SCHOLASTIC CORP (SCHL)
SIC breadcrumb: Manufacturing > SIC Major Group 27 > SIC 2731 Books: Publishing or Publishing & Printing
SEC company page: https://www.sec.gov/edgar/browse/?CIK=866729. Latest filing source: 0000866729-25-000020.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 1,625,500,000 | USD | 2025 | 2025-07-25 |
| Net income | -1,900,000 | USD | 2025 | 2025-07-25 |
| Assets | 1,950,100,000 | USD | 2025 | 2025-07-25 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-07-25. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000866729.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 1,653,900,000 | 1,487,100,000 | 1,300,300,000 | 1,642,900,000 | 1,704,000,000 | 1,589,700,000 | 1,625,500,000 | |||
| Net income | 40,500,000 | 52,300,000 | -5,000,000 | 15,600,000 | -43,800,000 | -11,000,000 | 80,900,000 | 86,300,000 | 12,100,000 | -1,900,000 |
| Operating income | 71,700,000 | 89,200,000 | 55,600,000 | 25,000,000 | -88,500,000 | -22,700,000 | 97,400,000 | 106,300,000 | 14,500,000 | 15,800,000 |
| Diluted EPS | 1.16 | 1.47 | -0.14 | 0.43 | -1.27 | -0.32 | 2.27 | 2.49 | 0.40 | -0.07 |
| Assets | 1,713,100,000 | 1,760,400,000 | 1,825,400,000 | 1,878,500,000 | 2,033,600,000 | 2,008,300,000 | 1,940,800,000 | 1,866,700,000 | 1,671,200,000 | 1,950,100,000 |
| Stockholders' equity | 1,257,600,000 | 1,307,900,000 | 1,320,800,000 | 1,272,800,000 | 1,180,600,000 | 1,182,300,000 | 1,218,400,000 | 1,164,500,000 | 1,018,100,000 | 946,500,000 |
| Cash and cash equivalents | 399,700,000 | 444,100,000 | 391,900,000 | 334,100,000 | 393,800,000 | 366,500,000 | 316,600,000 | 224,500,000 | 113,700,000 | 124,000,000 |
| Net margin | 0.94% | -2.95% | -0.85% | 4.92% | 5.06% | 0.76% | -0.12% | |||
| Operating margin | 1.51% | -5.95% | -1.75% | 5.93% | 6.24% | 0.91% | 0.97% |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-20. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000866729.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2023-Q1 | 2022-08-31 | -1.33 | reported discrete quarter | ||
| 2023-Q2 | 2022-11-30 | 2.12 | reported discrete quarter | ||
| 2023-Q3 | 2023-02-28 | -0.57 | reported discrete quarter | ||
| 2023-Q4 | 2023-05-31 | 528,300,000 | 75,700,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2023-08-31 | 228,500,000 | -74,200,000 | -2.35 | reported discrete quarter |
| 2024-Q2 | 2023-11-30 | 562,600,000 | 76,900,000 | 2.45 | reported discrete quarter |
| 2024-Q3 | 2024-02-29 | 323,700,000 | -26,500,000 | -0.91 | reported discrete quarter |
| 2024-Q4 | 2024-05-31 | 474,900,000 | 35,900,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2024-08-31 | 237,200,000 | -62,500,000 | -2.21 | reported discrete quarter |
| 2025-Q2 | 2024-11-30 | 544,600,000 | 48,800,000 | 1.71 | reported discrete quarter |
| 2025-Q3 | 2025-02-28 | 335,400,000 | -3,600,000 | -0.13 | reported discrete quarter |
| 2025-Q4 | 2025-05-31 | 508,300,000 | 15,400,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2025-08-31 | 225,600,000 | -71,100,000 | -2.83 | reported discrete quarter |
| 2026-Q2 | 2025-11-30 | 551,100,000 | 55,900,000 | 2.17 | reported discrete quarter |
| 2026-Q3 | 2026-02-28 | 329,100,000 | 62,500,000 | 2.55 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0000866729-26-000011.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
and Asia, which included lower severance expense of $1.0 million, in addition to lower bad debt expenses in Asia.
Segment operating loss for the quarter ended February 28, 2026 was $4.7 million, compared to an operating loss of $2.1 million in the prior fiscal year quarter. The $2.6 million increase in operating loss was primarily attributable to lower revenues in Canada and New Zealand.
Segment operating income for the nine months ended February 28, 2026 was $3.5 million, compared to an operating loss of $4.7 million in the prior fiscal year period. The $8.2 million improvement was primarily attributable to increased revenues in the U.K, Australia, and Asia, coupled with improved margins driven by lower freight costs and operational efficiencies.
Overhead
Unallocated overhead expense for the quarter ended February 28, 2026 increased by $3.8 million to $22.4 million, from $18.6 million in the prior fiscal year quarter. The increase was primarily attributable to the impact of the sale and leaseback transactions which resulted in lower rental income and higher rent expense, partially offset by lower depreciation expense.
Unallocated overhead expense for the nine months ended February 28, 2026 increased by $2.1 million to $74.7 million, from $72.6 million in the prior fiscal year period. The increase was primarily attributable to the impact of the sale and leaseback transactions which resulted in lower rental income and higher rent expense, partially offset by lower depreciation expense. In addition, the Company incurred increased severance expense related to cost-savings initiatives of $7.6 million, which was partially offset by lower employee-related costs resulting from the Company's previous reorganization efforts and cost-savings programs.
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SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Seasonality
The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions 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. Education channel revenues are generally higher in the fourth quarter. Trade channel and Entertainment segment revenues can vary throughout the year due to the timing of published titles' release dates and program production deliveries and the start dates of distribution license agreements.
Liquidity and Capital Resources
Cash used in operating activities was $39.1 million for the nine months ended February 28, 2026, compared to cash provided by operating activities of $17.3 million for the prior fiscal year period, representing an increase in cash used in operating activities of $56.4 million. The increase in cash used was primarily attributable to higher tax payments of approximately $38 million, largely due to the gain recognized on the sale and leaseback transactions, coupled with an additional contribution to the UK Pension Plan and higher severance payments.
