New York, NY (September 24, 2002) -- Scholastic Corporation (NMS: SCHL) today announced its results for the first fiscal quarter ended August 31, 2002 and its new contract to publish Harry Potter Book Five in the United States.

Revenue was $306.9 million as compared to $306.1 million in the year ago period with a net loss of $44.6 million, or $1.14 per share, as compared to a net loss of $37.0 million, or $1.05 per share last year. The net loss for the first quarter was $43.4 million or $1.11 per share, excluding a previously announced after-tax one-time charge of $1.2 million or $0.03 per share from the settlement of a securities lawsuit from 1997. The net loss for the year-ago quarter was $31.8 million or $0.90 per share, excluding an after-tax charge of $5.2 million or $0.15 per share for a change in accounting due to the adoption of SOP 00-2, "Accounting by Producers and Distributors of Films".
 
"We're pleased to announce that author J.K. Rowling's next novel, Harry Potter and The Order of the Phoenix, is under contract to be published by Scholastic, and to reaffirm our $2.65-$2.95 EPS target for Fiscal 2003, with the range largely a function of the publication date of Harry Potter Book Five," said Richard Robinson, Chairman, President and CEO.
 
"We're also pleased to announce that first quarter results were in line with expectations, excluding the litigation charge, during our smallest revenue period, when most schools are not in session and we always report a seasonal loss," Mr. Robinson said. "Highlights included a strong performance in reading intervention products led by READ 180®, which tripled in sales; 12% revenue growth in our International segment; and significant progress toward reaching our goal of at least $30 million in cost reductions this year, fueled by our purchasing initiative and similar efforts. While still early, book fair bookings are strong for the fall and the initial second quarter orders for book clubs and school-based continuities are in line with expectations."
 
First Quarter Segment Analysis
Children's Book Publishing & Distribution — Revenue was $140.2 million in the quarter compared to $141.1 million in the year ago period. The Klutz "books plus" business (acquired in the fourth quarter of Fiscal 2002) added $11 million in revenue, while Direct-to-Home continuities revenue declined $6.3 million year over year, primarily due to the elimination of less profitable marketing programs, as previously announced, partially offset by revenue from Baby's First Book Club®, acquisition. Best selling trade titles included all four Harry Potter novels, The Thief Lord, Captain Underpants Extra Crunchy Book O' Fun 2, and David Gets In Trouble.
 
Educational Publishing — Revenue was $88.0 million in the quarter compared to $91.7 million in the year ago period. Sales of READ 180, other reading intervention programs, and the Tom Snyder Productions supplemental software business (acquired in the third quarter of Fiscal 2002) largely offset the anticipated decline in sales of the Scholastic Literacy Place® basal reading program, which the Company decided not to update in fiscal 2001.
 
International — Revenue was $61.6 million in the quarter compared to $55.0 million in the year ago period, reflecting growth in the United Kingdom, Canada and Australia and a small impact from favorable currency exchange rates in Fiscal 2003 as compared to the year-ago quarter.
 
Media, Licensing & Advertising — Revenue was $17.1 million in the quarter compared to $18.3 million in the year ago period due in part to slightly lower advertising revenue in consumer magazines. During the quarter, Scholastic reached agreement with PBS Kids to produce Clifford's Puppy Days, a new series for late 2003-early 2004 broadcast, which will be used to expand Scholastic's highly successful Clifford™ publishing, multi-media and consumer products franchise. In November I Spy™, based on Scholastic's best selling publishing franchise, will make its series debut on HBO Family.
 
Conference Call
Scholastic will discuss its first quarter Fiscal 2003 results in a conference call tomorrow (September 25, 2002) at 8 AM Eastern. To participate, call (800) 374-0124 (conference ID number 5631044, meeting leader Richard Robinson). Slides can be viewed at www.mshow.com (show number 71457). Slides also will be available at the Investor Relations section of www.scholastic.com. Replay of slides and audio will be available at mshow.com and the Investor Relations section of scholastic.com until October 8, 2002. An audio replay of the call will also be available from 11 AM, September 25, 2002, to 5 PM, October 8, 2002 at (800) 642-1687.
 
About Scholastic
Scholastic is the world's largest publisher and distributor of children's books. Scholastic creates quality educational and entertaining materials and products for use in school and at home, including children's books, textbooks, magazines, technology-based products, teacher materials, television programming, videos and toys. The Company distributes its products and services through a variety of channels, including proprietary school-based book clubs, school-based book fairs, and direct-to-home continuity programs; retail stores, schools, libraries, television networks; and the Company's www.scholastic.com Internet site.
 
Forward-Looking Statements
This news release contains certain forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties including the conditions of the children's book and educational materials markets and acceptance of the Company's products within those markets and other risks and factors identified from time to time in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated.


Click here to view the Consolidated Statement of Operations (This file is in PDF format, which requires Adobe Acrobat Reader software. If you do not have this software already installed, click here to download it for free from Adobe.).

Contacts: