NEW YORK--(BUSINESS WIRE)--May 29, 1997--
Includes $25 Million In Annual Cost Savings; Steps To Grow Core Businesses,
Improve Margins Expects Break-Even Results In Current Fiscal Year,
Improved Performance Next Year Wins San Francisco Adoption For Reading
Textbooks, Ninth Major Recent School Award; Plans To Sell Home Office
Computing(R) Magazine
Scholastic Corporation (NASDAQ: SCHL) today announced a comprehensive
plan designed to refocus the Company on its core businesses and significantly
improve profitability in the fiscal year beginning June 1, 1997 and beyond. The
plan includes new cost-cutting measures expected to save at least $25 million
per year as well as initiatives to increase growth and improve margins in
Scholastic's four core businesses.
Scholastic now expects approximately break-even results in the fiscal year
ending May 31, 1997, due to lower than expected fourth quarter revenues
(particularly related to Goosebumps(R)), further increases in reserves for trade
book returns and inventory, and additional restructuring charges related to new
cost-reduction actions. Based on its plan, Scholastic expects significantly
improved earnings and positive cash flow in the new fiscal year starting June 1,
1997.
The Company also announced that the Scholastic Literacy Place(R) instructional
reading program has been selected by the San Francisco school system, the
latest of nine major textbook awards received this year by Scholastic and one of
many recent adoptions of the product.
Scholastic's plan includes the following initiatives:
-- Focus on Growing Four Core Businesses -- Scholastic will focus on
increasing revenues and improving margins in its four core businesses --
Children's Books, the largest contributor to revenues and profits; Instructional
Publishing, which is expected to report a substantial swing to profitability in the
new fiscal year after a period of losses due to investment spending; Media &
Technology, which is expected to have a transitional year; and International,
which is expected to produce increased earnings in the new fiscal year.
Scholastic will pursue targeted growth strategies and cost-cutting steps in all four
businesses, while maintaining its long-term commitment to reading and literacy.
Specific steps include: Children's Books
(1) Reinvigorate the book clubs by appealing to teachers with more exclusive
products, better promotion, simplified ordering and improved service; (2)
Rebuild the trade book business by further developing promising new series
such as Animorphs(TM) and Dear America(TM); launching titles such as I
Spy(TM) Challenger, Miss Spider's New Car, and a new series from Bill
Cosby; and relaunching Goosebumps in early 1998 with new branding and
focus; and (3) Increase book fair revenues by expanding profitable premium
book fairs. Instructional Publishing
(1) Focus on literacy and basal reading, building on the growing success of
Scholastic Literacy Place, Scholastic's new core reading program, which has
recently been adopted by major school districts across the country including San
Francisco, San Bernardino, Bakersfield and Long Beach, CA; Atlanta, GA;
Tampa, FL; Des Moines, IA; Milwaukee, WI; and by the Department of
Defense for use in its overseas schools; (2) Consolidate sales, marketing and
promotion of all instructional products into a single school group to reduce costs
and unify presentation; and (3) Expand profitable supplementary publishing
activities. Media & Technology
(1) Develop Scholastic Productions television programs to support major
franchises such as Animorphs and Clifford(TM); (2) Use licensing and
merchandising to generate profits and boost related book sales; (3) Continue
marketing the Scholastic Network(TM) on the Internet while reducing
development costs; (4) Partner with a major distributor to distribute select
CD-ROMs in the trade; (5) Develop additional early reading software for
school and home use based on the profitable Wiggleworks(R) model; and (6)
Expand the successful school software clubs. International
(1) Consolidate operations in the United Kingdom to improve profitability; (2)
Continue growing the Company's businesses in Canada, Australia, and New
Zealand; and (3) Develop cost- effective children's book distribution capability
in emerging growth markets such as Mexico, India and the Far East. -- $25
Million in Annual Cost Savings -- Scholastic expects to reduce annual costs by
at least $25 million by: (1) Eliminating over 400 positions, including an
approximate 10% reduction in New York; (2) Improving productivity at its
primary fulfillment and distribution facility in Jefferson City, MO; (3) Closing
magazines such as Agenda, Superscience(R) Red and Math Power, and cutting
losses at other magazines; (4) Subleasing 40,000 square feet of NY office
space; (5) Consolidating four instructional divisions into one school group; (6)
Closing its operations in France; and (7) Implementing improved purchasing
terms with suppliers. -- Sell Non-Core Assets -- Scholastic has retained the
investment banking firm of Veronis & Suhler to sell Home Office Computing
and Small Business Computing(TM), two profitable consumer magazines for
adults that do not fit Scholastic's strategic focus. -- Link Executive
Compensation to Stock Performance -- Scholastic will replace a portion of cash
compensation for executives with stock options in order to more closely align
executive compensation with stock performance.
"We are making the tough decisions and taking specific steps to position
Scholastic for future growth and profitability," said Richard Robinson, Chairman,
President and Chief Executive Officer. "Despite our current problems and
difficult industry conditions, we have a sound strategic plan and our franchise
remains strong. Scholastic is truly a unique company -- kids love our products,
parents trust us and teachers rely on us. We have a superb brand, unmatched
distribution through school book clubs and book fairs, a proven ability to
develop best-selling trade books, a respected textbook business that is now
generating major school contracts, a flourishing international business, a track
record of developing hit children's television shows based on our own
properties, and growing multimedia skills. All of these capabilities will benefit our
shareholders in the years to come."
For more than 75 years, Scholastic has been committed to creating quality
educational materials for students and teachers. The Company is one of the
leading publishers and distributors of children's books, classroom magazines,
instructional materials and other educational products. Scholastic also publishes
educational software and produces children's and family-oriented video and
television programming. The Company's international operations include
Canada, Australia, New Zealand, the United Kingdom, and Mexico.
This press release contains certain forward-looking statements which are subject
to various risks and uncertainties, including the condition of the children's book
and instructional material markets and the acceptance of the Company's
products within those markets. Actual results could differ materially from those
currently anticipated. |