Cash provided by investing activities was $406.0 million for the nine months ended February 28, 2026, compared to cash used in investing activities of $232.0 million in the prior fiscal year period, representing an increase in cash provided by investing activities of $638.0 million. The increase in cash provided by investing activities was primarily driven by the pre-tax net proceeds of $452.4 million from the sale and leaseback transactions related to the Company's headquarters in New York City and primary distribution center in Jefferson City, Missouri during the nine months ended February 28, 2026, coupled with the cash paid for the 9 Story acquisition of $176.2 million, net of cash acquired, during the nine months ended February 28, 2025. In addition, capital expenditures were lower by $6.5 million during the nine months ended February 28, 2026.
Cash used in financing activities was $386.9 million for the nine months ended February 28, 2026, compared to cash provided by financing activities of $197.6 million for the prior fiscal year period, representing an increase in cash used in financing activities of $584.5 million. The increase in cash used was primarily attributable to net repayments on borrowings under the U.S. Credit Agreement of $250.0 million in the nine months ended February 28, 2026 funded by the proceeds from the sale and leaseback transactions, compared to net borrowings of $275.0 million in the prior fiscal year period in which the Company incurred increased borrowings to fund the 9 Story acquisition. In addition, the Company repurchased $127.2 million of common stock in the nine months ended February 28, 2026, compared to $40.0 million of common stock repurchases in the prior fiscal year period. This was partially offset by an increase in net repayments of film related obligations of $17.7 million.
Cash Position
The Company’s cash and cash equivalents totaled $104.6 million at February 28, 2026, $124.0 million at May 31, 2025 and $94.7 million at February 28, 2025. Cash and cash equivalents held by the Company’s U.S. operations totaled $41.6 million at February 28, 2026, $48.7 million at May 31, 2025 and $41.0 million at February 28, 2025. Due to the seasonal nature of its business as discussed under “Seasonality”, the Company usually experiences negative cash flows in the June through September time period.
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 and dividend declarations. Under the Company's open-market buy-back program, $19.5 million remained available for future purchases of common shares as of February 28, 2026. Subsequent to February 28, 2026, the Board authorized an increase of $297.0 million for common stock repurchases, resulting in a current Board authorization of $300.0 million, which includes the remaining amount from the previous Board authorization, less repurchases of $16.5 million made subsequent to February 28, 2026. See Note 20, "Subsequent Events," of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information regarding the increased authorization.
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SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
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, debt service, planned capital expenditures and other investments, as well as dividends and share repurchases. As of February 28, 2026, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $104.6 million, cash from operations and the Company's U.S. Credit Agreement. See Note 6, "Debt," of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information regarding the U.S. Credit Agreement. The Company expects the U.S. Credit Agreement to provide it with an appropriate level of flexibility to strategically manage its business operations. The Company's U.S. Credit Agreement, less commitments of $0.4 million, has $399.6 million of availability at February 28, 2026. Additionally, the Company has short-term credit facilities of $38.1 million, less current borrowings of $5.6 million and commitments of $3.6 million, resulting in $28.9 million of current availability under these facilities at February 28, 2026. 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.
Financing
The Company is party to the U.S. Credit Agreement and certain credit lines with various banks, including those related to film related obligations, as described in Note 6, "Debt," of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements."
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, 2025.
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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 and strategic plans, ecommerce and digital initiatives, new product introductions, strategies, new education standards, goals, revenues, improved efficiencies, general operating costs, including transportation and labor costs and the extent such costs are impacted by inflationary pressures, manufacturing costs and tariffs, medical costs, potential cost savings, tax incentives, 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, 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
Latest 10-K MD&A
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The Company categorizes its businesses into four reportable segments: Children’s Book Publishing and Distribution; Education Solutions; Entertainment; and International.
The following discussion and analysis of the Company’s financial position and results of operations should be read in conjunction with the Company’s Consolidated Financial Statements and the related Notes included in Item 8, “Consolidated Financial Statements and Supplementary Data.”
Overview and Outlook
Overview
Revenues from operations for the fiscal year ended May 31, 2025 increased by $35.8 million, or 2.3%, to $1,625.5 million, compared to $1,589.7 million in the prior fiscal year. The Company reported net loss per basic and diluted share of Class A and Common Stock of $0.07 for the fiscal year ended May 31, 2025, compared to net income per basic and diluted share of Class A and Common Stock of $0.41 and $0.40, respectively, in the prior fiscal year.
During fiscal 2025, the Company successfully integrated 9 Story into its Entertainment segment, which significantly contributed to the Company's revenue growth year over year. Fiscal 2025 results also reflected new releases in the Company's bestselling series, including Sunrise on the Reaping, the latest installment in Suzanne Collins’ Hunger Games series and Dav Pilkey's Dog Man #13: Big Jim Begins, which benefited the Company's trade channels globally and helped to offset softness in the overall retail market. Education Solutions continued to be negatively impacted by the continuing headwinds in the supplemental curriculum market and the Company is repositioning the business focused on long-term growth and improved profitability under its new leadership. Operating income in fiscal 2025 was $15.8 million compared to $14.5 million in the prior fiscal year, representing an increase of $1.3 million, as the Company successfully executed on a cost management strategy.
Outlook
During fiscal 2026, the Company expects to continue to expand the reach and monetization of Scholastic’s intellectual property, which includes the release of the next title in the best-selling Dog Man series and a growing slate of content development and production commitments. While there continues to be significant near-term uncertainty about school funding, the Company is focusing its product development and go-to-market strategies in Education Solutions to better align with the evolving needs of educators, schools, and families. The Company has also made progress on its strategic and operational initiatives, which include streamlining the Company's organizational structure, strengthening leadership, reducing costs and evaluating options to optimize its real estate assets, all of which are intended to enhance the Company's ability to drive long-term growth and deliver greater value to shareholders.
