Increases in the school and international segments offset declines in the trade and media groups, resulting in a 1% increase in overall revenue at Scholastic in the second quarter ended November 30. Operating income slipped to $105.6 million from $108.0 million, but net income in the quarter rose to $55.5 million from $43.1 million. Operating earnings in the most recent quarter included a $40.1 million charge associated with consolidating Scholastic’s supplemental print nonfiction and reference titles into the children’s book group as well as costs associated with dissolving a joint venture in the U.K.
Scholastic chairman Dick Robinson touted the company’s ability to improve the bottomline in the quarter, excluding one-time charges, on a small increase in revenue. Cost reductions and selected price increase helped to improve margins, and Robinson said Scholastic remains positioned to achieve its goal of a 9% operating margin for the full year.
The company’s best performing group was educational publishing which had a 35% revenue rise, to $122.6 million, driven by exceptionally strong sales of READ 180 and System 44, which benefitted from the stimulus program. Sales of supplemental print products were down modestly reflecting lower sales to libraries.
In the children’s book publishing and distribution group, sales dropped 6%, to $368.8 million. Book fairs held even at $180 million as an increase in the number of fairs offset a slight decline in revenue per fair. Trade sales fell 5%, to $49.6 million, as strong sales from two Suzanne Collins books plus Shiver and How Do Dinosaurs Say I Love You couldn’t offset higher sales of Potter books in last year’s comparable quarter. Book club revenue dropped 14%, to $138.4 million, which Scholastic attributed to lower orders from reduced promotions and a later start to the school year. Teacher layoffs and reassignments also negatively impacted club results.
International revenue rose 7% in the quarter, to $130.9 million, but was even with last year’s quarter excluding currency rate changes. Sales were up in Canada, Asia and Australia, but export sales were down. The company continues to restructure its U.K. operation, and Scholastic said that it expects one-time charges related to the reorganization, including severance and impairment charges, to be between $7 million and $10 million.
For the first half of fiscal 2010, revenue was up 5%, to $975.7 million, and operating income jumped to $70.3 million from $45.7 million; the company posted net income of $32.5 million compared to a loss of $6 million in the first six months of fiscal 2009.
