses consisted of the following as of the dates indicated: 
 August 31, 2020May 31, 2020August 31, 2019
Accrued payroll, payroll taxes and benefits$41.4 $38.8 $43.6 
Accrued bonus and commissions11.8 12.1 9.3 
Returns liability43.1 43.5 35.5 
Accrued other taxes21.4 22.9 19.4 
Accrued advertising and promotions10.8 9.9 10.2 
Other accrued expenses38.1 34.3 37.6 
Total accrued expenses$166.6 $161.5 $155.6 
21
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Dollar amounts in millions, except per share data)



17. OTHER ACCRUED EXPENSES
Other accrued expenses consist of the following as of the dates indicated: 
 August 31, 2019 May 31, 2019 August 31, 2018
Accrued payroll, payroll taxes and benefits$43.6 $41.2 $43.9
Accrued bonus and commissions9.3
 13.7
 13.3
Returns liability35.5
 34.5
 45.4
Accrued other taxes19.4
 29.3
 21.3
Accrued advertising and promotions10.2
 9.6
 9.7
Other accrued expenses37.6
 36.5
 52.3
Total accrued expenses$155.6 $164.8 $185.9




18.17. 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 second quarter of fiscal 2020.2021. The dividend is payable on December 16, 201915, 2020 to shareholders of record as of the close of business on October 31, 2019.30, 2020.

22
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview and Outlook

Revenues for the first quarter ended August 31, 20192020 were $232.6$215.2 million, compared to $218.4$232.6 million in the prior fiscal year quarter, an increasea decrease of $14.2$17.4 million. The Company reported a net loss per diluted share of $1.68Class A and Common Stock of $1.16 in the first quarter of fiscal 2020,2021, compared to a net loss per diluted share of $1.75$1.68 in the prior fiscal year quarter.

The increaseCompany has executed on its cost-saving programs implemented to help mitigate the impact of COVID-19, which improved the Company's quarterly operating loss and cash used in operating activities year-over-year and preserved the Company's capital position. Globally, best-selling titles within the trade channel continued to perform well in the fiscal quarter ended August 31, 2020, including The Ballad of Songbirds and Snakes, which was released in the fourth quarter of fiscal 2020. In addition, the Company benefited from improved results across a number of education business lines, including digital product subscriptions, teaching resources, summer literacy camps and summer reading packs.

There is still uncertainty surrounding the duration and continued severity of the COVID-19 pandemic and its forward impact on schools, and the Company has implemented cost-saving programs targeted to improve its operations which are expected to help mitigate lower revenue expectations for the book fairs and book clubs channels as schools adapt to COVID-19 disruptions and delays. A substantial portion of these cost-saving programs are also expected to bring permanent improvements to the Company's first quarter revenue was primarily driven by an increase incost structure and provide opportunities for profitability as normal sales levels return. The trade channel sales globally. In the Company's Children's Book Publishing and Distribution segment, revenues increased dueis expected to successful frontlistbenefit from new titles includingsuch as Dav Pilkey's Dog Man: For Whom the Ball Rolls, Grime and Punishment, which was released in September, and J.K. Rowling's new title, The Ickabog®, which is targeted for release in November, as well as Tui Sutherland's Wingsrecently announced development deals for live-action feature films of Fire: The Poison Junglebook series, including Caster™. In the , Goosebumps®International , Animorphs®segment, trade revenues also increased, in local currency, due to Dav Pilkey's Dog Man: For Whom the Ball Rolls, as well as Aaron Blabey's Pig the Tourist and Anh Do's Weirdomania! in Australia and Julia Donaldson and Axel Scheffler's The Smeds, and The SmooMagic School Bus®s and Liz Picon's Tom Gates: Mega Make and Do and Stories Too in the UK, evidence of trade's continued strength in series publishing across all age groups and categories. In Education, revenues increased compared to the prior year with initial sales of Scholastic Literacy and continued higher sales ofprofessional learning and teaching resources sales to dealer-trade..

The Company is on track with the digital transformation of its book clubs business to shift more parents and students to online ordering and fortifying its position as the premier book fair operator in the U.S., where brand recognition, extensive distribution outlets and product offerings will enable the Company to hold approximately 120,000 fairs in the current fiscal year. The Company has also continued its efforts to improve operating margins through cost management and Scholastic 2020 technology-informed methods and process improvement initiatives in procurement, warehousing and shipping.

Results of Operations – Consolidated

Revenues for the quarter ended August 31, 2019 increased2020 decreased to $232.6$215.2 million, compared to $218.4$232.6 million in the prior fiscal year. The Children's Book Publishing and Distribution segment revenues increaseddecreased by $13.9$18.7 million, primarily due to increased trade channel revenue driven by the Company's best-selling titles and series which continue to top best-seller lists with number one books including Dav Pilkey's Dog Man: For Whom the Ball Rolls and Tui Sutherland's Wings of Fire: The Poison Jungle. The Company ended the fiscal quarter with six of the top eight spotslower school-based channel revenues resulting from COVID-impacted delays in Publishers Weekly Children's Frontlist Fiction and the number one book across all categories.school re-openings. In the Education segment, revenues increased by $0.5$5.2 million, primarily driven by revenue from initial deliveriesdue to higher sales of digital products in literacy programs and magazines and sales of take-home Scholastic LiteracyGrab and Go and increased professional learning revenue and teaching resources sales to dealer-trade.reading packs. In local currency, the International segment revenues increaseddecreased by $2.4$4.3 million, primarily driven by higher trade saleslower revenues in the majorschool-based channels in Canada and the direct sales channel in Asia due to the impact of COVID-19, partially offset by increased revenues in the trade channel across all international markets. Internationalsegment revenues were impacted by unfavorablefavorable foreign exchange of $2.6$0.4 million.

Components of Cost of goods sold for the three months ended August 31, 20192020 and August 31, 20182019 are as follows:
 Three months ended
August 31,August 31,
 20202019
($ amounts in millions)$% of Revenue$% of Revenue
Product, service and production costs$60.9 28.3 %$68.2 29.3 %
Royalty costs23.4 10.9 %22.3 9.6 %
Prepublication amortization6.5 3.0 %6.6 2.8 %
Postage, freight, shipping, fulfillment and other32.4 15.0 %40.0 17.2 %
Total$123.2 57.2 %$137.1 58.9 %
 Three months ended August 31,
 2019 2018
($ amounts in millions)$ % of Revenue $ % of Revenue
Product, service and production costs$68.2 29.3% $59.7 27.4%
Royalty costs22.3
 9.6% 20.9
 9.6%
Prepublication and production amortization6.6
 2.8% 5.3
 2.4%
Postage, freight, shipping, fulfillment and other40.0
 17.2% 39.4
 18.0%
Total$137.1 58.9% $125.3 57.4%

Cost of goods sold for the quarter ended August 31, 20192020 was $123.2 million, or 57.2% of revenues, compared to $137.1 million, or 58.9% of revenues, in the prior fiscal year quarter. The decrease in Cost of goods sold as a percentage of revenue was primarily driven by favorable product cost due to the sales mix within the education business, partially offset by higher royalty costs due to the product mix of titles sold within the trade channel in the quarter ended August 31, 2020.
23
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Selling, general and administrative expenses in the quarter ended August 31, 2020 decreased to $121.5 million, compared to $125.3$163.1 million in the prior fiscal year quarter. The $41.6 million decrease was due to the Company's COVID-related cost-saving initiatives, which included employee furlough and reduced work week programs and restructuring resulting in lower employee-related expenses, reduced technology-related spending, improvements in operating and financial processes, and other efforts to lower the Company's overall cost base. A substantial portion of these cost-saving programs are expected to bring permanent improvements to the Company's cost structure to meet the current economic environment and provide opportunities for profitability as normal sales levels return. The employee short-term furlough and reduced work week programs have been discontinued as of the second quarter of fiscal 2021.

Depreciation and amortization expenses in the quarter ended August 31, 2020 were $15.5 million, which is comparable to $15.4 million in the prior fiscal year quarter.

Severance expense in the quarter ended August 31, 2020 was $12.0 million, compared to $4.4 million in the prior fiscal year quarter, which included charges of $12.0 million and $2.8 million for the three months ended August 31, 2020 and August 31, 2019, respectively, related to cost-reduction and restructuring programs.

Net interest expense in the quarter ended August 31, 2020 was $1.2 million compared to Net interest income of $0.7 million in the prior fiscal year quarter. The increase in Net interest expense is primarily due to interest expense on long-term debt borrowings.

The Company’s effective tax rate for the quarter ended August 31, 2020 was 23.2%, compared to 32.8% in the prior fiscal year quarter.

Net loss for the quarter ended August 31, 2020 decreased by $18.7 million to $39.8 million, compared to Net loss of $58.5 million in the prior fiscal year quarter. Net loss per basic and diluted share of Class A and Common Stock was $1.16 and $1.16, respectively, for the fiscal quarter ended August 31, 2020, compared to a net loss per basic and diluted share of Class A and Common Stock of $1.68 and $1.68, respectively, in the prior fiscal year quarter.