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Critical Accounting Policies and Estimates
General:
The Company’s discussion and analysis of its financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements involves the use of estimates and assumptions by management, which affects the amounts reported in the Consolidated Financial Statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, future expectations 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 assets and liabilities. Actual results may differ from those estimates and assumptions. On an ongoing basis, the Company evaluates the adequacy of its reserves and the estimates used in calculations, including, but not limited to: collectability of accounts receivable; variable consideration related to anticipated returns; allocation of transaction price to contractual performance obligations; amortization periods; stock-based compensation expense; pension and other postretirement obligations; tax rates; recoverability of inventories; deferred income taxes and tax reserves; the timing and amount of future income taxes and related deductions; recoverability of prepublication costs; recoverability of investment in film and television programs; royalty advance reserves; customer reward programs; and the impairment assessment of long-lived assets, goodwill and other intangibles. For a complete description of the Company’s significant accounting policies, see Note 1, "Description of Business, Basis of Presentation and Summary of Significant Accounting Policies," of Notes to Consolidated Financial Statements in Item 8, “Consolidated Financial Statements and Supplementary Data.” The following policies and account descriptions include all those identified by the Company as critical to its business operations and the understanding of its results of operations:
Revenue recognition:
The Company has identified the allocation of the transaction price to contractual performance obligations related to revenues within the school-based book fairs channel, as described below, as a critical accounting estimate.
Revenues associated with school-based book fairs relate to the sale of children's books and other products to book fair sponsors. In addition, the Company employs an incentive program to encourage the sponsorship of book fairs and increase the number of fairs held each school year. The Company identifies two potential performance obligations within its school-based book fair contracts, which include the fulfillment of book fairs product and the fulfillment of product upon the redemption of incentive program credits by customers. The Company allocates the transaction price to each performance obligation and recognizes revenue at a point in time. The Company utilizes certain estimates based on historical experience, redemption patterns and future expectations related to the participation in the incentive program to determine the relative fair value of each performance obligation when allocating the transaction price. Changes in these estimates could impact the timing of the recognition of revenue. Revenue allocated to the book fairs product is recognized at the point at which product is delivered to the customer and control is transferred. The revenue allocated to the incentive program credits is recognized upon redemption of incentive credits and the transfer of control of the redeemed product. Incentive credits are generally redeemed within 12 months of issuance. Payment for school-based book fairs product is due at the completion of a customer's fair. Revenues associated with virtual fairs are recognized upon shipment of the products and related incentive program credits are expensed upon issuance.
Estimated returns:
For sales that include a right of return, the Company estimates the transaction price and records revenues as variable consideration based on the amounts the Company expects to ultimately be entitled. In order to determine estimated returns, the Company utilizes historical return rates, sales patterns, types of products and expectations and recognizes a corresponding reduction to Revenues and Cost of goods sold. Management also considers patterns of sales and returns in the months preceding the fiscal year, as well as actual returns received subsequent to the fiscal year, available customer and market specific data and other return rate information that management believes is relevant. In addition, a refund liability is recorded within Other accrued expenses for the consideration to which the Company believes it will not ultimately be entitled and a return asset is recorded within Prepaid expenses and other current assets for the expected inventory to be returned. Actual returns could differ from the Company's estimate. A one percentage point change in the estimated reserve for returns rate would have resulted in an increase or decrease in operating income for the year ended May 31, 2025 of approximately $5.0 million.
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Inventories:
Inventories, consisting principally of books, are stated at the lower of cost, using the first-in, first-out method, or net realizable value. The Company records a reserve for excess and obsolete inventory based upon a calculation using the expected future sales of existing inventory driven by estimates around forecasted purchases, inventory consumption costs, and the sell-through rate of current fiscal year purchases. In accordance with the Company's inventory retention policy, expected future sales of existing inventory are compared against historical usage by channel for reasonableness and any specifically identified excess or obsolete inventory, due to an anticipated lack of demand, will also be reserved. The impact of a one percentage point change in the obsolescence reserve rate would have resulted in an increase or decrease in operating income for the year ended May 31, 2025 of approximately $3.5 million.
Royalty advances:
Royalty advances are initially capitalized and subsequently expensed as related revenues are earned or when the Company determines future recovery through earndowns is not probable. The Company has a long history of providing authors, illustrators, licensors and other publishers with royalty advances, and it tracks each advance earned with respect to the sale of the related publication. Historically, the longer the unearned portion of the advance remains outstanding, the less likely it is that the Company will recover the advance through the sale of the publication, as the related royalties earned are applied first against the remaining unearned portion of the advance. The Company applies this historical experience to its existing outstanding royalty advances to estimate the likelihood of recovery. Additionally, the Company’s editorial staff regularly reviews its portfolio of royalty advances to determine if individual royalty advances are not recoverable through earndowns for discrete reasons, such as the death of an author prior to completion of a title or titles, a Company decision to not publish a title, poor market demand or other relevant factors that could impact recoverability.
Business combinations:
The Company allocates the purchase price in a business combination to the underlying tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates, estimated useful lives and market multiples, among other items.
With respect to the 9 Story acquisition, the Company was required to make significant judgments and estimates, particularly in the identification and valuation of identifiable intangible assets. The Company utilized a third-party valuation specialist in determining the fair values. The assets acquired primarily include intellectual property ("IP") related to 9 Story's existing and recognized program titles, customer contracts/relationships related to licensing, distribution and service arrangements, and the trade names associated with 9 Story and Brown Bag Films, its animation studio. The intellectual property and customer contracts/relationships were valued using the multi-period excess earnings valuation method and the tradename was valued using the relief-from-royalty valuation method. The significant underlying assumptions used in these methods included the projected revenue and revenue attributable to the individual intangible assets, as well as the discount and royalty rate. These assumptions are inherently subjective and sensitive to changes in market conditions and the future performance of the acquired business. Refer to Note 11, "Acquisitions," of Notes to Consolidated Financial Statements in Item 8, “Consolidated Financial Statements and Supplementary Data” for further details regarding this acquisition.
