Scholastic(SCHL) - 2025 Q4 - Annual Report

Part I Business Scholastic Corporation, a leading children's book publisher and educational materials provider, operates through four segments with a highly seasonal business model - Scholastic Corporation is the world's largest publisher and distributor of children's books, primarily operating through school-based book clubs and fairs[13] Fiscal Year 2025 Revenue by Segment | Segment | Revenue (in millions) | % of Total Revenue | | :--- | :--- | :--- | | Children's Book Publishing and Distribution | $963.9 | 59.3% | | Education Solutions | $309.8 | 19.1% | | Entertainment | $61.0 | 3.8% | | International | $279.6 | 17.2% | | Overhead | $11.2 | 0.6% | | Total | $1,625.5 | 100.0% | - The company's business is highly seasonal, with lower revenues in the first and third fiscal quarters due to its school-year-based channels[50] Employee Distribution as of May 31, 2025 | Business Channel/Function | Full-time | Part-time | Seasonal | Total | | :--- | :--- | :--- | :--- | :--- | | Central Functions | 670 | 25 | — | 695 | | Primary U.S. Warehouse | 675 | 130 | 5 | 810 | | Book Fairs Warehouses | 640 | 700 | 435 | 1,775 | | Scholastic Reading Events | 505 | 10 | 75 | 590 | | Trade | 205 | 5 | — | 210 | | Education Solutions | 540 | 60 | — | 600 | | Entertainment | 760 | — | — | 760 | | International | 1,005 | 70 | 15 | 1,090 | | International Warehouses | 310 | 10 | 240 | 560 | | Total | 5,310 | 1,010 | 770 | 7,090 | Risk Factors The company faces key risks including talent dependency, evolving customer patterns, rising costs, competition, cybersecurity, technological adaptation, regulatory changes, acquisition integration, and concentrated stock ownership - The company's business is highly dependent on maintaining strong relationships with authors, illustrators, and other creative talent[63] - The top five trade customers account for approximately 75% of U.S. trade business and 16% of total company revenues, indicating significant customer concentration risk[84] - As of May 31, 2025, the company held $198.9 million in goodwill and $87.9 million in intangible assets, subject to impairment risk if business objectives are not met[75] - Voting power is exclusively vested in Class A Stockholders, with the Estate of Richard Robinson owning a majority, controlling Board elections and major corporate actions[107] Unresolved Staff Comments The company reports that there are no unresolved staff comments from the SEC - None[112] Cybersecurity Scholastic implements a NIST-CSF-based cybersecurity program, overseen by the Board's Technology, Data and Supply Chain Committee, with no material incidents reported to date - The company adopted the NIST-CSF as its cybersecurity program blueprint since 2018[114] - The Board's Technology, Data and Supply Chain Committee oversees cybersecurity risks, receiving quarterly updates from the CIO and CISO[116] - As of the report date, no past cybersecurity incidents are believed to have materially affected the company's business or financial condition[115] Properties The company operates global owned and leased facilities, including its New York City headquarters and a primary Missouri warehouse, with the headquarters generating rental income Major Facilities as of May 31, 2025 | Location | Primary Purpose | Owned Square Footage | Leased Square Footage | | :--- | :--- | :--- | :--- | | Metropolitan NY Area | Principal offices | 355,000 | 19,000 | | U.S. Various Locations | Book Fairs warehouses | — | 2,302,000 | | Jefferson City, MO Area | Primary warehouse | 1,459,000 | — | | International | Warehouse and office | 236,000 | 1,022,000 | - The company's SoHo, New York City headquarters generated $11.2 million in rental income during fiscal 2025[123] Legal Proceedings The company is involved in routine legal proceedings, with management not expecting any material adverse effect on its financial position or results of operations - The company accrues for probable and estimable legal liabilities, anticipating no material adverse effect from current matters on its financial position[126] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[127] Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Scholastic's common stock trades on NASDAQ, with the company declaring a $0.20 per share quarterly dividend and repurchasing $70.9 million in shares during fiscal 2025 - On July 16, 2025, the Board declared a regular quarterly cash dividend of $0.20 per share for Q1 fiscal 2026[132] Share Repurchases (Fiscal 2025 vs. 2024) | Fiscal Year | Shares Repurchased | Average Price Paid | Total Cost (incl. tax) | | :--- | :--- | :--- | :--- | | 2025 | 3,482,280 | $20.10 | $70.9 million | | 2024 | 3,993,576 | $39.00 | $156.8 million | - As of May 31, 2025, approximately $70.0 million remains available for future common share repurchases under board authorizations[133] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2025 revenues grew 2.3% to $1.626 billion, driven by Entertainment and Children's Book Publishing, but a net loss of $1.9 million resulted from increased interest expense related to the 9 Story acquisition Fiscal 2025 vs. 2024 Consolidated Results | Metric | Fiscal 2025 | Fiscal 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,625.5 M | $1,589.7 M | +2.3% | | Operating Income | $15.8 M | $14.5 M | +$1.3 M | | Net Income (Loss) | ($1.9 M) | $12.1 M | -$14.0 M | | Diluted EPS | ($0.07) | $0.40 | -$0.47 | - Fiscal 2025 revenue growth was primarily driven by a $59.1 million increase in Entertainment (9 Story acquisition) and a $10.6 million increase in Children's Book Publishing, offset by a $41.4 million decrease in Education Solutions[164] - Interest expense significantly increased to $18.2 million in fiscal 2025 from $1.9 million in fiscal 2024, primarily due to debt for the 9 Story acquisition[174] - Cash provided by operating activities decreased to $124.2 million in fiscal 2025 from $154.6 million in fiscal 2024, due to lower customer remittances and increased inventory and royalty payments[202] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from foreign currency and variable-rate debt interest rate fluctuations, managing currency risk with short-term forward exchange contracts without speculative derivatives - The company's primary market risks include foreign currency exchange rate fluctuations and interest rate changes on its variable-rate debt[212][213] Debt Obligations by Maturity as of May 31, 2025 (in millions) | Type | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lines of credit/Current Debt | $6.2 | $— | $— | $— | $— | $— | $6.2 | | Long-term debt | $— | $— | $— | $— | $250.0 | $— | $250.0 | | Film related obligations | $6.1 | $9.3 | $0.7 | $2.2 | $— | $— | $18.3 | Consolidated Financial Statements and Supplementary Data This section provides audited consolidated financial statements for fiscal years 2023-2025, including key statements and notes, with critical audit matters identified for book fair revenue recognition and 9 Story acquisition asset valuation Consolidated Balance Sheet Highlights (as of May 31) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | $725.3 | $676.9 | | Total Noncurrent Assets | $1,224.8 | $994.3 | | Total Assets | $1,950.1 | $1,671.2 | | Liabilities & Equity | | | | Total Current Liabilities | $626.4 | $534.7 | | Total Noncurrent Liabilities | $377.2 | $118.4 | | Total Stockholders' Equity | $946.5 | $1,018.1 | | Total Liabilities & Equity | $1,950.1 | $1,671.2 | Consolidated Cash Flow Highlights (Year ended May 31) | (in millions) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $124.2 | $154.6 | $148.9 | | Net cash used in investing activities | ($252.9) | ($89.7) | ($99.6) | | Net cash from (used in) financing activities | $137.3 | ($176.1) | ($139.5) | | Net increase (decrease) in cash | $10.3 | ($110.8) | ($92.1) | - Ernst & Young LLP identified two critical audit matters: school-based book fair revenue recognition and the valuation of 9 Story acquisition assets[455][460] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[475] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of May 31, 2025, with the independent auditor issuing an unqualified opinion - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of May 31, 2025[476] - Management concluded that the Corporation's internal control over financial reporting was effective as of May 31, 2025, based on the COSO 2013 framework[477] Other Information During the fourth quarter of fiscal 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended May 31, 2025[479] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[480] Part III This section incorporates by reference information from the definitive proxy statement for the September 17, 2025 Annual Meeting, covering directors, executive officers, governance, compensation, security ownership, and accounting fees Directors, Executive Officers and Corporate Governance Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Executive Compensation Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Certain Relationships and Related Transactions, and Director Independence Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Principal Accounting Fees and Services Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Part IV Exhibits, Financial Statement Schedules This section lists all financial statements, supplementary information, and exhibits filed with the annual report, including corporate governance documents and compensation plans Form 10-K Summary This item is noted as 'None' in the report - None[497]