About Scholastic Inc.
Once upon a time, a company grew up to become one of the world's leading children's book publishers. Scholastic Corporation sells books to children in some 165 countries. It operates through three divisions: Children's Book Publishing and Distribution; Education; and International. The US accounts for about 80% of sales. Scholastic owns the rights to properties such as Goosebumps and The Baby-Sitters Club and is the US distributor of the Harry Potter books, the best-selling children's series of all time. Known for its school book fairs, Scholastic also publishes magazines, textbooks, and software for students and teachers, and produces children's TV shows. The publisher was founded in 1920.
Scholastic's Children's Book Publishing and Distribution segment accounts for around 60% of total revenue. It includes publishing and distributing children's books, e-books, media, and interactive products in the US. The segment also operates a trade channel that includes school book clubs and school book fairs.
The Education segment accounts for approximately 20% of revenue and covers grades pre-K to 12 in the US. It includes publishing and distributing books and education materials to schools and children's libraries. Materials include print and online reference and classroom magazines and literacy instruction products. The segment also provides consulting services and related products and services (workshops, seminars, coaching) supporting professional development for teachers and administrators.
The International segment houses operations outside the US, including Scholastic's export and foreign rights businesses. The segment accounts for more than 20% of revenue.
Scholastic, based in New York, generates more than 20% of sales outside the US. The company has operations in the US and throughout the world including Canada, the UK, Australia, New Zealand, and Asia. Through its export business, Scholastic sells products in approximately 165 countries around the world. The company licenses the rights to select Scholastic titles in 45 languages to other publishing companies around the world. Scholastic also partners with governments and non-governmental agencies to create and distribute books to public schools in developing countries.
In Asia, operations include educational publishing programs based out of Singapore, as well as the wholly-owned Grolier direct sales business, which sells English language and early childhood learning materials through a network of independent sales representatives in India, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. In addition, Scholastic operates school-based marketing channels throughout Asia; publishes original titles in English and Hindi in India; conducts reading programs inside local schools in the Philippines; and operates a chain of English language tutorial centers in China in cooperation with local partners.
Sales and Marketing
Scholastic has extensive marketing operations throughout the globe. Key activities include school-based book clubs and school-based book fairs. Its trade organization focuses on marketing and selling books to bookstores, internet retailers, mass merchandisers, specialty sales outlets, and other book retailers.
The company's book fairs channel incurs high expenses associated with heavy promotions and incentive spending to attract and retain fairs in response to increased competition. Competitors include numerous other book, e-book, textbook, library, reference material, and supplementary publishers, distributors, and other resellers (including over the internet) of children's books and other educational materials, as well as national publishers of classroom and professional magazines with substantial circulation.
Throughout the five-year period ending in 2019 Scholastic's revenue hovered around $1.6 billion with little to no year-over-year growth. The absence of new Harry Potter titles has stifled the company's top line. During that same period net income fluctuated, with a major dip in 2016 and a loss in 2018 before a swing back to profitability in 2019.
Scholastic posted $1.65 billion in revenue for fiscal 2019, a slight increase from $1.63 billion in 2018. Higher media and entertainment revenues from the company's programming library of children's shows contributed to the increase. Top selling titles for the year included two titles in Dav Pilkey's Dog Man series as well as new Harry Potter-related material commemorating the series' 20th anniversary.
Net income was $15.6 million in 2019, up from a loss of $5 million the prior year. The company's adjusted effective tax rate for fiscal year 2019 was 37%, compared to 233% in 2018. The loss for 2018 related to a $40 million charge to the company's defined benefit pension plan that year. Scholastic issued payments to vested plan participants as part of plan termination efforts.
Cash at the end of fiscal year 2019 was $334.1 million. Cash provided by operating activities was $116.4 million for 2019, compared to $141.5 million for the prior fiscal year, representing a decrease of $25.1 million, primarily driven by higher inventory purchases and higher royalty payments. Cash used in investing activities was $147.3 million while cash used in financing activities was $25.7 million.
Scholastic started its "Scholastic 2020 Plan," a company-wide strategic initiative to boost profits, in 2017. The plan aims to drive savings, implement pricing initiatives (including selective pricing increases), and enact sustainable operational efficiencies within the supply chain.
As part of these efforts Scholastic is transitioning more customers to its online ordering platform and away from paper-based order forms. It is also making moves to simplify the book fair experience for organizers and volunteers through company provided support services, including setup and fair replenishment.
In fiscal 2020, the publisher expects increases in revenue driven by new trade publishing as it continues to grow its important franchises including Hunger Games, Dog Man, Captain Underpants, Wings of Fire, and I Survived along with an increased focus on licensing and brand merchandising.
As it move further into its Scholastic 2020 transformation plan, it expects to achieve greater benefits from new technology platforms and data analytics programs, including salesforce.com, integrated analytics, ERP deployment, POS and eWallet, e-commerce enablement, and infrastructure upgrades.
Scholastic expects higher levels of depreciation and amortization from the impact of the capital investments it made in 2019. It also expects continued cost pressures due to paper mills and print vendor consolidation and rising costs related to tariffs, labor, fuel, and postage.
Mergers and Acquisitions
In 2019 Scholastic completed the acquisition of a majority ownership interest in Make Believe Ideas (MBI), a UK-based publisher of creative books for young children, by acquiring an additional 46.5% of equity interest in MBI to bring its total ownership interest to 95%. MBI publishes more than 100 titles a year and is known for creating high-quality, affordable books for young children and babies, with distribution largely through mass merchants.
Fresh from a stint at his college newspaper, Maurice Robinson returned to his hometown of Wilkinson, Pennsylvania, in 1920 and launched The Western Pennsylvania Scholastic, a newspaper geared toward high school students. By 1922 its circulation had grown to 4,000 -- prompting Robinson to incorporate his business as Scholastic Publishing Company and launch Scholastic, a national version of the newspaper.
The Depression found the unprofitable Scholastic struggling to improve its financial picture. In 1932 the company changed its name to Scholastic Corporation. A cost-cutting program helped it achieve a profit for the first time four years later. Profitability, however, would be fleeting: Accusations that Scholastic's publications promoted Communism prompted some schools to ban them.
During WWII paper rationing compelled Scholastic to print slimmer publications and turn away subscribers. Following the war the company introduced a string of publications and initiated a sales push that permitted it to pay its first dividend in 1951. In the 1950s, while weathering another spate of accusations that the company had Communist leanings, Scholastic continued to expand its list of publications. The company also created two book clubs that decade, launching what would become one of its most successful endeavors. Scholastic next broadened its interests to include instructional materials and hardcover books. The company went public in 1969, allowing it to continue its expansion.
557 Broadway Lbby 1
New York, NY 10012-3999
Phone: 1 (212) 343-6100
Employer Type: Privately Owned
Chief Architect: John Lewis
Chief Of Research: Myrna Rich-ray
Chairman, President And Ceo: Richard Robinson
Employees (This Location): 2,000
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