Evaluation of Goodwill impairment:
Goodwill is not amortized and is reviewed for impairment annually or more frequently if impairment indicators arise.
The Company compares the estimated fair values of its identified reporting units to the carrying values of their net assets. The Company first performs a qualitative assessment to determine whether it is more likely than not that the fair values of its identified reporting units are less than their carrying values. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs the quantitative goodwill impairment test. The Company measures goodwill impairment by the amount the carrying value exceeds the fair value of a reporting unit. For each of the reporting units, the estimated fair value is determined utilizing the expected present value of the projected future cash flows of the reporting unit, in addition to comparisons to similar companies. The Company reviews its definition of reporting units annually or more frequently if conditions indicate that the reporting units may change. The Company evaluates its operating segments to determine if there are components one level below the operating segment level. A component is present if discrete financial information is available and segment management regularly reviews the operating results of the business. If an operating segment only contains a single
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component, that component is determined to be a reporting unit for goodwill impairment testing purposes. If an operating segment contains multiple components, the Company evaluates the economic characteristics of these components. Any components within an operating segment that share similar economic characteristics are aggregated and deemed to be a reporting unit for goodwill impairment testing purposes. Components within the same operating segment that do not share similar economic characteristics are deemed to be individual reporting units for goodwill impairment testing purposes.
The Company has seven reporting units with goodwill subject to impairment testing. The determination of the fair value of the Company’s reporting units involves a number of assumptions, including the estimates of future cash flows, discount rates and market-based multiples, among others, each of which is subject to change. Accordingly, it is possible that changes in assumptions and the performance of certain reporting units could lead to impairments in future periods, which may be material.
Income taxes:
The Company uses the asset and liability method of accounting for income taxes. Under this method, for purposes of determining taxable income, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of such assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to be realized.
The Company believes that its taxable earnings, during the periods when the temporary differences giving rise to deferred tax assets become deductible or when tax benefit carryforwards may be utilized, should be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration date of the tax benefit carryforwards or the projected taxable earnings indicate that realization is not likely, the Company establishes a valuation allowance.
In assessing the need for a valuation allowance, the Company estimates future taxable earnings, with consideration for the feasibility of ongoing tax planning strategies and the realizability of tax benefit carryforwards, to determine which deferred tax assets are more likely than not to be realized in the future. Valuation allowances related to deferred tax assets can be impacted by changes to tax laws, changes to statutory tax rates and future taxable earnings. In the event that actual results differ from these estimates in future periods, the Company may need to adjust the valuation allowance.
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Results of Operations - Consolidated
(Amounts in millions, except per share data)
For fiscal years ended May 31,
2025
2024
$
% (1)
$
% (1)
Revenues:
Children’s Book Publishing and Distribution
$
963.9
59.3
$
953.3
60.0
Education Solutions
309.8
19.1
351.2
22.1
Entertainment (2)
61.0
3.8
1.9
0.1
International
279.6
17.2
273.6
17.2
Other (3)
11.2
0.6
9.7
0.6
Total revenues
1,625.5
100.0
1,589.7
100.0
Cost of goods sold
718.8
44.2
705.1
44.4
Selling, general and administrative expenses
822.3
50.6
803.0
50.5
Depreciation and amortization
65.7
4.0
57.1
3.6
Asset impairments and write downs
2.9
0.2
10.0
0.6
Operating income (loss)
15.8
1.0
14.5
0.9
Interest income
2.2
0.1
4.6
0.3
Interest expense
(18.2)
(1.1)
(1.9)
(0.1)
Other components of net periodic benefit (cost)
(1.1)
(0.1)
(1.0)
(0.1)
Earnings (loss) before income taxes
(1.3)
(0.1)
16.2
1.0
Provision (benefit) for income taxes
0.6
0.0
4.1
0.2
Net income (loss)
$
(1.9)
(0.1)
$
12.1
0.8
Basic and diluted earnings (loss) per share of Class A and Common Stock
Basic
$
(0.07)
$
0.41
Diluted
$
(0.07)
$
0.40
(1) Represents percentage of total revenues.
(2) The Entertainment segment includes the operations of Scholastic Entertainment Inc. ("SEI"), which were included in the Children’s Book Publishing and Distribution segment in prior periods, and 9 Story, as acquired on June 20, 2024. The financial results for SEI for the prior fiscal year presented have been reclassified to Entertainment to reflect this change.
(3) Represents rental income related to leased space in the Company's headquarters which was not allocated to a segment.
26
Results of Operations – Consolidated
The section below is a discussion of the Company's fiscal year 2025 results compared to fiscal year 2024. A discussion of the Company's fiscal year 2024 results compared to fiscal year 2023 is not included in this Form 10-K and can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended May 31, 2024, filed as part of the Company's Form 10-K dated July 19, 2024.
Fiscal 2025 compared to fiscal 2024
Revenues from operations for the fiscal year ended May 31, 2025 increased by $35.8 million, or 2.3%, to $1,625.5 million, compared to $1,589.7 million in the prior fiscal year. Children’s Book Publishing and Distribution, Entertainment and International segment revenues increased $10.6 million, $59.1 million and $6.0 million, respectively, partially offset by lower revenues from the Education Solutions segment of $41.4 million.
Children’s Book Publishing and Distribution segment revenues increased $10.6 million, primarily driven by the school reading events business on higher fair count in the book fairs channel and higher revenue per sponsor in the book clubs channel. Trade channel revenues were relatively consistent with the prior year as increased sales from the Hunger Games and Dog Man series, driven by the latest releases, Sunrise on the Reaping and Dog Man #13: Big Jim Begins, respectively, were largely offset by lower sales of backlist titles reflecting continued softness in the retail book market.
