Scholastic Q2 Adj. Profit Rises, Reiterates 2014 Outlook

(RTTNews) - Children's publishing, education and media company Scholastic Corp. (SCHL) on Thursday reported an increase in profit for the second quarter from last year, excluding one-time charges.

Revenues for the quarter grew 2 percent, reflecting higher sales of the "Hunger Games" series and improved results in the children's books segment. Looking ahead, the company reiterated its financial outlook for fiscal 2014.

The company also said it has agreed to purchase its headquarters property at 555 Broadway in New York City, pursuant to a right of first offer under its master lease agreement, for a price of $255 million. The company expects the transaction to close prior to the end of its current fiscal year.

Richard Robinson, Chairman, President and Chief Executive Officer said, "Scholastic had a very strong second quarter, driven by profit improvement in each part of our children's book business and excellent educational technology program sales. These operating results were offset by a one-time, non-cash charge related to acquisitions made more than 10 years ago."

Scholastic's net income for the second quarter was $58.3 million or $1.80 per share, down from $61.8 million or $1.89 per share in the year-ago period.

The latest quarter's results include one-time expenses of $0.35 per share. This reflects a goodwill impairment charge of $13.4 million in the Children's Book Publishing and Distribution segment and $5.5 million of one-time expenses related to cost reduction and restructuring programs.

Excluding items, adjusted net income for the quarter was $69.5 million or $2.15 per share, compared to $61.8 million or $1.89 per share in the prior-year quarter.

The improved results largely reflect profit improvement in children's books, strong performance of Scholastic's new educational technology programs that were successfully launched over the summer, favorable results in classroom book collections and guided reading initiatives, and growing circulation of the company's classroom magazines.

Revenues for the quarter rose 2 percent to $623.2 million from $613.5 million in the year-ago period.

Segment revenue at Children's Book Publishing and Distribution for the quarter rose 1 percent from last year to $352.1 million.

In Trade, sales of core backlist titles including "The Hunger Games" and Harry Potter as well as the recently released multi-platform "Spirit Animals" drove a 3 percent increase in revenues. In School Book Fairs, revenue increased 3 percent, reflecting higher revenue per fair compared to the prior year period.

Educational Technology and Services segment revenue rose 17 percent to $60.9 million, primarily due to higher sales of educational technology products in the latest quarter including System 44 Next Generation, MATH 180, Common Core Code XTM and iReadTM.

Classroom and Supplemental Materials Publishing segment revenue increased 11 percent to $59.1 million, compared to $53.2 million in the prior year period, as a result of higher sales of guided reading and other classroom book collections and higher circulation in classroom magazines.

However, International segment revenues declined 6 percent to $135.6 million, primarily due to an unfavorable foreign exchange impact of $7.5 million. This was partially offset by strong performance in Asia, where revenues rose by about 19 percent.

Media, Licensing and Advertising segment revenue decreased 9 percent to $15.5 million as a result of lower interactive sales, partially offset by an increase in Consumer Magazines revenue.

Looking ahead to fiscal 2014, Scholastic reiterated its outlook for total revenue of around $1.8 billion and earnings per share from continuing operations of $1.40 to $1.80, excluding the impact of any one-time items associated with cost reduction programs or non-cash, non-operating items.

In Thursday's regular session, SCHL is trading at $29.20, up $0.39 or 1.35 percent.