Results of Operations

Children’s Book Publishing and Distribution
Three months ended
August 31,August 31,$ %
($ amounts in millions)20202019changechange
Revenues$90.9 $109.6 $(18.7)(17.1)%
Cost of goods sold54.6 65.5 (10.9)(16.6)%
Other operating expenses (1)
65.5 85.8 (20.3)(23.7)%
Operating income (loss)$(29.2)$(41.7)$12.5 30.0 %
Operating margin— %— %  

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

Revenues for the quarter ended August 31, 2020 decreased by $18.7 million to $90.9 million, compared to $109.6 million in the prior fiscal year quarter. Book fairs channel revenues decreased $14.3 million, primarily driven by lower fair count, and book clubs channel revenues decreased $2.2 million due to declines in sponsor engagement, both largely attributable to COVID-impacted school re-openings. Trade channel revenues decreased by $2.2 million, primarily due to a shift in the timing of the release of a new title in the popular Dog Man® book series to the second quarter of fiscal 2021 compared to a first quarter release in the prior fiscal year quarter.



24
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
This decrease was partially offset by sales of frontlist titles including The Ballad of Songbirds and Snakes (A Hunger Games Novel), Logan Likes Mary Anne! (The Baby-Sitters Club® Graphix #8), Captain Underpants and the Revolting Revenge of the Radioactive Robo-Boxers (Color Edition), The Bad Guys in the Dawn of the Underlord (The Bad Guys® #11), Karen's Roller Skates (Baby-Sitters Little Sister® Graphic Novel #2); Forget Me Nat (Nat Enough #2), and You Should See Me in a Crown by best-selling author Leah Johnson, as well as increased sales of workbooks within the Company's Scholastic Early LearnersTM and BOB Books® lines and higher audio book sales.

Cost of goods sold for the quarter ended August 31, 2020 was $54.6 million, or 57.4%60.1% of revenues, compared to $65.5 million, or 59.8% of revenues, in the prior fiscal year quarter. The increase in Cost of goods sold as a percentage of revenues was due toprimarily driven by higher paper and printingroyalty costs higherassociated with the product costs and higher amortization of prepublication costs related to newly released programs.mix within the trade channel.

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

Selling, general and administrativeOther operating expenses infor the quarter ended August 31, 2019 increased2020 decreased to $167.5$65.5 million, compared to $163.7$85.8 million in the prior fiscal year quarter. The increase isdecrease was attributable to cost-saving measures, which primarily related to higherresulted in a reduction in employee-related expenses and an increasecosts across all channels in costs in conjunction with the Company's ongoing technology initiatives.segment, as well as the temporary closure of book fair distribution facilities.

Depreciation and amortization expenses inSegment operating loss for the quarter ended August 31, 2019 increased to $15.42020 was $29.2 million, compared to $13.2an operating loss of $41.7 million in the prior fiscal year quarter. The increase$12.5 million improvement was primarily attributabledriven by cost-saving measures, which resulted in a decrease in employee-related costs and warehouse and distribution center costs. The Company expects continued impact from COVID-19 and related school re-opening issues, and continues to the Company's on-going implementation of new technology and data analytics platforms which are now in service.

Net interest incomemonitor costs in the quarter ended August 31, 2019 was $0.7 millionschool channels, while simultaneously preparing itself to be in a position to respond to varied customer requirements which is comparable to Net interest incomemay emerge as a result of $0.8 million in the prior fiscal year quarter.pandemic.

The Company’s effective tax rate for the quarter ended August 31, 2019 was 32.8%, compared to 26.5% in the prior fiscal year quarter. For the full fiscal year, the Company expects an effective tax rate, exclusive of discrete items, of approximately 32.7%.

Education
Net loss for the quarter ended August 31, 2019 decreased by $2.8 million to $58.5 million, compared to a Net loss of $61.3 million in the prior fiscal year quarter. Loss per basic and diluted share of Class A and Common Stock was $1.68 for the fiscal quarter ended August 31, 2019, compared to a Loss per basic and diluted share of Class A and Common Stock of $1.75 in the prior fiscal year quarter.
Three months ended
August 31,August 31,$ %
($ amounts in millions)20202019changechange
Revenues$53.6 $48.4 $5.2 10.7 %
Cost of goods sold22.6 20.9 1.7 8.1 %
Other operating expenses (1)
33.2 40.9 (7.7)(18.8)%
Operating income (loss)$(2.2)$(13.4)$11.2 83.6 %
Operating margin— %— %  

Results of Operations

Children’s Book Publishing and Distribution
 Three months ended August 31,
($ amounts in millions)2019 2018 
$
change
 