Education Solutions segment revenues decreased $41.4 million, primarily driven by the continued impact of market conditions as school districts focus on adopting and implementing new evidence-based core programs and decrease spending on supplemental materials.
Entertainment segment revenues increased $59.1 million, reflecting the addition of 9 Story.
International segment revenues increased $6.0 million, primarily driven by increased revenues from the Company's Major Markets, which benefited from the new releases in the Hunger Games and Dog Man series. International segment revenues were also impacted by unfavorable foreign currency exchange of $1.6 million.
Components of Cost of goods sold for fiscal years 2025 and 2024 are as follows:
($ amounts in millions)
2025
% of revenue
2024
% of revenue
Product, service and production costs and inventory reserves
$
419.1
25.8
%
$
417.2
26.3
%
Royalty costs
129.4
8.0
118.9
7.5
Prepublication amortization
31.9
2.0
27.3
1.7
Postage, freight, shipping, fulfillment and all other costs
138.4
8.4
141.7
8.9
Total cost of goods sold
$
718.8
44.2
%
$
705.1
44.4
%
Cost of goods sold as a percentage of revenue for the fiscal year ended May 31, 2025 was 44.2%, compared to 44.4% in the prior fiscal year. Cost of goods sold benefited from favorable product mix in the trade channels, driven in particular by the higher priced hardcover sales of Sunrise on the Reaping. This was largely offset by higher royalty costs as a result of an increase in the mix of higher-royalty bearing titles sold in the fiscal year ended May 31, 2025 and the addition of production costs as a result of the 9 Story acquisition. The Company expects cost of good sold to increase in fiscal 2026 due to the newly imposed tariffs.
Selling, general and administrative expenses for the fiscal year ended May 31, 2025 were $822.3 million, compared to $803.0 million in the prior fiscal year. The $19.3 million increase was primarily attributable to the addition of 9 Story, which resulted in higher operating expenses in the period ended May 31, 2025, partially offset by lower commission expense and external labor costs within Education Solutions. In addition, amortization expense related to cloud computing arrangements for the fiscal year ended May 31, 2025 increased by $2.5 million compared to the prior fiscal year as a result of new assets placed into service.
Depreciation and amortization expenses for the fiscal year ended May 31, 2025 were $65.7 million, compared to $57.1 million in the prior fiscal year. The $8.6 million increase in Depreciation and amortization was primarily driven by the intangible assets acquired as a result of the 9 Story acquisition. The Company also continues to shift spending to cloud
27
computing arrangements in which the amortization expense is included in Selling, general and administrative expenses rather than Depreciation and amortization.
Asset impairments and write downs for the fiscal year ended May 31, 2025 were $2.9 million, compared to $10.0 million in the prior year. In fiscal 2025, the Company recognized asset impairments of $1.2 million related to certain digital products in Children's Book Publishing and Distribution and Education Solutions, $1.1 million related to certain inventory and other assets in Asia, and $0.6 million related to the early exit of leased office space in the U.S., Canada and Ireland. In fiscal 2024, the Company recognized asset impairments of $6.1 million related to certain education products as a result of the shift to evidence-based approaches to literacy instruction in the education market and $3.9 million related to the early exit of leased office space in the U.S. and Canada.
Interest income for the fiscal year ended May 31, 2025 was $2.2 million, compared to $4.6 million in the prior fiscal year. The decrease in interest income was attributable to lower average short term investment balances as compared to the prior fiscal year. The Company invests excess cash in short term investments which earn competitive interest rates that change directionally in relation to the Federal Funds rate.
Interest expense for the fiscal year ended May 31, 2025 was $18.2 million, compared to $1.9 million in the prior fiscal year. The increase in interest expense was due to borrowings under the U.S. Credit Agreement incurred during the first quarter of fiscal 2025 to fund the 9 Story acquisition. The Company expects to maintain these borrowings into the next fiscal year resulting in comparable to slightly higher interest expense in fiscal 2026. Any potential asset monetization strategies executed by the Company could result in repayments of the outstanding borrowings and reduce interest expense.
The Company’s effective tax rate for the fiscal year ended May 31, 2025 was (46.2)%, compared to 25.3% in the prior fiscal year. The effective tax rate varies from the statutory rate primarily due to expected state and local income taxes and non-deductible compensation for covered executive employees. The tax provision on the global consolidated loss before income taxes was due to the Company's domestic taxable income generating tax expense.
Net loss for fiscal 2025 was $1.9 million compared to net income of $12.1 million in fiscal 2024, a decrease of $14.0 million. The basic and diluted loss per share of Class A Stock and Common Stock was $0.07 in fiscal 2025, compared to basic and diluted income per share of Class A Stock and Common Stock of $0.41 and $0.40, respectively, in fiscal 2024. Outstanding shares decreased 11% from 28.2 million to 25.0 million as of May 31, 2025 which is expected to benefit earnings per share calculations in fiscal 2026.
Results of Operations – Segments
CHILDREN’S BOOK PUBLISHING AND DISTRIBUTION
($ amounts in millions)
2025 compared to 2024
2025
2024
$ change
% change
Revenues
$
963.9
$
953.3
$
10.6
1.1
%
Cost of goods sold
410.2
412.0
(1.8)
(0.4)
Other operating expenses *
422.4
417.5
4.9
1.2
Asset impairments and write downs
0.6
0.5
0.1
20.0
Operating income (loss)
$
130.7
$
123.3
$
7.4
6.0
%
Operating margin
13.6
%
12.9
%
* Other operating expenses include selling, general and administrative expenses and depreciation and amortization.
