Thursday, December 20, 2007

Scholastic Beat Estimates

Scholastic reported second-quarter profit above analysts' estimates, helped by revenue and profit growth in their International segment. The company also announced they are divesting the direct to home continuity business. From the press release;

Revenue in the second quarter was $746.2 million compared to $735.5 million in the prior year period, and net profit was $75.6 million versus $75.1 million. Earnings per diluted share rose to $1.93 from $1.75 in the prior year period, primarily reflecting accretion from the previously announced $200 million accelerated share repurchase. In the quarter, Direct-to-Home Continuities contributed revenue of $33.2 million and resulted in a pro forma net loss of $6.1 million or $0.16 per diluted share, based on the Company's normal effective tax rate of 37.0%; this is compared to revenue of $38.1 million and a pro forma net loss of $2.8 million or $0.06 per diluted share in the second quarter of fiscal 2007.

"In the second quarter, Scholastic's businesses, excluding Direct-to-Home, performed on plan, and the Company's operating income and margin improved year-over-year," commented Richard Robinson, Chairman, CEO and President. "Profits from School Book Fairs, Clubs and Trade Publishing all rose, while Scholastic Education made progress investing in a reorganized sales force, increased technical support and consulting services, and new technology products. In addition our International segment recorded double-digit revenue and profit growth."

The company has retained Greenhill & Co. and has begun the sales process and will also report direct to home as discontinued operations.

The company maintains their full year revenue forecast of $2.3 to $2.5 billion and earnings per diluted share of $2.35 to $2.85, noting that they expect the solid performance in their core businesses to offset the lower than expected results from Continuities. Full year net income may be impacted by write-downs associated with the sale of the business unit but there is no expectation that cash flow will be adversely impacted. The company also announced a modest stock repurchase plan and is authorized to purchase $20mm of its common stock.

  • Harry Potter's boxed set helped the consumer segment to achieve flat revenue and profit
  • In education, revenues were flat with prior but operating income was lower due to planned investments
  • Large gains in international revenues and profits offset declines in other segments.
  • Revenues were up 13% and profit up $4.5mm (22%)

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