 %
change
Revenues$109.6  $95.7  $13.9 14.5 %
Cost of goods sold65.5  55.8  9.7
 17.4 %
Other operating expenses (1)
85.8  85.9  (0.1) (0.1)%
Operating income (loss)$(41.7)  $(46.0)  $4.3 9.3 %
Operating margin —%  —%    

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

Revenues for the quarter ended August 31, 20192020 increased by $13.9 million to $109.6$53.6 million, compared to $95.7$48.4 million in the prior fiscal year quarter, with continued growth in the trade channel of $12.7quarter. The $5.2 million driven by successful releases including Dav Pilkey's Dog Man: For Whom the Ball Rolls and Tui Sutherland's Wings of Fire: The Poison Jungle. Other top selling trade titles in the fiscal quarter included The Bad Guys in The Big Bad Wolf, The Baby-Sitters Club® Graphix #7: Boy-Crazy Stacey, and licensed titles, Bendy and the Ink Machine and Season of the Witch (The Chilling Adventures of Sabrina, Book 1). In addition, Make Believe Ideas Ltd. contributed additional revenue as its results are now consolidated within the Children's Book Publishing and Distribution segment. Book fair channel revenue increased $2.3 million primarily driven by revenue associated with higher net redemptions of incentive credits. Book club channel revenues decreased $1.1 millionincrease was primarily due to lower revenue per eventhigher sales of instructional programs, including programs provided through the Company's Summer LitCamp® partnership with BellXcell®Summer, as well as the Company’s line of Grab and lower number of events compared to the prior fiscal year quarter. Revenues from book club and book fair channels generally are not significantGo summer reading packs. Digital revenues also increased in the first fiscal quarter ended August 31, 2020, which included a large school district sale of Scholastic Literacy Pro®and F.I.R.S.T.®, digital programs for independent reading and foundational reading skills, respectively. The Company's teaching resources business revenues increased from sales of products such as most schools are not in session.First Little Readers™ packs and teaching guides and Jumbo and Summer Express activity books.

Cost of goods sold for the quarter ended August 31, 20192020 was $65.5$22.6 million, or 59.8%42.2% of revenues, compared to $55.8$20.9 million, or 58.3%43.2% of revenues, in the prior fiscal year quarter. The increasedecrease in Cost of goods sold as a percentpercentage of revenues was primarily due to favorable product mix from higher paperdigital sales and printing costs andtake-home packs, partially offset by higher fulfillment costs in the fiscal quarter, a trend that has continued from the prior fiscal year.postage costs.

Other operating expenses for the quarter ended August 31, 20192020 decreased to $85.8$33.2 million, which is comparablecompared to $85.9$40.9 million in the prior fiscal year quarter. The $7.7 million decrease was primarily related to a decrease in employee-related costs as a result of cost-saving measures implemented to mitigate the impact of COVID-19.

25
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Segment operating loss for the quarter ended August 31, 20192020 was $41.7$2.2 million, compared to an operating loss of $46.0$13.4 million in the prior fiscal year quarter. The $4.3$11.2 million improvement was primarily driven by higher trade channel revenues.

Education
 Three months ended August 31,
($ amounts in millions)2019 2018 
$
change
 
%
change
Revenues$48.4  $47.9  $0.5 1.0 %
Cost of goods sold20.9  19.9  1.0
 5.0 %
Other operating expenses (1)
40.9  42.9  (2.0) (4.7)%
Operating income (loss)$(13.4)  $(14.9)  $1.5 10.1 %
Operating margin —%  —%    

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

Revenues for the quarter ended August 31, 2019 increased to $48.4 million, compared to $47.9 millionrevenue increases in the prior fiscal year quarter. The $0.5 million increase was primarily driven by higher revenue from initial salesa number of Scholastic Literacy, professional learning and education business lines, including digital product subscriptions, teaching resources, sales to dealer-trade, partially offset by a decline in revenue ofsummer literacy camps and summer reading and paperbacks and classroom collections.programs, coupled with cost-saving measures taken to mitigate the impact of COVID-19.


Cost of goods sold for the quarter ended August 31, 2019 was $20.9 million, or 43.2% of revenues, compared to $19.9 million, or 41.5% of revenues, in the prior fiscal year quarter. The increase in Cost of goods sold as a percent of revenues was primarily due to an increase in amortization of prepublication costs related to newly released programs.

Other operating expenses for the quarter ended August 31, 2019 decreased to $40.9 million, compared to the prior fiscal year quarter of $42.9 million. The $2.0 million decrease primarily related to lower marketing expenses.