Fiscal 2025 compared to fiscal 2024
Revenues for the fiscal year ended May 31, 2025 increased by $10.6 million to $963.9 million, compared to $953.3 million in the prior fiscal year. The increase in segment revenues was primarily driven by increased revenues from School Reading Events of $8.2 million. Book fairs channel revenues increased $6.7 million, driven by higher fair count, partially offset by slightly lower revenue per fair as compared to the prior year. Book clubs channel revenues increased $1.5 million as a result of higher revenue per sponsor and an increase in events. Trade channel revenues were relatively consistent with the prior year, increasing $2.4 million, or 1%, as increased sales from the Hunger Games and Dog Man series, driven by the latest releases, Sunrise on the Reaping and Dog Man #13: Big Jim Begins, respectively, were largely offset by lower sales of backlist titles reflecting continued softness in the retail book market. The retail book
28
market is expected to remain soft in fiscal 2026 and, similar to fiscal 2025, the Company is anticipating its proprietary school market channels to outpace this softness.
Cost of goods sold for the fiscal year ended May 31, 2025 was $410.2 million, or 42.6% of revenues, compared to $412.0 million, or 43.2% of revenues, in the prior fiscal year. The improvement in Cost of goods sold as a percentage of revenues was primarily attributable to the mix of product sold in the trade channel in fiscal 2025, driven in particular by the higher priced hardcover sales of Sunrise on the Reaping, partially offset by higher royalty costs as a result of an increase in the mix of higher-royalty bearing titles sold in the fiscal year ended May 31, 2025. In addition, the book fairs channel had lower excess inventory reserves as a result of better inventory utilization. The Company expects an increase in cost of product as a result of increased tariffs, especially in the book fairs channel beginning in the peak selling season in the upcoming second fiscal quarter.
Other operating expenses were $422.4 million for the fiscal year ended May 31, 2025, compared to $417.5 million in the prior fiscal year. The $4.9 million increase in Other operating expenses was primarily attributable to the book fairs channel to support the increased fair count, in addition to inflationary pressures.
Asset impairments were $0.6 million for the fiscal year ended May 31, 2025, compared to $0.5 million in the prior fiscal year. In fiscal 2025, the Company recognized an asset impairment of $0.6 million related to certain digital products. In fiscal 2024, the Company early exited leased office space, as a result of which the Company recognized an impairment expense of $0.5 million, primarily related to the right-of-use asset associated with the operating lease.
Segment operating income for the fiscal year ended May 31, 2025 was $130.7 million, compared to $123.3 million in the prior fiscal year. The $7.4 million increase in operating income was attributable to higher revenues, primarily from School Reading Events, driven by higher fair count in the book fairs channel, coupled with favorable cost of product in the trade channel driven by higher margins on Sunrise on the Reaping. This was partially offset by increased operating costs in the book fairs channel to support the increased fair count.
EDUCATION SOLUTIONS
($ amounts in millions)
2025 compared to 2024
2025
2024
$ change
% change
Revenues
$
309.8
$
351.2
$
(41.4)
(11.8)
%
Cost of goods sold
122.8
137.6
(14.8)
(10.8)
Other operating expenses *
180.1
191.7
(11.6)
(6.1)
Asset impairments
0.6
6.1
(5.5)
(90.2)
Operating income (loss)
$
6.3
$
15.8
$
(9.5)
(60.1)
%
Operating margin
2.0
%
4.5
%
* Other operating expenses include selling, general and administrative expenses and depreciation and amortization.
Fiscal 2025 compared to fiscal 2024
Revenues for the fiscal year ended May 31, 2025 decreased by $41.4 million to $309.8 million, compared to $351.2 million in the prior fiscal year. The decrease in segment revenues was primarily driven by the continued impact of market conditions as school districts focus on adopting and implementing new evidence-based core programs and decrease spending on supplemental materials. In addition, subscription revenues from Magazines+ and revenues from community literacy programs decreased from the prior fiscal year. Partially offsetting the decline, the segment benefited from increased revenues from sponsored programs as a result of an increase in participants and increased sales of the Company's Ready4ReadingTM phonics curriculum. The Company expects the revenues to remain consistent in fiscal 2026 due to the on-going headwinds in the education market.
Cost of goods sold for the fiscal year ended May 31, 2025 was $122.8 million, or 39.6% of revenue, compared to $137.6 million, or 39.2% of revenue, in the prior fiscal year. Cost of goods sold as a percentage of revenues was impacted by higher outbound freight costs related to sponsored programs, which was largely offset by lower prepublication amortization as a result of the impairment of certain education products in fiscal 2024.
Other operating expenses were $180.1 million for the fiscal year ended May 31, 2025, compared to $191.7 million in the prior fiscal year. The $11.6 million decrease in Other operating expenses was primarily attributable to lower commission expense driven by the lower revenues, in addition to lower external labor and marketing costs.
29
Asset impairments were $0.6 million for the fiscal year ended May 31, 2025, compared to $6.1 million in the prior fiscal year. In fiscal 2025, the Company recognized an asset impairment of $0.6 million related to certain digital products. In fiscal 2024, the Company recognized an asset impairment of $6.1 million related to certain education products that were not aligned with evidence-based approaches to literacy instruction.
Segment operating income for the fiscal year ended May 31, 2025 was $6.3 million, compared to $15.8 million in the prior fiscal year. The $9.5 million decrease in operating income was attributable to lower revenues, primarily due to continued market conditions which resulted in decreased spending on supplemental materials. This was partially offset by lower external labor and marketing costs and lower impairment expense in the fiscal year ended May 31, 2025.
ENTERTAINMENT
($ amounts in millions)
2025 compared to 2024
2025
2024
$ change
% change
Revenues
$
61.0
$
1.9
$
59.1
NM
Cost of goods sold
33.4
0.1
33.3
NM
Other operating expenses *
39.2
13.0
26.2
NM
Asset impairments and write downs
0.5
—
0.5
NM
Operating income (loss)
$
(12.1)
$
(11.2)
$
(0.9)
(8.0)%
Operating margin
NM
NM
* Other operating expenses include selling, general and administrative expenses and depreciation and amortization.
