Revenue at Scholastic rose 2% in the third quarter ended February 28, 2015, over the same period a year earlier, hitting $382.1 million. However, a number of one-time charges led to a net loss of $22.1 million, compared to a loss of $12.1 million in last year’s third quarter.
Among the one-time items was a charge associated with the restructuring of its media division, which resulted in severance charges. In March, Scholastic entered a first-look deal to develop feature films with Universal Pictures. Because of the deal, Deborah Forte, president of Scholastic Media, left the company to develop the properties through her new production company Silvertongue Films. Scholastic said the ensuing restructuring of the media organization was “to better align its operations with the company’s core businesses.” Beginning in March 2015, audio and video book operations will become a part of the trade publishing group, Scholastic said.
Scholastic’s children's book publishing and distribution group had a good quarter with revenue up 7% to $202.9 million. School book club revenue jumped 17% due to higher orders, while sales in book fairs increased 2% to $91.2 million, reflecting higher revenue per fair. The “harsh winter weather in many parts of the United States and related school closures had an unfavorable effect on the number of fairs held during the quarter,” Scholastic said. In Trade, sales of the Minecraft Handbook series and core backlist titles, including the Harry Potter series, helped drive a 2% increase in revenues to $41.5 million.
In Scholastic’s other segments, revenue in the educational technology and services group fell 4%, to $34.3 million, mostly due to lower math product sales and lower consulting revenues in the company's International Center for Leadership in Education unit. Sales in the classroom and supplemental materials publishing group rose 7%, to $49.1 million, due to higher circulation and increased pricing in classroom magazines and higher sales of Scholastic’s guided reading and other classroom book collections, which were partially offset by lower sales in the teaching resources business and library publishing division.
In its international operation, revenue fell 5%, to $86.3 million, primarily due to unfavorable foreign exchange translation, Scholastic said. Higher local currency sales in Australia/New Zealand, the Asia-Pacific region, and Scholastic’s export unit were partially offset by lower local currency revenues in the U.K. and Canada, due largely to lower Hunger Games sales in the quarter.
For the first nine months of the year, total revenue was up 4.5%, to $1.33 billion, but net income fell to $12.3 million, from $16.3 million in the first nine months of fiscal 2014. The company said it still expected total revenue of approximately $1.9 billion for fiscal 2015, and earnings per diluted share from continuing operations in the range of $1.80 to $2.00. These figured were drawn up without taking into account the impact of one-time items associated with cost reduction programs and non-cash, non-operating items.
In a note related to its investment earlier this week in the U.K. company Make Believe Ideas, Scholastic reported that under its agreement it has the right to acquire the remaining outstanding shares in Make Believe Ideas after four years.