Segment operating loss for the quarter ended August 31, 2019 was $13.4 million, compared to an operating loss of $14.9 million in the prior fiscal year quarter. This improvement was primarily driven by an increase in revenues and lower operating expenses, partially offset by higher prepublication cost amortization.

International
Three months ended
August 31,August 31,$%
($ amounts in millions)20202019changechange
Revenues$70.7 $74.6$(3.9)(5.2)%
Cost of goods sold37.6 38.7(1.1)(2.8)%
Other operating expenses (1)
27.9 39.6(11.7)(29.5)%
Operating income (loss)$5.2 $(3.7)$8.9 240.5 %
Operating margin7.4 %— %  
 Three months ended August 31,
($ amounts in millions)2019 2018 
$
change
 
%
change
Revenues$74.6  $74.8  $(0.2) (0.3)%
Cost of goods sold38.7  38.3  0.4
 1.0 %
Other operating expenses (1)
39.6  38.5  1.1
 2.9 %
Operating income (loss)$(3.7)  $(2.0)  $(1.7) (85.0)%
Operating margin —%  —%  
  

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

Revenues for the quarter ended August 31, 20192020 decreased to $74.6$70.7 million, compared to $74.8$74.6 million in the prior fiscal year quarter. Local currency revenues across the Company's foreign operations increaseddecreased by $2.4$4.3 million which werepartially offset by an adversefavorable foreign exchange of $0.4 million. In Canada, local currency revenues decreased $1.5 million, primarily driven by lower school-based channel sales resulting from the impact of $2.6 million. LocalCOVID-19, partially offset by increased sales of best-selling trade titles. In the UK, local currency revenues decreased $0.2 million, primarily due to lower volumes in the book fairs channel, partially offset by increased book clubs sales from parent-to-home orders and demand for digital product, as well as increased sales of the Hunger Games® titles within the trade channel. Australia and New Zealand local currency revenues increased $1.5 million, primarily on higher revenue from the trade and book clubs channels, partially offset by lower volumes in the book fairs channel. In Asia, local currency revenues decreased $4.9 million primarily related to lower revenues from the direct sales channel due in part to higherthe adverse impact of COVID-19. In addition, revenues from the export and foreign rights channels increased a total of $0.8 million compared to the prior fiscal year quarter.

Cost of goods sold for the quarter ended August 31, 2020 was $37.6 million, or 53.2% of revenues, compared to $38.7 million, or 51.9% of revenues, in the prior fiscal year quarter. The higher cost of goods sold as a percentage of revenue was driven by higher royalty costs due to a sales shift to trade channeltitles with higher royalty rates.

Other operating expenses for the quarter ended August 31, 2020 were $27.9 million, compared to $39.6 million in the prior fiscal year quarter. Other operating expenses decreased $11.7 million primarily driven by COVID-related governmental employee retention programs in Australia, Canada, and the UK, which are expected to cease in fiscal 2021, in addition to lower employee-related expenses as a result of cost-saving programs implemented by the Company. This decrease was partially offset by severance expense of $1.0 million in the quarter ended August 31, 2020 related to the cost-reduction measures.

Segment operating income for the quarter ended August 31, 2020 was $5.2 million, compared to segment operating loss of $3.7 million in the prior fiscal year quarter. Total local currency operating results across the Company's major marketsforeign operations increased $8.7 million, primarily driven by the global successCOVID-related governmental employee retention programs and lower employee-related costs as a result of Dav Pilkey's Dog Man: For Whom the Ball Rolls. Incost-saving measures, in additionother top selling titles include Aaron Blabey's Pig the Tourist and Anh Do's Weirdomania! in Australia and Julia Donaldson and Axel Scheffler's The Smeds and The Smoos and Liz Pichon's Tom Gates: Mega Make and Do and Stories Too to increased trade channel revenues, partially offset by lower revenues in the UK.book fairs and direct sales channels.

Overhead
Unallocated overhead expense for the quarter ended August 31, 2020 increased by $2.2 million to $30.8 million, from $28.6 million in the prior fiscal year quarter. Severance expense, related to cost-reduction programs, increased by $8.2 million to $11.0 million, compared to $2.8 million in the prior fiscal year quarter.
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SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Revenues were also driven by higher education sales in Asia,The increase was partially offset by lower revenuesemployee-related costs and technology-related spending in an effort to mitigate the Asia directimpact on operating income of lower sales channel and Export.

Cost of goods sold for the quarter ended August 31, 2019 was $38.7 million, or 51.9% of revenues, compared to $38.3 million, or 51.2% of revenues, in the prior fiscal year quarter. Cost of goods sold as a percentage of revenues increased primarilyvolumes due to higher royalty costsCOVID-19, as a resultwell as the absence of increased trade revenue and fulfillment costs across the major markets.