NM Not meaningful
The Entertainment segment includes the operations of 9 Story, as acquired on June 20, 2024, and Scholastic Entertainment Inc. ("SEI"). SEI was reported in the Children's Book Publishing and Distribution segment in prior periods. The financial results for SEI for fiscal 2024 have been reclassified to Entertainment to reflect this change. Refer to Note 11, "Acquisitions," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details regarding the acquisition of 9 Story.
Revenues for the fiscal year ended May 31, 2025 were $61.0 million compared to $1.9 million in the prior fiscal year period. The increase reflected the addition of 9 Story from the date of acquisition on June 20, 2024 through May 31, 2025 in which a majority of the revenues were driven by production revenue related to episodic deliveries, production services provided to third parties and, to a lesser extent, revenues from royalties and distribution. Entertainment revenues have been negatively impacted by delays in production greenlights from major platforms which are expected to improve in fiscal 2026.
Cost of goods sold for the fiscal year ended May 31, 2025 was $33.4 million, or 54.8% of revenues. Cost of goods sold primarily consists of production costs and amortization, participation expenses and interest on film related obligations.
Other operating expenses for the fiscal year ended May 31, 2025 were $39.2 million, which included costs of $3.0 million related to the 9 Story acquisition and severance expense of $1.4 million related to cost-saving initiatives. Other operating expenses for the fiscal year ended May 31, 2024 were $13.0 million, which included transaction costs of $9.3 million related to the 9 Story acquisition.
Asset impairments for the fiscal year ended May 31, 2025 were $0.5 million. The Company early exited certain leased office space as a result of which the Company recognized an impairment expense of $0.5 million in fiscal 2025, primarily related to the right-of-use asset associated with the operating leases.
Segment operating loss for the fiscal year ended May 31, 2025 was $12.1 million compared to $11.2 million in the prior fiscal year.
30
INTERNATIONAL
($ amounts in millions)
2025 compared to 2024
2025
2024
$ change
% change
Revenues
$
279.6
$
273.6
$
6.0
2.2
%
Cost of goods sold
159.3
162.2
(2.9)
(1.8)
Other operating expenses *
120.2
117.2
3.0
2.6
Asset impairments and write downs
1.1
1.1
—
—
Operating income (loss)
$
(1.0)
$
(6.9)
$
5.9
85.5%
Operating margin
NM
NM
* Other operating expenses include selling, general and administrative expenses and depreciation and amortization.
NM Not meaningful
Fiscal 2025 compared to fiscal 2024
Revenues for the fiscal year ended May 31, 2025 increased by $6.0 million to $279.6 million compared to $273.6 million in the prior fiscal year. Local currency revenues in the Company's ongoing foreign operations increased $7.6 million when compared to the prior fiscal year, excluding unfavorable foreign exchange impact of $1.6 million. In the UK, local currency revenues increased $8.4 million, driven by higher trade channel sales which benefited from several current year releases including the latest Hunger Games title, Sunrise of the Reaping, Jonty Gentoo: The Adventures of a Penguin by Julia Donaldson and Axel Scheffler and Dog Man #13: Big Jim Begins by Dav Pilkey, in addition to higher book fairs channel sales driven by higher fair count. In Canada, local currency revenues increased $4.2 million, primarily driven by higher sales from the trade channel, which benefited from the new releases in the Hunger Games and Dog Man series and lower sales returns from its major customers, coupled with higher sales from the book clubs channel. In Australia and New Zealand, local currency revenues increased $1.9 million, driven by increased sales of education products in New Zealand and higher trade channel sales in both markets, partially offset by lower school channel revenues in Australia. The increase in revenues from the Major Markets was partly offset by lower local currency revenues in Asia of $5.5 million. This was primarily attributable to lower sales within the trade and education channels, partially offset by growth in India. Export channel sales also decreased $1.4 million as compared to the prior fiscal year.
Cost of goods sold for the fiscal year ended May 31, 2025 was $159.3 million, or 57.0% of revenues, compared to $162.2 million, or 59.3% of revenues, in the prior fiscal year. Cost of goods sold as a percentage of revenues decreased as a result of the mix of product sold in Canada and the U.K. in fiscal 2025, driven in particular by the higher priced hardcover sales of Sunrise on the Reaping. This was partially offset by increased fulfillment costs in Australia on lower revenues.
Other operating expenses were $120.2 million for the fiscal year ended May 31, 2025, compared to $117.2 million in the prior fiscal year. Other operating expenses increased $3.0 million primarily due to higher general overhead costs in the Major Markets, partially offset by lower costs in Asia driven by operational efficiencies as a result of the Company's reorganization efforts. In the fiscal year ended May 31, 2025, the Company incurred severance expense from its cost-saving initiatives and reorganization efforts in Asia, Canada and Australia of $2.8 million, compared to $2.7 million in the prior fiscal year related to reorganization efforts in Canada and its exit from the franchise business in China.
Asset impairments and write downs were $1.1 million for the fiscal years ended May 31, 2025 and 2024. In fiscal 2025, the Company recognized an asset impairment of $1.1 million related to certain inventory and other assets that were not recoverable as a result of the reorganization in China. In fiscal 2024, the Company early exited certain leased office space in Canada as part of the Company's efforts to rightsize its real estate footprint to reduce occupancy costs, resulting in an impairment expense of $1.1 million related to the right-of-use assets associated with the operating leases.
Segment operating loss for the fiscal year ended May 31, 2025 was $1.0 million, compared to $6.9 million in the prior fiscal year. The $5.9 million improvement was primarily attributable to higher revenues in the Major Markets, coupled with favorable cost of product in the trade channels driven by higher margins on Sunrise on the Reaping. In addition, operating efficiencies in Canada and Asia drove improved profitability, coupled with lower trade sales returns in Canada. This improvement was partially offset by increased general overhead costs in the Major Markets in the fiscal year ended May 31, 2025.