Other operating expenses for the quarter ended August 31, 2019 were $39.6 million, compared to $38.5 million in the prior fiscal year quarter. Other operating expenses increased $1.1 million primarily related to an increase in employee-related expenses across most markets and lower equity method investment income.

Segment operating loss for the quarter ended August 31, 2019 was $3.7 million, compared to an operating loss of $2.0 million in the prior fiscal year quarter. During the current fiscal quarter, segment operating loss was primarily impacted by an increase in employee-related expenses.

Overhead
Unallocated overhead expense for the quarter ended August 31, 2019 increased by $7.7 million to $28.6 million, from $20.9 million in the prior fiscal year quarter. The increase was primarily driven by an increase in expense attributable to the Company's new technology and data analytics platforms, higher depreciation expense related to recent system upgrades which are now in service, a $1.5 million settlement, in the current fiscal year quarter, without admission of liability, of a claim for an alleged patent infringement and higher severance expense.that occurred in the prior year fiscal quarter.

Seasonality

The Company’s Children’s Book Publishing and Distribution school-based book club and book 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 lower than its revenues in the other two fiscal quarters. Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Trade sales can vary throughout the year due to varying release dates of published titles. TheWhile the Company generally experiences a loss from operations in the first and third quarters of each fiscal year. Asyear, the second quarter of fiscal 2021, ending November 30, 2020, which is traditionally an income quarter, is expected to be negatively impacted by the COVID-19 pandemic. Presently, there are many uncertainties concerning the timing of, and any patterns which may emerge from, school re-openings for the new school year, and the nature and continuing magnitude of the negative impact of COVID-19 into and beyond the second quarter of fiscal 2021 will depend on the actual timing and emerging patterns of such re-openings throughout the United States.

Liquidity and Capital Resources

Cash used by operating activities was $26.0 million for the three months ended August 31, 2020, compared to cash used by operating activities of $97.6 million for the prior fiscal year quarter, representing a decrease in cash used by operating activities of $71.6 million. While there were lower revenues in the quarter ended August 31, 2020, the cost-saving measures taken by the Company resulted in a decrease in cash used compared to the prior fiscal year quarter. The Company modified inventory procurement and other activities, which usually ramp up in advance of the back-to-school selling season, to adapt to the anticipated impact of the COVID-related delays in school re-openings. In addition, there was an overall reduction in general spending as part of the cost-saving programs, such as lower payroll spending due to employee furlough programs, lower spending on non-essential projects, and limitations on expenditures related to travel, events, and conferences. The Company intends to continue to limit spending in view of the economic uncertainty brought on by the global pandemic.

Cash used in investing activities was $8.9 million for the three months ended August 31, 2020, compared to cash used in investing activities of $24.3 million in the prior fiscal year quarter, representing a decrease in cash used in investing activities of $15.4 million. The decrease in cash used was primarily driven by the net proceeds from the sale of the Danbury facility of $12.3 million and the absence of the UK land acquisition of $3.3 million which occurred in the prior fiscal year quarter. The Company intends to continue to limit investment spending in view of the economic uncertainty brought on by the global pandemic.

Cash used in financing activities was $5.3 million for the three months ended August 31, 2020, compared to cash used in financing activities of $12.3 million for the prior fiscal year quarter, representing a decrease in cash used in financing activities of $7.0 million. The decrease in cash used is primarily related to the suspension of the Company's Education segment beginsshare buy back program pursuant to sell its core curriculum offering, Scholastic Literacy, these revenues are likely to be recognizedwhich $12.6 million of common stock was reacquired in the firstprior fiscal quarter, when schoolsyear quarter. This was partially offset by lower short-term credit facility net borrowings of $7.8 million.

Cash Position

The Company’s cash and districts are preparing forcash equivalents totaled $355.5 million at August 31, 2020, $393.8 million at May 31, 2020 and $199.4 million at August 31, 2019. Cash and cash equivalents held by the upcoming school year.Company’s U.S. operations totaled $323.7 million at August 31, 2020, $364.2 million at May 31, 2020 and $177.5 million at August 31, 2019.

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

Liquidity and Capital Resources

Cash used in operating activities was $97.6 million for the three months ended August 31, 2019, compared to cash used in operating activities of $89.0 million for the prior fiscal year period, representing an increase in cash used in operating activities of $8.6 million. The increase in cash used was primarily due to higher customer receivable balances resulting from the increased trade channel revenues.

Cash used in investing activities was $24.3 million for the three months ended August 31, 2019, compared to cash used in investing activities of $37.4 million in the prior fiscal year period, representing a decrease in cash used in investing activities of $13.1 million. The decrease in cash used was primarily due to lower capital spending on the now completed Company's headquarters building modernization project.

Cash used in financing activities was $12.3 million for the three months ended August 31, 2019, compared to cash provided by financing activities of $5.2 million for the prior fiscal year period, representing an increase in cash used in financing activities of $17.5 million. The increase in cash used was primarily driven by common stock repurchases by the Company, which were $12.6 million in the current fiscal year period with no such repurchases in the prior fiscal year quarter and last fiscal year's proceeds pursuant to stock option exercises of $2.7 million with no proceeds received in the current year quarter.

Cash Position

The Company’s cash and cash equivalents totaled $199.4 million at August 31, 2019, $334.1 million at May 31, 2019 and $269.8 million at August 31, 2018. Cash and cash equivalents held by the Company’s U.S. operations totaled $177.5 million at August 31, 2019, $308.7 million at May 31, 2019 and $253.4 million at August 31, 2018.

Due to the seasonal nature of its business as discussed under “Seasonality” above, the Company usually experiences negative cash flows in the June through October time period. As a result of the Company’s business cycle, borrowings have historically increased during June, July and August, have generally peaked in September or October, and have been at their lowest point in May. The Company expects lower cash receipts from its school channel businesses in the second quarter of fiscal 2021 as a result of the effects of COVID-19 on school re-openings, resulting in lower book fairs and book clubs revenues. As a precautionary measure in the context of the COVID-19 pandemic, the Company accessed its $375.0 million committed bank credit facility in the fourth quarter of fiscal 2020 by taking a U.S. dollar LIBOR-based advance for $200.0 million, although there continues to be no immediate working capital requirement.

The Company’s operating philosophy is to use cash provided by operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses or acquiring other strategic assets, as well as engaging in shareholder enhancement initiatives, such as share repurchases or dividend declarations. The Company will also use its cash position, combined with improved technology-driven data,Company’s open-market buy-back program continues to reduce procurement costs acrossbe suspended in the Company's businesses.face of COVID-19 uncertainties.

The Company has maintained, and expects to maintain for the foreseeable future, sufficient liquidity to fund ongoing operations, including working capital requirements, pension contributions, postretirement benefits, dividends, currently authorized Common share repurchases, debt service, planned capital expenditures and other investments.investments, as well as dividends and share repurchases as appropriate in the context of COVID-19 considerations. As of August 31, 2019,2020, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $199.4$355.5 million, cash from operations and funding available under the Loan AgreementCompany's loan agreements in the US and the UK totaling approximately $375.0 million.$386.4 million, less borrowings of $211.4 million and commitments of $0.4 million, resulting in $174.6 million of availability. The Company may at any time, but in any event not more than once in any calendar year, request that the aggregate availability of credit under the US Loan Agreement be increased by an amount of $10.0 million or an integral multiple of $10.0 million (but not to exceed $150.0 million). Additionally, the Company has short-term credit facilities of $49.3$55.2 million, less current borrowings of $13.0$8.5 million and commitments of $4.9$3.9 million, resulting in $31.4$42.8 million of current availability at August 31, 2019.2020. Accordingly, the Company believes these sources of liquidity are sufficient to finance its currently anticipated ongoing operating needs, as well as its financing and investing activities.activities, taking COVID-19 into consideration.

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

Financing
 
The Company is party to the US and UK Loan AgreementAgreements and certain credit lines with various banks as described in Note 4 of Notes to Condensed Consolidated financial statementsFinancial Statements - unaudited in Item 1, “Financial Statements." There were noThe Company had $200.0 million in outstanding borrowings under the US Loan Agreement as of August 31, 2019.2020. On September 23, 2019, Scholastic Limited UK entered into a term loan agreement to borrow £2.0 million to fund a land purchase in connection with the construction of the new UK facility. The loan has a maturity date of July 31, 2021. As of August 31, 2020, the Company had $2.7 million outstanding on the loan. On January 24, 2020, Scholastic Limited UK entered into a term loan facility with a borrowing limit of £6.6 million to fund the construction of the new UK facility. The loan has a maturity date of July 31, 2021. As of August 31, 2020, the Company had $8.7 million outstanding on the loan.

New Accounting Pronouncements
 
Reference is made to Note 1 of Notes to Financial Statements - unaudited in Item 1, “Financial Statements,” for information concerning recent accounting pronouncements since the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019.2020.