31
Overhead
Fiscal 2025 compared to fiscal 2024
Unallocated overhead expense for the fiscal year ended May 31, 2025 increased by $1.6 million to $108.1 million, compared to $106.5 million in the prior fiscal year. The increase was primarily attributable to higher employee-related expenses driven by higher medical costs. This was partly offset by lower severance expense of $0.6 million related to the Company's cost-savings initiatives and lower impairment expense of $2.2 million. The Company early exited certain leased office space as part of the Company's efforts to rightsize office space in fiscal years 2025 and 2024, resulting in an impairment expense of $0.1 million and $2.3 million, respectively, related to the right-of-use assets associated with the operating leases. In addition, the Company recognized higher rental income of $1.5 million as a result of a new tenant leasing space in the Company's headquarters.
Liquidity and Capital Resources
Fiscal 2025 compared to fiscal 2024
Cash provided by operating activities was $124.2 million for the fiscal year ended May 31, 2025, compared to cash provided by operating activities of $154.6 million for the prior fiscal year, representing a decrease in cash provided by operating activities of $30.4 million. The decrease in cash provided was primarily driven by lower customer remittances, increased inventory purchases and royalty advance payments, as well as increased medical claim payments, interest payments related to the Company's borrowings and higher spending in Entertainment due to the acquisition of 9 Story in fiscal 2025. This was partially offset by lower tax payments and lower discretionary spending in the fiscal year ended May 31, 2025.
Cash used in investing activities was $252.9 million for the fiscal year ended May 31, 2025, compared to cash used in investing activities of $89.7 million for the prior fiscal year, representing an increase in cash used in investing activities of $163.2 million. The increase in cash used was driven by the cash paid for the 9 Story acquisition of $176.2 million, net of cash acquired, during the fiscal year ended May 31, 2025, as compared to the prior fiscal year in which the Company acquired certain amortizable intangible assets related to educational programs and a U.S.-based children's book publishing business for $6.0 million and purchased the remaining noncontrolling interest related to Make Believe Ideas Limited for $2.1 million. This was partially offset by lower capital expenditures of $6.2 million.
Cash provided by financing activities was $137.3 million for the fiscal year ended May 31, 2025, compared to cash used in financing activities of $176.1 million for the prior fiscal year, representing an increase in cash provided by financing activities of $313.4 million. The increase in cash provided was primarily attributable to net borrowings of $250 million under the U.S. Credit Agreement incurred during fiscal 2025 to fund the 9 Story acquisition. In addition, the Company repurchased common stock of $70.0 million, compared to repurchases of $158.2 million in the prior fiscal year, which also resulted in lower dividends of $2.1 million. This was partially offset by $18.3 million of net repayments of film related obligations in the fiscal year ended May 31, 2025.
Cash Position
The Company’s cash and cash equivalents totaled $124.0 million at May 31, 2025 and $113.7 million at May 31, 2024. Cash and cash equivalents held by the Company’s U.S. operations totaled $48.7 million at May 31, 2025 and $54.9 million at May 31, 2024.
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. During fiscal 2025, the Company repurchased $70.0 million of its common stock on the open market. See Note 15, "Treasury Stock," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details. Under the Company's open-market buy-back program, $70.0 million remained available for future purchases of common shares as of May 31, 2025.
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, debt service, planned capital expenditures and other investments, as well as dividends and share repurchases. As of May 31, 2025, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $124.0 million, cash from
32
operations and the Company's U.S. Credit Agreement. The Company expects the U.S. Credit Agreement to provide it with an appropriate level of flexibility to strategically manage its business operations. The U.S. Credit Agreement has a borrowing limit of $400 million and a maturity date of November 26, 2029. See Note 5, "Debt," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for more information regarding the U.S. Credit Agreement. As of May 31, 2025, the Company's U.S. Credit Agreement, less borrowings of $250.0 million and commitments of $0.4 million, had $149.6 million of availability. Additionally, the Company has short-term credit facilities of $32.0 million, less current borrowings of $6.2 million and commitments of $3.6 million, resulting in $22.2 million of current availability under these facilities at May 31, 2025. 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.
The following table summarizes, as of May 31, 2025, the Company’s contractual cash obligations by future period (see Notes 5, 6, 10 and 16 of Notes to Consolidated Financial Statements in Item 8, “Consolidated Financial Statements and Supplementary Data”):
$ amounts in millions
Payments Due By Period
Contractual Obligations
1 Year or Less
Years 2-3
Years 4-5
After Year 5
Total
Minimum print quantities
$
0.4
$
0.6
$
0.3
$
—
$
1.3
Royalty advances
13.0
11.0
1.7
0.2
25.9
Lines of credit and short-term debt
6.2
—
—
—
6.2
Long-term debt
—
—
250.0
—
250.0
Film related obligations (1)
6.1
10.0
2.2
—
18.3
Finance leases (2)
2.1
3.2
1.6
0.5
7.4
Operating leases
32.4
53.7
26.3
25.3
137.7
Pension and postretirement plans (3)
2.4
4.6
4.6
11.3
22.9
Total
$
62.6
$
83.1
$
286.7
$
37.3
$
469.7
(1) Film related obligations are due on demand. Outstanding borrowings are presented by fiscal year maturity based on expected repayment dates per loan agreements.
(2) Includes principal and interest.
(3) Excludes expected Medicare Part D subsidy receipts.
Financing
Loan Agreement
The Company is party to the U.S. Credit Agreement and certain credit lines with various banks, including those related to film related obligations. For a more complete description of the U.S. Credit Agreement, as well as the Company's other debt obligations, reference is made to Note 5, "Debt," of Notes to Consolidated Financial Statements in Item 8, “Consolidated Financial Statements and Supplementary Data.”
Acquisitions
In the ordinary course of business, the Company explores domestic and international expansion opportunities, including potential niche and strategic acquisitions. As part of this process, the Company engages with interested parties in discussions concerning possible transactions. The Company will continue to evaluate such expansion opportunities and prospects. See Note 11, "Acquisitions," of Notes to Consolidated Financial Statements in Item 8, “Consolidated Financial Statements and Supplementary Data.”