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SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Forward Looking Statements
 
This Quarterly Report on Form 10-Q contains forward-looking statements. Additional written and oral forward-looking statements may be made by the Company from time to time in Securities and Exchange Commission ("SEC") filings and otherwise. The Company cautions readers that results or expectations expressed by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects strategic 2020 Plan and otherstrategic plans, ecommerce and digital initiatives, new product introductions, strategies, new education standards, goals, revenues, improved efficiencies, general costs, manufacturing costs, medical costs, potential cost savings, merit pay, operating margins, working capital, liquidity, capital needs, the cost and timing of capital projects, interest costs, cash flows and income, are subject to risks and uncertainties, thatincluding, in particular, how the foregoing may be affected by developments in the context of the current COVID-19 pandemic and measures or responses of governmental authorities, business suppliers or customers, which may have an impact on the Company's operations and could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors including those noted in the Annual Report and this Quarterly Report and other risks and factors identified from time to time in the Company’s filings with the SEC. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.


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SCHOLASTIC CORPORATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company conducts its business in various foreign countries, and as such, its cash flows and earnings are subject to fluctuations from changes in foreign currency exchange rates. The Company sells products from its domestic operations to its foreign subsidiaries, creating additional currency risk. The Company manages its exposures to this market risk through internally established procedures and, when deemed appropriate, through the use of short-term forward exchange contracts, which were not significant as of August 31, 2019.2020. The Company does not enter into derivative transactions or use other financial instruments for trading or speculative purposes.
 
Market risks relating to the Company’s operations result primarily from changes in interest rates in its variable-rate borrowings. The Company is subject to the risk that market interest rates and its cost of borrowing will increase and thereby increase the interest charged under its variable-rate debt.

Additional information relating to the Company’s outstanding financial instruments is included in Note 4 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements.”

The following table sets forth information about the Company’s debt instruments as of August 31, 2019:2020:

($ amounts in millions)Fiscal Year Maturity
 
2020(1)
 2021 2022 2023 2024 Thereafter Total Fair
Value @
8/31/2019
Debt Obligations 
  
  
  
  
  
  
  
Lines of Credit and current
  portion of long-term debt
$13.0 $—
 $—
 $—
 $—
 $—
 $13.0 $13.0
Average interest rate4.1% —
 —
 —
 —
 —
 —
 

($ amounts in millions)Fiscal Year Maturity
 
2021(1)
2022202320242025ThereafterTotalFair
Value @
8/31/2020
Debt Obligations        
Lines of credit and current
portion of long-term debt		$8.5 11.4 — — — — $19.9 $19.9 
Average interest rate4.2 %1.9 %— — — — 
Long-term debt$— 200.0 $— $— $— $— $200.0 $200.0 
Average interest rate— 1.4 %— — — —   

(1)    Fiscal 20202021 includes the remaining nine months of the current fiscal year ending May 31, 2020.2021.




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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 August 31, 2019,2020, 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 August 31, 20192020 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.


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PART II – OTHER INFORMATION
SCHOLASTIC CORPORATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
6. Exhibits
Exhibits:
The following table provides information with respect to repurchases of shares of Common Stock by the Corporation during the three months ended August 31, 2019:
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)
 
June 1, 2019 through June 30, 2019 260,956
 33.16
 260,956
 44.2
 
July 1, 2019 through July 31, 2019 3,200
 33.22

3,200
 44.1
 
August 1, 2019 through August 31, 2019 112,828
 33.55

112,828
 40.2
 
Total 376,984
   376,984
 $40.2
 
(i) Represents the amount remaining at August 31, 2019 under 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 12 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements,” for a description of the Company’s share buy-back program and share repurchase authorizations.





SCHOLASTIC CORPORATION
Item 6. Exhibits31.1

Exhibits:
31.1
31.2
32
10.1101
Severance Arrangement, dated January 27, 2014, between the Company and Satbir Bedi.

101Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended August 31, 2019,2020 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.

104Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.


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SCHOLASTIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q, DATED August 31, 20192020
Exhibits Index
Exhibit NumberDescription of Document
31.1
31.2
32
10.1 *101Severance Arrangement, dated January 27, 2014, between Scholastic Corporation and Satbir Bedi
101Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended August 31, 2019,2020 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.
104Cover Page, formatted Inline Extensible Business Reporting Language and contained in Exhibit 101.

* The referenced exhibit is a management contract or compensation plan or arrangement described in Item 601(b) (10) (iii) of Regulation S-K.






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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: September 20, 201925, 2020By:By:/s/ Richard Robinson
Richard Robinson
Chairman of the Board,
President and Chief
Executive Officer
Date: September 20, 201925, 2020By:By:/s/ Kenneth J. Cleary
Kenneth J. Cleary

Chief Financial Officer
(Principal Financial Officer)


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